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ASSIGNMENT ON
MODERN ACCOUNTING
THEORY AND
REPORTING PRACTICES
2014-15
SUBMITTED TO:
SUBMITTED BY:
Dr.ASHWANI BHALLA
MUSKAN KUNDRA
ROLL NO: 6204
M.COM 1(1ST SEM)
TOPIC
IFRS-1
FIRST TIME
ADOPTION OF
IFRSCONTENTS
INDEX
SR.
NO
1.
PARTICULARS
PAGE NO.
GENSIS
4-6
2.
INTRODUCTION
6-7
3.
OBJECTIVES
4.
Reseach Article
9-20
5.
IFRS-1
21
6.
22-26
7.
27-29
8.
Scope of IFRS-1
30-31
9.
Steps in IFRS-1
31-34
10.
35
11.
Additional Disclosure
36-38
12.
39
13.
40
14.
41-42
15.
43-46
16.
Summary
46-49
17
18
Bibliography
Abbreviations
50-53
54
Genesis
International Accounting Standard Board (IASB) in its drive to develop a single
set of high quality, globally acceptable accounting and reporting standards has
made a series of efforts to achieve excellence. In regard to this International
Accounting Standard Board(IASB) adopted all IAS and began developing new
standards known as International Financial Reporting Standards (IFRS).
International Financial Reporting Standards (IFRS) is the collection of financial
reporting standards developed by the International Accounting Standards Board
(IASB). The aim of IFRS is to provide a single set of high quality,
global accounting standards that require transparent and comparable
information in general purpose financial statements.
IFRS is becoming a global language. IFRS are standards, interpretations and
framework for the preparation and presentation of financial statements.
The IFRS Foundation is an independent, not-for-profit private sector
organisation working in the public interest.
Its principal objectives are:
IFRS are as principles based set of standards that establish broad rules and also
dictate specific treatments.
IFRS Structure
Introduction
IFRS-1 deals the first time adoption of international financial reporting
standards. If an entity is preparing it's financial reports under an accounting
framework other than international financial reporting standards i.e.(Accounting
standards of their own countries) and decides to change to IFRS then it has to
comply with requirements prescribed by IASB on conversion to IFRS. These
requirements are stated in IFRS-1 (The first time adoption of international
financial reporting standards).
It specifies the procedures any entity applying IFRS for the first time must
follow. IFRS-1 is essentially a road map for prepares of first year financial
statements under IFRS. IFRS-1 also ensures that all first time adopters have
consistent starting point. The process of developing the IFRS-1 was started in
April 2001 when the international Accounting Standard Board (IASB) adopted
SIC-8 first time application of IAS as primary basis of accounting which has
been issued by SIC of IASC in July 1998. SIC was replaced with IFRS1 in the
June 2003.
Since the introduction of IFRS 1 in 2003, amendments have been made to other
IFRSs and IASs. As the latter change, the unique needs of first-time adopters are
considered, and IFRS 1 is updated where and when appropriate.
First-time adopter
A first-time adopter is an entity that, for the first time, makes an explicit and
unreserved statement that its general purpose financial statements comply
with IFRSs.
An entity may be a first-time adopter if, in the preceding year, it prepared IFRS
financial statements for internal management use, as long as those IFRS
financial statements were not and given to owners or external parties such as
investors or creditors. If a set of IFRS financial statements was, for any reason,
given to an external party in the preceding year, then the entity will already be
considered to be on IFRSs, and IFRS 1 does not apply.
An entity can also be a first-time adopter if, in the preceding year, its financial
statements asserted compliance with some but not all IFRSs, or included only a
reconciliation of selected figures from previous GAAP to IFRSs.
IFRS 1 focuses on requirements for:
presentation of the opening statement of financial position (opening balance
sheet) at the date of transition,
comparative information as required,
reconciliations between previous GAAP and IFRS, for example with respect to
financial position, financial performance, and cash flows,
other requirements and disclosures.
