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IFRS
Lecture Outcomes
• Describe the concept of IFRS,
• Apprehend the features and elements of
financial statements
• Compare and contrast between IFRS and
GAAP
What is it???
Masaa' alkhayr
It means-
Good morning
• It is an Arabian language which you find
difficult in understanding but Good
morning you easily understood.
Why?????
• Because you have the knowledge of
English language.
• Similarly, Accounting is the language of
business.
• You should have knowledge of this
business language to understand it.
• There are certain rules which is to be
followed in a particular language. For e.g :
In case of english, is/am is used with
singular and are is used with plural.
• Similarly, Accounting also has certain
certain rules which is required to be
followed.
GAAP-Introduction
• Accounting is the language of business. It
communicates the results and state of
affairs.
• This language follows some accounting
principles.
Concepts
Accounting
principles
Set of
conventions
• Accounting principles are accepted
worldwide or by different countries, are
known as GAAP
GAAP
NATIONAL
New
version of
AS
E.g. AS
(followed by
INDIA)
US-GAAP
(followed by
US)
INTERNATI
ONAL
E.g. IAS
(followed by
UK &
EUROPEAN
countries)
IND AS
(followed by
INDIA only)
prepared in line
with IFRS
IFRS
New
version of
IAS
IFRS-Introduction
 is a set of accounting standards
developed by an independent, not-forprofit organization called the International
Accounting Standards Board (IASB).
 It provides general guidance for the
preparation of financial statements, rather
than setting rules for industry-specific
reporting.
NEED OF ADOPTING IFRS
Globalization
International Acquisitions
100% Uniformity
 Attract International Investment
INDIA
DEVELOPING
COUNTRIES
NEEDS TO
DEVELOP
INFRASTRUCTURE
NEEDS FUNDS
INTERNATIONAL
CAPITAL CAN BE
HELPFUL
IFRS COMPLIANT
1. IFRS adopt: countries are adopting IFRS
as it is.
2. IFRS converge: countries are preparing
own standards but in line with IFRS.
3. On 16th Feb, 2015, MCA notified
Companies Rules 2015 which are in line
with IFRS
4. Date of applicability of IND-AS
VOLUNTARY
ADOPTION----
1-4-2015
MANDATORY
ADOPTION---PHASE I…1-4-2016
PHASE II…1-4-2017
VOLUNTARY ADOPTION
• IND AS was voluntary adopted by
companies w.e.f. 1-4-2015
• Companies could opt in but couldn’t opt
out
• If a company opts for IND AS w.e.f. 1-42015, its holding, subsidiary, associate
and joint venture will have to mandatorily
follow IND AS
INDIAN COMPANIES
(CONVERGED)
 IT Sector……….INFOSYS, WIPRO, NIIT
 Auto Sector……MAHINDRA &
MAHINDRA, TATA MOTORS
 Textile………BOMBAY DYEING
 Pharma……..Dr. REDDY’s LAB
 Telecom……..BHARTI AIRTEL
• Comparative financial statement
Particulars
Current year (CY)
Previous year (PY)
2015-16
2014-15
IND AS
Will have to apply IND AS
for PY or for comparison
MANDATORY ADOPTION
TRANSITION PHASE
Big companies have to
follow IFRS
Small companies are
not required to follow
for the time being, but
later on, it will be
mandatory to follow for
all
PHASE I
• All the companies (whether listed or
unlisted at any stock exchange) having net
worth of Rs.500 crore or more, should
adopt IND AS in this phase.
• If IND AS is applied on any company, then
its holding, subsidiary etc. have to
mandatorily be adopted irrespective of its
net worth.
• Comparative financial statement
Particulars
Current year (CY)
Previous year (PY)
2016-17
2015-16
IND AS
Will have to apply IND AS
for PY or for comparison
PHASE II
• All listed companies having net worth less
than 500 crores and,
• All unlisted companies having net worth
greater than 250 crores, should adopt IND
AS
• If IND AS is applied on any of the
company then its holding, subsidiary etc.
will have to mandatorily adopt it.
• Comparative financial statement
Particulars
Current year (CY)
Previous year (PY)
2017-18
2016-17
IND AS
Will have to apply IND AS
for this year or for
comparison
ADVANTAGES OF
CONVERTING TO IFRS
1. It allows for greater comparability
2. It is beneficial to international investors.
3. Companies may also benefit by using
IFRS if they wish to raise capital abroad.
Cont….
4. By adopting IFRS, a business can present
its financial statements on the same basis
as its foreign competitors, making
comparisons easier.
5. Furthermore, companies with subsidiaries
in countries that require or permit IFRS
may be able to use one accounting
language company-wide.
DISADVANTAGES OF
ADOPTING IFRS
1. It requires high costs.
2. It is prone to manipulation.
3. It is not accepted by all the countries.
COMPARISON BETWEEN
INDIAN GAAP AND IFRS
BASIS
INDIAN GAAP(AS)
IFRS
COMPONENTS OF
FINANCIAL
STATEMENT
 Balance Sheet
 Statement of Profit
and Loss
 Cash Flow
statement
 Notes to accounts
 Statement of
financial position
 Statement of
comprehensive
income
 Statement of
change in equity
 Statement of cash
flow
PRESENTATION AND
PREPARATION
 The Companies Act,  There is no
1956prescribed format prescribed rigid
of Balance
format
Sheet(Schedule VI)
BASIS
INDIAN GAAP(AS)
IFRS
PARENT COMPANY
 Any company
holding 51% or more
share of subsidiary
 Any company
having control on
decision making or
control on the
ownership of other
company
PROPOSED DIVIDEND  The companies are
required to make
provision for
proposed dividend
CONVERTIBLE
DEBENTURES
 Long term debt
 IAS 10 provides that
proposed dividend
should not be shown
as a liability when
proposed or declared
after the balance
sheet date.
 Shareholder’s fund
Which company from textile
industry has converged to
IFRS?
A. Vardhman
B. JCT Mills
C. Bombay dying
D. Fab India ltd
• C
There were ____ phases in
convergence to IFRS
A. 2
B. 3
C. 4
D. 1
• A
According to IFRS, income
Statement is known as
A. Statement of comprehensive income
B. Income Statement
C. Profit and loss account
D. Statement of changes in equity
• A
Which additional statement is
prepared as per IFRS???
• Statement of change in equity