1 / 93

IFRS in India

Agenda. Global Convergence of Accounting StandardsIFRS StandardsConvergence of Indian Accounting Standards with IFRSIFRS ResourcesIFRS Vs Indian GAAP major items (separate presentation).. 2. GLOBAL CONVERGENCE. of ACCOUNTING STANDARDS. 3. Convergence Drivers. Capital MarketsRegulatory requ

silvio
Download Presentation

IFRS in India

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

    2. Agenda Global Convergence of Accounting Standards IFRS Standards Convergence of Indian Accounting Standards with IFRS IFRS Resources IFRS Vs Indian GAAP major items (separate presentation). 2

    3. GLOBAL CONVERGENCE of ACCOUNTING STANDARDS 3

    4. Convergence Drivers Capital Markets Regulatory requirements Internal controls Performance evaluation 4

    5. IFRS Objective Principles based high quality global standards Emphasis on relevance and disclosures 5

    6. IFRS Adoption Approximately 100 countries have adopted or are in the process of adoption Status of adoption by some countries which compete with India for capital allocation: 6

    7. Europe moved to IFRSs from 1/1/2005 with about 8000 EU listed companies mandated Non-EU listed companies allowed to use GAAPs of US, Japan, China, S Korea, and India, other countries to use IFRS – Review in 2011 EU member states may require IFRSs for non-listed companies and to separate company statements European Commission has so far endorsed all IASs, IFRSs and all interpretations (except some recent amendments) Use of IFRSs in Europe

    8. Use of IFRSs in Canada Currently Canadian companies listed in US may use US GAAP for domestic reporting and foreign issuers are allowed to use IFRSs From 1 January 2011, all Canadian public entities must use IFRSs Early adoption is permitted on case-by-case basis by securities regulator Not-for-profit and pension plans are not required to transition to IFRSs

    9. IFRS Adoption BIGGEST STAMP OF APPROVAL Securities and Exchange Commission (SEC), United States of America have permitted Foreign Private Issuers to file IFRS compliant financial statements (as promulgated by the IASB) without reconciliation to US GAAP SEC has issued a proposed roadmap to assess whether US domestic registrants should be permitted to use IFRS 9

    12. The Global Move Towards IFRS

    15. IFRS in India On April 5, 2010 Amendment to listing Agreement provides the option of adoption of International Financial Reporting Standards (IFRS) by listed entities having subsidiaries while declaring Consolidated results/financial statements Standalone results will be as per the existing Indian GAAP

    16. IFRS in India On January 22, 2010 MCA has released Road Map for convergence with IFRS – For large Companies

    17. IFRS in India – Phase I The following categories of companies will convert their opening balance sheets as at 1st April, 2011, if the financial year commences on or after 1st April, 2011 in compliance with the notified accounting standards which are convergent with IFRS. These companies are:- a.   Companies which are part of NSE – Nifty 50 b.   Companies which are part of BSE - Sensex 30 c.   Companies whose shares or other securities are listed on stock exchanges outside India d.   Companies, whether listed or not, which have a net worth in excess of Rs.1,000 crores.

    18. IFRS in India – Phase II The companies, whether listed or not, having a net worth exceeding Rs. 500 crores but not exceeding Rs. 1,000 crores will convert their opening balance sheet as at 1st April, 2013, if the financial year commences on or after 1st April, 2013 in compliance with the notified accounting standards which are convergent with IFRS.

    19. IFRS in India – Phase III Listed companies which have a net worth of Rs. 500 crores or less will convert their opening balance sheet as at 1st April, 2014, if the financial year commences on or after 1st April, 2014, whichever is later, in compliance with the notified accounting standards which are convergent with IFRS.

    20. IFRS in India – Road map When the accounting year ends on a date other than 31st March, the conversion of the opening Balance Sheet will be made in relation to the first Balance Sheet which is made on a date after 31st March.

    21. IFRS in India – Road map Companies which fall in the following categories will not be required to follow the notified accounting standards which are converged with the IFRS (though they may voluntarily opt to do so) but need to follow only the notified accounting standards which are not converged with the IFRS. These companies are: - (a)            Non-listed companies which have a net worth of Rs. 500 crores or less and whose shares or other securities are not listed on Stock Exchanges outside India. (b)             Small and Medium Companies (SMCs).

    22. IFRS in India – Road map The draft of the Companies (Amendment) Bill, proposing for changes to the Companies Act, 1956 will be prepared incorporating the recommendation of Sub-Group 1 Report.

