Way to Go!

IFRS: An Introduction
Click to edit Master subtitle Divya Deep Srivastava style (IFRS Co-ordinator-IDT) Nov 18th.2010

4/27/12

Way to Go ! IFRS An Introduction

SCOPE
As against existing IFRS A Truly Accounting Global Standards, International Standard. Financial Reporting Standards (IFRS) An Overview draw more upon to IFRS : of Fair the concept Benefits, Value and case specific Challenges & assessments Concepts. involving Way to Go ! Managerial & IFRS

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Hands-on An Introduction

First

created by Henry Benson, Accountants International Study Group (1967) and IASC (1973), IASB since 2001. impetus came when EU leaders envisoned common IFRS based financial regime for EU. 2007, US SEC has accepted Financial Statements based on IFRS by Global IFRS Now A Truly foreign issuers without reconcilliation with US Standard 4/27/12 Way to to IFRS GAAP. Roadmap for full conversion Go ! IFRS
An Introduction

Main

From

MCA

& ICAI initiative for Indias phased convergence starting 01.04.2011 is in line with global momentum. for companies covered in each phase defined separate sets of Accounting Standards under Section 211(3c) of the companies Act,1956 Truly Global IFRS Now A -IFRS Converged standards and existing accounting Standard 4/27/12 Way to Go ! IFRS standards
An Introduction

Criteria Two

Timeline

for achieving convergence

Phase1-Transition

date

April1,2011
NIFTY

50 30

SENSEX

Companies

whose shares or other IFRS Now A Truly Global securities listed on stock exchange outside India Standard
4/27/12

Way to Go ! IFRS An Introduction

Date of Transition : The beginning of the earliest period for which comparative data is to be provided. Date of Reporting : End of the latest period for which Financial Statement is prepared or Interim Financial Report is generated

IFRS - First Time Transition

4/27/12 Way to Go ! IFRS An Introduction

2.

e i

O W

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Way to Go ! IFRS An Introduction

Accounting

Standards are norms for Recognition, Measurement, Presentation and Disclosure of Financial information. is a Globally acceptable Accounting Standards Framework as against Country Specific GAAPs. refers to the entire body of Standards, Guidance and Interpretations Overview: So What is IFRS issued by IASC, IASB, IFRIC and SIC and? 4/27/12 Framework for the PreparationWay to Go ! IFRS &
An Introduction

IFRS

Broadly,

Improved

Markets

Access to International Capital

Lower Global

Cost of Capital

Benchmarking, Comparative Standing and Transparency. Multiple Reporting for Group Cos, Ease of Consolidation.

Avoids True

acquired assets and Accounting forGo ! IFRS 4/27/12 Way to

An Introduction

Overview : Benefits of IFRS of Value of Acquisition Fair Valuation

Shortage Training

of Professional Manpower.

to Stakeholders.

Indicators Taxation

of Business & Executive performance & Tax Planning Framework of Debt Covenants,

Renegotiation Impact

on Distributable Profits. Overview : Challenges

4/27/12 Way to Go ! IFRS An Introduction

IFRS

are Principles Based Standards. rather than the Form is

Substance

important Values.

Enhanced

Focus Fair Value and Present

Comparability over time and across entities.

Primarily

Providers. Hence, a Balance SheetGo ! IFRS 4/27/12 Way to focus.

An Introduction

Overview :to needs of Capital cater Conceptual Focus

n o s d n a .H S 3 e u s 4/27/12 Way to Go ! IFRS An Introduction

I s

ISSUES
Under

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Retrospective Restatement of all Property, previous Financial Plant & Statements. Equipment, However, certain Exemptions are Intangibles, available to First Depreciation, Time Adopters Way to Go ! IFRS without affecting Depletion,
An Introduction

IFRS, any Presentation change in & Accounting Policy requires Disclosures.

