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UNIVERSITY OF MUMBAI 2013-14 PROJECT REPORT ON INTERNATIONAL FINANCIAL REPORTING STANDARD SUBJECT: FINANCE & ACCOUNTING BY NAME OF STUDENT: GANESH NIKAM COLLEGE SEAT NO :- 119 MASTER IN COMMERCE ( SEMESTER-II )

K.M.AGRAWAL COLLEGE OF ARTS,COMMERCE & SCIENCE KALYAN (W).

CERTIFICATE

K.M.AGRAWAL COLLEGE, KALYAN

THIS IS TO CERTIFY THAT MR. GANESH NIKAM HAS WORKED AND COMPLETED HIS PROJECT WORK FOR THE DEGREE OF MASTER IN COMMERCE IN THE FACULTY OF COMMERCE IN THE SUBJECT OF FINANCE ACCOUNTING ON TITLE OF PROJECT WORK TO BE WRITTEN INTERNATIONAL FINANCIAL REPORTING STANDARD UNDER MY SUPERVISION. IT IS HIS OWN WORK AND FACTS REPORTED BY HIS PERSONAL FINDINGS AND INVESTIGATIONS.

NAME & SIGNATURE OF

PROF. (INTERNAL GUIDE)

PROF (EXTERNAL GUIDE)

PROF. (PRINCIPAL)

DECLARATION

I, GANESH NIKAM THE STUDENT OF K.M. AGRAWAL COLLEGE OF M.COM (PART-1) HERE BY DECLARE THAT I HAVE COMPLETED THIS PROJECT ON IN THE INTERNATIONAL FINANCIAL REPORTING STANDARD FOR THE ACADEMIC YEAR 2013-14. THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE. I HERE BY FURTHER DECLARE THAT ALL INFORMATION OF THIS DOCUMENT HAS BEEN OBTAINED AND PRESENTED IN ACCORDANCE WITH ACEDAMIC RULES AND ETHICAL CONDUCT.

COLLEGE SEAT NO. :- 119 YEAR:- 2013-14

DATE : PLACE :-

NAME & SIGNATURE

ACKNOWLEDGEMENT

I WOULD LIKE TO THANKS EVERYONE WHO HELPED ME IN THE COMPILING OF MY DISSERTATION, FROM, INITIAL RESEARCH TO FINAL DOCUMENTATION. SPECIALLY THANKS TOWARDS MY INTERNAL PROJECT GUIDE WHO SUPERVISED THIS STUDY AND GAVE VALUABLE FEEDBACK AND ADVICE THROUGHOUT. AND ALSO I AM VERY THANKS TO MY EXTERNAL GUIDE, PROF._________________. I OWE MY INDEBTEDNESS TOWARDS ALL THE TEACHERS OF K.M. AGRAWAL COLLEGE FOR THEIR COOPERATION AND ENCOURAGEMENT EXTENDED TO ME DURING THE COURSE OF PRESENT STUDY. I AM ALSO THANKFUL TO ALL MY FRIENDS WHO ARE THE CURIOUS LEARNERS AND HAVE DEEPENED MY INTEREST IN THE SUBJECT MATTER AND IN TURN, IT HAS HELPED ME TO IMPROVE MY KNOWLEDGE ON THE THEME. FURTHER THANKS TO MY PARENTS AND MY FAMILY FOR THEIR UNLIMITED AND SUPPORT DURING MY STUDY.

TABLE OF CONTENTS

SR.NO. 1.

TITLE
INTRODUCTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD OBJECTIVES OF IFRS CHARACTERISTICS OF IFRS IFRS ISSUED TILL DATE IFRS 1 - FIRST TIME ADOPTION OF IFRS GLOBAL CONVERGENCE CONVERGENCE IN INDIA PROCESS OF CONVERGENCE TO IFRS BENEFITS OF ADOPTING IFRS FOR INDIAN COMPANIES CHALLENGES IN ADOPTION AND FULL COMPLIANCE WITH IFRS IN INDIA RELATED AMENDMENTS CONCLUSION BIBLIOGRAPHY

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2. 3 4. 5. 6. 7. 8. 9. 10.

7 8 11 12 15 18 26 27 29

11. 12. 13.

