WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

33
WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India

Transcript of WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

Page 1: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

WEBCAST ON IFRS

INTRODUCTION TO IFRS

CA MAYUR CHOKSHIMumbai, India

Page 2: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

WHY IFRS - PROCESS

Globally accepted language

Most widely spread , accepted and trusted financial reporting language

Based on Economic reality of transaction

Major economies moving towards IFRS

PROCESS OF ISSUE OF STANDARDS

IASB ,

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 3: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IAS STANDARDS DEVELOPMENT

IAS 1 Disclosure of Accounting Policy 1974

INDIA AS 1 1979

IAS 2 Val. & Presentation on Inventory 1975

INDIA AS 2 1981

IAS 7 SOFP 1977

INDIA Chgs in Fin Position 1981

. . . . . . . . & SO ON . . .

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 4: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

WHY IFRS – WORLD WIDE RECOGNISED

Australia, Canada, France, Germany, Japan, Mexico, Netherlands, USA, UK and Ireland agreed to form IASC in June 1973 Total 130 countries joined.

India joined in 1974

Nigeria, South Africa, Pakistan, Sri Lanka, Italy, China, Japan, Singapore, Hong Kong, Malaysia, New Zealand, …….. More than 130 countries across globe signed the agreement

AS OF NOW :-

41 IAS of which 13 are withdrawn or superseded. Thus effective IAS 28

15 IFRS . . . . . . . . . . . . . . . . . . . .THUS, Total 43 standards.

IFRIC 21 ( 3 Withdrawn / superseded)

SIC 33 ( 25 Withdrawn / superseded)

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 5: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS BOARD, ETC.

Process to issue standards by IASB

Constitution of IASB

Subsequent evolution of IFRS

IFRIC

SIC

Revision to Standards

Projects

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 6: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

GLOSSARY

IFRS – International Financial Reporting Standards

IAS – International Accounting Standards

IFRIC – International Financial Reporting Interpretation Committee

SIC – Standing Interpretation Committee

IND AS : INDIAN VERSION OF IFRS

AS - Accounting Standards ( Present - IGAAP)

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 7: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

DUE PROCESS

Overview

Background to IFRSs

Requests for information

Discussion papers

Exposure drafts

Finalised pronouncements

Post-implementation reviews

Annual improvements process

Editorial corrections

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 8: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

APPROACH IN INDIA

Convergence and not adoption

Phased Manner to Implement

Two separate AS U/S 211(3C)

Early adoption possible

Clarifications required on various matters

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 9: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

# Name Issued

IFRS 1 First-time Adoption of International Financial Standards 2008*

IFRS 2 Share-based Payment 2004

IFRS 3 Business Combinations 2008*

IFRS 4 Insurance Contracts 2004

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 2004

IFRS 6 Exploration for and Evaluation of Mineral Assets 2004

IFRS 7 Financial Instruments: Disclosures 2005

IFRS 8 Operating Segments 2006

IFRS 9 Financial Instruments 2013*

IFRS 10 Consolidated Financial Statements 2011

IFRS 11 Joint Arrangements 2011

IFRS 12 Disclosure of Interests in Other Entities 2011

IFRS 13 Fair Value Measurement 2011

IFRS 14 Regulatory Deferral Accounts 2014

IFRS 15 Revenue from Contracts with Customers 2014

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

Page 10: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

# Name Issued

IAS 1 Presentation of Financial Statements 2007*

IAS 2 Inventories 2005*

IAS 3Consolidated Financial Statements

1976Superseded in 1989 by IAS 27 and IAS 28

IAS 4Depreciation Accounting

Withdrawn in 1999

IAS 5Information to Be Disclosed in Financial Statements

1976Superseded by IAS 1 effective 1 July 1998

IAS 6Accounting Responses to Changing Prices

Superseded by IAS 15, which was withdrawn December 2003

IAS 7 Statement of Cash Flows 1992

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 2003

IAS 9Accounting for Research and Development Activities

Superseded by IAS 38 effective 1 July 1999

IAS 10 Events After the Reporting Period 2003

Page 11: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

IAS 11Construction Contracts

1993Will be superseded by IFRS 15 as of 1 January 2017

IAS 12 Income Taxes 1996*

IAS 13Presentation of Current Assets and Current Liabilities

Superseded by IAS 39 effective 1 July 1998

IAS 14

Segment Reporting1997

Superseded by IFRS 8 effective 1 January 2009

IAS 15

Information Reflecting the Effects of Changing Prices2003

Withdrawn December 2003

IAS 16 Property, Plant and Equipment 2003*

IAS 17 Leases 2003*

IAS 18Revenue

1993*Will be superseded by IFRS 15 as of 1 January 2017

IAS 19

Employee Benefits (1998)1998

Superseded by IAS 19 (2011) effective 1 January 2013

IAS 19 Employee Benefits (2011) 2011*

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance 1983

Page 12: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

IAS 21 The Effects of Changes in Foreign Exchange Rates 2003*

IAS 22

Business Combinations1998*

Superseded by IFRS 3 effective 31 March 2004

IAS 23 Borrowing Costs 2007*

IAS 24 Related Party Disclosures 2009*

IAS 25Accounting for Investments

Superseded by IAS 39 and IAS 40 effective 2001

IAS 26 Accounting and Reporting by Retirement Benefit Plans 1987

IAS 27 Separate Financial Statements (2011) 2011

IAS 27

Consolidated and Separate Financial Statements2003

Superseded by IFRS 10, IFRS 12 and IAS 27 (2011) effective 1 January 2013

IAS 28 Investments in Associates and Joint Ventures (2011) 2011

IAS 28

Investments in Associates2003

Superseded by IAS 28 (2011) and IFRS 12 effective 1 January 2013

IAS 29 Financial Reporting in Hyperinflationary Economies 1989

IAS 30

Disclosures in the Financial Statements of Banks and Similar Financial Institutions1990