    23. IFRS in India – Road map Revised Schedule VI to the Companies Act, 1956 according to the converged Accounting Standards has been submitted by the ICAI to NACAS which, after review, will submit to the Ministry. Amendments to Schedule XIV will also be made in a time bound manner.

    24. IFRS in India – Road map In respect of the converged Accounting Standards, the Chairman of the Accounting Standards Board of ICAI will submit the converged version of Accounting Standards to NACAS from time to time for recommendations and onward submission to Ministry. However, convergence of all the accounting standards will be completed by ICAI and NACAS will submit its recommendations to the Ministry.

    25. IFRS in India – Road map Roadmap recommended by Core Group of MCA in respect of insurance companies, banking companies and non-banking finance companies. Insurance companies:- All insurance companies will convert their opening balance sheet as at 1stApril, 2012 in compliance with the converged Indian Accounting Standards.

    26. IFRS in India – Road map Banking companies:- (a) All scheduled commercial banks and those urban co-operative banks(UCBs) which have a net worth in excess of Rs. 300 crores will convert theiropening balance sheet as at 1st April, 2013 in compliance with the first set ofAccounting Standards (i.e. the converged Indian Accounting Standards).

    27. IFRS in India – Road map Banking companies:- (b) Urban co-operative banks which have a net worth in excess of Rs. 200crores but not exceeding Rs. 300 crores will convert their opening balance sheets as at 1st April, 2014 in compliance with the first set of Accounting Standards (i.e. the converged Indian Accounting Standards).

    28. IFRS in India – Road map Banking companies:- (c) Urban co-operative banks which have a net worth not exceeding Rs. 200crores and Regional Rural banks (RRBs) will not be required to apply the first set of Accounting Standards i.e. the converged Indian Accounting Standards(though they may voluntarily opt to do so) and need to follow only the existing notified Indian Accounting Standards which are not converged with IFRSs.

    29. IFRS in India – Road map NON-BANKING FINANCE COMPANIES

    30. IFRS in India – Road map NON-BANKING FINANCE COMPANIES Unlisted NBFCs which have a net worth of Rs. 500 crores or less will not be required to apply the converged Indian Accounting Standards.

    31. Clarification issued MCA on the certain issues in the Roadmap 31

    32. MCA Clarifications The Ministry of Corporate Affairs issued clarification on the following issues in the IFRS Roadmap on 4th May 2010: Determination of Applicability Applicability for entities that are subsidiaries, joint ventures or associates of companies covered under the convergence roadmap. Discontinuing use of the first set of Accounting Standards (Converged Accounting Standards) Calculation of net worth Removal of options 32

    33. MCA clarifies on: Determination of Applicability Whether companies can voluntarily opt to provide comparative figures for 2010-11 in accordance with the converged Accounting Standards? 33

    34. MCA clarifies on: Determination of Applicability Previous year figures - Clarification: Companies should show previous years’ figures as per the F/s for 2010-11. Option available to add an additional column to indicate what the figures could have been if the Converged Accounting Standards had been applied in the previous year Companies which make this additional disclosure, for this purpose, convert their opening balance sheet as the date on which this pervious year commences and in that case, a further conversion of the opening balance sheet for the year for which the F/s are prepared will not be necessary. 34

    35. MCA clarifies on: Determination of Applicability Whether companies covered in 2nd / 3rd phase for application of the converged Accounting Standards can voluntarily opt to apply the same w.e.f accounting year beginning 1st April 2011? 35

    36. MCA clarifies on: Determination of Applicability Clarification: Companies in the 2nd / 3rd phase will have an option for application of the Converged Accounting Standards only for the financial year commencing on 1st April 2011 or thereafter 36

    37. MCA clarifies on: Determination of Applicability What is the cut-off date on which the criterion set out in the roadmap shall be applied in order to determine the companies falling in each of the four categories which will convert their opening balance sheet as at 1st April 2011 in compliance with the converged accounting standards 37

    38. MCA clarifies on: Determination of Applicability Clarification: The date of determination of the criteria is the Balance Sheet as at 31st March 2009; OR the first Balance Sheet prepared thereafter when the accounting year ends on another date. 38

    39. MCA clarifies on: Determination of Applicability What is the cut-off date on which the criterion set out in the roadmap shall be applied in order to determine the scheduled commercial banks/urban co-operative banks/NBFCs falling in each of the categories (as set out in the roadmap for Banks and NBFCs) which will convert their opening balance sheet as at 1st April 2013 in compliance with the converged Accounting Standards? 39