Objective
The Objectives of IFRS 1 is to ensure that an organizations first
IFRS financial statements (and any interim financial reports for
part of the period covered by those financial statements)
contain high-quality information that :
is transparent for users and comparable over all periods
presented
provides a suitable starting point for accounting under
International Financial Reporting Standards (IFRS)
can be generated at a cost that does not exceed the benefits
to users.
Research
Articles
Patro.Archana, Gupta.V.K., Adoption of International Financial
Reporting Standards (IFRS) in Accounting Curriculum in India, Procedia
Economics &Finance, 2012,Vol.2,PP-9
Review
Archana Patro (2012) outlines that ICAI announced its decision to adopt IFRS
in India w.e.f. April 2011 with the objective that this standard will have an
significant impact on capital markets as many European countries have shifted
to IFRS and are ahead of India in including IFRS in the curriculum for students
and concludes that understanding of Indian Generally Accepted Accounting
Principles (GAAP) and IFRS standards is an urgent need for today's students.
Therefore, the adoption of IFRS mainly depends on the need and interest among
students to understand the subject. If students are knowledgeable about the
positive impact of the course, they are more likely to take these courses when
management colleges or universities offer them.
Teller, R., First-Time Adoption of IFRS, Managerial Incentives, and ValueRelevance: Some French Evidence, Journal of International Accounting
Research,2009, Vol. 8.2,PP- 2
Review
R.Teller (2008) outlines that whether and how managerial incentives influence
the decision to elect optional exemptions when first adopting International
Financial Reporting Standards (IFRS). It also outlines the value-relevance of the
mandatory and optional equity adjustments that must be recognized as a result of
the first-time adoption of IFRS and finally concludes that first, managerial
incentives influence the decision to strategically elect one or more optional
exemptions at the transition date. Second, mandatory equity adjustments are
more valued than French GAAP equity, suggesting that the first-time adoption of
IFRS by French firms is perceived as a signal of an increase in the quality of
their financial statements. Third, the value-relevance of optional IFRS equity
adjustments depends on whether they result in the disclosure of new
information.
10
the IFRSs starting with the consolidated financial statements prepared for the
financial year 2007. and concludes that no clear tendency can be identified
regarding changes in net income of listed entities generated by the transition
from Romanian accounting regulations to IFRS.
11
12
13
the global economy and to follow private sector best practice in the UK public
sector. However, experience has shown that the transition is both lengthy and
complex. IFRS 1 has great practical significance for sectors and countries that
are expected to adopt the standards in the near future. The introduction of the
IFRS will be a significant challenge to a council, as seen in the implementation
within the private sector where accounts have, on average, increased by 60% in
content and concludes that many types of entity have not yet made the move to
IFRS and, similarly, many countries have yet to fully adopt IFRS. A detailed
knowledge of IFRS 1 is critical, as it gives entities the opportunity to clean up
their balance sheets before being caught by IFRS.
14
15
16
17
18
Review
Stephen Courtenay (2014) outlines that some of the countries that have
adopted IFRS had national accounting standards similar to IFRS prior to
adopting IFRS, while others had national accounting standards divergent from
IFRS. Prior studies on whether or not International Financial Reporting
Standards (IFRS) adoption improves earnings quality have found mixed results.
The study examine the effects of IFRS adoption by taking into account the level
of divergence prior to the adoption of IFRS. We find that countries experience a
greater drop in earnings management when they have a higher level of
divergence from IFRS prior to IFRS adoption. More specifically, high
divergence countries with higher levels of enforcement benefit the most
followed by high divergence countries with lower levels of enforcement. Lower
divergence countries with higher levels of enforcement do not significantly
benefit from IFRS adoption. Lower divergence countries with lower levels of
enforcement do not benefit from IFRS adoption at all. Results support the
contention that countries with lower quality local accounting standards prior to
IFRS adoption benefit more from IFRS adoption.
19
5 audit firms exhibit higher levels of accounting quality. Our findings are robust
in regard to different model specifications and after controlling for firm-specific
effects like size, risk, profitability and growth opportunities.
