The document discusses the global adoption of IFRS (International Financial Reporting Standards) as the global accounting standard. It provides an overview of the history and evolution of IFRS, outlines the benefits of a single global standard in enhancing transparency and comparability, and notes that over 100 countries have adopted or based their local standards on IFRS. It also summarizes some of the key challenges of converting to IFRS, noting that it requires changes across business processes, technologies, and the entire organization.

1. Journey to IFRS

2. Momentum for a Global GAAP Global GAAP Enhances Transparency and Comparability Facilitates Accounting and Reporting Reduces Cost of Capital

3. The economics of IFRS – CFO.com Two new studies discuss the optimism about the future of a global standard. A survey by the International Federation of Accountants asked 143 accounting leaders from 91 countries about the significance of converging standards, and 89% said it was very important or important

4. History IASB (International Accounting Standards Board) / IASC (Committee) was formed in the early 1970‘s, about the same time as the FASB Early IAS standards allowed many options Efforts were made to harmonize standards in the early 1990s Some early adopters came from countries with multinational companies but few local accounting rules (e.g., Switzerland, Australia) IASB was restructured in 2001 and began issuing IFRSs (International Financial Reporting Standards) in 2003

5. IFRS – A truly global accounting standard 137 32 IFRS not permitted for domestic listed companies 4 IFRS required for some domestic listed companies 24 IFRS permitted for domestic listed companies 77 IFRS required for all domestic listed companies Number of countries Domestic listed companies

6. Evolution of IFRS IASC 2001 to 2005 ACCOUNTING STANDARD SETTERS INTERNATIONAL REGULATORS IAS – Core Standards Program 2006 to 2007 Future IASB FASB IASB/FASB? Norwalk Agreement Memorandum of Understanding IOSCO EU Mandate European Commission CESR CESR Equivalency ? 2000 and Prior

7. IFRS in the world IFRS gaining momentum throughout the world as a single, consistent accounting framework Move toward IFRS is strong Europe: 2005 Australia Brazil: 2010 Canada: 2011 What is the status of IFRS acceptance in countries relevant for you? Statutory reporting requirements Tax reporting requirements Source IASB

8. Global IFRS reporting trends IFRS quickly picking up share of Global F500 companies More than100 countries have moved to or base their local standards on IFRS IFRS will become the predominant GAAP in the near future Enhances transparency/comparability Eases flow of capital globally, thus possible reduction in cost of capital Facilitates accounting and reporting IFRS Drivers and Potential Benefits

9. Why IFRS in India? One language Comparability enhanced Understanding enhanced One set of books Access to Global capital markets Low cost of capital Attract foreign investment Elimination of multiple reports

10. Public interest entities – IFRS In India in first wave to cover following entities Listed companies Banks, insurance companies, and financial institutions Turnover in preceding year > Rs 100 crores Borrowing in preceding year > Rs 25 crores Holding or subsidiary of the above

11. Calendar for IFRS Conversions The Standards for IFRS conversions are fluid and evolving Dates for converting consolidated Financial Statements to IFRS are set by the local regulatory body The example below illustrates the relevant dates for companies with a closing year end of March 31 and a adoption date is April 2011 [to be adapted at local level] Opening IFRS balance sheet * 01/04/2011 31/03/2012 1/4/2010 Reporting date Date of transition to IFRS IFRS Comparatives 1st IFRS Financial Statements * For a March year-end, adopting IFRS in 2011 with one year comparative

12. Issuer Considerations Prior to Adopting IFRS Diagnostic Review of Financial Reporting and IT Assess Employee Skill Set Costs of Implementation Regulatory body/Other Local Statutory Reporting Analysts/Investors/ Competitors External Drivers Internal Drivers Conversion to IFRS

13. IFRS conversion dimensions – more than a change in accounting policy What’s Involved ? The scope and complexity involved in the conversion to IFRS should not be underestimated. The new standards involve changes in presentation, new valuation rules, and additional disclosure requirements. A successful conversion must plan and manage change across business processes, technologies, and the organization impacting both the group and business unit levels. ERP configurations will likely be impacted across multiple modules. Financial system architectures may require substantive modifications. Conversion scope / content IFRS conversion will impact all levels of accounting in a business. IFRS conversions will impact several areas of the business outside of the accounting function A top level conversion to IFRS may not be sufficient Organization Technology Process Changes in Presentation New Valuation Rules Additional Disclosure Requirements IFRS Conversion ERP Environment Financial Systems Architecture

14. Key challenges Impact on financial statements Performance indicators Volatility IT/MIS systems Contractual obligations (debt covenant, compensation) Taxes Distributable profits Managing market, investors and analysts

15. IFRS conversion approach Compliance analysis Identifying the main accounting differences Identifying the major impacts on the information and the organisational systems Action plans and macro-planning Diagnostic Organisational and financial optimisation Defining scenarios and simulations for selecting the accounting and tax options Choosing the information system and organisational architecture Calculating the project cost and the necessary resources Preparation Rollout and first application Adapting information system and procedures Drawing up the opening balance sheet Drawing up the first IFRS financial statements Implementation

16. Updating accounting policy procedures and manuals Monitoring changes to Standards during conversion period Updating education and training for personnel System and data changes for capturing and reporting under IFRS System and data implications for First Time Adoption and parallel reporting activities Changes to processes and systems across the organization, not solely within accounting areas Modifications to internal controls Enhanced internal audit plans Management reporting updates Performance management modifications – KPIs and other metrics, reports, etc. Audit support – accounting records need to support application of IFRS Scope & complexity should not be underestimated…

17. Not just a Corporate-level exercise Management buy-in was one of the biggest initial challenges Do not underestimate the amount of work involved Definitely not just a technical exercise Changes the way performance is measured and basis of incentive schemes Interaction with internal controls and systems is key Increasing complexity of IFRS and speed of change is requiring more technical resources Has increased the volatility of results Important to align internal and external reporting Consider the impact on investor relations – timing and nature of communication Focus on education, resource and training – use experts, actuaries and valuer’s Start early IFRS conversion: Not just an accounting exercise— Comments from a CFO

18. Domains – Business Areas Covered An Illustrative Example Value chain Support Functions Business impact of IFRS Business impact of IFRS Accounting Differences Human Resources Transactions IT Tax Risk Management/ Compliance Finance and Accounting Performance Management Legal Investor relations Treasury Sales / Marketing New Product Development Trading Customer Relationships Hedging / Risk Management Securitization Activity Asset / Liability Management Minimal Moderate Significant IFRS Conversion is not just an accounting exercise