30 31 32

1. INTRODUCTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD The Institute of Chartered Accountant of India (ICAI) has decided the strategy for adoption of IFRS in India with effect from 1st April, 2011. At present over 110 countries in the European Union, Africa, West Asia and Asia Pacific regions either require or permit the use of IFRS. Even in the US there is ongoing debate about adoption of IFRS replacing the US GAAP. Now the International Accounting Standards Board (IASB) that issues IFRS and the Financial Accounting Standards Boards (FASB) that issues the US GAAP are cooperating and they have long term projects and short term projects to converge US GAAP into IFRS. MEANING OF IFRS International Financial Reporting Standards (IFRS) are global accounting standards used by more than 100 countries in the world. The International accounting standards Board (IASB), a private sector body, develops and approves IFRS. The IASB replaced the International Accounting standards Committee (IASC) in 2001. I.F.R.S. represent sets of financial reporting standards issued by International Accounting Standards Board (I.A.S.B.). This Board is independent standard setting body of International Accounting Standards Committee Foundation (I.A.S.C.). In July 2005 IASC Foundation was formed. It constitutes team of 22 trustees from various countries. SCOPEOF IFRS The term IFRS has both, a narrow and a broad meaning. Narrowly, IFRS refers to the new numbered series of pronouncements that the IASB is issuing, as distinct from the IAS series issued earlier. More broadly, IFRS refers to the entire body of IASB pronouncements, including standards and interpretations. Till date, IASB has issued 41 IAS and 9 IFRS. 33 SIC (Standing Interpretations Committee) are also issued to provide guidance on some interpretation issues arising from IAS and IFRS.

2. OBJECTIVES OF IFRS The objective of IFRS is to ensure that an entitys first financial statements, and its interim financial reports contain high quality information which is : 1. Transparent for users 2. Provides a suitable starting point for accounting under IFRS. 3. Can be generated at a cost which does not exceed the benefits to user. Conceptual Framework for Financial Statements issued under IFRS is summed up below : 1. Position, Performance and Flows : Balance sheet, Profit & Loss Statement and Cash Flow Statements make up the financial statement of an entity. The objective of financial statements of a business entity is to provide information about the financial position, performance and cash flows of the entity that is useful for economic decision making by a broad range of the users who are not in a position to demand reports tailored to meet their particular information needs. General purpose financial statements provide information to help users to estimate the equity value of the reporting entity. To assess an entitys prospects for future net cash inflows, existing and potential investors, lenders and other creditors need information about the resources of the entity, claims against the entity, and how efficiently and effectively the entitys management has discharged its responsibilities to use the entitys resources.

2. Stewardship : Financial statements also show the results of the stewardship of management the accountability of management for the resources entrusted to it. Shareholders who vote on whether to retain directors or replace them, and on how members of management should be remunerated for their services, need information on which to base their decisions. Shareholders decision making processes may include evaluating how management of the entity performed against management in competing entities in similar circumstances.

3. CHARACTERISTICS OF IFRS 1. Qualitative : The qualitative characteristics of useful financial information are the characteristics of information that are likely to be most useful to existing and potential investors, lenders and other creditors for making decisions about the reporting entity on the basis of information in its financial report. Understandability, relevance, materiality, reliability and comparability are the main qualitative characteristics. 2. Understandability : The information provided in financial statement should be presented in a way that makes it comprehensible by users. Users should have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence. Relevant information should not be omitted on the grounds that it may be too difficult for some users to understand. Classifying and presenting information clearly and concisely makes it understandable. 1. Relevance : The information provided in financial statements must be relevant to the decisions of users. Information has the quality of relevance when it helps users to evaluate past, present or future events or confirming, or correcting, their past evaluations. 2. Materiality: Information is material if its omission or misstatement could influence the

decisions of users. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Materiality provides a cut-off point for relevance.