Clarkson. Peter, Hanna.J.Douglas. "The impact of ifrs adoption on the
value relevance of book value and earnings, Journal of contemporary
Accounting and Economics, June 20th, Vol, 7.1, PP.1-17
Review
PeterClarkson, Douglas.J.Hanna(2011) investigate the impact of IFRS
adoption in Europe and Australia on the relevance of book value and earnings
for equity valuation. Using a sample of 3488 firms that initially adopted
International Financial Reporting Standards (IFRS) in 2005, they are able to
compare the figures originally reported for the 2004 fiscal years to the IFRS
figures that were provided in 2005 as the 2004 IFRS comparative figures. As
part of the inquiry, we introduce a cross-product term, equal to the product
of EPS and BVPS, into the traditional linear pricing models. The estimated
coefficient on the cross-product term is statistically significant and negative, as
theory suggests in the presence of important nonlinearities. Further, there is
increased non-linearity in the data subsequent to IFRS adoption, with the
increase being most pronounced for firms in Common Law countries. With nonlinear effects controlled for, there is no observed change in price relevance for
firms in either Code Law or Common Law countries, contradicting the results
from the linear pricing models. The results also suggest that the distribution of
measurement errors becomes more similar across Code Law and Common Law
countries after the adoption of IFRS, removing one difference between these
groups. Thus, IFRS enhances comparability, an inference that would not be
possible had we confined the analysis only to linear pricing models.
20
IFRS-1
On 19 June 2003, the International Accounting Standards Board issued
IFRS 1, First-Time Adoption of International Financial Reporting
Standards. IFRS 1 sets out the procedures that an entity must follow when
it adopts IFRS for the first time as the basis for preparing its general
purpose financial statements.
IFRSs are increasingly becoming a truly global accounting framework with
many countries committed to adopting them in the next few years. For
companies, the process of converting to IFRS and preparing their first IFRS
financial statements will be challenging.IFRS-1 deals the first time adoption of
international financial reporting standards. IFRS 1 First-time Adoption of
International Financial Reporting Standards sets out the procedures that an
21
entity must follow when it adopts IFRSs for the first time as the basis for
preparing its general purpose financial statements
The objective of this Standard is to ensure that first-time IFRS financial
statements contain high quality information that can be prepared at a cost not
exceeding the benefits. IFRS 1 also specifies a number of additional disclosures
for first-time adopters that must be addressed in addition to the normal IFRS
presentation and disclosure requirements.
If an entity is preparing it's financial reports under an accounting framework
other than international financial reporting standards i.e.(Accounting standards
of their own countries) and decides to change to IFRS then it has to comply with
requirements prescribed by IASB on conversion to IFRS. These requirements
are stated in IFRS-1 (The first time adoption of international financial reporting
standards).
The IFRS-1 applies when an entity adopts IFRS for the first time by an
explicit and unreserved statement of compliance with IFRSs.
In general,the IFRS requires an entity to comply with each IFRS effective
at the end of its first IFRS reporting period.
a. In particular,IFRS requires an entity to do the following :
22
23
24
IV.
The IFRS required disclosures that explain how transition from previous
GAAP to IFRS affected the entities Reported financial position,financial
performance & cash flows.
25
V.
Example:- XYZ ltd. Decides to adopt IFRS from the Financial year 201112i.e April 2011-12.
Solution:- In this regard financial statements should be applied
retrospectively in the opening IFRS statement of financial position, the
comparative period and the first IFRS reporting period. Practically,it must
apply all IFRSs effective at the date retrospectively to 2011 -12 and 201011 reporting periods and to the opening statement of financial position as
on 1April 2010(assuming one year of comparative information).
26
27
1. Optional exceptions.
There are some important exceptions to the general restatement and
measurement principles set out above. The following exceptions are
individually optional, not mandatory:
Business combinations that occurred before opening balance sheet date
a. An entity may keep the original previous-GAAP accounting, that is, not
restate:
previous mergers or goodwill written-off from reserves;
the carrying amounts of assets and liabilities recognised at the date of
acquisition or merger;
how goodwill was initially determined (do not adjust the purchase price
allocation on acquisition).
b. However, should it wish to do so, an entity can elect to restate all business
combinations starting from a date it selects prior to the opening balance sheet
date.
c. In all cases, the entity must make an initial IAS 36 impairment test of any
remaining goodwill in the opening IFRS balance sheet, after reclassifying, as
appropriate, previous GAAP intangibles to goodwill.
d. IFRS 1 includes an appendix explaining how a first-time adopter should
account for business combinations that occurred prior to transition to IFRS.
