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Overview of Ifrss-Global Gaaps

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Overview of IFRSs-

Global GAAPs
Basic
 What is accounting?
 What is a standard?
 What is a accounting standard?

 What is GAAP?
 How Many types of International accounting
standards are there ?
 How many types of GAAPs are there?

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IFRS- Meaning
 both a narrow and a broad meaning.
 Narrowly, IFRSs refers to the new numbered series of
pronouncements that the IASB is issuing, as distinct
from the International Accounting Standards (IASs)
series issued by its predecessor.
 More broadly, IFRSs refers to the entire body of
IASB pronouncements, including standards and
interpretations approved by the IASB and IASs and
SIC interpretations approved by the predecessor
International Accounting Standards Committee.

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Bodies Associated with IFRS
 International Accounting Standard Board
 Based in London.
 Formed in 2001.
 Funded by IASC Foundation
 Consist of 14 members
 overseen by the 22 Trustees of the International Accounting Standards
Committee (IASC) Foundation.
 Standards Advisory Council
 Advises IASB
 Comprises 40 members
 International Financial Reporting Interpretation Committee
 Established in March 2002
 Replaced Standing Interpretation Committee
 Assists IASB
 Fourteen Voting Members

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Contents of IFRS Literature
 Preface to IFRS
 Framework for the Preparation and
Presentation of Financial Statements
 37 : Main Standards i.e. 8 IFRS + 29 IAS
 26 Interpretations i.e. 15 IFRIC + 11 SIC
[IFRIC 3 withdrawn in June 2005]

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Need for IFRS
A single set of accounting standards would enable internationally
 to standardize training and assure better quality of accounting
profession
 it would also permit international capital to flow more freely
 enabling companies to develop consistent global practices on
accounting problems.
 It would be beneficial to regulators as a complexity associated with
needing to understand various reporting regimes would be reduced.
 Enhance comparability between financial statements of various
companies across the globe
 Reduce time and resources required to prepare different set of
accounts for companies listed in various exchanges of the world and
for companies having global group companies.

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Objective of IFRS
 to develop, in the public interest, a single set of high quality,
understandable and enforceable global accounting standards
that require high quality, transparent and comparable
information in financial statements and other financial
reporting to help participants in the world's capital markets
and other users make economic decisions;
 to promote the use and rigorous application of those standards;
 to take account of the special needs of small and medium-
sized entities and emerging economies.
 to bring about convergence of national accounting standards
and International Accounting standards and IFRS to high
quality solutions.

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Scope of IFRS
1. IASB Standards are known as International Financial Reporting Standards
(IFRSs). All International Accounting Standards (IASs) and Interpretations
issued by the former IASC (International Accounting Standard Committee)
and SIC (Standard Interpretation Committee) continue to be applicable unless
and until they are amended or withdrawn.
2. IFRS set out recognition, measurement, presentation and disclosure
requirements of transaction and events in general purpose financial statements.
3. IFRSs apply to the general purpose financial statements and other financial
reporting by profit-oriented entities -- those engaged in commercial, industrial,
financial, and similar activities, regardless of their legal form.
4. Entities other than profit-oriented business entities may also find IFRSs
appropriate.

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Scope …….
5. General purpose financial statements are intended to meet the
common needs of shareholders, creditors, employees, and the
public at large for information about an entity's financial position,
performance, and cash flows.
6. Other financial reporting includes information provided outside
financial statements that assists in the interpretation of a complete
set of financial statements or improves users' ability to make
efficient economic decisions.
7. IFRS apply to individual company and consolidated financial
statements.
8. A complete set of financial statements includes a balance sheet,
an income statement, a cash flow statement, a statement showing
either all changes in equity or changes in equity other than those
arising from investments by and distributions to owners, a
summary of accounting policies, and explanatory notes.

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Scope …………..
9. If an IFRS allows both a 'benchmark' and an 'allowed alternative'
treatment, financial statements may be described as conforming to IFRS
whichever treatment is followed.

10. In developing Standards, IASB intends not to permit choices in accounting


treatment. Further, IASB intends to reconsider the choices in existing IASs
with a view to reducing the number of those choices.

