INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
International Financial Reporting Standards (IFRS) is a set of accounting standards, developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements. The IASB is an independent accounting standards body, based in London. Today's business(s) are crossing their national boundaries, promoting the synchronization of accounting standards across the globe. The objective behind the IFRS is to create a common platform for better understanding of accounting internationally.
Most jurisdictions that report under IFRS, including the EU, mandate the use of IFRS only for the listed companies. However, in INDIA, IFRS would apply to a wider group of entities than their international counterparts. This is primarily because of a large number of private enterprises getting covered under the size criteria, based on their turnover and/or their borrowing.
The Ministry of Corporate Affairs (MCA) has come out with the roadmap for achieving convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRS) from the year 2011.
As per the press release – 2/2010 No. 1/1/2009-IFRS dated 22nd January 2010, there will be two separate sets of Accounting Standards u/s Section 211 (3C) of the Companies Act, 1956. First set would comprise of the Indian Accounting Standards which are converged with the IFRSs which shall be applicable to the specified class of companies. The second set would comprise of the existing Indian Accounting Standards and would be applicable to other companies, including Small and Medium Companies (SMCs).
The first set of Accounting Standards (i.e., converged accounting standards) will be applied to specified class of companies in phases:-
a) Phase-I:-
The following categories of companies will convert their opening balance sheets as at 1st April'2011, if the financial year commences on or after 1st April, 2011 in compliance with the notified accounting standards which are convergent with IFRS. These companies are:-
i) Companies which are part of NSE – Nifty 50
ii) Companies which are part of BSE – Sensex 30
iii) Companies whose shares or other securities are listed on stock exchanges outside India.
iv) Companies, whether listed or not, which have a net worth in excess of Rs. 1000 crore.
b) Phase-II:-
The companies, whether listed or not, having a net worth exceeding
Rs. 500 crores but not exceeding Rs 1000 Crores will convert their opening balance sheet as at 1st April, 2013, if the financial year commences on or after 1st April, 2013 in compliance with the notified accounting standards which are convergent with IFRS.
c) Phase-III:-
Listed companies which have a net worth of Rs 500 crores or less will convert their opening balance sheet at at 1st April, 2014, if the financial year commences on or after 1st April, 2014, whichever is later, in compliance with the notified accounting standards which are convergent with IFRS.
When the accounting year ends on a date other than 31st March, the conversion of the opening Balance Sheet will be made in relation to the first Balance Sheet which is made on a date after 31st March.
Companies which fall in the following categories will not be required to follow the notified accounting standards which are converged with the IFRS (though they may voluntarily opt to do so) but need to follow only the notified accounting standards which are not converged with the IFRS. These companies are:-
a) Non-listed companies which have a net worth of Rs 500 crores or less and whose shares or other securities are not listed on Stock Exchanges outside India.
b) Small and Medium Companies (SMCs).
Necessary amendments are being introduced for changes to the Companies Act, 1956 Revision of Schedule VI to the Companies Act, 1956 and amendments to Schedule XIV are also planned in a time bound manner.
In respect of the converged Accounting Standards, the Chairman of the Accounting Standards Board of ICAI will submit the converged version of Accounting Standards to National Advisory Committee on Accounting Standards (NACAS) from time to time for recommendations and onward submission to Ministry. However, convergence of all the accounting standards will be completed by ICAI by 31st March, 2010 and NACAS will submit its recommendations to the Ministry by 30th April 2010.
IFRS 1 FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
IFRS 2 SHARE –BASED PAYMENT
IFRS 3 BUSINESS COMBINATIONS
IFRS 4 INSURANCE CONTRACTS
IFRS 5 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
IFRS 6 EXPLORATION FOR AND EVALUATION OF MINERAL RESOURCES
IFRS 7 FINANCIAL INTRUMENTS: DISCLOSURES
IFRS 9 FINANCIAL INSTRUMENTS
