Sandy Gill Project

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CHAPTER – 1 INTRODUCTION 1

Transcript of Sandy Gill Project

CHAPTER 1

INTRODUCTION

1. INTRODUCTION TO IFRS

Users of financial statements have always demanded transparency in financial reporting and disclosures. However, the willingness and need for better disclosure practices have intensified only in recent times. Globalization has helped Indian Companies raise funds from offshore capital markets. This has required Indian companies, desirous of raising funds, to follow the Generally Accepted Accounting Principles (GAAP) of the investing country. The different disclosure requirements for listing purposes have hindered the free flow of capital. The policy makers in India have also realized the need to follow IFRS and it is expected that a large number of Indian companies would be required to follow IFRS from 2011. This poses a great challenge to the makers of financial statements and also to the auditors.

1.1 Meaning of 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. IFRS is a principles-based accounting system, meaning it is objective-oriented allowing for more presentation freedom.1.2 Objectives of IFRS to develop, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the world's capital markets and other users make economic decisions; to promote the use and rigorous application of those standards; in fulfilling the objectives associated with (1) and (2), to take account of, as appropriate, the special needs of small and medium-sized entities and emerging economies. to bring about convergence of national accounting standards and International Accounting standards and IFRS to high quality solutions. 1.3BENEFITS OF IFRS By adopting IFRS, you would be adopting a "global financial reporting" basis that will enable your company to be understood in a global marketplace. This helps in accessing world capital markets and promoting new business. It allows your company to be perceived as an international player. A consistent financial reporting basis would allow a multinational company to apply common accounting standards with its subsidiaries worldwide, which would improve internal communications, quality of reporting and group decision-making. In increasingly competitive markets, IFRS allows a company to benchmark itself against its peers throughout the world, and allows investors and others to compare the company's performance with competitors globally. In addition, companies would get access to number of capital markets across the globe.1.4 DISADVANTAGES OF IFRS Despite a general consensus of the inevitability of the global acceptance of IFRS, many people also believe something will be lost with full acceptance of IFRS. Further certain issuers without significant customers or may resist IFRS because they may not have a market incentive to prepare IFRS financial statements. Some other issuers may have to stick with existing GAAP because it is required for filings with other regulators and authorities, thus resulting in extra costs than currently incurred by following only existing GAAP. Another concern is that many countries that claim to be converting to international standards may never get to 100 percent compliance.Most reserve the right to carve out selectively or modify standards they do not consider in their national interest, an action that could lead to incomparability V one of the very issues that IFRS seeks to address.

2. BENEFITS TO STAKEHOLDERS

There are many beneficiaries of convergence with IFRSs such as the economy, investors, and industry and accounting professionals.

The Economy

As the markets expand globally the need for convergence increases. The convergence benefits the economy by increasing growth of its international business. It facilitates maintenance of orderly and efficient capital markets and also helps to increase the capital formation and thereby economic growth. It encourages international investing and thereby leads to more foreign capital flows to the country.

Investors

A strong case for convergence can be made from the viewpoint of the investors who wish to invest outside their own country. Investors want the information that is more relevant, reliable, timely and comparable across the jurisdictions. Financial statements prepared using a common set of accounting standards help investors better understand investment opportunities as opposed to financial statements prepared using a different set of national accounting standards. For better understanding of financial

The industryA major force in the movement towards convergence has been the interest of the industry. The industry is able to raise capital from foreign markets at lower cost if it can create confidence in the minds of foreign investors that their financial statements comply with globally accepted accounting standards. With the diversity in accounting standards from country to country, enterprises which operate in different countries face a multitude of accounting requirements prevailing in the countries. The burden of financial reporting is lessened with convergence of accounting standards because it simplifies the process of preparing the individual and group financial statements and thereby reduces the costs of preparing the financial statements using different sets of accounting standards.The accounting professionalsConvergence with IFRSs also benefits the accounting professionals in a way that they are able to sell their services as experts in different parts of the world. The thrust of the movement towards convergence has come mainly from accountants in public practice. It offers them more opportunities in any part of the world if same accounting practices prevail throughout the world. They are able to quote IFRSs to clients to give them backing for recommending certain ways of reporting. Also, for accounting professionals in industry as well as in practice, their mobility to work in different parts of the world increases.

3. Impact of IFRS on current reporting practices of Indian companiesParticularsStandards followed under Indian GAAPImpact on current reporting practices by transition to IFRS.

StandardAS 1 Disclosure of Accounting PoliciesIAS 1 Presentation of Financial Statements

Balance SheetRequired. The balance sheet is neither classified into current and non-current nor is it in order of liquidityRequired. An entity is required to present current and non-current assets, and current and noncurrent liabilities, asSeparate classifications in the statement of financial position.

Income StatementRequiredRequired

Statement of ComprehensiveIncomeNot requiredRequired

Statement of changes inEquityNo separate statement ofchanges in shareholdersEquity is required.A separate statement of changes in shareholders equity is required

Cash flow StatementRequiredRequired

Accounting PoliciesRequiredRequired

Notes to financial statementsRequiredRequired

Preparation and PresentationFinancial statements arepresented on a single-entity parent company(Standalone) basis. It is not mandatory to prepareconsolidated financial statements but must use the consolidation standard if prepared.Financial statements arepresented on aconsolidated basis. On avoluntary basis, an entitymay present single-entityparent company(standalone) financialstatements along with itsconsolidated financialstatements.