Property, plant, and equipment, intangible assets, and investment property
carried under the cost model
a. These assets may be measured at their fair value at the opening IFRS balance
sheet date (this option applies to intangible assets only if an active market
exists). Fair value becomes the "deemed cost" going forward under the IFRS
cost model. (Deemed cost is an amount used as a surrogate for cost or
depreciated cost at a given date.)
28
b. If, before the date of its first IFRS balance sheet, the entity had revalued any
of these assets under its previous GAAP either to fair value or to a price-indexadjusted cost, that previous-GAAP revalued amount at the date of the
revaluation can become the deemed cost of the asset under IFRS.
c. If, before the date of its first IFRS balance sheet, the entity had made a onetime revaluation of assets or liabilities to fair value because of a privatisation or
initial public offering, and the revalued amount became deemed cost under the
previous GAAP, that amount (adjusted for any subsequent depreciation,
amortisation, and impairment) would continue to be deemed cost after the initial
adoption of IFRS.
IAS 19 - Employee benefits: actuarial gains and losses
An entity may elect to recognise all cumulative actuarial gains and losses for all
defined benefit plans at the opening IFRS balance sheet date (that is, reset any
corridor recognised under previous GAAP to zero), even if it elects to use the
IAS 19 corridor approach for actuarial gains and losses that arise after first-time
adoption of IFRS. If an entity does not elect to apply this exemption, it must
restate all defined benefit plans under IAS 19 since the inception of those plans
(which may differ from the effective date of IAS 19).
IAS 21 - Accumulated translation reserves
An entity may elect to recognise all translation adjustments arising on the
translation of the financial statements of foreign entities in accumulated profits
or losses at the opening IFRS balance sheet date (that is, reset the translation
reserve included in equity under previous GAAP to zero). If the entity elects this
exemption, the gain or loss on subsequent disposal of the foreign entity will be
adjusted only by those accumulated translation adjustments arising after the
opening IFRS balance sheet date. If the entity does not elect to apply this
exemption, it must restate the translation reserve for all foreign entities since
they were acquired or created.
2.
Mandatory exceptions.
29
There are also three important exceptions to the general restatement and
measurement principles set out above that are mandatory, not optional. These
are:
IAS 39 - Derecognition of financial instruments
A first-time adopter is not permitted to recognise financial assets or financial
liabilities that had been derecognised under its previous GAAP in a financial
year beginning before 1 January 2001 (the effective date of IAS 39). This is
consistent with the transition provision in IAS 39.172(a). However, if an SPE
was used to effect the derecognition of financial instruments and the SPE is
controlled at the opening IFRS balance sheet date, the SPE must be
consolidated.
IAS 39 - Hedge accounting
The conditions in IAS 39.122-152 for a hedging relationship that qualifies for
hedge accounting are applied as of the opening IFRS balance sheet date. The
hedge accounting practices, if any, that were used in periods prior to the opening
IFRS balance sheet may not be retrospectively changed. This is consistent with
the transition provision in IAS 39.172(b). Some adjustments may be needed to
take account of the existing hedging relationships under previous GAAP at the
opening balance sheet date.
30
SCOPE OF IFRS 1
1.IFRS 1 is applicable to the entity's first set of IFRS financial statements and
each interim financial report for part of the period covered by its first IFRS
financial statements.
2. An entity's first IFRS statements is defined as the first annual financial
statements in which the entity adopts IFRSs, by an explicit and unreserved
statement of compliance with IFRS.
