PRESENTED BY:
H. MD. ZAHEER
ASSISTANT MANAGER (FINANCE)
DIOM, DONIMALAI
PRESENT SCENARIO
• At Present NMDC is preparing Accounts as per the
Companies Act, 1956
• These are prepared based on Accounting Standards and
Guidance Notes issued by ICAI
• These are called INDIAN GAAP
• If we want to enter in to the business in another
country, we have to re-draft our Financial Statements as
per their Standards and Act.
•Example: MOU’s with Legacy Iron Ore Ltd, Australia,
OJSC Severstal-Russia)
•Hence to avoid the complexity IFRS is been introduced
What is IFRS?
• IFRS stands for “International Financial Reporting
Standards”.
• Standards and Interpretations issued
(International Accounting Standard Board).
by
IASB
• IFRS is a set of international accounting standards
stating how particular types of transactions and other
events should be reported in financial statements.
WHY IFRS ?
Company
Single Set of
Accounting
Standards
would enable
internationally
to standardise
and assure
better quality
on global screen
Government
It would also
permit
International
Capital to flow
more freely
Investors
It gives better
understanding to
Financial
Statements and
Assess the
investment
opportunities
other than home
Country
NEED FOR IFRS?
• FDI’s and FII’s are more comfortable with one global
accounting language which can be understood globally
(i.e., IFRS)
• IFRS works on Fair Value basis for PPE (Property, Plant
and Equipment), where as Indian GAAP works on
Historical cost for PPE
Applicability
• ICAI is of the view that IFRS to be adopted for public
interest entities such as listed Co, Banking Companies,
Insurance entities and large size entities from the
Accounting period beginning on or after April 2011. The
view is further strengthened by convergence process
being initiated by Ministry of Corporate Affairs.
• For this purpose, public interest entities are the entities
falling under the Category level 1 as defined by ICAI which
exceed threshold of INR 1000 crs networth subsequent to
March 31, 2009
Status of IFRS reporting in India
2013-14 & 2014-15
‘Phase II’ companies
2011-12
►
Companies with net worth of
< 1,000 and > 500 Crores
►
Note – Phase III (remainder of listed
companies) convert in 2014
‘Phase I’ companies
►
Those designated as Phase I
Voluntary adopters
Subsidiaries and joint ventures of
those designated (optional)
2007 or earlier
►
Not for statutory reporting
US listing (foreign filers only)
Status and key decisions
►
►
►IFRS optionally replaces US GAAP
►
European listing
►IFRS or IGAAP currently permitted (IFRS
from 2011)
only
►
Little time remains for conversion
of April 2010 balance sheet
Good proportion of companies
have a project underway
Many are preparing comparatives
for 2010-11 and will decide later
on publication
Status and key decisions
►
►
►
Reviewing implementation of key
competitors in Phase I
Can choose to adopt in 2011 or 2012
(e.g. if competitors are all Phase I)
May apply different versions of key
standards than Phase I companies
(e.g. financial instruments)
How to present Indian GAAP
comparatives in first IFRS financial
statement?
• IFRS format for the income statement and
balance sheet are significantly different from
the Schedule VI formats.
• Redraw the Indian GAAP financial statements
based on IFRS presentation requirements.
• Book2.xls
Example
Area
Presentation under Indian GAAP
Presentation under IFRS
Redeemable preference shares
Share Capital
Liability
Bank loan
Entire loan disclosed under head
“secured loan”
Loan amount broken into current
and non-current liability
Investment Property
Investment
As a separate line item in balance
sheet
ADVANTAGES TO OUR CORPORATION
• Financial Statements prepared with IFRS are accepted
to almost all of the World’s Stock exchanges
• Improved clarity in Communication to the Stake
Holders.
•Decrease Investor Uncertainty
•Universally understood and comparable, can both
improve and initiate new relationships with
customers and suppliers across national borders
•Eliminates barriers to Cross-Border trading in
Securities, as the Financial Statements are more
transparent
•Financial Statements are more comparable with
companies with which we are signing MOU’s (eg:
Legacy Iron Ore Ltd – Australia, OJSC Severstal-Russia)
•Financial Statements can also be compared with the
companies having same business in other countries (eg:
Vale - Brazilian Company, BHP Biliton & Rio Tinto GroupAustralian Companies etc.,)
• Component Accounting to recognize the major parts of
property, plant and equipment to depreciate separately.
• Depreciation is calculated based on the useful life of the
Asset.
STEPS BY NMDC
•In view of the requirement, NMDC rightly is in the
process of convergence of AS to IFRS.
• Earnest & Young has been appointed as a
consultant for implementation of the same.
• Phase wise training programs will be conducted to
executives