Presented by: Nayan Shah Ranjit Shetty Apurva
Transcript of Presented by: Nayan Shah Ranjit Shetty Apurva
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 1/80
Presented By:Nayan Shah
Ranjit ShettyApurva ShethVishal Kothari
Pritesh maniarSurbhi Mondkar
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 2/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 3/80
International Financial Reporting StandardsIFRS was developed in the year 2001 by the
International Accounting Standards Board(IASB)
IFRS requirement includes IASsIFRS Comprises: 8 IFRSs and 31 IASs.It started of with EU making IFRS mandatoryfrom 2005 onwards.
By 2011 more than 150 countries wouldhave adopted IFRS.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 4/80
IASB (International Accounting Standards Board) /IASC (Committee) was formed in the early 1970‘s,about the same time as the FASBEarly IAS standards allowed many options
Efforts were made to harmonize standards in theearly 1990sSome early adopters came from countries withmultinational companies but few local accountingrules (e.g., Switzerland, Australia)IASB was restructured in 2001 and began issuing in2003
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 5/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 6/80
Standards Advisory Committee (SAC)International Financial Reporting
Interpretations Committee (IFRIC)IASB-FASB Convergence Agenda
Objective of Financial ReportingQualitative characteristics
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 7/80
Globally AcceptedSimplifiedCost EffectivenessCross-border capital raising and tradeCreate comparable, reliable, andtransparent financial statementsCompany-wide one accounting language
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 8/80
to develop global accountingstandardsto promote the use and rigorousapplication of those standardsto take account of small and medium-sized entities and emergingeconomies.to bring about convergence for highquality solutions.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 9/80
Pakistan –Already Reporting asper IFRS
Canada – to Converge in 2011US – Sooner or Later – To beComplete by 2014
India – 2011
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 10/80
Adoption or convergence with IFRS is now a globalphenomenon
EU, Australia, Russia and several other countries in theMiddle East and Africa have decided on a wholesale,mandatory change to IFRS.
US, South Africa, Singapore, Turkey and Malaysia arecommitted to convergence with the internationalbenchmark.
New information technologies have dramatically changedthe financial reporting environment
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 11/80
The use of IFRS as a universal financial reporting languageis gaining momentum across the globe, especially ascompared to a few years ago when a number of differentnational accounting standards existed.
More than 100 countries now require or allow use of IFRSand by 2011 the number is expected to increase to 150.Some of the major countries that are seeking to converge /adopt IFRS by 2011 include Canada, Korea, India andBrazil .
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 12/80
IFRS 1 First-time Adoption of International FinancialReporting StandardsIFRS 2 Share-based PaymentIFRS 3 Business CombinationsIFRS 4 Insurance ContractsIFRS 5 Non-current Assets Held for Sale and DiscontinuedOperationsIFRS 6 Exploration for and evaluation of MineralResourcesIFRS 7 Financial Instruments: DisclosuresIFRS 8 Operating Segments
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 13/80
1. Objective
2. Underlying assumptions
3. Qualitative characteristics
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 14/80
OBJECTIVE OF THE STANDARD:
To ensure that an entity’s first IFRS financial statements , and its interim financial reports containhigh quality information
1. Transparen t and comparable
2. Prepare and present an opening IFRS statement
3. Cost doesn’t exceed Benefit
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 15/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 16/80
Objective of this standard: The objective of this IFRS is to enhance theRelevance, Reliability and Comparability of theinformation that an entity provides in its financialstatements about a Business Combination and
its effects.Acquisition-date fair values
Joint Ventures not includedImpotant Terms : Acquirer, Acquiree, Acquisition
date, GoodwillDisclosure
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 17/80
Objective of standard: To prescribe the financial reporting for
InsuranceContracts by any entity that issues such
contractsNot only for Insurance CompaniesLocal GAAP accounting policies
Liability adequacy testinsurance liabilities
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 18/80
Objective of standard: To specify the accounting for non-current assetsheld for sale, and the presentation and disclosure of discontinued operations.Non-current assets (or disposal groups)
Discontinued Operation Assets (or disposal groups) classified as heldfor sale are :
1. Carried at the lower of the carrying amount and fairvalue less costs to sell.
2. Not depreciated or amortized.3. Presented separately on the face of the balance
sheet.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 19/80
Search for mineral resourcesExploration and evaluation expenditures
Exploration and evaluation assets areexploration and evaluation expendituresrecognized as assets in accordance with theentity’s accounting policy.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 20/80
Exploration and evaluation assets shall beassessed for impairment when facts andcircumstances suggest that the carryingamount of an exploration and evaluationasset may exceed its recoverable amount.