3. Following are some of the examples of situations where an entity's
financial statements under IFRS would be considered as first IFRS
financial statements and therefore would be subject to IFRS 1
requirements:
(a) An entity presented its most recent previous financial statements:
- in accordance with national requirements which are not
consistent with IFRSs in all respects;
- in conformity with IFRSs in all respect, except that the financial
statements did not contain an explicit and unreserved statement
of compliance with IFRS;
- containing explicit compliance with some but not all IFRSs;
- under national requirements inconsistent with IFRS, using some
IFRSs to account for items for which national requirements did not exists;
- in accordance with national requirements, with a reconciliation of
some amounts to the amounts determined under IFRSs;
(b) an entity prepared financial statements in accordance with IFRSs for internal
use only, without making them available to the entity's owners or any other
external users;
(c) an entity prepared reporting package in accordance with IFRSs for
consolidation purposes without preparing a complete set of financial statements
as defined in IAS 1;
(d) did not present financial statements for previous period.
4. If the most recent financial statements of an entity contained an explicit and
unreserved statement of compliance with IFRS then it will not be considered as
a first-time adopter. For example IFRS 1 does not apply when an entity:
31
32
33
34
35
disclose the nature of the main adjustments that would make it comply with
IFRS. The entity is not required to quantify those adjustments .
36
Additional disclosures
A few final disclosure requirements are as follows:
If an entity presented a statement of cash flows under its previous GAAP, it
must also explain the material adjustments to the statement of cash flows.
If an entity becomes aware of errors made under previous GAAP, the
reconciliations must distinguish the correction of those errors from changes in
accounting policies
If an entity did not present financial statements for previous periods, its first
IFRS financial statements must disclose that fact
International Financial Reporting Standard 1 (IFRS 1), First-Time Adoption of
IFRS
A September 2009 survey of accounting standards used by Global Fortune 500
companies revealed that just less than half of them use IFRS or their home
countries have committed to adopt IFRSs within the next few years. Perhaps
most significant, the percentage of worldwide market capitalization on stock
exchanges has shown a dramatic shift: from just under 50% in 2002, US
exchanges now account for approximately 35% of market capitalization. The
worldwide adoption of IFRSs can only help in this regard.
Conversion to IFRSs also provides an opportunity to assess and realign systems
and improve internal controls. The increased information needs can result in
greater links between finance
and operations, thereby increasing knowledge sharing. We need to view this
change as an opportunity to improve and realign internal systems and improve
teamwork, rather than just as a compliance exercise.
PARAGRAPH 23
An entity shall explain how the transition from previous GAAP to IFRSs
affected its reported financial position, financial performance and cash flows.
37
PARAGRAPH 24
To comply with paragraph 23, an entitys first IFRS financial statements shall
include:
(a) reconciliations of its equity reported in accordance with previous GAAP to
its equity in
accordance with IFRSs for both of the following dates:
(i) the date of transition to IFRSs; and
(ii) the end of the latest period presented in the entitys most recent annual
financial statements in accordance with previous GAAP.
(b) a reconciliation to its total comprehensive income in accordance with IFRSs
for the latest period in the entitys most recent annual financial statements. The
starting point for that reconciliation shall be total comprehensive income in
accordance with previous GAAP for the same period or, if an entity did not
report such a total, profit or loss under previous GAAP.
(c) if the entity recognised or reversed any impairment losses for the first-time in
preparing its opening IFRS statement of financial position, the disclosures that
IAS 36 Impairment of Assets would have required if the entity had recognised
those impairment losses or reversals in the period beginning with the date of
transition to IFRSs.
PARAGRAPH 25
The reconciliations required by paragraph 24(a) and (b) shall give sufficient
detail to enable users to understand the material adjustments to the statement of
financial position and statement of comprehensive income. If an entity presented
a statement of cash flows under its previous GAAP, it shall also explain the
material adjustments to the statement of cash flows.
PARAGRAPH 26
If an entity becomes aware of errors made under previous GAAP, the
reconciliations required by paragraph 24(a) and (b) shall distinguish the
correction of those errors from changes in accounting policies
.
38
PARAGRAPH 27
IAS 8 does not deal with changes in accounting policies that occur when an
entity first adopts IFRSs. Therefore, IAS 8s requirements for disclosures about
changes in accounting policies do not apply in an entitys first IFRS financial
statements.
