Presentation on Study of convergence of IAS and IFRS

Presented by:

Lovely B.com{p} – v

12-153.

INTRODUCTION{convergence IAS with IFRS}

The idea of convergence of Indian GAAP with IFRS was made by the Prime Minister of India Dr. Manmohan Singh commencing on or after 1 April 2011.

Two sets of Accounting Standards under the Companies Act.

The new set of standards converged with IFRS known as Indian Accounting Standards or Ind AS.

The Ministry of Corporate Affairs has notified the 35 Ind AS on 25 February 2011.

Meaning of IAS Indian Accounting Standards,

abbreviated as Ind AS is a set of accounting standards notified by the Ministry of Corporate Affairs which is converged with International Financial Reporting Standards(IFRS).

Formulated by Accounting Standards Board of Institute of Chartered Accountants of India.

ObjectiveTo remove variations in the treatment of

several accounting aspects and to bring about standardization in presentation.

To harmonize the diverse accounting policies followed in the preparation and presentation of financial statements by different reporting enterprises so as to facilitate intra-firm and inter-firm comparison.

Meaning of IFRS

A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

IFRS are issued by the International Accounting Standards Board in 2001.

Designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

REVIEW OF LITERATURE Wong and Wong(2005) examined to explore the impact

of not amortizing goodwill and identifiable intangible assets.

Lantto (2007) examined whether IFRS improved the usefulness of accounting information and improved the relevance of accounting information .

Chand & White (2007) demonstrated that the influence of Multinational Enterprises can lead to transfer of economic resources in their favour, wherein the public interests are usually ignored.

Paananen & Lin (2009) gave a contrary view to prior research that IFRS adoption ensures better quality of accounting information.

RESEARCH METHODOLOGY

Objective of Study To comparatively study Indian Accounting StandardsTo study the effect of IFRS on Ind ASs.To create the global financial reporting infrastructure.To generate sound business senses among the

beneficiaries. To generate the dimensions of fair presentation of

financial statement.To maintain higher transparency of financial

statement and mobility of capital.

Type of Survey: -Secondary Survey Source and type of data Secondary data Collected throughNewspapers, Internet,Magazines,BooksGovernment Documents etc…

RATIONALE BEHIND ADOPTING IFRS

Eliminate blockades to cross border listings and beneficial for the investors .

Enhances comparability among different sectors, lead to more transparent financial reporting benefiting investors, customers.

Remove multiple reporting and related costs, as the same set of financial statements.

Likely to enhance the reliability and image of financial reporting.

With use of a single global standard, enhance the efficiency of capital allocation and help to diminish the cost of capital.

CHALLENGES TO IMPLEMENT IFRS

Lack of responsiveness to International Financial Reporting Practices.

New Standards introduces discrepancies.Difficult to make adjustment with Indian

Taxation law.Volatility in Use of Fair Value as assessment

yardstick .Harmonization and modification to the Existing

Laws becomes necessary .Lack of properly trained up professional .Management reporting.

IMPACT OF CONVERGENCE OF IFRS ON FINANCIAL RATIOS

Return on Equity defined as net income

divided by book value of equity; Return on Assets, defined as net income

divided by total assets; Total Asset Turnover, defined as sales

revenue divided by total assets; Leverage, defined as total liabilities divided

by book value of equity Net Profit ratio defined as Net income

divided by sales revenue.

CONCLUSIONDifferences in accounting methods create

information costs for the preparers, auditors, and users of financial statements.

Need to harmonize financial reporting, and to reduce differences in the reporting of similar transactions.

Legal and regulatory requirements related to financial statements, the technical and accounting professionals and the economic environment will pose challenges to this convergence.

Given the task and challenges, all the entities should ensure that their convergence plan are designed in such a way as to achieve the objective of doing it once,but doing it right.