Disclosure
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 21/80
Objective of standard
To enable the users of the Fin Statements to
evaluate :1) the significance of financial instruments forthe entity’s financial position and performance
2) the nature and extent of risks arising from
financial instruments to which the entity isexposed during the period and at the reportingdate, and how the entity manages those risks.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 22/80
This IFRS applies to all entities , including entities thathave few financial instruments (e.g. a manufacturerwhose only financial instruments are accounts receivableand accounts payable) and those that have manyfinancial instruments (eg a financial institution most of whose assets and liabilities are financial instruments).
Requires disclosure of information about the nature andextent of risks arising from financial instruments: –
1. qualitative disclosures about exposures to each class of risk and how those risks are managed; and
2. quantitative disclosures about exposures to each classof risk, separately for credit risk, liquidity risk and marketrisk (including sensitivity analyses).
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 23/80
An entity shall disclose information to enableusers of its financial statements to evaluate thenature and financial effects of the business
activities in which it engages and the economicenvironments in which it operates.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 24/80
IFRS 8 Applies to the consolidated financialstatements of a group with a parent (and to theseparate or individual financial statements of anentity ):– whose debt or equity instruments are traded in a public
market; or– that files, or is in the process of filing, its (consolidated)financial statements with a securities commission or otherregulatory organisation for the purpose of issuing any classof instruments in a public market.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 25/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 26/80
o ICAI, constituted the Accounting StandardsBoard (ASB) on 21st April, 1977
o At a meeting held in May 2006, the Councilof ICAI expressed the view to adopt IFRS.
o Based on the recommendation of the IFRS
Task Force, ICAI decided to converge withIFRS, for accounting periods commencingon or after 1 April 2011.
Friday, March 5, 2010
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 27/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 28/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 29/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 30/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 31/80
KEY DIFFERENCE BETWEEN IFRS,
INDIAN ACCOUNTING STANDARD& US GAAP
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 32/80
IFRS & US GAAP AS 1
Deals with overall
consideration,minimum structure& components of Financial
statements
Does not specificallyprescribe componentsof Financialstatements
Companies Act 1956
& Companies(AccountingStandards) Rules,2006
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 33/80
IFRS/IAS 7 & US GAAPAS 3
AS 3
It allows int. &div. paid or recd.as operating cashflow
It does notrequire disclosureof extraordinaryitems
It does not allow
It requiresdisclosure of extraordinaryitems
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 34/80
AS 6 & IAS 16 allows depreciationon revalued value of assets.
US GAAP prohibits revaluation of assets
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 35/80
AS 7 & IFRS/IAS 11 prescribes only %agecompletion method.
US GAAP prescribes completed contractmethod.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 36/80
AS-10 & IFRS/IAS-16 allows revaluation of Fixed assets
US GAAP does not allow revaluation of Fixed assets
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 37/80
AS-13 covers investment in property,subsidiary, associates, fin. Instruments.
IFRS/ IAS-40 deals in property.
IFRS/ IAS-32 &39 deals in financialinstruments.
ICAI is planning to revise AS-13
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 38/80
AS-14 allows pooling of interest method &Purchase method.
IFRS-3 & US GAAP allows only Purchasemethod.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 39/80
IFRS-3 requires recognition of negativegoodwill to P&L a/c.
AS-14 requires recognition of negativegoodwill to be credited to Capital Reserve.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 40/80
AS-20 requires disclosure in parent separatefinancial statement as well as consolidatedstatement.
IAS-33 & US GAAP require disclosure inconsolidated financial statement.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 41/80
AS-23 & IAS-28 US GAAP
It permits
investments inassociates to bemeasured usingequity method if itpreparesconsolidatefinancialstatements.
It requires use of
equity methodirrespectivewhether anentity hassubsidiaries
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 42/80
AS-26 & US GAAP do not permit revaluationof intangibles.
IFRS/IAS-38 permits revaluation of intangibles.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 43/80
“reach an economic equal level playing fieldwithin the Community”“common political vision”Large risks of being drawn to US-GAAP
Why Did Australia adopt IFRS?
Why Did New Zealand adopt IFRS?
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 44/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 45/80
45
McKinsey Global Investor Opinion onCorporate Governance in 2002
Surveyed 201 professional investors from institutionswith an estimated $9 trillion under
management.
Covered 31 countries.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 46/80
46
Single Accounting Standard
5% - Undesirable5% - Not sure
90% - desirable
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 47/80
47
What standard to chose as a global standard ?
78
76
65
41
Western Europe
Eastern Europe/Africa
Asia
Latin America
North America
22
24
35
41 59
24 76
IFRS
GAAP
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 48/80
48
Issues that impact the investment decisions
Accounting disclosure 7147
43
42
3746
32
32
3130
Shareholder equality
Market regulation and infrastructure
International Accounting Standards
Market liquidityProperty rights
Pressure on corruption
Insolvency and bankruptcy regulation
Fiscal environmentBanking system
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 49/80
49
What are the top reform priorities for policymakers
Strengthen shareholder rights
Improve accounting standards
More effective disclosure
Stronger enforcement
33
32
31
27
Percentage of investors selecting this option;multiple responses possible
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 50/80
1. For CompaniesLower Cost of capitalConsistent reporting format for subsidiaries indifferent countriesFacilitating multiple listing in different marketsEfficient allocation of resources.