Estimation UncertaintyNot required.The nature of theuncertainty and thecarrying amounts of suchassets and liabilities at theend of the reporting periodare required to bedisclosed.

Income Statement FormatDisclosed as a separate item after profit before tax on the face of income statementFringe Benefit tax isincluded as a part ofrelated expense whichgives rise to incurrence of tax.

Inventories ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 2 Valuation of InventoriesIAS 2 Inventories

Cost FormulaeStated at cost on weighted average basis.No change required

Consistency of cost formulae for similar inventoriesNot specifiedSame cost formulae isused for all inventoriesthat have similar

Cash Flow Statements ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 3 Cash Flow StatementsIAS 7 Statement ofCash Flows

Cash and Cash equivalentsNo provision in AS 3 forclassification of bank overdrafts.Cash may include bankoverdrafts repayable ondemand but not shorttermbank borrowings;these are considered tobe financing cash flows.

Format and content ofcash flow statementIndirect methodNo change required.

Cash flows associated with extraordinary itemsSeparately disclosed.Prohibited.

Disclosure of interestpaid and receivedInterest paid should be disclosed as financing cash flow and interest received should be disclosed as investing cash flow.Interest paid should bedisclosed as operatingor financing. Interestreceived is disclosed aseither operating orinvesting cash flow.

Disclosure of dividendPaidFinancing.Operating or financing.

Disclosure of dividendReceivedInvesting.Operating or investing

Disclosure of taxes paidOperating.Similar.

Disclosure of cash paymentsNo such requirement.Additional disclosure ofcash payments by a lesseerelating to finance leaseunder financing activities.

Events after the Reporting Period ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 4 Contingencies and Events Occurring after the Balance Sheet DateIAS 10 - Events After theReporting Periods

Accounting Policies, Changes in Accounting Estimates and ErrorParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 5 - Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting PoliciesIAS 8 - Accounting Policies,Changes in AccountingEstimates and Errors

Definition of prior period ItemsAS 5 covers only items of income and expenses under the definition of prior period items. AS 5 do not include balance sheet misclassification, which do not have an income statement impact.IAS 8 covers all the itemsin financial statements

Prior period ItemsReported as a prior period adjustment in current year results. Comparatives are not restated.An entity shall correctmaterial prior period errorsretrospectively in the firstset of financial statementsauthorized for issue byrestating the comparativeamounts for the priorperiod(s) presented inwhich the error occurred

ErrorsPrior period errors areincluded in determination of profit or loss of the period in which the error is discovered.Material prior period errorsare correctedretrospectively byrestating the comparativeamounts for prior periodspresented in which theerror occurred or if theerror occurred before theearliest period presented,by restating the openingstatement of financialposition.

Property, Plant and Equipment ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 6 Depreciation AccountingIAS 16 - Property, Plantand Equipment

Method of depreciationStraight- Line basis MethodSimilar but other methodssuch as diminishingbalance method and theunits of production methodare also available

Change in method of depreciationRequires retrospective recompilation of depreciation and any excess or deficit on such re-computation be required to be adjusted in the period in which such change is affected.Changes in useful life isconsidered as change inaccounting estimate andapplied prospectively

(*)Reassessment of useful life andNot currently requiredRequires annualreassessment of useful life.

Revenue RecognitionParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 9 Revenue RecognitionIAS 18 - RevenueIFRIC 13 - CustomerLoyalty Programmes

Revenue DefinitionRevenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities from the scheduled services (such as passenger, excess baggage, mail, and cargo), and fromthe use by others of enterprise resources yielding handling and servicing revenue, manufacturers credit and incidental revenue.Revenue is the grossinflow of economic benefitsduring the period arising inthe course of the ordinaryactivities of an entity whenthose inflows result inincreases in equity, otherthan increases relating tocontributions from equityparticipants.Amounts collected onbehalf of third parties suchas sales and service taxesand value-added taxes areexcluded from revenues.(IAS 18)

Measurement of RevenuePassenger revenue is recognized on flown basis. While Cargo revenue is recognized on uplift basis after making the necessary adjustments for estimated cargo carriage beyond the year-end. The Pool Revenue is accounted on accrual basis as per the arrangement with the airlines concerned.Fair value of revenue fromsale of goods and serviceswhen the inflow of cashand cash equivalents isdeferred is determined bydiscounting all futurereceipts using an imputedrate of interest. (IAS 18

InterestInterest is recognized on a time proportion basis taking into account the amount outstanding and the rate applicableInterest income isrecognized using theeffective interest method.(IAS 18)

(*)Customer Loyalty ProgrammesNo specific guidance. The company operates joint Frequent FlyeProgramme for which the estimated food cost and legal liability if any for free travel under this programme is provided for and charged to Profit and Loss AccountAward credits granted tocustomers as part of asales transaction areaccounted for as aseparately identifiablecomponent of the salestransaction(s), with theconsideration received orreceivable allocatedbetween the award creditsand the other componentsof the sale.

