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Dear professionals

Dear professionals. LET US DISCUSS IFRS March 11, 2014. WELCOME TO HUGE GATHERING SO WE ARE KEEPING ALL ON MUTE MODE SO THAT YOU CAN HEAR SPEAKERS QUESTIONS BE EMAILED TO mohanbhave@gmail.com. IFRS OVERVIEW. ICSI WITH RELIANCE March 11, 2014. IFRS. March 11, 2014.

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  1. Dear professionals • LET US DISCUSS • IFRS • March 11, 2014

  2. WELCOME TO HUGE GATHERING SO WE ARE KEEPING ALL ON MUTE MODE SO THAT YOU CAN HEAR SPEAKERS QUESTIONS BE EMAILED TO mohanbhave@gmail.com

  3. IFRS OVERVIEW ICSI WITH RELIANCE March 11, 2014

  4. IFRS March 11, 2014

  5. Where are we moving Global vs Indian approach Fair value vs historical cost Reporting vs Accounting Substance over Form Group vs Standalones Principles over rules

  6. IFRS 8 Standards – what is most critical? 1 first time adoption 2 3 Business combination 4 5 6 7 financial instruments 8

  7. An Overview of IFRS (what we are moving towards) Proposed Current Global Approach vs Indian Approach Fair Value A/cing vs Historical Value A/cing Group vs Standalones Substance over Form Principles over Rules

  8. An Overview of IFRS (Boards/Committees Involved) • IFRS are standards and interpretations adopted by the International Accounting Standards Board (IASB) • International Accounting Standards (IAS) were issued by the International Accounting Standard Committee (IASC) between 1973 and 2000.

  9. An Overview of IFRS (Boards/Committees Involved) • The IASB replaced the IASC in 2001 and made a couple of changes - • Amended some IASs • Replaced some IASs with new IFRSs • Issued certain new IFRSs on topics for which there was no previous IAS. • Through committees, both the IASC and the IASB have also issued interpretation of standards.

  10. An Overview of IFRS (Boards/Committees Involved) • IFRS Comprises: • 8 IFRSs and 30 IASs • 18 IFRIC (International Financial Reporting Interpretations Committee) and 12 SICs (Standard Interpretations Committee) • There is also a framework for the Preparation & Presentation of Financial Statements which describes some of the principles underlying IFRS.

  11. IFRS in India - Why • 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 • Reflect true value of acquisitions • Schedule VI in today’s environment

  12. IFRS in India - Who • All public interest entities are required to adopt IFRS - • Listed companies • Banks, insurance companies, and financial institutions • Turnover > Rs 100 crores • Borrowing > Rs 25 crores • Holding or subsidiary of any of the above

  13. IFRS in India - When • ICAI has set up a Task Force on Convergence with IFRS • The task force has decided on date of adoption of IFRS as April 1, 2011 • This means that date of transition is April 1, 2010

  14. Calendar for IFRS Conversions • The timetable below shows the illustrative transition timetable Opening IFRS balance sheet* IFRS adoption date Reporting date for FS 31/03/2012 1/4/2010 01/04/2011 IFRS Comparatives 1st IFRS Financial Statements 31 March 2012 seems a long way off, but there is a lot of work required to convert, as we have seen in countries which have already adopted IFRS *For a March year -end, adopting IFRS in 2011 with one year comparative

  15. IFRS in India – How (Practical implications for companies) • Converting to IFRS is more than a technical exercise; it presents many business challenges and opportunities. • Major conversions can take 12 - 18 months to complete.

  16. IFRS in India – How (Practical implications for companies) • Senior management will need the time to understand the full impact of IFRS on the company and to develop the right messages for the marketplace. • Companies that fail to appropriately implement IFRS may lose competitive advantage or may present an inconsistent picture compared with competitors. They may face regulatory actions too.