3. Reliability: Information is reliable when it is from material error and bias and represents

faithfully that which it either purports to represents or could reasonably be expected to represent. Financial statements are not free from bias if, by the selection or presentation of information, they are intended to influence the making of decision or judgment in order to achieve a predetermined result or outcome. The information should be complete, neutral and free from error. To be reliable, the information in financial statements must be complete within the bounds of materiality and cost. An omission can cause information to be false or misleading and thus unreliable and deficient in terms in terms of its relevance. 4. Comparability : Users must be able to compare the financial statements of an entity through time to identify trends in its financial position and performance. Users must also be able to compare the financial statements of different entities to evaluate their relative financial position, performance and cash flows. The measurement and display of the financial effects of similar transactions and other events and conditions must be carried out in a consistent way throughout an entity and over time for the entity, and in a consistent way across entities. Users must be informed of the accounting policies employed in the preparation of the financial statements, and of any changes in those policies and the effects of such changes. 5. Timeliness : To be relevant, financial information must be able to influence the economic decisions of users. Timeliness involves providing the information within the decision time frame. If there is undue delay in the reporting of information it may lose its relevance. Management may need to balance the relative merits of timely reporting and the provision of reliable information. In achieving a balance between relevance and reliability, the overriding consideration is how best to satisfy the needs of users in making economic decisions.

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6. Balance between benefit and cost : The benefits derived from information should exceed the cost of providing it. The evaluation of benefits and costs is substantially a judge mental process. Furthermore, the costs are not necessarily borne by those users who enjoy the benefits, and often the benefits of the information are enjoyed by a broad range of external users. Financial reporting information helps capital providers make better decisions, which results in more efficient functioning of capital markets and a lower cost of capital for the economy as a whole.

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4. IFRS ISSUED TILL DATE Following is the List of IFRS issued till date: IFRS 1 First-time Standards. Adoption of International Financial Reporting

IFRS 2 IFRS 3 IFRS 4 IFRS 5

Share-based Payment Business Combinations Insurance Contracts Non-current Assets Held for sale and Discontinued operations.

IFRS 6 IFRS 7 IFRS 8 IFRS 9

Exploration for and Evaluation of Mineral Assets Financial instruments: Disclosures Operating Segments Financial Instruments

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5. IFRS 1 - FIRST TIME ADOPTION OF IFRS Following is the summary of IFRS 1 (First Time Adoption of IFRS). (1) Issue Date :

IFRS 1 (First Time Adoption of International Financial Reporting Standards) was issued in June 2003.

(2) Application : It applies to an entity whose first IFRS financial statement are for a period beginning on or after 1 January 2004. It applies when an entity adopts IFRSs for the first by an explicit statement of compliance with IFRSs. Most companies apply IFRS 1 when they move from local accounting standards to international accounting standards.

(3) Definitions : a. First IFRS reporting period - the latest reporting period covered by first IFRS financial statement. b. First time adopter an entity that presents first IFRS financial statements in which an explicit and unreserved statement of compliance is made. c. Opening IFRS statement of financial position an entitys statement of financial position at the date of transition to IFRSs. d. Previous GAAP the basis of accounting used immediately before the adoption of IFRS. e. Date of transition the beginning of the earliest period for which an entity presents full comparative information under IFRSs in its first IFRS financial statements.

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(4) Objective : The objective of this IFRS is to ensure that an entitys first IFRS financial statements, and its interim financial reports for part of the period covered by those financial statements, contain high quality information that : a. Is transparent for users and comparable over all periods presented; b. Provides a suitable starting point for accounting in accordance with

International Financial Reporting Standards (IFRSs); c. Can be generated at a cost that does not exceed the benefits.

(5) Opening BS : An entity shall prepare and present an opening IFRS statement of Financial position at the date of transaction to IFRSs. This is the starting point for its accounting in accordance with IFRSs.

(6) Accounting Policies : An entity shall use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. In general, those accounting policies shall comply with each IFRS effective at the end of its first IFRS reporting period. For example, if an entity adopts IFRS for the financial year ending on 31st March, 2012, then it should apply the accounting policies in effect as at 31st March, 2012 for all the comparative periods. (7) Steps : In general, the IFRS requires an entity to do the following in the opening IFRS statement of financial position that it prepares as a starting point for its accounting under IFRSs : a. Include all assets and liabilities that the IFRS require (e.g. assets held under finance lease and lease obligations); b. Exclude any assets or liabilities not permitted by the IFRS (e.g. provisions which do not meet the definition of liability);

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c. Reclassify any item, liability or equity (current/non-current, liability/equity) in accordance with IFRS (e.g. preferred shares with fixed maturity as debt rather than equity); d. Measure all assets and liabilities by applying IFRS (e.g. at cost, fair value or a discounted amount); and e. Adjust the difference due to above steps in the reserves (e.g. revaluation reserve).