Fixed Assets ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 10 - Accounting for Fixed AssetsIAS 16 - Property, Plantand Equipment

Component accountingAS 10 does not require full adoption of the component approach. Aircraft are stated at purchase price. Other assets including aircraft notables are capitalized and stated at historical costIAS 16 mandatescomponent accounting.Under componentaccounting approach, eachmajor part of an item ofequipment with a cost thatis significant in relation tothe total cost of the item isdepreciated separately

Sale/scrap of Fixed AssetsGain or loss arising out of sale/scrap of Fixed Assets including aircraft over the net depreciated value is taken to Profit & Loss account as Non-Operating Revenue or Expenses.Non-current assetsclassified as held for salesare measured at the lowerof its carrying value andfair value less costs to sell.Non-current assets to bedisposed of are classifiedas held for sale when theasset is available forimmediate sale and thesale is highly probable.

Foreign ExchangeParticularsStandards followedOn transition to IFRS

StandardAS 11 - The Effects ofChanges in Foreign Exchange RatesIAS 21 - The Effects ofChanges in ForeignExchange Rates

Exchange DifferencesExchange differences onconversion of foreign currency loans/liabilities taken/incurred after April 01, 2004 in respect of qualifying assets isrecognized in the Profit & Loss Account; or before 31 March 2004 are capitalized in the carrying amount of these assets.Similar to Indian GAAP,exchange differencesarising on translation orsettlement of foreigncurrency monetary itemsare recognized in profit orloss in the period in whichthey arise.

Translation in the consolidated financialStatementsForeign currency denominated current assets and current liabilities balances at the year-end are translated at the year end exchange rate circulated by Foreign Exchange Dealers Association of India (FEDAI), and the gains/losses arising out of fluctuations in exchange rates arerecognized in the Profit and Loss Account.Assets and liabilitiesshould be translated fromfunctional currency topresentation currency atthe closing rate at the dateof the statement offinancial position; incomeand expenses atactual/average rates forthe period; exchangedifferences are recognizedin other comprehensiveincome and recycled toprofit or loss on disposal ofthe operation.

Forward ContractsForward exchange contract intended for trading or speculation purposes: The premium or discount on the contract is ignored andat each balance sheet date, the value of the contract is marked to its current market value and the gain or loss on the contract is recognized.Accounted as a derivative.It is covered in IAS 39:Financial Instrument Recognition andMeasurement

Accounting for Investments ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 13 - Accounting forInvestmentsIAS 39 - FinancialInstruments: Recognitionand Measurement

InvestmentsInvestments are classified as long-term or current. Long-term investments are carried at cost less provisionfor diminution in value.Current investments arecarried at lower of cost and fair value. FinancialFinancial instruments areclassified as at fair valuethrough profit or loss if it isheld for trading or hasbeen designated as at fairvalue through profit or lossupon initial recognition.Financial instruments areclassified as held fortrading if these areacquired or incurredprincipally for the purposeof selling or repurchase inthe near future, is part of aportfolio that is managedtogether and for whichthere is evidence of recentactual pattern of shorttermprofit taking orderivative that is not afinancial guaranteecontract or is notdesignated as an effectivehedging instrument.Financial instruments canbe designated at fair valuethrough profit or loss onlyif it eliminates or reducesmeasurement orrecognition inconsistencyor a group of financialinstruments are managedand its performanceevaluated on a fair valuebasis in accordance with adocumented riskmanagement strategy andinformation about thisgroup of instruments are provided to keymanagement personnel.Held-to-maturityinvestments are nonderivativefinancial assetswith fixed or determinablepayments and fixedmaturity that an entity haspositive intent and abilityto hold to maturity. Held tomaturity investments ismeasured at amortizedcost using effectiveinterest method.

Investment in convertible bondsThe entire instrument isaccounted for as debtinvestmentThe holder may:designate the hybridinstrument as at fairvalue through profit orloss subject to certainconditions, ordesignate the debtelement as available forsale with changes in fairvalue recognized inequity and theconversion option as aderivative with changesin fair value recognizedin profit or loss, orrecognize the debtelement as loans andreceivables andmeasure at amortizedcost and the conversionoption as a derivativewith changes in fairvalue recognized inprofit or loss.

Borrowing Costs ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 16 - Borrowing CostsIAS 23 - Borrowing Costs

RecognitionBorrowing cost that aredirectly attributable toacquisition, construction or production of qualifying assets including capital work-in-progress are capitalized up to the date of commercial use of the assets. Recognizing, as an expense when incurred is not permitted.Similar but borrowing costsare also expensed asincurred (not permitted forqualifying assets for whichthe capitalization date fallsin annual periodsbeginning on or after 1January 2009).

Capitalization RateNo disclosure requiredThe disclosurerequirements of IAS 23require the entity todisclose separately thecapitalization rate used todetermine the amount ofborrowing costs.

Segment Reporting ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 17 - Segment ReportingIFRS 8 OperatingSegments

Determination of segmentsAS 17 requires an enterprise to identify two sets of segments (business and geographical), using a risks and rewards approach. The company is engaged in airline related business, which is its primary businesssegment, and hence, segment results are notdisclosed. The details ofgeographical wise revenue earned based on either the location of production or service facilities and other assets of an enterprise; or the location of its customers are specified for areas such as USA/Canada; UK/Europe; Asia, Africa, & Australia; and India.IFRS 8 requires operatingsegments to be identifiedon the basis of internalreports about componentsof the group that areregularly reviewed by thechief operating decisionmaker in order to allocateresources to the segmentand to assess itsperformance. For eachoperating segment profitor loss needs to berecognized by the chiefdecision-maker.

