IFRS A Numero-Uno Globally Accepted Accounting Framework

What is IFRS…  Stands for International Financial Reporting Standards.  In a Broad sense IFRSs includes IASs, However in narrow it relates to only IFRS issued and effective so far.  Till date 30 International Accounting Standards (IAS, now adopted as IFRS), by IAS Committee and 8 IFRS, by IAS Board has been issued and effective.30 International Accounting Standards 8 IFRS  Also 11 SICs (Standing Interpretation Committee) and 13 IFRICs International Financial Reporting Interpretation Committee has been issued for guidance on IAS and IFRS.11 SICs 13 IFRICs To see the List Please click on these Hyperlink

Convergence of IFRS in India…  Participants (Who will take a part in convergence) ۞ ICAI (Institute of Chartered Accountants of India) ۞ NACAS (National Advisory Committee on Accounting Standards) ۞ Central Government ۞ Ministry of Corporate Affairs  The power of issuance of Accounting Standards has been delegated to Central government (but AS issued by ICAI shall be deemed to be issued by Central Government) U/S 211 3(c) of Companies Act,  NACAS (National Advisory Committee on Accounting Standards) has been established to ensure smooth transition to IFRS by the Ministry of Corporate Affairs, Government, Various Regulators like RBI, SEBI and IRDA.  ICAI will discuss with IASB on the areas required changes, keeping in view the Indian Conditions.  IFRS will apply to Listed Cos., Banks, Insurance Organizations, other Large size Cos. And probably to Level I Enterprises (as defined in preface to Indian Accounting Standards).Level I Enterprises

Process and Timings of Convergence ICAI will draft and issue Accounting Standards IFRS becomes mandatory from accounting period commencing on or after 1 st April (However it is also required to state previous year figures complied with IFRS in Financial Statement as on 31 st March Therefore it is also applicable on Financials as on 31 st March 2010). NACAS will review it and give its node Central Government will make it effective on the date of notification. Central Government considers it and make consequential amendments to other Fiscal Laws as in Companies Act Sec 211(3C) will require an amendment initially.

Global Acceptance ۞ In June 2000 European Commission passed a ruling for all listed companies to follow IFRS for preparing CFS. ۞ SEC (Securities Exchange Commission in US) has given a option to Foreign Private Issuers to follow IFRS instead of US GAAP in preparation of Financial Reporting Standards. ۞ SEC is also considering a proposal of treating Foreign and US issuers at par. ۞ In more than 100 Countries, IFRS is required or permitted in preparation and presentation of Financial Statements of Domestic Listed Companies. Moreover in china it will applicable on 1 st April 2008 & in Canada it will applicable in Permitted/ RequiredNo. of Countries Required for all77 Permitted24 Required (but not for all)4 Total105

IFRS Convergence… Benefits and Challenges BenefitsChallenges  Access to International Capital Market, International Money Market without risk premium. - Lower cost of Capital -Eliminating dual set of Financials  Global Benchmarking and Improved Brand Values  Elimination of Multiple Reports required by stock exchanges  Fair Value approach in valuation of Assets and Liabilities (Recognition of Intangible Assets and Contingent Liabilities)  New and Global Opportunities for professionals (Specially C.A.s).  Shortage of Resources (India with a Population of more than 1 Billion, has only approx. 145K)  Training to be provided to Stakeholders, CFO’s, Auditors, Audit Committee, Analysts, Regulators, Tax Authorities  Information System and communication is required to be altered to adopt the disclosures and presentation of Financials  Fiscal Laws should adopt IFRS (for e-g Deciding Taxability of Unrealized Gains)  Management Compensation, Distributable Profits and Debt Covenants should be valued taking care of new Financials based on IFRS

IASs/IFRSsvis-à-vis Indian GAAPs IAS/(IFRS) No. & TitleIndian GAAP No. & Title 1. Presentation of Financial Statements 1. Disclosure of Accounting Policies 2. Inventories 2. Valuation of Inventories Corresponding IAS has been withdrawn since the matter is now covered by IAS 16 and IAS Depreciation Accounting 7. Cash Flow Statements 3. Cash Flow Statements 8. Accounting Policies, Changes in Accounting Estimates and Errors 5. Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies 10. Events After the Balance Sheet Date 4. Contingencies and Events Occurring after the Balance Sheet Date 11 Construction Contracts 7

IASs/IFRSsvis-à-vis Indian GAAPs IAS/(IFRS) No. & TitleIndian GAAP No. & Title 12. Income Taxes 22. Accounting for Taxes on Income 14. Segment Reporting 17. Segment Reporting 16. Property, Plant and Equipment 10. Accounting for Fixed Assets 17. Leases 19. Leases 18. Revenue 9. Revenue Recognition 15. Employee Benefits 19. Accounting for Retirement Benefits in the Financial Statements of Employers (recently revised and titled as 'Employee Benefits') 20. Accounting for Government Grants and Disclosure of Government Assistance 12. Accounting for Government Grants 21. The Effects of Changes in Foreign Exchange Rates 11. The Effects of Changes in Foreign Exchange Rates

IASs/IFRSsvis-à-vis Indian GAAPs IAS/(IFRS) No. & TitleIndian GAAP No. & Title 23. Borrowing Costs 16. Borrowing Costs 24. Related Party Disclosures 18. Related Party Disclosures 27. Consolidated and Separate Financial Statements 21. Consolidated Financial Statements 28. Investments in Associates 23. Accounting for Investments in Associates in Consolidated Financial Statements 31. Interests in Joint Ventures 27. Financial Reporting of Interests in Joint Ventures 33. Earnings Per Share 20. Earnings Per Share 34. Interim Financial Reporting 25. Interim Financial Reporting 36. Impairment of Assets 28. Impairment of Assets 37. Provisions, Contingent Liabilities and Contingent Assets 29. Provisions, Contingent Liabilities and Contingent Assets