(8) Exemption : The IFRS grants 10 limited exemptions from these requirements in specified areas where the cost of complying with them would be likely to exceed the benefits to users of financial statements. (9) Prohibitions : The IFRS also makes 4 prohibitions regarding retrospective application of IFRS in some areas. Hindsight should not be used to revise estimates. The estimates made under previous local standards can be revised only to correct objectives errors. (10) Disclosures : The IFRS requires disclosures that explain the effects of transition from previous standards to IFRS on the entitys reported financial position, financial performance and cash flows. The first IFRS Financial Statement should include a reconciliation of : (i) (ii) Equity and Net profit, from previous GAAP to IFRS.

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6. GLOBAL CONVERGENCE NEED : Each country has its own set of rules, regulations and reporting standards. When a company decides to raise capital from the foreign markets, the rules and regulations of that foreign country will apply. The final accounts in rupees need to be translated in foreign currency in order to be acceptable to foreign investors. If an Indian Company wishes to raise capital in the U.S., its final accounts based on Indian Accounting Standards need to be re worked as per the U.S.A. accounting standards in order to be acceptable to U.S. investors. The two SETS of accounts local and global must be comparable. International analysts and investors would like to compare financial statements based on similar accounting standards. There is a strong need to bring about uniformity, comparability, transparency and adaptability in financial statements. Multiplicity of accounting standards around the world creates confusion, encourages errors and facilitates fraud. The financial statements will not be useful if accounting for the same events and information produces different financial statements due to adoption of different sets of accounting standards. The cure for these ills is to have a single set of high quality global standards. The convergence is very much essential also for companies whose shares are listed in both domestic and foreign stock exchange.

ROLE OF IASB / IFRS : The task of creating such single set of high quality global standards, was taken up by International Accounting Standards Board (IASB) which led to the creation of International Financial Reporting Standards (IFRS). The goal of the IFRS is to create single set of accounting standards that can be applied anywhere in the world, allowing investors to compare the performance of business entities across geographic boundaries. The harmonization of financial reporting around the world will help to raise confidence of investors in the information they are using to make their financial decisions.

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MEANING : (1) General : In general terms, convergence, means to achieve harmony in relation to IFRS. (2) Precise : In precise terms, converge means to design and maintain national accounting standards in a way that financial statements prepared in accordance with national accounting standards draw unreserved statement of compliance with IFRS.

(3) Compliance with IFRS : International Accounting Standard (IAS) 1, Presentation of Financial statements, states that financial statements shall not be described as complying with IFRS unless they comply with all the requirements of IFRS.

(4) Exceptions : However, this does not imply that financial statements comply with IFRS only when IFRS are adopted word by word. The IASB accepts that adding disclosure requirements or removing optional treatments does not crates non compliance with IFRS. Indeed, the IASB aims to remove optional treatments from IFRS. This makes it clear that if a country wants to add a disclosure that is considered necessary in the local environment, or removes an optional treatment, this will not amount to non compliance with IFRS. Thus, convergence with IFRS means adoption of IFRS with the above exceptions, where necessary. (5) Entities : For a country to be IFRS compliant, it is not necessary that IFRS are applied to all entities of different sizes and of different public interests. Even the IASB recognizes that IFRS are suitable for publicity accountable entities. The IASB has, therefore, recently issued a separate set of IFRS for Small and Medium sized Entities (SME).

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CHALLENGES : The process of convergence faces the following challenges : a. Preparing financial statements under IFRS poses a great challenge to the accountants. b. Cultural, legal and political differences may cause difficulties in convergence. c. Reconciliation and restatement of financial statements is costly. d. There are disagreements in some countries with the requirements of certain specific IFRS. e. Some IFRS are complicated in nature. EXTENT : IFRS are used in many parts of the world, including the European union, Australia, South Africa and Russia. More than 100 countries have required or permitted the use of IFRS since 2001 and the number is excepted to increase to 150 by 2011. The Group of 20 leader countries (G20) reaffirmed their commitment to global convergence in accounting standards in a meeting held at Pittsburgh (United States) in September 2009, calling on international accounting bodies to complete their convergence project by June 2011. Some of the major countries that are seeking to converge with IFRS by 2011 include Canada, Korea, India and Brazil.