11. IFRS will present fundamental principles in bold face type and other
guidance in non-bold type (the 'black-letter'/'grey-letter' distinction).
Paragraphs of both types have equal authority.

12.IAS 1 provides that, the conformity with IAS requires compliance with
every applicable IAS and Interpretation requires compliance with all IFRSs
as well.

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IASB Framework

Objectives of
financial statements

Qualitative characteristics of IAS


Capital and financial statements
capital maintenance

Elements of the
financial statements
-Definition
-Recognition
-Measurement
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Framework
 The IASB Framework was approved by IASC Board in April,
1989 for publication in July 1989, and adopted by the IASB in
April, 2001.
 The framework :
 Defines the objective of financial statements;
 Identifies the qualitative characteristics that make
information in financial statements useful; and
 Defines the basic elements of financial statements and
the concepts for recognising and measuring them in
financial statements

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LIST OF IFRS
1. IFRS 1 First-time Adoption of International Financial Reporting
Standards
2. IFRS 2 Share-based Payment
3. IFRS 3 Business Combinations
4. IFRS 4 Insurance Contracts
5. IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations
6. IFRS 6 Exploration for and evaluation of Mineral Resources
7. IFRS 7 Financial Instruments: Disclosures
8. IFRS 8 Operating Segments

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International Accounting standards
[IAS]
1. IAS 1 Presentation of Financial Statement
2. IAS 2 Inventories
3. IAS 7 Statement of Cash Flow
4. IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors
5. IAS 10 Events after Reporting Period
6. IAS 11 Construction Contracts
7. IAS 12 Income Tax
8. IAS 16 Plant, Property and Equipment
9. IAS 17 Leases
10. IAS 18 Revenue
11. IAS 19 Employee Benefits

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Index…………….
12. IAS 20 Accounting for Government Grants and Disclosure of
Government Assistance
13. IAS 21 The Effect of Change in Foreign Exchange Rates
14. IAS 23 Borrowing Costs
15. IAS 24 Related Party Disclosures
16. IAS 26 Accounting and Reporting by Retirement Benefit Plans
17. IAS 27 Consolidated and Complete Financial Statements
18. IAS 28 Investment in Associates
19. IAS 29 Financial Reporting in Hyper Inflationary Economies
20. IAS 31 Interest in Joint Venture

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21. IAS 32 Financial Instrument: Presentation
22. IAS 33 Earning per Share
23. IAS 34 Interim Financial Reporting
24. IAS 36 Impairment of Assets
25. IAS 37 Provisions, Contingent Liability and Contingent
Assets
26. IAS 38 Intangible Assets
27. IAS 39 Financial Instrument: Recognition and
Measurement\
28. IAS 40 Investment Property
29. IAS 41 Agriculture

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Index of Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

IFRIC 2 Members’ Share in Co-operative Entities and Similar Instruments

IFRIC 4 Determining whether an Arrangement contains Lease

IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental


Rehabilitation Funds
IFRIC 6 Liabilities arising from Participation in a Specific Market- Waste Electrical and Electronic
Equipment
IFRIC 7 Applying restatement approach under IAS 29

IFRIC 8 Scope of IFRS 2

IFRIC 9 Reassessment of Embedded Derivative

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 IFRS 2- Group and Treasury Share Transaction

IFRIC 12 Service Concession Arrangements


IFRIC 13 Customer Loyalty Programmes
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Index of Interpretations……..
IFRIC 14 IAS 19- The Limit on a Defined Benefit Asset,
Minimum Funding Requirement and their Interaction
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 16 Hedges of a Net Investment in a Foreign Operation

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Index of Interpretations……..
SIC 7 Introduction of the EURO
SIC 10 Government Assistance- No Specific Relation to Operating Activities
SIC 12 Consolidation- Special Purpose Entities
SIC 13 Jointly Controlled Entities- Non Monetary Contribution by Venturers
SIC 15 Operating Lease- Incentives
SIC 21 Income Taxes- Recovery of Revalued Non Depreciable Assets
SIC 25 Income Taxes- Change in Tax Status of an Entity or its Shareholders
SIC 27 Evaluating the Substance of Transaction Involving the Legal Form of a
Lease
SIC 29 Service Concession Arrangements: Disclosures