PARAGRAPH 28
If an entity did not present financial statements for previous periods, its first
IFRS financial statements shall disclose that fact.
39
40
41
Effective date
Paragraph 34
An entity shall apply this IFRS if its first IFRS financial statements are for a
period beginning on or after 1July 2009. Earlier application is permitted.
Paragraph35
An entity shall apply the amendments in paragraphs D1(n) and D23 for annual
periods beginning on or after1 July 2009. If an entity applies IAS 23 Borrowing
Costs (as revised in 2007) for an earlier period, thoseamendments shall be
applied for that earlier period.
36 IFRS 3 Business Combinations (as revised in 2008) amended paragraphs 19,
C1 and C4(f) and (g). If an
entity applies IFRS 3 (revised 2008) for an earlier period, the amendments shall
also be applied for that earlier period.
Defined Terms
Date of transition to IFRSs
The beginning of the earliest period for which an entity presents full
comparative information under IFRSs in its first IFRS financial statements.
Deemed cost
An amount used as a surrogate for cost or depreciated cost at a given date.
Subsequent depreciation or amortisation assumes that the entity had initially
recognised the asset or liability at the given date and that its cost was equal to
the deemed cost.
Fair value
The amount for which an asset could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arms length transaction.
First IFRS financial statements
42
43
Present scenario
India is one of the over 100 countries that have or are moving towards
IFRS (International Financial Reporting Standards) convergence with a
view to bringing about a uniformity in reporting systems globally,
enabling businesses, finances and funds to access more opportunities.
Indian companies are listed on overseas stock exchanges and have to
recast their accounts to be compliant with GAAP requirements of those
countries.
Foreign companies having subsidiaries in India are having to recast their
accounts to meet Indian & overseas reporting requirements which are
different.
Foreign Direct Investors (FDI), overseas financial institutional investors
(FII) are more comfortable with compatible accounting standards and
companies accessing overseas funds feel the need for recast of accounts in
keeping with globally accepted standards.
44
When IFRS?
IFRS for public entities in India is applicable from 01/04/2011.
The opening IFRS balance sheet at the date of transition to IFRS
01/04/2010, which is the start date for full comparative information
presentation in IFRS
45
Analysis
Can an entity be a first-time adopter if, in the preceding year, it has
prepared IFRS financial
statements for internal management use?
Yes, as long as those IFRS financial statements were not given to owners or
external parties such as investors or creditors. If a set of IFRS statements was,
for any reason, given to an external party in the preceding year, then the
entity will already be considered to be on IFRS and IFRS 1 does not apply
.
What if, last year, an entity said it complied with selected, but not all, IFRS,
or it included in its previous -GAAP financial statements a reconciliation of
selected figures to IFRS figures?
It can still qualify as a first-time adopter.
When does IFRS 1 take effect?
IFRS 1 applies if an entitys first IFRS financial statements are for a period
beginning on or after 1 January 2004.Earlier application is encouraged.
If an entity adopts IFRS for the first time in its annual financial statements
for the year ended 31December 2005, what is it required to do?
1. Accounting policies. The entity should select its accounting policies based on
IFRS in force at 31 December 2005. (The exposure draft that preceded IFRS 1
had proposed that an entity could use the IFRS that were in forceduring prior
periods, as if the entity had always used IFRS. That option is not included in the
final standard.)
2. IFRS reporting periods. The entity should prepare at least 2005 and 2004
financial statements and restateretrospectively the opening balance sheet
(beginning of the first period for which full comparative financial
statements are presented) by applying the IFRS in force at 31 December 2005.
a. Since IAS 1 requires that at least one year of comparative prior period
financial information be presented, the opening balance sheet will be 1 January
2004 if not earlier.
46
b. If a 31 December 2005 adopter reports selected financial data (but not full
financial statements) on an IFRS basis for periods prior to 2004, in addition to
full financial statements for 2004 and 2005, that does not
change the fact that its opening IFRS balance sheet is as of 1 January 2004.