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7. CONVERGENCE IN INDIA NEEDS : In the era of globalization, India cannot ignore the developments taking place worldwide. High quality financial reporting is essential for a global capital market. A few Indian companies are already listed on overseas stock exchanges and many more are in the process of getting themselves listed. Also, the recent acquisitions of foreign companies by Indian companies makes a stronger case for adoption of IFRS. At present, the Accounting Standards Board (ASB) of the Inst. of C.A. of India (ICAI) formulates the Accounting Standards (AS) based on IFRS. However, these standards remain sensitive to local conditions, including the legal and economic environment. AS issued by ICAI depart from the corresponding IFRS in order to ensure consistency with legal, regulatory and economic environment of India. ROLE OF ICAI : Convergence with IFRS would require several changes in Indian laws and decision processes. In India, the Institute of Chartered Accountants of India (ICAI) is on way towards convergence of its Accounting Standards (AS) with global reporting standards. The ICAI, being a member of the International Federation of Accountants (IFAC), studies the IFRS and tries to integrate them, to the extent possible, in the light of the laws, customs, practices and business environment. Recognizing the growing need of full convergence of Indian Accounting Standards with IFRS, the ICAI has constituted a Group to interact with government and regulatory authorities. This group has constituted separate core groups to identify inconsistencies between IFRS and various relevant acts. IFRS Task Force has also been formed to examine various issues involved in the convergence process. The Task Force has proposed for adoption of IFRS, in phased manner, for listed entities and public interest entities form accounting periods commencing on or after April 1,2011.

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IFRS CATEGORIES: The ICAI has also classified IFRS into four broad categories as part of its convergence strategy, which can be detailed as follows : 1. First category describes IFRS which can be adopted immediately or in the immediate future in view of no or minor differences (for example construction contracts, borrowing costs, inventories ). 2. Second category includes IFRS which may require some time to reach a level of technical preparedness by the industry and professionals, keeping in view the existing economic environment and other factors ( for example, share-based payments ). 3. Third category includes IFRS which have conceptual differences with corresponding Indian Accounting Standards and where further dialogue and discussions with the IASB may be required ( consolidation, jointventures, provisions and contingent liabilities ). 4. Last category comprises if IFRS which would require changes in laws/regulations. CORE GROUP BY MCA : A Core Group has been constituted by the Ministry of Corporate Affairs (MCA) for convergence of Indian Accounting Standards with International Accounting Standards with International Financial Reporting Standards (IFRS). It is made up of various officials from the Institute of Chartered Accountants of India (ICAI), Ministry of Finance, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Reserve Bank of India (RBI), Comptroller and Auditor General (C&AG), Pension Fund Regulatory and Development Authority (PFRDA), Industry representatives and other experts. The Core Group also deals with amendments required in the Companies Act, 1956, the related Schedules - VI AND XIV and Accounting Standards Rules for the purpose of convergence, the implementation challenges especially those related to legal and accounting framework and transitional issues.

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IFRS - COMPLIANT STANDARDS : The ICAI has already started the process of issuing IFRS equivalent AS and revising the existing standards and Guidance Notes to bring them at par with IFRS. ASB has, so far, issued thirty five Accounting Standards. Thirty five Indian Accounting Standards converged with International Financial Reporting Standards ( henceforth called IND AS ) have been notified by the Ministry of Corporate Affairs (MCA) as on February, 2011. The Ministry of Corporate Affairs will implement the IFRS converged Indian Accounting Standards in a phased manner after various including tax related issues are resolved with the concerned Departments. The date of implementation of the IND AS will be notified by Minister at a later date. Till date 41 IAS have been issued, but 12 have been withdrawn, As on date 29 IAS are in force. IND AS 101 First-time adoption of Indian Accounting Standards IND AS 102 Share based Payment IND AS 103 Business Combinations IND AS 104 Insurance Contracts IND AS 105 Non -current Assets Held for Sale and Discontinued operations IND AS 106 Exploration for and Evaluation of Mineral Resources IND AS 107 Financial Instruments : Disclosures IND AS 108 Operating Segments IND AS 1 Presentation of Financial Statements IND AS 2 Inventories IND AS 7 Statement of Cash Flows IND AS 8 Accounting Policies, Changes in Accounting Estimates & Errors