Two An

year Consolidated Statements are Prepared. entity shall present current and noncurrent assets, and current and noncurrent liabilities, as separate classifications in its statement of financial position except when a presentation based on liquidity provides information that is Issues: Presentation & reliable and more relevant.
4/27/12 Way expected Asset is any Asset that isto Go ! IFRS An Introduction

Current

Disclosures

IFRS

permits Presentation Statement either on:

a)Function

of

Income

wise (Cost of Production, Selling & Distribution expenses, Administrative expenses etc) (Raw Material Consumed, Manpower Cost, Depreciation etc). Issues: Presentation & wise

b)Nature

)However,

wise 4/27/12 Way to Go ! IFRS presentation is made, the entity is also An Introduction

Disclosures where function

Componentisation Each

of Assets is Mandatory

part of an item that is significant in relation to the total cost is to be classified and depreciated separately. of Componentisaton to be decided with Technical support. Economic Life, Residual Value and Issues: PP&E Depreciation method has to be reviewed Componentisation annually for individual items with Technical 4/27/12 Way to Go ! IFRS support and considering An Introduction Replacement

Level

Useful

After componentisation, units will calculate retrospective Depreciation for items with IFRS Team upto DoTransition. Methods proposed is as under

Depreciation

To be Tested for Impairment Annually.

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Issues : Depreciation / Depletion / Impairment

Way to Go ! IFRS An Introduction

Definition:

Estimated liability towards costs relating to dismantling, abandoning and restoring well sites and allied facilities at the time of Abandonment. requires discounting of such costs to the date of capitalisation. This discounted value will be capitalised and Depreciated till DoTransition. annually
4/27/12 Way to Go ! IFRS An Introduction

IFRS

Issues : Decommissioning Decommissioning Liability to be reviewed Liability

The exploration costs would be shown under Intangible assets until the drilling of the well is complete and results have been evaluated. After evaluation, if no reserves are found, the same shall be charged off to P&L. If hydrocarbons are found and likely to be developed commercially, the costs shall Issues : Exploratory and continue to be shown as Intangible assets Evaluation Assets and shall be subject to 4/27/12 Way to Go ! IFRS management review and Introduction for test An

R&D

Costs in the Research Phase are Expensed. Development Costs are Capitalised if and only if all the six criteria are demonstrated Technical feasibility, ability, intention, generation of economic benefit, Resources for completion as also Measurability.

In

an acquisition, assets are Fair Valued and Intangibles are recognised and not Issues : Intangibles adjusted to Goodwill as in Indian GAAP.
4/27/12

Way to Go ! IFRS An Introduction

An

Arrangement that does not take the legal form of a lease but confers the right to use an asset or its output substantially shall have to be assessed for embedded lease.

IFRS

requires all contracts (hiring of rigs, compressors and other equipments) to be bifurcated into operating lease and financial : Accounting for Leases Issues lease.
4/27/12 & Liability is created for Way to Go ! IFRS finance An Introduction

Asset

O 4. S e

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Way to Go ! IFRS An Introduction

Revenue

is recognised at Fair Value. Sale, Service insurance and financing elements are separated. Service is recognised on stage of completion method. Shares are shown as liability. Convertible Debentures are bifurcated as Debt and Equity elements. Value

Preference

Investment Actively

Other Issues
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Property to be shown at Fair

Way to Go ! IFRS -

Traded Financial AssetsIntroduction An are shown

Valuation

of Inventory :

Finished Goods & Pipeline Fill is valued at Minimum of Cost or NRV. Raw Material at FIFO. Stores & Spares at WAC.

Proposed Business

Dividends are recognised with Right to Receive Combinations are acquired at Fair Value Other Issues
4/27/12 to be Discounted. Way to Go ! IFRS An Introduction

Provisions

Way to Go! Thank You

Click to edit Master subtitle Divya Deep Srivastava style (IFRS Co-ordinator-IDT) Nov 18th.2010

4/27/12

Way to Go ! IFRS An Introduction