    40. MCA clarifies on: Determination of Applicability Clarification: The date of determination of the criteria is the Balance Sheet as at 31st March 2011; OR the first Balance Sheet prepared thereafter when the accounting year ends on another date. 40

    41. MCA clarifies on: Status of subsidiaries, JVs and Associates of entities who are covered under roadmap Whether it would be permissible for the companies which are not individually covered under the phasing plan for application of the Converged Accounting Standards to voluntarily opt for application of the Converged standards even for their standalone F/s? 41

    42. MCA clarifies on: Status of subsidiaries, JVs and Associates of entities who are covered under roadmap Clarification: Criteria to be considered for each company’s standalone accounts Companies covered in a particular phase having subsidiaries, JVs or associates not covered in those phases will prepare consolidate F/s according to Converged Accounting Standards One of more companies in a group will continue to prepare F/s in accordance with the Accounting Standards applicable to the particular phase to which it belongs but parent will need to make amendments to these accounts in order to consolidate as per Converged Accounting Standards Such subsidiaries, JVs or associates may have the option to early adopt the Converged Accounting Standards. 42

    43. MCA clarifies on: Discontinuing use of Converged Accounting Standards Does a company have the option to go back to preparing F/s in accordance existing Indian Accounting Standards if it no longer satisfies the specified criteria in the future? Clarification: No. Once a company starts following the Converged Accounting Standards on the basis of the eligibility criteria, it will be required to follow such Accounting Standards for all the subsequent financial statements even if any of the eligibility criteria does not subsequently apply to it. 43

    44. MCA clarifies on: Calculation of Net worth Rules for calculation of qualifying net worth Clarification: Networth will be calculated as per audited balance sheet of the company as at 31st March 2009 or first balance sheet for accounting periods which ends after that date Networth = Share Capital + Reserves – Revaluation Reserves – Miscellaneous Expenditure – Debit Balance in Profit and Loss A/c For companies which are not in existence on 31st March 2009, networth will be calculated on the basis of the first balance sheet ending after that date. 44

    45. MCA clarifies on: Calculation of Networth Rules for calculation of qualifying networth recommended to Scheduled Commercial Banks / Urban Cooperative Banks / NBFCs Clarification: Networth will be calculated as per audited balance sheet of the Bank / NBFC as at 31st March 2011 or first balance sheet for accounting periods which ends after that date Networth = Share Capital + Reserves – Revaluation Reserves – Miscellaneous Expenditure – Debit Balance in Profit and Loss A/c For Banks / NBFCs which are not in existence on 31st March 2009, networth will be calculated on the basis of the first balance sheet ending after that date. 45

    46. MCA clarifies on: Removal of Options Situation where Notified Converged Accounting Standards ARE NOT fully consistent with IAS / IFRS Clarification: Companies will follow the first set of Accounting Standards i.e. the Converged Accounting Standards and NOT IFRS. 46

    47. Regulatory updates

    48. Steps to reduce inconsistencies between regulations

    49. MCA Actions Formation of a Core Group Formation of Sub-group on Accounting and a CFO sub-group Public statements by Minister and officials indicating an increased sense of urgency

    50. Action Steps Changes required in legislations Accounting Standards standards on new subjects Conceptual changes Disclosure changes Language changes Training and accreditation Enabling infrastructure Regulatory oversight

    51. Convergence Status Exposure drafts on most of the converged standards have been released for public comments by ICAI 51

    52. IFRS Hierarchy International Accounting Standards Committee Foundation. The body which oversees the International Accounting Standards Board. International Accounting Standards Board (IASB). The body which sets International Financial Reporting Standards (IFRS) and approve interpretations International Financial Reporting Interpretations Committee (IFRIC). Responsible for interpretation of standards and issue guidance on issues that have not yet been addressed by standards. The Standards Advisory Council (SAC). Forum to provide broad strategic advice on IASB’s agenda priorities and insight into costs and benefits of projects.

    53. IFRS Hierarchy Statements International Accounting Standards (IAS) International Financial Reporting Standards (IFRS) Standard Interpretations (SIC) International Financial Reporting Interpretations (IFRIC)

    54. IFRS Structure The term “IFRSs” currently comprises of: 9 IFRSs, 29 IASs (originally 41), 18 IFRIC and 11 SIC interpretations, plus the Framework There are 15 new standards and major projects for which exposure drafts are issued Final SME standard was been issued in July 2009. 8 existing standards are being amended for which exposure drafts are issued

    55. IFRS - Standards Preface to International Financial Reporting Standards Framework for the Preparation and Presentation of Financial Statements

    56. IFRS – Standards Contd. IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 2 Share-based Payment IFRS 3(2008) Business Combinations

    57. IFRS – Standards Contd. 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

    58. IFRS – Standards Contd. IFRS 8 Operating Segments* IFRS 9 Financial Instruments - Assets * Annual periods beginning on or after 1 January 2009. Supersedes IAS 14 from that date, or date of earlier application.