SIC 31 Revenue: Barter Transaction Involving Advertising Services


SIC 32 Intangible Assets- Web Site Costs
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KEY DATA
 Totals for Listed Companies, for 162 jurisdictions:
 IFRSs not permitted — 34
 IFRSs permitted —
24
 IFRSs required for some —
4
 IFRSs required for all — 85 *
 No stock exchange — 15
*Includes 30 EU/EEA member states and 4 jurisdictions that
have adopted full IFRS equivalents

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KEY DATA…
Of the 113 jurisdictions (24 + 4 + 85) that permit or require
IFRSs
 In 80 jurisdictions the audit report refers to conformity with
IFRSs
 In 30 jurisdictions the audit report refers to conformity with
IFRSs as adopted by the EU
 In 1 jurisdiction (NZ) the audit report refers to local GAAP or
to IFRSs as adopted in the jurisdiction
 In 1 jurisdiction (HK) the audit report for some companies
refers to local GAAP and for other companies it refers to
IFRSs
 For 1 jurisdiction (Brazil) we do not have this information

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 Australia, New Zealand, China, Singapore, Japan, Middle East,
Africa and the European Union have either adopted or are
converging to IFRS.
 The eminent status to IFRS came about after the EU made it
mandatory for all its listed companies starting 2005.
 Consequently, more than 8,000 EU-listed companies adopted IFRS
in one go.
 US capital markets are losing their attractiveness as a result of what
many view as excessive regulation. As a consequence, many believe
that the predominance of US GAAP as a standard may be coming to
an end. This could make large companies look at other capital
markets, and in many of those capital markets IFRS are accepted.
 More than 1,100 Chinese companies have recently switched over to
new accounting standards bringing their books in line with
international norms

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Classification of IFRSs
 Financial Statements
 Assets
 Liabilities
 Revenue
 Expenditure
 Recognition & Measurement
 Disclosure & Presentation
 Industry Specific IFRSs
 Others

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Financial Statements

 IAS 1 Presentation of Financial Statements


 IAS 7 Cash flow statements

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Business Combinations & Group
Reporting
 IAS 27 Consolidated financial statements and
accounting for investments in subsidiaries
 IFRS 3 Business Combinations

 IAS 28 Investments in associate

 IAS 31 Financial reporting of interest in joint


venture

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Financial Instruments

 IAS 32 Financial instruments – presentation


 IAS 39 Financial instruments – recognition and
measurement
 IFRS 7 Financial instruments - disclosures

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Assets
 IAS 38 Intangible assets
 IAS 16 Property, plant and equipment
 IAS 40 Investment property
 IAS 23 Borrowing costs
 IFRS 5 Non – current assets held for sale and discontinued
operations
 IAS 2 Inventories

 IAS 41 Agriculture
 IAS 20 Accounting for grants and disclosure of
government assistance
 IAS 17 Leases

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Liabilities
 IAS 12 Income taxes
 IAS 37 Provisions,Contingent Liabilities and
Contingent Assets

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Recognition & Measurement
 IAS 21 The Effect of Changes in Foreign
Exchange Rates
 IAS 36 Imapirement of Assets
 IAS 10 Events after the balance sheet date

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Disclosure & Presentation
 IFRS 8 Operating Segments
 IAS 33 Earnings Per Share
 IAS 24 Related Party Disclosures

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Revenue
 IAS 9 Revenue
 IAS 11 Construction Contracts

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Expenses
 IAS 19 Employee Benefits
 IAS 2 Share Based Payments

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Others
 IFRS 1 First –time Adoption of International
Financial Reporting Standards
 IAS 29 Financial Reporting In
Hyperinflationery Economies
 IAS 34 Interim Financial Reporting

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Industry Specific IFRSs
 IFRS 4 Insurance Contracts
 IFRS 6 Exploration for and Evaluation of
Mineral Resources
 IFRIC 12 & SIC 29 Service Concession
Arrangements

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Framework of Financial Statements
 Fundamental Assumptions

 Qualitative Characteristics of Financial


Statements
 Components of Complete set of Financial
Statements
 Elements of Financial Statements

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Presentation of FS
 Statement of Financial Position
 Current / Non-Current