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IND AS 10 Events after the Reporting Period IND AS 11 Construction Contracts IND AS 12 Income Taxes IND AS 16 property, Plant and Equipment IND AS 17 Lease IND AS 18 Revenue IND AS 19 employee Benefits IND AS 20 Accounting for Government Grants & disclosure of Assistance IND AS 21 The Effects of Changes in Foreign Exchange Rates IND AS 23 Borrowing Costs IND AS 24 Related Party Disclosures IND AS 26 Accounting and Reporting by Retirement Benefit Plans IND AS 27 Consolidated and Separate Financial Statements IND AS 28 Investments in Associates IND AS 29 Financial Reporting in Hyperinflationary Economics IND AS 31 Interests in Joint Ventures IND AS 32 Financial Instruments: Presentation IND AS 33 Earnings per share IND AS 34 Interim Financial Reporting IND AS 36 Impairment of Assets IND AS 37 Provisions, Contingent Liabilities and assets

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IND AS 38 Intangible Assets IND AS 39 Financial Instrument : Recognition and Measurement (to be replaced by IFRS 9) IND AS 40 Investment Property IND AS 41 Agriculture (NOTE : IND AS 101 108 correspond with IFRS 1- 8. IND as 1 40 correspond with IAS 1 40.) TWO SEPARATE SETS OF ACCOUNTING STANDARDS : The Core Group has decided that there will be two separate sets of Accounting Standards under Section 211(3C) of the Companies Act, 1956, which are as follows : 1. Indian Accounting Standards Converged with the IFRS : These are the standards which are being converged by eliminating the differences of the Indian Accounting Standards vis--vis IFRS. These standards shall be applied for all companies falling under Phase I to Phase III.

2. Indian Accounting Standards notified in the Companies (Accounting Standards) Rules, 2006 : These are the standards used, at present, by Indian Companies under the Companies Act, 1956. Companies not falling within the threshold limits prescribed for IFRS compliance in the respective phases shall continue to use these standard in the preparation and presentation of financial statements.

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PHASES FOR IMPLEMENTATION : On 22nd January 2010, the Ministry of Corporate Affairs has issued a press release setting out the roadmap for convergence with IFRS for certain defined entities with effect from accounting periods commencing on or after April 1, 2011. EXHIBIT 1 : PHASES FOR IMPLEMENTATION Class of Companies Opening Balance sheet as per converged accounting standards 1 Insurance Companies Scheduled Commercial Banks Urban CoBanking Companies operative April 1,2012 April 1,2013 Net worth in excess of Rs.300 April 1,2013 crores

Banks (UCB) Net worth in excess of Rs.200 April 1,2014 crores but not exceeding Rs.300 crores Net worth not exceeding of Rs.200 crores Regional Rural Banks (RRB) Optional Optional

Non Banking Financial Companies (NBFC) 2

- Companies which are a part of NSE Nifty 50 Companies which are a part of BSE Sensex 30 April 1,2013 Companies whether listed or not, which have a not worth in excess of Rs.1,000 crores

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Listed All that fall above categories NBFCs Non listed which have a net do in not worth in excess of Rs.500 crores the Non listed which have a net worth crores not exceeding Rs.500

April 1,2014

April 1,2014

Optional

Companies which are a part of NSE Nifty 50 Other Companies Companies whose shares or other securities are listed on stock exchanges outside India Companies whether listed or not, which have net worth in excess of Rs.1,000 crores Other Companies 2 Companies whether listed or not, which have net April 1,2013 worth in excess of Rs.500 crores but not (Phase 2) April 1,2011 (Phase 1) Companies which are a part of BSE Sensex 30

exceeding Rs.1,000 crores

Listed companies which have a net worth not April 1,2014 exceeding Rs.500 crores Non listed companies which have a net worth not exceeding Rs.500 crores and whose shares or other securities are not listed on stock exchanges outside India Other defined small and medium sized companies (SMC) Optional (Phase 3)

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1. The opening balance sheets shall have to be converted as per converged Accounting Standards as on the said date.

2. For NBFCs and companies whose financial year commences on any date other than April 1, the conversion of the opening balance sheet will be on the financial year commencing on a date immediately following April 1 of the relevant year.