MeasurementThe major revenue-earning asset of the company is the aircraft fleet, which is flexibly deployed across its worldwide route network.There is no suitable basis for allocation of assets to geographical segments. Consequently, area-wise assets are not disclosed.Segment profit or loss isreported on the samemeasurement basis as thatused by the chiefoperating decision-maker.There is no definition ofsegment revenue,segment expense,segment result, andsegment asset or segmentliability.

Entity wide disclosuresDisclosures of airline related business as its primary business segmentRequires disclosure of (a)external revenues fromeach product or service;(b) revenues fromcustomers in the countryof domicile and fromforeign countries; (c)geographical informationon non-current assetslocated in the country ofdomicile and foreigncountries.

Related Party DisclosuresParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 18 Related PartyDisclosuresIAS 24 - Related PartyDisclosures

IdentificationPost employment benefit plans are not included as related partiesRelated party includes postemployment benefit plansfor the benefit ofemployees of the reportingentity or any entity that isa related party of thereporting entity.

Key ManagementPersonnelNo other transactions with key managerial personnel except Remuneration andPerquisites to Chairman & Managing Director and Functional Directors. Transactions such as providing Airline services in the normal course of Airlinebusiness are not included. However, compensation of key management personnelneeds to be disclosed intotal as an aggregate of all items.Compensation of keymanagement personnel isdisclosed in total andseparately for (a) shorttermemployee benefits;(b) post-employmentbenefits; (c) other longtermbenefits; (d)termination benefits; and(e) share-based payments

Close relativesAS 18 includes specific relations as relatives.IAS 24 adopts a more'substance over form'based approach in definingrelatives as close membersof the family, i.e., whoinfluence and can beinfluenced by theindividual in his/ herdealings with the reportingentity.

Information to be disclosedName of the related party and nature of the related party relationship where control exists is disclosed for key managerial personnel and relatives.Relationships betweenparents and subsidiariesshall be disclosed and ifneither the entity's parentnor the ultimate controllingparty produces financialstatements available forpublic use, the name ofthe next most seniorparent that does so shallalso be disclosed

Earnings per share ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 20 Earnings Per ShareIAS 33 - Earnings per share

Basic EPSBasic earnings per share are calculated by dividing the net profit or loss for the period attributable to equityshareholders by the weighted average number of equity shares outstanding during the period.An entity shall calculatebasic earnings per shareamounts for profit or lossattributable to ordinaryequity holders of theparent entity and, ifpresented, profit or lossfrom continuing operationsattributable to those equityholders.

Disclosure in separateFinancial statementsAS 20 requires disclosure of basic and diluted EPS information both in the separate and consolidated financial statements of the parent.IAS 33 permits that suchdisclosure be made only inthe consolidated financialstatements of the parenti.e. an entity being aparent who presentsconsolidated financial statements may elect notto make these disclosuresin its separate financialstatements

IAS 33, Earnings per share - disclosureAS 20 does not requirethese disclosuresIAS 33 requires additionaldisclosures for EPS fromcontinuing anddiscontinued operations.Disclosure is also requiredfor instruments that couldpotentially dilute basicearnings per share in thefuture, but were notincluded in the calculationof diluted earnings pershare because they areanti-dilutive for the periodspresented.

IAS 33, Earnings Per Share - ExtraordinaryItemsThe control number fordetermining dilution is net profit or loss fromcontinuing ordinaryactivities. EPS with andwithout extraordinary items is to be presented.The control number fordetermining dilution is netprofit or loss fromcontinuing activities sinceno item can be presentedas extraordinary item.

Consolidated Financial Statements ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 21 ConsolidatedFinancial StatementsIAS 27 (2008) -Consolidated and SeparateFinancial StatementsSIC 12 Consolidation -Special Purpose Entities

)ScopeIndian GAAP does notspecify entities that arerequired to present consolidated financial statements.A parent is required toprepare consolidatedfinancial statements toconsolidate all itssubsidiaries.A parent need not prepare consolidated financialstatements only if all thefollowing conditions aremet:the entity's debt orequity instruments arenot traded in a publicmarket;the entity is not in aprocess of filing itsfinancial statements forthe purposes of issuingany class of instrumentsin a public market; andany intermediate parentof the entity producesconsolidated financialstatements available forpublic use that complywith IFRSs.

ControlControl is: (a) the ownership, directly or indirectly through subsidiaries, of more than one-half of the voting power of an enterprise; or (b) control of the composition of the board of directors in the case of a company or of the composition of theCorresponding governing body so as to obtain economic benefits from its activities.Control is the power togovern the financial andoperating policies of anentity so as to obtainbenefits from its activities.

Potential voting RightsPotential voting rights are not considered in assessing control.The effect of potentialvoting rights that arecurrently exercisable orconvertible, includingpotential voting rights heldby another entity, areconsidered when assessingcontrol.

Exclusion of subsidiaries, associates and joint venturesExcluded from consolidation, equity accounting or proportionate consolidation if thesubsidiary was acquiredwith intent to dispose ofwithin twelve months or if it operates under severe long-term restrictions whichsignificantly impair its ability to transfer funds to the parentIf on acquisition asubsidiary meets the criteria to be classified asheld for sale in accordancewith IFRS 5, it is includedin the consolidation but isaccounted for under thatstandard.

Reporting datesThe difference between the reporting date of thesubsidiary and that of the parent shall be no more than six months.The difference betweenthe reporting date of thesubsidiary and that of theparent shall be no morethan three months.