 Liquidity

 Statement of Comprehensive Income


 Function of Expense

 Nature of Expense

 Retrospectiveapplication for Change in


Accounting Policy and Prior Period Errors
 Proposed Dividends

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Recognition and Measurement of Assets
 Types of Assets other than for specialised industries
 IAS 2, IAS 16, IAS 17, IAS 39, IAS 38, IAS 40, IAS 41,
IFRS 5
 Initial Measurement
 IAS 2, IAS 16, IAS 17, IAS 39, IAS 38, IAS 40, IAS 41,
IFRS 5
 Subsequent Measurement
 IAS 2, IAS 16, IAS 17, IAS 39, IAS 38, IAS 40, IAS 41,
IFRS 5, IAS 36, IAS 23, IAS 20
 Effect of Change in Method of Depreciation / Amortisation
 Derecognition

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Recognition & Measurement of Liabilities
 Income Taxes IAS 12

 Employee Benefits IAS 19

 Provisions IAS 37

 Share Based Payment IFRS 2

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Revenue Recognition Principles
 Measurement at Fair Value of the
Consideration Received
 Cost should be clear

 No continuing managerial involvement

 Interest on the basis of effective interest


method

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Recognition & Measurement of Financial
Instruments
 Definitions
 Financial Instrument

 Financial Asset

 Financial Liability

 Categories of Financial Asset

 Categories of Financial Liabilities

 Compound Financial Instruments

 Hedge Accounting

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SUBJECT IFRS US GAAP Indian GAAP

Accounting framework

Historical cost Generally uses historical cost, No revaluations except for Uses historical cost, but
but intangible assets, property certain types of financial property, plant and equipment
plant and equipment (PPE) and instruments. may be revalued to fair value.
investment property may be Certain derivatives are carried
revalued to fair value. at fair value.
Derivatives, biological assets No comprehensive guidance on
and certain securities are derivatives and biological
revalued to fair value. assets.

Components of Two years’ consolidated Similar to IFRS, except three Single-entity parent company
financial statements balance sheets, income years required for SEC (standalone) two years’ balance
statements, cash flow registrants (public companies) sheets, income statements, cash
statements, changes in equity for all statements except flow statements, and accounting
and accounting policies and balance sheet. policies and notes.
notes. Specific accommodations in Public listed company:
In limited circumstances or on a certain circumstances for Additionally are required to
voluntary basis, an entity may foreign private issuers that may prepare consolidated financial
present single-entity parent offer relief from the three-year statements along with the
company (standalone) financial requirement. standalone financial statements.
statements along with its
consolidated financial
statements.

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Balance sheet Does not prescribe a particular Entities may present either a Accounting standards do not
  format. A liquidity presentation classified or non-classified prescribe a particular format;
  of assets and liabilities is used, balance sheet. Items on the face certain items must be presented
  instead of a current/non-current of the balance sheet are on the face of the balance sheet.
  presentation, only when a generally presented in Formats are prescribed by the
liquidity presentation provides decreasing order of liquidity. Companies Act and other
more relevant and reliable US public companies should industry regulations like
information. Certain minimum follow SEC regulations. banking, insurance, etc.
items are presented on the face
of the balance sheet.

Income statement Does not prescribe a standard Present as either a single-step or Does not prescribe a standard
  format, although expenditure is multiple-step format. format; but certain income and
  presented in one of two formats Expenditures are presented by expenditure items are disclosed
  (function or nature). Certain function. in accordance with accounting
minimum items are presented US public companies should standards and the Companies
on the face of the income follow SEC regulations. Act.
statement. Industry-specific formats are
prescribed by industry
regulations.

Statement of Statement shows capital Similar to IFRS except that the No separate statement is
changes in share transactions with owners, the statement is presented as a required.
(stock) holders’ movement in accumulated primary statement; SEC rules Changes in shareholders’ equity
equity profit and a reconciliation of all allow certain information to be are disclosed in separate
  other components of equity. included in the notes and not in schedules of ‘Share capital’ and
  The statement is presented as a the primary statement. ‘Reserves and surplus’.
primary statement except when
a SoRIE is presented. In this
case, only disclosure in the
notes applies.