IASs/IFRSsvis-à-vis Indian GAAPs IAS/(IFRS) No. & TitleIndian GAAP No. & Title 38. Intangible Assets 26. Intangible Assets Corresponding IAS has been withdrawn since the matter is now covered by IAS 32, 39 and Accounting for Investments 40. Investment Property Dealt with by Accounting Standard 13 (3.) (Business Combinations) 14. Accounting for Amalgamations (5.) (Non-current Assets Held for Sale and Discontinued Operations). Recently issued and withdrew IAS Discontinuing Operations2 Further, As 10 deals with accounting for fixed assets retired from active use. *Only 3 AS (AS 15, 30 & 31) are in line with IFRS so far.

Other IASs / IFRSs ۩ Corresponding to IFRS 6, Exploration for and Evaluation of Mineral Resources, Guidance Note of the ICAI titled ‘Accounting for Oil and Gas Producing Activities’, has been issued. ۩ Some IAS/IFRS are not considered relevant for issuance of either Accounting Standards or the Guidance Notes by the ICAI. Standards Reasons IAS 29, Financial Reporting in Hyper-inflationary Economies Hyper-Inflationary conditions do not prevail in India IFRS 1, First-time Adoption of IFRSs IFRSs are not being adopted till date ۩ Relevant ASs are under preparation relevant to following IASs/IFRSs :- IAS 26Accounting and Reporting by Retirement Benefit Plans IAS 32Financial Instruments: Disclosure and Presentation IAS 39Financial Instruments: Recognition and Measurement* IAS 41Agriculture IFRS 2 Share Based Payments (Covered by Guidance Notes) IFRS 4Insurance Contracts IFRS 7Financial Instruments: Disclosure

Abhishek K. Garg Chartered Accountant Honeywell International India (P) Ltd.

List of IASs (Issued and Effective) No.TitleNo.Title 1*Presentation of Financial Statements 2Inventories 7Cash Flow Statements8Accounting Policies, Changes in Accounting Estimates and Errors 10Events after Balance Sheet Date11Construction Contracts 12Income Taxes14Segment Reporting 16Property, Plant and Equipment17Leases 18Revenue19Employee Benefits 20Accounting for Government Grants and disclosure of Government Assistance 21The Effect of Changes in Foreign Exchange Rates 23*Borrowing Cost24Related Party Disclosure 26Accounting and Reporting by Retirement Benefit Plan 27Consolidated and Separate Financial Statements Continue to…

List of IASs (Issued and Effective) No.TitleNo.Title 28Investments in Associates29Financial Reporting in Hyperinflationary Economies 31Interest in Joint Ventures32Financial Instruments: Presentation 33Earning Per Share34Interim Financial Reporting 36Impairment of Assets37Provisions, Contingent Liabilities and Contingent Assets 38Intangible Assets39Financial Instruments: Recognition and Measurement 40Investment Property41Agriculture *Revised standards has been issued and applicable from accounting period commencing on or after 1 st January ** IAS 3,4,5,6,9,13,15,22,25,30 & 35 have been withdrawn.

List of IFRSs (Issued and Effective) No.Title 1First Time Adoption of International Financial Reporting Standards 2Share Based Payment 3Business Combinations 4Insurance Contracts 5Non Current Assets Held for Sale and Discontinued Operations 6Exploration for and Evaluation of Mineral Resources 7Financial Instruments: Disclosure 8Operating Segments

List of SICs (Issued and Effective) No.Title 7Introduction of Euro 10Government Assistance- No Specific Relation to Operating Activities 12Consolidation- Special Purpose Entities 13Jointly Controlled Entities- Non-Monetary Contributions by Ventures 15Operating Leases- Incentives 21Income Taxes- Recovery of Revalued Non-Depreciable Assets 25Income Taxes- Changes in Tax Status of an Entity or its Shareholders 27Evaluating the Substance of Transactions Involving the Legal Form of a Lease 29Disclosure: Service Concession Agreements 31Revenue- Barter Transactions Involving Advertising Service 32Intangible Assets- Website Costs

List of IFRICs (Issued and Effective) No.Title 1Changes in Existing Decommissioning, Restoration and Similar Liabilities 2Member’s Share in Co-operative Entities and Similar Instruments 4Determining whether an Arrangement contains a Lease 5Rights to Interest arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 6Liabilities arising from Participating in a Specific Market-Waste Electrical and Electronic Equipment 7Applying the Restatement Approach under IAS 29 8Scope of IFRS 2 9Reassessment of Embedded Derivatives 10Interim Financial Reporting and Impairment 11IFRS 2- Group and Treasury Share Transactions 12Service Concession Arrangements 13Customer Loyalty Programmes 14IAS 19- The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Meaning of Level I Enterprises Means an Enterprises which satisfy one or more of following conditions :  Listed or in the process of listing whether in india or outside india.  Banks, Financials Institution, Enterprises carrying on Insurance Business  All Commercial, Industrial and Business Reporting Enterprises having turnover more than Rs.50 Crores or borrowings more than Rs.10 Crores in Preceding accounting period.  Holding and subsidiary of any one of the above, at any time during the accounting period.