Latest Status : MCA convened a meeting of Core Group in September 2012 to consider the revised road map. ICAI has been requested to suggest new road map considering the status of the IFRS developments by the IASB. The revised roadmap to be suggested to MCA is under consideration of the Council of the ICAI and is excepted to be finalized shortly. Implementation date will be greatly dependent on the completion of the current projects by IASB. Regulators for the Insurance Companies and banks have indicated that they will await the finalization of IFRA 4 and IFRS 9

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PROCESS OF CONVERGENCE TO IFRS :

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8. BENEFITS OF ADOPTING IFRS FOR INDIAN COMPANIES The decision by ICAI to coverage with IFRS is a path breaking decision. It is likely to provide the following benefits to Indian companies. 1. Improved access to International capital markets : Many Indian companies are expanding or acquiring companies outside India for which huge capital is required. Majority of world stock exchange require financial information prepared under IFRS. Change to IFRS will enable Indian companies to have

access to international capital markets as IFRS is globally acceptable.

2. Lower cost of capital : Change to IFRS will lower the cost of raising funds, as there will be no need for preparing two sets of financial statements (one under IFRS and another under Indian Accounting Standards). It will also reduce audit fees and higher rate of interest.

3. Enable benchmarking with global peers and improve brand value: Adoption of IFRS will enable companies to gain a broader and deeper understanding of its relative standing in the global market. With adoption of IFRS companies can set

targets and milestones based on global business environment, rather than merely local ones.

4. Escape Multiple Reporting : Convergence to IFRS, by all group entities, will enable company managements to have one financial reporting platform for the Indian as well as foreign components / branches. This will eliminate the need for multiple reports and significant adjustments for preparing Consolidated financial statements or filing financial statements in different stock exchanges.

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5. Reflects true value of acquisitions : In Indian GAAP, business combinations (amalgamations or absorptions), with few exceptions, are recorded at costs and not at fair values of net assets taken over. Purchase consideration paid for intangible assets not recorded in the vendors books is usually not reflected separately in the financial statements; instead the amount gets added to goodwill. Hence, true value of the business combination is not reported in the financial statements. IFRS will overcome this drawback as it requires accounting for net taken over in a business combination at fair value. It requires recognition of intangible assets, even though they have not been recorded in the vendors financial statements.

6. New opportunities : IFRS will open up many opportunities in the services sector. With accountants trained in IFRS, India can act as the accountant for the global community. As IFRS emphasizes fair value, it will provide jobs to professionals, including accountants, valuers and actuaries. It will help the BPO (Business Process

Outsourcing) concerns in India.

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9. CHALLENGES IN ADOPTION AND FULL COMPLIANCE WITH INDIA

IFRS IN

There are several practical challenges in adoption of and full compliance with IFRS in India. 1. Several laws and regulations governing financial accounting and reporting in India need to be amended.

2. There are certain sections of the Companies Act that over ride the provisions of IFRS.

3. There is a shortage of professionals with practical IFRS conversion experience and therefore many companies will have to depend on external advisors and their auditors.

4. There is an urgent need to build adequate IFRS skills among the Indian accounting professionals to manage the conversion

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10. RELATED AMENDMENTS Compliance with converged IFRS is, however, not possible until the regulations / laws are amended. In India, IFRS convergence is subject to direct or indirect control of several regulators, such as National Advisory Committee on Accounting Standards (NACAS) established by the Ministry of Corporate Affaires (MCA), the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority (IRDA) and the Security and Exchange Board of India (SEBI). Further, the Indian Companies Act, 1956 provides guidance on accounting and financial reporting matters. The requirements of Schedule VI of Act, which currently prescribes the format for presentation of financial statements for Indian companies, are substantially different from the presentation and disclosure requirements under IFRS. Convergence with IFRS will also require significant changes from the tax authorities [Central Board of Direct Taxes (CBDT) ] on treatment of various accounting transactions.

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CONCLUSION

The decision by ICAI to coverage with IFRS is a path-breaking decision. It is likely to provide the various new opportunities in Indian companies.

In Indian GAAP, business combinations, with few exceptions, are recorded at costs and not at fair values of net assets taken over. Purchases consideration paid for intangible assets not recorded in the vendors books is usually not reflected separately in the financial statement; instead the amount gets added to good will.

IFRS will open of many opportunities in service sector. With accountants trends in IFRS, India can act as the accountant for the global community. IFRS provide job to professional, including accountants, valuears and actuaries. It will also help to BPO.

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BIBLIOGRAPHY
There have been many good books on IFRS written over the years. Some of those that have inspired the writing of this are listed & Internet sites are given below:-

SOURCES AND SUGGESTED READINGS:1. Advance financial accounting text books. 2. Management Accounts & Financial Accounts text books (Manan Prakashan). 3. www.wikipedia.co.in