Accounting for investments in subsidiaries in separateFinancial statements ofthe parentAccounted at cost lessimpairment lossAccounted either at costless impairment loss or asavailable for sale withchanges in fair valuerecognized in othercomprehensive income.

(*)GoodwillGoodwill or capital reserve is determined on historical cost basis.Goodwill or capital reserveis determined on the basisof assets or liabilitiesconsidered at their fairvalue, amortization is alsoprovided.

Deferred Tax Asset ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 22 - Accounting for Taxes on IncomeGuidance Note on Accounting for FringeBenefits Tax

IAS 12 - Income TaxesSIC 21 - Income Taxes -Recovery of Revalued Non-Depreciable AssetsSIC 25 - Income Taxes -Changes in the Tax Statusof an Entity or itsShareholders

Deferred income taxesDeferred taxes are computed for timingdifferences in respect ofrecognition of items of profit or loss for the purposes of financial reporting and for income taxes.Deferred taxes are computed for temporarydifferences between thecarrying amount of anasset or liability in thestatement of financialposition and its tax base.

Recognition of deferred tax assets and liabilitiesDeferred taxes are generally recognized for all timing differences.Deferred income taxes arerecognized for alltemporary differencesbetween accounting andtax base of assets andliabilities.

(*)Recognition of taxes on items recognized inOther comprehensiveincome or directly in equityNo specific guidance in AS 22Current tax and deferredtax is recognized outsideprofit or loss if the taxrelates to items that arerecognized in the same ora different period, outsideprofit or loss. Therefore thetax on items recognized inother comprehensiveincome or directly inequity, is also recorded inother comprehensiveincome or in equity, asappropriate.

Recognition of deferred tax assetsDeferred tax asset forunused tax losses andunabsorbed depreciation is recognized only to theextent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized.Deferred tax asset isrecognized for carryforward unused tax lossesand unused tax credits tothe extent that it isprobable that futuretaxable profit will beavailable against which theunused tax losses and taxcredits can be utilized.

(*)Deferred tax businesscombinationsNo specific guidance.If the potential benefit ofthe acquiree's income taxloss carry-forwards orother deferred tax assetsdid not satisfy the criteriain IFRS 3 for separaterecognition when thebusiness combination was initially accounted but ifsuch benefit issubsequently recognized,goodwill is reduced torecord pre-acquisitiondeferred tax assets whichare recognized within 12months of the acquisitiondate as result of newinformation on facts andcircumstances that existedon the acquisition date.

ClassificationDeferred tax assets are to be disclosed on the face of the balance sheetseparately after the head'Investments'. Deferred tax liabilities are to be disclosed after the head 'Unsecured Loans'.Always classified as noncurrent,if current and noncurrentclassification ispresented

(*)DisclosureNo such requirementReconciliation is presentedbetween the income taxexpense (income) reportedand the product ofaccounting profitmultiplied by theapplicable tax rate.Unrecognized deferred taxliability on undistributedearnings of subsidiaries,branches, associates andjoint ventures.

Fringe Benefit TaxFringe benefit tax is to be disclosed as a separate item after determining profit before tax for the period in which the related fringe benefits are recognized.Does not meet definition ofincome taxes and isreported as part of theunderlying expense.

SIC 21, Recovery of Revalued Non Depreciable AssetsNo specific guidance.Measurement of deferredtax liability or asset arisingfrom revaluation is basedon the tax consequencesfrom the sale of assetrather than through use.

(*)SIC 25, Changes in Tax Status of an Entity or its ShareholdersNo specific guidance.Current and deferred taxconsequences are included in the profit or loss of theperiod of change unlessthe consequences relate totransactions or eventsrecognized outside profitor loss either in othercomprehensive income ordirectly in equity in thesame or a different period.

Interim Financial Reporting ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 25 - Interim FinancialReportingIAS 34 - Interim FinancialReporting. Similar andthere are no materialdifferences between twostandards.

(*)Compliance withrequirements of law, etc.Condensed Balance Sheet, Condensed Income Statement, Condensed Cash Flow, Explanatory Notes and disclosures like EPS etc. is required.Similar but CondensedStatement of Changes inEquity is required

Minimum content ofInterim financialReportingA statute governing an entity or a regulator may require an entity to prepare and present certain information at an interim date, which may be different in form and /or content as required by AS 25.Does not recognize law/regulator prescribingformat of financialstatements.

Intangible Assets ParticularsStandards followedunder Indian GAAPOn transition to IFRS

StandardAS 26 - Intangible AssetsIAS 36 Impairment ofAssetsIAS 38 Intangible Assets

MeasurementMeasured only at costIntangible assets can bemeasured at either cost orrevalued amounts.

Useful lifeIntangible assets are amortized over their useful life or five years whichever is lower.Useful life may be finite orindefinite.

Annual impairment testfor goodwill and intangiblesIntangible assets are amortized over their useful life or five years whichever is lower to be assessed for impairment at least at each financial year end.Goodwill and indefinite lifeintangible assets arerequired to be tested forimpairment at least on anannual basis or earlier ifthere is an impairmentindication.