If an entity is going to adopt IFRS for the first time in its annual financial
statements for the year ended31 December 2005, is any disclosure required
in its financial statements prior to the 31 December 2005statements?
Yes, but only if the entity presents an interim financial report that complies with
IAS 34. Explanatory information and
a reconciliation are required in the interim report that immediately precedes the
first set of IFRS annual financial
statements. The information includes changes in accounting policies compared
to those under previous local GAAP.
A parent or investor may become a first-time adopter earlier than or later
than its subsidiary,
associate, or joint venture investee. In these cases, how is IFRS 1 applied?
1. If the subsidiary has adopted IFRS in its entity-only financial statements
before the group to which it belongs adopts IFRS for the consolidated financial
statements, then the subsidiarys first-time adoption date is still the date at which
it adopted IFRS for the first-time, not that of the group. However, the group
must use the IFRS measurements of the subsidiarys assets and liabilities for its
first IFRS financial statements except for adjustments relating to the business
combinations exemption and to conform group accounting policies.
3. If the group adopts IFRS before the subsidiary adopts IFRS in its entity-only
financial statements, then the subsidiary has an option either (a) to elect that
the group date of IFRS adoption is its transition date or (b) to first time adopt
in its entity-only financial statements.
3. If the group adopts IFRS before the parent adopts IFRS in its entity-only
financial statements, then the parents first-time adoption date is the date at
which the group adopted IFRS for the first time.
4. If the group adopts IFRS before its associate or joint venture adopts IFRS in
its entity-only financial statements,then the associate or joint venture should
have the option to elect that either the group date of IFRS adoption is its
transition date or to first-time adopt in its entity-only financial statements
47
Summary
The Current Scenario Of IFRS in different countries is as follows:
Over 12,000 companies in over 100 countries have already adopted IFRS.
In the European Union, member states whose securities are listed on EU
regulated stock exchanges prepare Consolidated Financial Statements as
per IFRS.
In Israel, Australia and New Zealand, IFRS has been adopted as national
accounting standards.
China has formulated local GAAP which are IFRS based, although some
differences still exist.
Other countries like Canada, India and South Korea are attempting to
complete the transition to IFRS by 2011 while Mexico and Japan are
working towards convergence by 2012, which would eliminate major
differences between their current standards and IFRS.
IFRS should be adopted in INDIA due to following reasons:
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
But there are certain Issues in transitioning :
To get a sense of the types of issues likely to arise during an organizations
transition to IFRS, it is useful to look beyond our own borders. Here are some
issues experienced by first-time IFRS adopters:
48
49
Conclusion
Looking at the present scenario of the world economy and the position of India
convergence with IFRS can be strongly recommended. But at the same time it
can also be said that this transition to IFRS will not be a swift and painless
process.. Implementing IFRS would rather require change in formats of
accounts, change in different accounting policies and more extensive disclosure
requirements.
Therefore all parties concerned with financial reporting also need to share the
responsibility of international harmonization and convergence. Keeping in mind
the fact that IFRS is more a principle based approach with limited
implementation and application guidance and moves away from prescribing
specific accounting treatment all accountants whether practicing or nonpracticing have to participate and contribute effectively to the convergence
process. This would lead to subsequent revisions from time to time arising from
its global implementation and would help in formulation of future international
accounting standards.
A continuous research is in fact needed to harmonize and converge with the
international standards and this in fact can be achieved only through mutual
international understanding both of corporate objectives and rankings attached to
it.
50
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Websites
www.iasplus.com
www.ifrs.org
www.ey.com
www.pwc.com
www.webcrawler.com
www.icai.org
www.icwai.org
http://www.questia.com/favicon.png
Abbreviations
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EU-European Union
FDI-Foreign Direct Investment
GAAP- globally acceptable accounting principles.
IAS- International Accounting Standards
IASB- International Accounting Standard Board
IFRIC- Interpretations originated from the International
Financial Reporting Interpretations Committee
IFRS- international financial reporting standards
IFRS-1- first time adoption of international financial
reporting standards
SIC- Standing Interpretations Committee
55