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Correction of errors Comparatives are restated and, Similar to IFRS. Restatement is not required.
if the error occurred before the The effect of correction is
earliest prior period presented, included in current-year income
the opening balances of assets, statement with separate
liabilities and equity for the disclosure.
earliest prior period presented
are restated.

Consolidation Based on voting control or A bipolar consolidation model Based on voting control or
model power to govern. Control is is used, which distinguishes control over the composition of
  presumed to exist when parent between a variable interest the board of directors or the
  owns, directly or indirectly model and a voting interest governing body.
through subsidiaries, more than model. Control exists when (a) parent
one half of an entity's voting Control can be direct or indirect owns, directly or indirectly
power. Control also exists when and may exist with a lesser through subsidiaries, more than
the parent owns half or less of percentage of ownership (voting one half of an entity's voting
the voting power but has legal interest model). ’Effective power or (b) it controls
or contractual rights to control, control’, which is a similar composition of an entity’s
or de facto control (rare notion to de facto control under board of directors so as to
circumstances). The existence IFRS, is very rare if ever obtain economic benefits from
of currently exercisable employed in practice. its activities.
potential voting rights is also The existence of currently
taken into consideration. exercisable potential voting
Special purpose entities (SPEs) rights is not taken into
controlled by an entity are also consideration.
consolidated.

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Types All business combinations are Similar to IFRS. No comprehensive accounting
acquisitions. standard on business
combinations.
All business combinations are
acquisition; except uniting of
interests method is used in
certain amalgamations when all
the specified conditions are
met. Accounting would defer
for following:
    An entity acquired and held
as a subsidiary
    An acquisition by way of
amalgamation of entity
    A business acquisition
(assets & liabilities only)

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USGAAP
 Generally Accepted Accounting Principles
(accounting rules) used in the United States to
prepare financial statements for publicly traded
companies and many privately-held companies.
 GAAP is not written in law, although the U.S.
Securities and Exchange Commission (SEC) requires
that it be followed in financial reporting by publicly-
traded companies.
 The Financial Accounting Standards Board (FASB)
sets the accounting principles for the profession.
 US GAAP provisions differ somewhat from
International Financial Reporting Standards

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FASB PRONOUNCEMENTS
1. Statements of Financial Accounting Standards - the most
authoritative GAAP setting publications.
2. Statements of Financial Accounting Concepts - first issued in
1978. They are part of the FASB's conceptual framework
project and set forth fundamental objectives and concepts that
the FASB use in developing future standards. However, they
are not a part of GAAP.
3. 7 Financial Accounting concepts issued till date

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Financial Accounting Standards
 OUT OF 163 FAS ISSUED TILL DATE
 46 STANDARDS WERE SUPERCEDED
 11 STANDARDS WERE RESCINDED
 IN 29 FURTHER AMENDEDMENTS WERE MADE 164
 And 36 were issued as amendments
 And in the balance 41 no changes were made

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Accounting Standards in India
 Accounting Standards issued by ICAI- [ AS 1 to 32]
 Companies (Accounting Standards) Rules, 2006 notifying
accounting standards 1-7 and 9-29, effective for
COMPANIES for accounting periods commencing on or
after 7 December 2006
 Accounting standards to be followed by any class of
assessees or in respect of any class of income – Sec 145(2)
of Income Tax Act,1961
 Government Accounting standards issued by Government
Accounting Standards Advisory Board
 Accounting standards for Local bodies issued by ICAI

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 Accounting Standards Board (ASB) of ICAI formed
on 21st April, 1977.
 As on date 32 Accounting standards have been
issued.
 Recognising the need for convergence with IFRS in
the country, ICAI has decided to fully converge with
IFRS issued by the IASB on or after April 1, 2011 for
the listed entities and other public interest entities
such as banks, insurance companies.

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Useful Websites

 International Accounting Standard Board-


http://www.iasb.org/Home.htm
 Website launched by Deloitte-
http://www.iasplus.com/index.htm
 Institute of Chartered Accountants of India-
http://www.icai.org/
 International Federation of Accountants-
http://www.ifac.org/
 Financial Accounting Standards Board-
http://www.fasb.org/

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Questions/ Suggestions/
Comments???

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