Financial Instruments PresentationParticularsIndian GAAPOn transition to IFRS

StandardAS 31 FinancialInstruments: PresentationIAS 32 - FinancialInstruments: Presentation

Classification Of Financial LiabilitiesCapital instruments areclassified based on legalform - redeemablepreference shares will be classified as equity.Capital instruments areclassified as liability orequity depending on theissuer's contractualobligation to deliver cash orother financial asset, forexample redeemablepreference shares will beclassified as financialliability.Treasury Shares Acquiring own shares ispermitted only in limitedcircumstances. Sharesrepurchased should becancelled immediately andcannot be held as treasuryshares.If an entit

Treasury SharesAcquiring own shares isPermitted only in limited circumstances. Shares repurchased should be cancelled immediately and cannot be held as treasury shares.If an entity reacquires itsown shares (treasuryshares), these are shown asDeduction from equity.

OffsettingThere are no offset rules.Financial asset andfinancial liability can onlybe offset if the entity has alegally enforceable right toset off the recognizedamounts and intends toeither settle on a net basis,or to realize the asset andsettle the liabilitysimultaneously.

Classification of Convertible DebtsCurrently, the entireinstrument is classified as debt based on its legal form and any interest expense is recognized based on the coupon rate.Split the instrument inliability and equitycomponent at issuance.

CHAPTER -2

REVIEW OF LITERATURE

REVIEW OF LITERATUR

Dr. Bansal; [2009] Indian Infrastructure and Real Estate companies are booking revenues even before they start the construction. This is possible under the currently used percentage of completion method of accounting, which allows companies to book revenues provided an agreement of sale has been signed with the buyer and a specified percentage of the project cost has been incurred. As a result, Indian Infrastructure and Real Estate companies revenues are higher by as much as 30% as compared to the work done by them. The adoption of International Financial Reporting Standards (IFRS) will reflect more appropriately the revenues of Indian real estate developers and their ability to deliver projects. We also believe that IFRS deals with market risks that are related to real estate projects more effectively than the percentage completion method.

Preiato and Brown ; [2010] (1) whether analysts forecast accuracy and the extent to which they disagree have declined since the mandatory adoption of International Financial Reporting Standards (IFRS) in the European Union (EU) in 2005, and (2) whether differences between countries in their enforcement of accounting standards are a contributing factor. Based on a sample of 40,123 firm-month observations from 13 European countries during 2002-2007, we find analysts forecast errors and dispersion are indeed significantly smaller in the post-IFRS period, implying an increase in overall quality of financial reporting following widespread mandatory adoption of IFRS. We show enforcement proxies that focus on accounting enforcement (we use a self constructed proxy that distinguishes between countries based on legal aspects, statutory audit and independent oversight of financial reporting) and public and private enforcement in securities markets (La Porta et al. 2006) are more closely associated with properties of analysts forecasts than more general regulation proxies such as Kaufmann et al. (2007). The accounting enforcement proxies are statistically significant variables in our models, indicating analysts forecasts are more accurate and less disperse when enforcement is more developed. However, overall we find that enforcement proxies do not strongly influence the size of the forecast error or the extent to which analysts disagree, suggesting that country institutional differences may be less important than is commonly believed. Larson and Street [2011] The International Accounting Standards Board (IASB) acquired greater legitimacy and stature when the European Union (EU) decided to require all listed companies to prepare consolidated accounts based on International Financial Reporting Standards (IFRS) beginning in 2005. This study examines the progress and perceived impediments to convergence in 17 European countries directly affected by the EUs decision. These include: (1) the 10 new EU member countries, (2) EU candidate countries, (3) European Economic Area (EEA) countries, and (4) Switzerland. We utilize data collected by the six largest international accounting firms during their 2002 convergence survey. Additionally, we analyze subsequent events and studies. While all surveyed countries will either require or effectively allow listed companies to prepare consolidated financial statements in accordance with IFRS by 2005, few are expected to require IFRS for non-listed companies. This suggests the development of a two-standard system. The two most significant impediments to convergence identified by the survey appear to be the complicated nature of particular IFRS (including financial instruments) and the tax-orientation of many national accounting systems. Other barriers to convergence include underdeveloped national capital markets, insufficient guidance on first-time application of IFRS, and limited experience with certain types of transactions (e.g. pensions).

CHAPTER NO -3ResearchMethodology

NEED OF STUDY

International Financial Reporting Standards is a set of accounting standards developed by International Accounting Standards Board (IABS). That is being the global standards for the preparation for public companies financial statements. So it is implemented in India from April, 2011.when India economy is robust and vibrant with GDP growth of around 8%. It is become imperative for Indian companies to go in tune with global standards. A comparative study of different standard with real time Indian case studies make the reading not education but also very interesting It is new topic. So it is very necessary to do study that topic to get familiarity with it and also to know the impact on Indian companies reporting practices and stakeholders and to know the benefits and challenges of IFRS.

OBJECTIVES OF STUDY

To know the change that will come after implementation of IFRS in Indian companies.

To know the perception of professionals regarding IFRS.

Impact on the stakeholders after the conception of IFRS.

Research design- in this project I am using the three types of research design. Exploratory research to collect the information about IFRS is done by exploratory research. Descriptive research To know the perception of professionals about IFRS that is second object of study is done by descriptive research. Causal research it is cause and effect research. To know the impact of IFRS on Indian companies is done by causal research.

DATA SOURCE Primary data second object of study to know the perception of professionals is covered by primary data. QUESTIONS I am using close ended question. Both types of questions are used in this research. Questions are structured and proper analysis of the dada is done Secondary data first object to know the changes that will come after implementation of IFRS in Indian companies. and third question impact on the stakeholders after the conception of IFRS is covered by secondary data.

