An Overview Of IFRS & Challenges Involved In First Time Adoptions

912 views

Published on

Presentation in Bangalore Branch of SIRC of ICAI

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
912
On SlideShare
0
From Embeds
0
Number of Embeds
16
Actions
Shares
0
Downloads
46
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

An Overview Of IFRS & Challenges Involved In First Time Adoptions

  1. 1. 1<br />An overview of IFRS & Challenges involved in first time adoption<br />The Institute of Chartered Accountants of India, Bangalore<br />1st December’2010<br />CA Aditya Singhal<br />M.Com, FCA, DISA(ICAI)<br />+91 99728 27300<br />Aditya.singhal@icai.org<br />Join IFRS professional group for regular IFRS update:<br />http://finance.groups.yahoo.com/group/IFRS-Professional/<br />
  2. 2. Authoritative literature<br />IFRS<br /> IFRS<br /> IAS<br /> IFRIC<br /> SIC<br />Order of authoritativeness<br /> IFRS including any appendices<br /> Interpretations<br /> Appendices to IFRS that do not form part of the standards<br /> Implementation guidance issued by IASB<br />2<br />
  3. 3. IASC & its Objectives<br />IASC was founded in 1973<br />2001 -IASC was set up as part of a restructuring<br />Objectives of the IASC Foundation are<br />To develop a single set of high quality global accounting standards to help participants in the worlds capital markets and other users make economic decisions<br />To promote use and rigorous application of those standards<br />To take into account the special needs of small and medium sized entities<br />To bring about convergence of national accounting standards and IFRS<br />3<br />
  4. 4. Framework for preparation and presentation of Financial Statements<br />Framework provides a conceptual framework as a foundation for the preparation and appraisal of accounting standards<br />FRAMEWORK is the FOUNDATION of many IFRS but is not an IFRS<br />It does not have the same authority as an IFRS<br />In some circumstances there may be conflict between the Framework and an IFRS. In such cases the requirements of the specific IFRS always prevail over the Framework <br />4<br />
  5. 5. The Framework<br />5<br />
  6. 6. Assets - Liability - Equity - Income - Expenses<br />6<br />T h e - E l e m e n t s <br />
  7. 7. Recognition criteria<br />Recognition is the process of incorporating an item that meets the definition of an element and satisfies the recognition criteria into the SOFP or SCI<br />An item that meets the definition of an element (asset, liability, income or expense) should be recognized if :<br />It is probable that any economic benefit associated with the item will flow to or from the entity<br />The item has a cost or value that can be measured reliably<br />7<br />
  8. 8. Measurements of Elements<br />8<br />
  9. 9. IFRS – From India perspective<br />9<br />IFRS would be applicable into three phases:<br />
  10. 10. Conceptual Differences<br />Substance over form<br />Fair value<br />Current and Non-Current Classification<br />Discounting (Time value of money)<br />Standards prevail over law<br />10<br />
  11. 11. Challenges involved in first time adoptions<br />Fair value override permitted under IFRS<br />Retrospective application<br />Barred – extraordinary items <br />Impact of change in accounting policy<br />The use of revaluation for fixed assets, intangibles and investment property<br /> …. cont<br />11<br />
  12. 12. Challenges involved in first time adoptions<br />Consolidation of financials – Special purpose entities <br />Goodwill/negative goodwill treatment <br />Revenue recognition of long term construction contract<br />Impairment of non-current assets<br />Classification of financial instrument <br />12<br />
  13. 13. IFRS 1 – the 5 step process<br />Identification of date of transition<br />Selection of accounting policies that comply with IFRSs<br />Preparation of an opening IFRS balance sheet<br />Preparation of the first IFRS financial statements<br />Reconciliations and disclosures. <br />13<br />
  14. 14. Identification of date of transition<br />14<br />
  15. 15. Selection of accounting policies that comply with IFRSs<br />Need to apply IFRS effective at the Reporting Date. <br />May apply a new IFRS that is not yet mandatory, if it permits early application. <br />Determine which exceptions to use<br />Take into account the exceptions to retrospective application<br />15<br />
  16. 16. Preparation of an opening IFRS Balance Sheet <br />Does not recognize items as assets or liabilities if IFRS does not permit such recognition<br />Recognize all assets and liabilities whose recognition is required by IFRS<br />Reclassify assets, liabilities and items of equity as per the requirements of IFRS<br />Measure all assets and liabilities in accordance with IFRS<br />16<br />
  17. 17. Preparation of an opening IFRS Balance Sheet<br />17<br />YES<br />YES<br />No<br />YES<br />No<br />No<br />YES<br />
  18. 18. Preparation of the first IFRS financial statements - Optional Exemptions<br />18<br />
  19. 19. Preparation of the first IFRS financial statements - Mandatory Exceptions<br />19<br />
  20. 20. Reconciliations and disclosures<br />Equity from previous GAAP to IFRS at the transition date and the end of the last period presented in the entity ‘s most recent financials statements under previous GAAP<br />Net profit from previous GAAP to IFRS for the last period in the entity's most recent financial statements under previous GAAP. <br />Other disclosures in the first IFRS financials statements <br />20<br />
  21. 21. 21<br />Questions ?<br />
  22. 22. Key Learning Points<br />22<br />First time adoption is more of a business decision than accounting<br />Doing it right at the first time is very critical<br />Judiciously applying the optional exemptions will help reduce the GAAP difference<br />Practice with options will guide to refine decisions<br />Significant disclosure and reconciliation requirements<br />
  23. 23. Thanks !<br />CA Aditya Singhal<br />M.com, FCA, DISA(ICAI)<br />+91 99728 27300<br />Aditya.singhal@icai.org<br />Join IFRS professional group for regular IFRS update:<br />http://finance.groups.yahoo.com/group/IFRS-Professional/<br />23<br />

×