  17. International Financial Reporting Standards IFRS 1 – First time adoption of IFRS IFRS 2 – Share Based Payment IFRS 3 – Business Combinations IFRS 4 – Insurance Contracts IFRS 5 – Non-current assets held for sale and discontinued operations IFRS 6 – Exploration for and evaluation of mineral resources IFRS 7 – Financial Instruments-Disclosures IFRS 8 – Operating Segments

  18. Overview of differences • Though Indian AS are based on IFRS, there are significant differences between the two in many areas – for eg.: • Legal differences • Schedule VI • Depreciation rates under schedule XIV • Court schemes • Shift from Historical cost basis to Fair Value • Derivative Financial Instruments • Tangible and intangibles acquired in business combinations • Loans and advances e.g. Interest free deposits

  19. Key accounting concepts affected by IFRS • Presentation of Financials – governed by IAS 1 instead of Schedule VI • Prior period items – coverage of Balance Sheet items and restatement • IFRS 1 on First Time Adoption • Business combination – no pooling • Consolidation of Financial Statements • Control definition • Uniform accounting policies

  20. Key accounting concepts affected by IFRS • Tangible assets • Component accounting • Repairs, maintenance and overhauling – major expenses • Revaluation • Change in method of depreciation – prospective • Deferred payment liability – recognition of interest • Intangible assets- revaluation permitted if active market • Provision, contingent liability and contingent asset • Discounting • Disclosure of contingent asset • Discounting of deferred revenue • Events after balance sheet date – proposed dividend • Deferred tax asset recognition - no virtual certainty

  21. Consolidated Financial Statements (CFS)

  22. Consolidated Financial Statements (CFS)

  23. IAS 16 – Property, Plant and Equipment • Component accounting: Key impact on Capital intensive industries • In-depth analysis required to identify significant components that make up a plant. • Each significant component to be depreciated over its own useful life • Application would require technical knowledge – usually cannot be provided by the accounting department on its own

  24. IAS 32 / 39 – Financial Instruments

  25. IAS- 18 – Revenue Recognition

  26. IAS 19 – Employee Benefits Corridor Approach: A range of plus or minus 10% around the Company's best estimate of post-employment benefit obligations. Outside that range, it is not reasonable to assume that actuarial gains or losses will be offset in future years.

  27. IAS 12 – Income Taxes

  28. IAS 1 – Presentation • IAS 1 does not lay down any format of financial statements • Minimum items to be presented on face and in notes are laid down • Presentation more governed by substance; rather than form • Preference shares to be classified as liability vs. equity based on substance • Portion of long-term loans payable with in twelve months to be presented as current

  29. Disclosures • IFRS prescribes extensive disclosures as compared to Indian GAAP • Few examples of additional disclosures required which may require substantial additional work • Critical judgements made by the management • Key sources of estimation uncertainty • Capital management policy and data • Standards/ interpretations issued but not yet effective and their impact • Determination of fair values and key assumptions used about the same • Sensitivity analysis of fair values • Various risks to which an entity is exposed, policies for management of such risks and quantitative date relating thereto

  30. Some interesting facts ! On 6 September 2007, the IASB issued a revised IAS 1 Presentation of Financial Statements. The main changes from the previous version are to require that an entity must: • present all non-owner changes in equity (that is, 'comprehensive income' ) either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income may not be presented in the statement of changes in equity. • present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies an accounting • 'balance sheet' will become 'statement of financial position' • 'income statement' will become 'statement of comprehensive income' • 'cash flow statement' will become 'statement of cash flows'.

  31. Books on IFRS that one may refer The list of reference books for IFRS are as follows: 1. International Financial Reporting Standards (IFRSs) - published by Taxmann Publications P Ltd. 2. A Guide through International Financial Reporting Standards July 2008- Published by IASB. 3. IFRS : A Quick Reference Guide by Robert Kirk 4. Wiley IFRS: Practical implementation guide and workbook by Abbas Ali Mirza, Graham J. Holt and Magnus Orrell 5. Wiley IFRS 2008: Interpretation and application of International Accounting and Financial Reporting Standards 2008 by Eva K. Jermakowicz In addition to the above, the following books can also be used for reference. 1. The IFRS Manual of Accounting authored by the UK Accounting Consulting Services team of PricewaterhouseCoopers LLP and published by CCH. 2. International GAAP® 2009 by Ernst and Young, published by Wiley.

  32. Thank You ! Rammohan N Bhave 9322249833 and 9004043365 mohanbhave@gmail.com

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