IFRS: VISA-VIS ACCOUNTING AND REPORTING PRACTICES IN INDIAN BANKING SECTOR

Dr.A.P.Hosmani* Associate Professor Department of Commerce Gulbarga University Gulbarga.

Jagadish. Hudagi** Research Scholar Department of Commerce Gulbarga University Gulbarga.

CONTENTS
Abstract Statement of problem Objectives  Methodology Indian GAAP and IFRS Factors having a bearing on Indian Banking Conclusion References

ABSTRACT:
The introduction of IFRS in India will involve "significant challenges" for the banking system according to the Reserve Bank of India. Struggling of stock markets can be felt across the global banking system. Till recent times IFRS is considered as a distant possibility, the need was felt for widely acceptable, transparent comparable and dependable financial statements that will facilitate greater cross-border corporate governance practices. Governing bodies, standard setters and law makers sit together to formulate the ways and means for implementation of International Financial Reporting Standards in India, a wide section of the industry is already debating the impact and the implementation challenges of transitioning into IFRS. . A road map has been set for convergence in compliance with IFRS especially from the view point of Banks in phased manner i.e. period beginning from April 1st 2013. In this paper an attempt has been made to study IFRS determinant Standards on Indian Banking Industry.

STATEMENT OF THE PROBLEM:

The IFRS convergence process involves significant challenges for the banking system in general. There are not many people who are aware and have an understanding of IFRS which is proving to be inconvenient to banking and corporate sector in transformation process. Banks would need to upgrade their Infrastructure, including IT and Human resources, to face the complexities and challenges of IFRS. Some major technical issues arising for Indian banking during the convergence process would be differences between the IFRS and current regulatory guidelines on classification and measurement of financial assets focus in the standard on the business model followed by banks and the challenges for management in this area. There is an inadequacy of guidelines for fair values transactions in India in terms of benchmarks, and expected changes in impairment rules. These issues should be clarified and correct procedure need to be laid.

OBJECTIVES OF THE STUDY:

It is need of present scenario in Indian banking sector which arise due new accounting and reporting practices at international level. Hence following objectives has been set for the study.

1. 2. 3. 4.

To study the origin and application of IFRS in the context of Indian banking sector. To study the relevant provisions of IFRS. To contrast and analyze between Indian Accounting Standards and IFRS. To determine major factors arising in wake of IFRS adoption in Indian banking context.

METHODOLOGY: This study is descriptive in nature. It gives the details about the IFRS and Indian GAAP for the purpose of better understanding and analysis. Both primary as well as secondary data has been used for the study purpose. The main sources of secondary data are books, journals, newspapers and concerned websites. Primary data has been collected through interview with professionals and chartered accountants. In the Data analysis part Comparative study and process table has been prepared. With this an attempt has been made to determine the factors influencing on convergence process in compliance with IFRS.

MAPPING OF IGAAP v/s IFRS:

IFRS is a moving target it is very hard to target towards it. Since it is a principle-based standards rather than rule-based standard which are currently followed. Under IFRS there is a need to apply professional judgment consistent with intent and spirit of standards. There are significant differences between Indian GAAP and IFRS specifically on the aspect of fixed asset accounting business combinations, presentation of financial statement, group accounts, foreign exchange accounting and measurement of financial instruments etc. Various countries have adapted to IFRS in different ways, often

embedding local cultures and that is why there are no standard rules, only broad principles which define the outer boundary of accounting.

As the business environment becomes increasingly global and companies routinely list on stock exchanges in many countries, the need for consistent worldwide reporting standards intensifies.

IFRS clearly addresses this issue; its goal is to create comparable, reliable, and transparent financial statements that will IFRS transition program for any organization will have multidimensional effect because of differences which exist between IFRS and local GAAP. SL. NO 1 TOPIC Preparation and Intangible assets presentation First time adoption Components of Financial Statements Balance Sheet Income Statement Cash Flow Statement Depreciation Dividends expenditure on repairs and fixed assets Change in the method of depreciation Revaluation Earnings per share

2 3 4 5 6 7 8 9 10 11 12

It is evident from the above factors that difference can be seen on the grounds of conceptual accounting frame work, terms and items in financial statements and also between accounting practices. IFRS has only 2,000 pages contents hence with IFRS you need to make your own judgments. To do so successfully, you need to create a framework to process the facts understand the economics, understand the practices and go beyond just speaking with accountants.

INFLUENTIAL FACTORS ON INDIAN BANKING SECTOR:

Accounting system in India is deeply affected by laws and regulations. Changes may be required to various regulatory requirements under The Companies Act, 1956, Income Tax Act, 1961, SEBI, RBI etc. so that IFRS financial statements are accepted generally. Banks need be in compliances with the Accounting Standards issued by ICAI. In addition to RBI, it also prescribes certain mandatory norms and provisions that have to be followed by bank. Like Reserve Bank of India has prescribed accounting guidelines forinvestments and prudential norms for non performing loans. In India there are only seven out of 32 applicable accounting standards are compliance with IFRS. There are 12 standards where there are conceptual differences and 10 standards where the regulatory changes are required.

2 Loan -Investment and impairment 3 Information and Technology 4 Fair value accounting 5 Human resource management 6 Derivatives hedge accounting 7 Financial Instruments 8 De-recognition of financial assets 9 Consolidation 10 Major tax related aspects.

CONCLUSION: The impact of IFRS 9 on banks will be significant. As India is on the path of IFRS convergence, Indian banks will have to closely examine the impact of IFRS 9 not only on their financial statements but also on their capital adequacy, IT systems, taxes and product design, among others. IFRS shall have the major impact over the advances, financial instruments, investments. The exchequers not yet clarified the provisions on the loss arises due to revaluation in such advances and instruments apart from this SLR issues need to clarified. Obviously these things are determining on the financial statement of the banking sector. It takes some time for implementation as in Indian case a scheduled time is set for banking sector i.e. 1st April 2013. This proposed convergence enhances access to capital markets globally and facilitate inter-firm comparisons better than previously.

REFERENCES: Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised framework. Bank for International Settlements. Basel. Bombay Chartered Accountants Journal. Convergence with IFRS Impact on fundamental accounting practices and regulatory framework in India. Capital Adequacy Framework: Reserve Bank of India. Concept paper on convergence with IFRSs in India, ICAI CA.Mohammad. F,A.A.Ansari, IFRS- impact on Indian Banking Industry. IJBM IFRS in India key aspects, RSM IFRS: Developing a Roadmap to Convergence, KPMG, (March 2008) R.Tripathi, and Shikha G.International financial reporting standard- a way for global consistency. Reserve Bank of India. Trends and progress of Banking in India. Securities and Exchange Commission - www.sec.gov The Institute of Chartered Accountants of India - http://www.icai.org/ The Institute of Company Secretaries of India - http://www.icsi.edu/ http://www.gaap-ifrs.com/diary/ http://www.google.com