Improved access to international capital marketsEnable benchmarking with global peers
Escape multiple reportingReflects true value of acquisitionsNew opportunities
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 51/80
2. For Small Investors
Global Investment opportunitiesBetter information for decision makingReduced Information Costsimprove average analyst forecast accuracy.Reduced cost of DebtRemoving barriers to cross-border acquisitionsand divestitures rewarding investors withincreased takeover premiums
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 52/80
3. For National EconomySmoothing the FDI ProcessHigher global economic growth
4. For StudentsHighly RemunerativeIFRS is the Future
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 53/80
Shortage of resources TrainingInformation systems
Tax PlanningCommunicationManagement compensation
and debt covenantsImpact on financial statementsDistributable profits
Alignment with other statutory bodiesManaging market, investors and analystsRunning out of TimeIncreased Volatility of ResultsSME Concerns
M a n a g e m e n t
r e p o r t i n g
s y s t e m
Empl oyeebenefit plans
Tax planning
IFRS
businessissues I n
v e s
t o r
r e l a t i o n s
F i n a n c i a l
a c c o
u n t i n g
a n d r e p
or t i n g
C o r p o
r a t e f i n a n
c e
a n d
s t r u c
t u r e d
f i n a n c i a l p r o d u c
t s
E m p l
o y e e
a n d
e x e c
u t i v e
c o m p e n
s a t i o nP e r f o r m a n
c e
i n d i c a t o r s
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 54/80
An IllustrativeExample
ValuechainSupportFunctions
Businessimpactof IFRS
Businessimpactof IFRS
AccountingDifferences
H u m a n R e s o u r c e s
T r a
n s a
c t i o n s
I T
T a x
Ris k Ma n a ge m e nt / C om p lia nce
F i n a n c e a n d
A c c o u n t i n g
P e r f o r m
a n c e
M a n a g e m
e n t
L e g a l
I n v
e s t o
r r e l a
t i o n s
T r e a s u r y
S a l e s / M
a r k e t i n g
N e w
P r o d
u c t D e
v e l o p
m e n
t
T r a d i n g
Customer Relationships
H e d g i n g / R i s k M a n a g e m e n t
S e c u r i t i z a t i o n A c t i v i t y
A s s e t / L i a b
i l i t y M a n a g e m
e n t
Minimal Moderate Significant
IFRS Conversionis not just an
accountingexercise
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 55/80
1. IASB Standards are known as International FinancialReporting Standards (IFRSs).
2. All IASs and Interpretations issued by the former IASC andSIC continue to be applicable unless and until they areamended or withdrawn.
3. IFRSs apply to the general purpose financial statementsand other financial reporting by profit-oriented entities
4. Entities other than profit-oriented business entities
may also find IFRSs appropriate.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 56/80
5. General purpose financial statements are
intended to meet the common needs of all entities forinformation about an company’s financial position,performance, and cash flows.
6. Other financial reporting includes information
which improves users' ability to make efficienteconomic decisions.
7. IFRS apply to individual company and consolidatedfinancial statements.
8. IFRS includes complete set of financial statements
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 57/80
9. IFRS allows both a 'benchmark' and an'allowed alternative' treatment
10. IASB intends not to permit choices inaccounting treatment .
11. IFRS will present fundamental principles inbold face type and other guidance in non-boldtype
12. The provision of IAS 1 that conformity with IAS
requires compliance with every applicable IASand Interpretation requires compliance with allIFRSs as well.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 58/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 59/80
Implemented by a broad network of experienced conversionspecialistsConsiders the broader impact on the business - accountingpolicies, people, financial reporting, tax and other businessprocesses and systems, stakeholder management, statutoryreporting and communications
Used by more than 1,300 companiesScalable and responsive to the unique complexities of eachclient’s businessEstablishes clear objectives with the client in the planning stageApplies a phased approach to IFRS conversionsIs a framework that is supplemented by deep business processand technical accounting and systems skills
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 60/80
How to Valuate ?
Some IFRSs require Fair Value Approach-Examples :
IFRS-3, Business Combinations
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 61/80
Fair value - for which the assets could beexchanged by willing parties in arm’s lengthtransaction.US GAAP provides a hierarchy of 3 levels of input data -
i. Level 1 - Quoted prices for identical items.ii. Level 2 - Observable information for similar
items.iii.Level 3 - Unobservable inputs to be used.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 62/80
During Fair Valuation – effect flow throughprofit and loss account.Both unrealized gains and losses mayappear in profit and loss account.As per Indian Income Tax Act, 1961 – thisgain would be chargeable.