    59. IFRS – Standards Contd. IAS 1(2007) Presentation of Financial Statements IAS 2 Inventories IAS 7 Statement of Cash Flows IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

    60. IFRS – Standards Contd. IAS 10 Events after the Reporting Period IAS 11 Construction Contracts IAS 12 Income Taxes IAS 16 Property, Plant and Equipment

    61. IFRS – Standards Contd. IAS 17 Leases IAS 18 Revenue IAS 19 Employee Benefits IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

    62. IFRS – Standards Contd. IAS 21 The Effects of Changes in Foreign Exchange Rates IAS 23 Borrowing Costs IAS 24 Related Party Disclosures IAS 26 Accounting and Reporting by Retirement Benefit Plans

    63. IFRS – Standards Contd. IAS 27(2008) Consolidated and Separate Financial Statements IAS 28 Investments in Associates IAS 29 Financial Reporting in Hyperinflationary Economies IAS 31 Interests in Joint Ventures

    64. IFRS – Standards Contd. IAS 32 Financial Instruments: Presentation IAS 33 Earnings per Share IAS 34 Interim Financial Reporting IAS 36 Impairment of Assets IAS 37 Provisions, Contingent Liabilities and Contingent Assets

    65. IFRS – Standards Contd. IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property IAS 41 Agriculture

    66. Benefits of IFRS Adoption Access to capital markets One financial language across different locations Reduction in cost of capital Improved internal controls 66

    67. IFRS CONVERSION ISSUES 67

    68. Business and organisational considerations IFRS impact beyond financial statements Most aspects of the business can be affected: Processes and systems Operations Tax Treasury Examples include impact on: Debt covenants Compensation plans Revenue contracts Joint ventures and alliances Investor communication

    69. IFRS Implementation Issues

    70. 70

    71. 71

    72. 72

    73. 73

    74. Potential tax implications Definition of “taxable profits”, follow accounting rules? Major accounting principles adopted: Mark-to-market basis for valuation Flow through P&L accounts for most items Both unrealized gains and loss will appear in profit and loss account Items may cause material impact: Financial instruments Share-based payments Investment properties Income taxes Revenue recognition Potential business issues 74

    75. Management information Forecasts and internal performance measurements may no longer be comparable with results reported in FS (eg fair value change) Making forecast more difficult Human resources & training Training will be required throughout the organization, but not just for finance dept Existing skills may not be adequate to tackle IFRS related issues ? need to be supplemented externally or by recruitment Potential business issues 75

    76. 76

    77. 77

    78. 78

    79. 79

    80. IFRS Conversion Approach 80

    81. 81

    82. IFRS Resources IASB website http://www.iasb.org/Home.htm ICAI’s website http://www.icai.org/ 82

    83. Deloitte IFRS Resources 83

    84. 84

    85. www.iasplus.com Day by day past news back to December 2000 (a new page updated almost daily); Detailed summaries of all Standards and Interpretations; E-Learning modules; Model IFRS financial statements and disclosure checklists; Comparisons of IFRS and various national GAAPs; Deloitte IFRS publications; and much more…… 85

    86. IFRS e-Learning 86

    87. e-Learning – IAS 40 “Home page” 87

    88. IFRS in your pocket 2009 Free at www. iasplus.com 88

    89. Model IFRS Financial Statements for 2009 Free at www. iasplus.com 89

    90. THOUGHT LEADERSHIP 90

    91. Experience Learned Be Strategic. Accounting choices and a principles based approach provides opportunity. The business will be impacted. Taxes. Systems. Debt Covenants. Dividends. Earnings. MIS. The reach of IFRS can be widespread. Execution counts. Understanding concepts is only the beginning. Striking the numbers and documenting your position requires a very large effort. Communication is critical. Internal communication across your business is needed. External communication with all stakeholders is important. Don’t forget the analysts! Disclosures require a lot of effort. Don’t leave this until it’s too late. The information requirements are extensive. 91

    92. Key considerations for Industries Impact on P&L and Net worth Market valuation Global image More business True picture IFRS is much more than an accounting matter.

    93. Deloitte Haskins & Sells 93

    94. Thank you 94 Deloitte Haskins & Sells

More Related