ANALYSIS AND INTERPRETATION The data will be collected by questionnaire then analyzed, interpreted and appropriate tools and techniques like graphs and chi square test and z-test are used to interpret the data SAMPLE DESIGN: Population for the convenient of research data would be collected throughout the Punjab. Sample unit industrialists, charted accountants, Simple size 60sLIMITATIONS OF STUDY Presence of human error: Some respondents have not given the proper answers, they are not aware of the objectives.

Non co-operation of some Respondent: Some Respondents do not properly Cooperated for giving answers the basic reason they are giving for non-cooperation was non-availability of time.

Respondent biasness: Some respondents gave answers according to their own perception or what they want to be proved.

Sample Size: The sample size was small and may not represent the whole universe.

Perception of Respondents: At the time the questions had to be explained to the respondents due to they are not aware about it.

CHAPTER -4ANALYSISOFTHESURVEY

QUESTIONNAIRE

Charted accountant, Industrialist1) Investors wosuld have benefits by implementing IFRS?Table no. - 1ResponsePercentage

Definitely yes60

Probably yes20

Undecided15

Probably no5

Definitely no0

INTERPRETATION above table shoes that 60% respondents say definitely yes and 20% say probably yes and only 15% are undecided and 5% say probably no and no respondents say no. Table no 1.1 Chi square (X2) Chi square (X2)7.57

ResultHighly significant

INTERPRETATION Null hypothesis is rejected and there is highly significant difference the data. Alternative is accepted. It means IFES would be beneficial for the investors.

2) Would it beneficial for the economic growth of the country?Table no - 2ResponsePercentage

Definitely yes65

Probably yes15

Undecided15

Probably no5

Definitely no0

INTERPRETATION above table represent that 65% respondents say definitely yes and 15% say probably yes and 15% are undecided and 5% agree that probably no and no one say definitely no. it means most of respondents accept that IFRS would beneficial for economic growth of country.

Table no 2.1 Chi squareX27.59

ResultHighly significant

INTERPRETATION from above tale it shows that there is highly significant between the data. And null hypothesis is rejected and alternative is accepted so it means IFRS would beneficial for economic growth of the country.

3) Would it helpful for the foreign investment in India? Table no. - 3AnswersPercentage

Yes65

No35

INTERPRETATION - above table shows that 65% respondents are agree that yes it would beneficial for the foreign investment and only 35% respondents are no agree.

Table no 3.1 Z Test Z Test3

ResultHighly significant

INTERPRETATION above table reveals that there is highly significant difference between data and it means null hypothesis is rejected and IFRS would beneficial for the foreign investment in India.

4) Would accountants and auditors have to face the challenges in accounting and auditing?Table no -4Answerspercentage

Yes70

No30

INTERPRETATION it can be seen from the above table that 70% respondents are agree and only 30% respondents are no agree.

Table no 4.1 Z TestZ - Test4

ResultHighly significant

INTERPRETATION above tale shows that null hypothesis is rejected and alternative is accepted and accountants and auditors would have to face the challenges in accounting and auditing.

5) Would it helpful to access the world market and promotion of business?Table no -5AnswersPercentage

Definitely yes65

Probably yes15

Undecided10

Probably no5

Definitely no5

INTERPRETATION above table shows that 65% respondents says definitely yes and 15% say probably yes and 10% are undecided and 5% are probably no and definitely yes.

Table no- 5.1 Chi - SquareX26.66

ResultHighly significant

INTERPRETATION it can be seen from the above table that null hypothesis is rejected and alternative accepted and IFRS would helpful to access the world market and promotion of business.

(6) Would it helpful to promote the new business?TABLE NO -6Answerspercentage

Definitely yes60

Probably yes20

Undecided10

Probably no5

Definitely no5

INTERPRETATION above table shows that 60% respondents are definitely agree and 20% probably yes and 10% are undecided and 5% are disagree with it. It means most of respondents are agree with it.

Table no 6.1 Chi Square X2 6.47

Result Highly significant

INTERPRETATION it can be seen from the above table that there is highly significant between the data and null hypothesis is rejected and be IFRS would beneficial for the promotion of new business.

7) Would some fundamentals changes required in the corporate law and regulations?Table no - 7AnswersPercentage

Definitely yes40

Probably yes20

Undecided5

Probably no20

Definitely no15

INTERPRETATION above table reveals 40% respondents are agree and 20% are % probably yes and only 5% are undecided and 20% are probably and 15 are disagree. Most of the respondents are agree with it.

Table no. 7.1 Chi Square X25.67

Result Highly significant

INTERPRETATION above table shows that there is highly significant difference between data and null hypothesis is rejected it is accepted that some fundamentals changes would be required in the corporate law and regulations.

8) Would there be lack of professionals with adequate valuation skill in accounting and auditing?Table no -8AnswersPercentage

Yes60

No40

INTERPRETATION above tale shows that60% respondents says yes and only 40% says no. so it means most of respondents are agree that there would be lack of professionals with adequate valuation skill in accounting and auditi Table no 8.1 Z TestZ Test3.45

ResultHighly significant

INTERPRETATION - it can be seen that there is highly significant difference between that data and null hypothesis is rejected and alternative is accepted and it means that there would be lack of professionals with adequate valuation skill in accounting and auditing.