Therefore, Income Tax Act needs to be
changed accordingly so that unrealized gainmay not be taxed.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 63/80
Suspension of AS 11 up to the period ending 31stmarch 2011Companies need not debit the forex loss to theincome statement – it should be adjusted to the
respective assets in the B/S by the process of capitalization of such forex loss The main objective of setting AS standards andpreparing financial statements is to provide trueand fair (reliable and relevant only whenunbiased) financial information to the intendedstakeholder of the company.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 64/80
Islamic finance already plays a significantpart in the global economyBasic difference in INTEREST conceptthe Islamic finance industry is set to growfrom $700bn to $4trn by 2013despite the crisis Islamic banking is still
projected to grow by 15-20 % p.a.
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 65/80
in April 2009 asked accounting standardsetters to work urgently with supervisorsand regulators to achieve a single set of high-quality, global accounting standardsand meet deadlines outlined in the ActionPlan
SEC is likely to consider responses to itsproposed roadmap for the potential use of (IFRS) in the U.S. before the year’s end
IFRS d it l k t
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 66/80
IFRS and capital market
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 67/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 68/80
Not merely be a technical accounting conversionstructuring of contracts with customers andvendors, performance appraisal parametersand reward plans , and managing externalinvestor relations and communicationprior years’ errors and omissions will have to beeffected through restatement account (1538 us)investors and regulators look at any restatementnegativelyexplaining variations and volatility in earnings on aquarterly basis to stake holders
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 69/80
to defer implementation of AS-11 till 2011.decision is not yet notified by thegovernmentNACAS has favoured suspending for twoyears, the AS11 ( ICAI has not favoured )Example (imported 1000 kl edible oil)Companies MTM provisions (crores)
Tata steel 775
Tata motor 632 JSW steel 815
suzlon 741
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 70/80
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 71/80
material impact on the financial statements
requires a high level of judgment for loanlosses and investments
Derivative and hedge accounting(separate a/c )
De-recognition of financial assets(securitization )
Consolidation of entities ( not driven purelyby ownership structure )
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 72/80
changes in the systems of the existing to thenewer version of IFRS enabled accounting software
Technology companies enter into bundled contractsand multiple offerings.Outsourcing contracts ( IT platform, hardware on
lease )
Share based payments ( intrinsic value, fairvalue )Discounting of receivables & payablesAcquisitions ( financial included when control isobtained )Derivatives and hedge accounting ( strict
documentation )
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 73/80
Public-private partnership
(construction phase, subsequentoperations phase )Leases(financial lease or operational lease )Financial instrument(embedded derivatives-consumer price orlabour index )
discounting of long-term payables andreceivables(interest rates )
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 74/80
Co. Takes revenue from under-construction projects
Under the IFRS, only when an apartment isconstructed and ownership rights aretransferred, the transaction is recorded asrevenue
IFRS will erode profits of real estatecompanies
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 75/80
Minimum depreciation rate
Mould, pattern, development cost, toolingcost, new technology etc.
IFRS will result into Higher profits
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 76/80
Telecom companies provide package
offers comprising handset, prepaidminutes, messages, discounts, specialoffers and other incentivesMedia firms often bundle products,programmes or channels andpublicationsIn IFRS, bundled contracts and multiple
offerings under a package will requireaccounting of different componentsand revenues
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 77/80
Exploration and evaluation (E&E) expenditure
(flexibility )Development expenditure ( lack of guidelines )Mine closure and rehabilitation provisions
(provisions for DCF varied significantly )Resources and reserves reporting ( notaddressed )Revenue (information went beyond strict
disclosure )commodity price riskSegment reporting ( operating segments )
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 78/80
US is set to converge to IFRS by 2015
About 6,000 US companies transit 2014-2016.
Assuming that 3,000 small companies may implement
IFRS internally, the remaining 3,000 would need anexternal agency’s help
Each company may need a 5-10 member team for
implementation. Even if 20-30 per cent of the work is
outsourced its big opportunity for India
$1 billion opportunity
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 79/80
listed companies and public interestentities in the country are required to transitfrom the Indian accounting standards to IFRS byApril 1, 2011 and for that companies will haveto start preparing their accounts in that formatfrom 2010 onwards
Infosys Technologies, NIIT, Wipro, Mahindra &Mahindra, Tata Motors, Bombay Dyeing, DrReddy's Laboratories
8/14/2019 Presented by: Nayan Shah Ranjit Shetty Apurva
http://slidepdf.com/reader/full/presented-by-nayan-shah-ranjit-shetty-apurva 80/80
Th kTh k