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Structure of IFRS IFRS are considered a "principles based" set of standards in that they establish broadrules as well as dictating specific treatments. International Financial Reporting Standards comprise: International Financial Reporting Standards (IFRS) - standards issued after 2001 International Accounting Standards (IAS) - standards issued before 2001 Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) - issued after 2001 Standing Interpretations Committee (SIC) - issued before 2001 There is also a Framework for the Preparation and Presentation of Financial Statements which describes of the principles underlying IFRS Framework The Framework for the Preparation and Presentation of Financial Statements states basic principles for IFRS.
Objective of financial statements The framework states that the objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in
BENEFITS OF ADOPTING IFRS FOR INDIAN COMPANIES:The decision to converage with IFRS is a milestone decision and is likely to provide significant benefits to Indian corporates.Some of them are listed below: Improved access to international capital markets : Many Indian entries are expanding or making significant acquisitions in the global arena, for which large amounts of capital is required.The majority of stock exchanges require financial information prepared under IFRS.Migration to IFRS will enable Indian entities to have international capital markets, removing the risk premium that is added to those reporting under Indian GAAP. Lower Cost of Capital : Migration to IFRS will lower the cost of raising funds, as it will eliminate the need for preparing a dual set of financial statements.It will also reduce accountants fees, abolish risk premiums and will enable access to all major capital markets as IFRS is globally acceptable. Enable benchmarking with global peers and improve brand value: Adoption of IFRS will enable companies to gain a broader and deeper understanding of the entitys relative standing by looking beyond country and regional milestones.
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Information systems: Financial accounting and reporting systems must be able to produce robust and consistent data for reporting financial information.The systems must also be capable of capturing new information for required disclosures, such as segment information, fair values of financial instruments and related party transactions.As financial accounting and reporting systems are modified and strengthened to deliver information in accordance with IFRS, entries need to enhance their IT security in order to minimize the risk of business interruption ,in particular to address the risk of fraud, cyber terrorism and data corruption. Taxes IFRS convergence will have significant impact on financial statements and consequently tax liabilities.Tax authorities should ensure that there is clarity on the tax treatment of items arising from convergence to IFRS.For example, will government authorities tax unrealized gains arising out of the accounting required by the standards on financial instruments? From an entity point of view, a thorough review of existing tax planning strategies is essential to test their alignment with changes created by IFRS.Tax,other regulatory issues and the risks involved will have to be considered by the entities
Communication: IFRS may significantly change reported earnings and various performance indicators. Managing market expectations and educating analysts will therefore be critical.A companys management must understand the differences in the way the entitys performance will be reviewed, both internally and in the market place and agree on key messages to be delivered to investors and other stake holders.Reported profits may be different from perceived
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Income statement
Does not prescribe a standard format, although expenditure is presented in one of two formats (function or nature). Certain minimum items are presented on the face of the income statement.
Extraordinary items
Prohibited.
Comparatives are restated, unless specifically exempted; where the effect of period(s) not presented is adjusted against opening retained earnings. estated and, if
Does not prescribe a standard format, but certain income and expenditure items are disclosed in accordance with accounting standards and the companies act. industry-specific formats are prescribed by industry regulations prescribed by industry regulations Defined as events or transactions clearly distinct from the ordinary activities of the entity and are not expected to recur frequently and regularly. Disclosed separately The effect and impact of change is included in current-year income statement. The impact of change is disclosed separately. Restatement is not
of
Prohibited
Not specifically addressed. Entities elect and consistently apply either purchase or pooling-of-interest accounting for all such transactions.
Allocated on a systematic basis to each accounting period over the useful life of the asset .
Similar to IFRS, except where the useful life is shorter as envisaged under the Companies Act or the relevant statute, the depreciation is computed by applying a higher rate. Recognised on an accrual basis; practice varies with respect to recognition of discounts and premiums.
Interest expense
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Capitalised if recognition criteria are met; amortised over useful life. Intangibles assigned an indefinite useful life are not amortised but reviewed at least annually for impairment. Revaluations are permitted in rare circumstances. Historical cost or revalued amounts are used. Regular valuations of entire classes of assets are required when revaluation option is chosen
preciated cost or fair value, with changes in fair value recognised in the income statement. Disclose unrecognised possible losses and probable gains.
Contingencies
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Convertible debt
Post-balancesheet events
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