9) Convergence with IFRS should be stage wise. How strongly do you agree or disagree with it?Tale no. -9AnswersPercentage

Strongly agree70

Agree15

Neither agree nor disagree10

Disagree5

Strongly disagree0

INTERPRETATION above table shows that most of the respondents are strongly agree and 10% are undecided and 5% are disagree and no one is strongly disagree.

Table no.-9.1 Chi Square X211.55

ResultHighly significant

INTERPRETATION above table reveals that there is highly significant in the data and null hypothesis is rejected it is accepted that Convergence with IFRS should be stage wise.

10) Convergence should be all at once approach wise. How strongly do you agree or disagree?Table no - 10AnswersPercentage

Strongly agree5

Agree10

Neither agree nor disagree5

Disagree25

Strongly disagree55

INTERPRETATION - it able t can be seen from the above that most of the respondents are disagree with it and less percentage of the respondents are agree with it and only 5% are undecided.

Tale no.-10.1 Chi Square X23.58

ResultHighly significant

INTERPRETATION above table shows that null hypothesis is rejected because there is highly significant in the data. And alternative is that Convergence should not be all at once approach wise.

CHAPTER - 5FINDINGS

FINDINGSFindings of the study have been summarized as follows:

1) After the survey conducted, it was found that charted accountants and industrialist accept that IFRS is beneficial for the Indian economy.2) 85% respondents said that it would definitely beneficial for the investors.3) Most of the respondents said that It would also helpful for the economic growth of the country and promotion of business. 4) 70% respondents also accept that it would helpful for the foreign investment in India5) It was also found that by implementing the IFRS in India accountants and auditors would have to face the challenges in accounting and auditing.6) In addition to it, it was also found that there is lack of professionals with adequate valuation skills in accounting and auditing7) Most of charted accountants and industrialist prefer the stage wise approach for implementing the IFRS.

CHAPTER - 6CONCLUSION

CONCLUSIONThere is a great impact of IFRS on current reporting practices of Indian companies now companies have to use the faire value and other new practices in reporting. It helpful for the investors and economic growth of the country. Stakeholders have also benefits by implementing the IFRS.

Though convergence with IFRS will improve the overall financial reporting and transparency of companies and safeguard the interests of stakeholders, there are various challenges which Indian Inc will have to face while converging with IFRS. The major challenge is to train the staff according to new accounting standards and to make sure that there is proper mechanism for implementing such strategy.

BIBLIOGRAPHYARTICALS ; Robert K. Larson, Donna L. Street; [2007]Convergence with IFRS in an expanding Europe: progress and obstacles identified by large accounting firms Journal of International Accounting, Auditing and Taxation Vol. 3, No. 4; pp-203-211 Dr. Atul Bansal; [2009] Impact of IFRS on Indian Infrastructure and Real Estate Industry Indian Journal of Commerce & Management Studies Vol. 2; pp 164 176. John Preiato, Philip Brown ; [2010] Mandatory IFRS and properties of analysts forecasts: How much does enforcement matter? International Journal of Accounting Vol. 43(4): pp 425-447.BOOKS Pandy I M, Financial Management, Vikas Publication House Pvt. Ltd., 10th Edition Khan and Jain, Financial Management, Tata McGraw-Hill Publishing Co. Ltd., New Delhi, 7th Edition IFRS Convergence, Challenges and Implementation Approaches for Banks in India, KPMG Report 2008.WEBSITES 1. www.iasplus.com2. www.caclubindia.com3. www.wikipedia.com4. www.feeismind.com5. www.icai.QUESTIONNAIREImpact of IFRS on current reporting practices of Indian companies

Occupation Time spent in present occupation Age . Qualification . Sex

1) Investors would have benefits by implementing IFRS?

A. Definitely they would have benefits.B. Probably they would have benefits.C. Undecided.D. Probably they would not have benefits.E. Definitely they would not have benefits.

2) Would it be beneficial for the economic growth of the country?A. Definitely it would be beneficialB. Probably it would be beneficialC. UndecidedD. Probably it would not be beneficialE. Definitely it would not be beneficial.

3) Would it helpful for the foreign investment in India?

A. YesB. NoC. Dont

4) Would accountants and auditors have to face the challenges in accounting and auditing?

A. YesB. NoC. Dont know

5) It would be helpful to access the world market and promotion of business?

A. Definitely would be helpful.B. Probably would be helpful.C. Undecided.D. Probably would not be helpful.E. Definitely would not be helpful.

6) Would it be helpful to promote the new business?

A. Definitely helpful.B. Probably helpful.C. Might/might not.D. Probably not helpful.E. Definitely not helpful.

7) Would some fundamental changes required in the corporate law and regulations?

A. Definitely requiredB. Probably requiredC. Might/might notD. Probably not requiredE. Definitely not required?

8) Would there be lack of professionals with adequate valuation skills in accounting and auditing?

A. Yes.B. No.C. Dont know.

9) Convergence with IFRS should be stage wise. How strongly do you agree or disagree with it?

A. Strongly agreeB. AgreeC. Neither agree nor disagreeD. DisagreeE. Strongly disagree

10) Convergence should be all at once approach wise. How strongly do you agree or disagree with it?A. Strongly agreeB. AgreeC. Neither agree nor disagree.D. DisagreeE. Strongly disagree.

THANKS

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