Superseded by IFRS 7 effective 1 January 2007

IAS 31

Interests In Joint Ventures2003*

Superseded by IFRS 11 and IFRS 12 effective 1 January 2013

IAS 32 Financial Instruments: Presentation 2003*

IAS 33 Earnings Per Share 2003*

IAS 34 Interim Financial Reporting 1998

IAS 35

Discontinuing Operations 1998

Superseded by IFRS 5 effective 1 January 2005

IAS 36 Impairment of Assets 2004*

IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1998

IAS 38 Intangible Assets 2004*

IAS 39Financial Instruments: Recognition and Measurement

2003*Superseded by IFRS 9 where IFRS 9 is applied

IAS 40 Investment Property 2003*

IAS 41 Agriculture 2001

Page 13: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

# Name Issued

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities 2004

IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments 2004

IFRIC 3Emission Rights

2004Withdrawn June 2005

IFRIC 4 Determining Whether an Arrangement Contains a Lease 2004

IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 2004

IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment 2005

IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies 2005

IFRIC 8Scope of IFRS 2

2006Withdrawn effective 1 January 2010

IFRIC 9 Reassessment of Embedded Derivatives 2006

IFRIC 10 Interim Financial Reporting and Impairment 2006

IFRIC 11IFRS 2: Group and Treasury Share Transactions

2006Withdrawn effective 1 January 2010

IFRIC 12 Service Concession Arrangements 2006

IFRIC 13Customer Loyalty Programmes

2007Will be superseded by IFRS 15 as of 1 January 2017

IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 2007

IFRIC 15Agreements for the Construction of Real Estate

2008Will be superseded by IFRS 15 as of 1 January 2017

IFRIC 16 Hedges of a Net Investment in a Foreign Operation 2008

IFRIC 17 Distributions of Non-cash Assets to Owners 2008

IFRIC 18Transfers of Assets from Customers

2009Will be superseded by IFRS 15 as of 1 January 2017

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 2009

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 2011

IFRIC 21 Levies 2013

Page 14: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

# Name Issued

SIC-1Consistency – Different Cost Formulas for Inventories

1997Superseded

SIC-2Consistency – Capitalisation of Borrowing Costs

1997Superseded

SIC-3Elimination of Unrealised Profits and Losses on Transactions with Associates

1997Superseded

SIC-5Classification of Financial Instruments - Contingent Settlement Provisions

1998Superseded

SIC-6Costs of Modifying Existing Software

1998Superseded

SIC-7 Introduction of the Euro 1998

SIC-8First-Time Application of IASs as the Primary Basis of Accounting

1998Superseded

SIC-9Business Combinations – Classification either as Acquisitions or Unitings of Interests

1998

Superseded

SIC-10 Government Assistance – No Specific Relation to Operating Activities 1998

SIC-11Foreign Exchange – Capitalisation of Losses Resulting from Severe Currency Devaluations

1998

Superseded

SIC-12Consolidation – Special Purpose Entities

1998Superseded by IFRS 10 and IFRS 12 effective 1 January 2013

SIC-13Jointly Controlled Entities – Non-Monetary Contributions by Venturers

1998Superseded by IFRS 11 and IFRS 12, effective for annual periods beginning on or after 1 January 2013

SIC-14Property, Plant and Equipment – Compensation for the Impairment or Loss of Items

1998

Superseded

SIC-15 Operating Leases – Incentives 1999

Page 15: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS ISSUED

CA MAYUR CHOKSHI : [email protected] : WWW.MCNCO.IN

SIC-16Share Capital – Reacquired Own Equity Instruments (Treasury Shares)

1999Superseded

SIC-17Equity – Costs of an Equity Transaction

2000Superseded

SIC-18Consistency – Alternative Methods

2000Superseded

SIC-19Reporting Currency – Measurement and Presentation of Financial Statements under IAS 21 and IAS 29

2000

Superseded

SIC-20Equity Accounting Method – Recognition of Losses

2000Superseded

SIC-21

Income Taxes – Recovery of Revalued Non-Depreciable Assets

2000Superseded by, and incorporated into, IAS 12 by amendments made by Deferred Tax: Recovery of Underlying Assets, effective for annual periods beginning on or after 1 January 2012

SIC-22Business Combinations – Subsequent Adjustment of Fair Values and Goodwill Initially Reported

2000

Superseded

SIC-23Property, Plant and Equipment – Major Inspection or Overhaul Costs

2000Superseded

SIC-24Earnings Per Share – Financial Instruments and Other Contracts that May Be Settled in Shares

2000

Superseded

SIC-25 Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders 2000

SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease 2000

SIC-28Business Combinations – 'Date of Exchange' and Fair Value of Equity Instruments

2001

Superseded

SIC-29 Disclosure – Service Concession Arrangements 2001

SIC-30Reporting Currency – Translation from Measurement Currency to Presentation Currency

2001

Superseded

SIC-31Revenue – Barter Transactions Involving Advertising Services

2001Will be superseded by IFRS 15 as of 1 January 2017

SIC-32 Intangible Assets – Web Site Costs 2001

SIC-33Consolidation and Equity Method – Potential Voting Rights and Allocation of Ownership Interests

2001

Superseded

Page 16: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

NO AS IN IGAAP

IAS 26 Accounting and Reporting by Reporting by Retirement Benefits Plans

IAS 29 Financial Reporting in Hyperinflationary Economies

IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies

IAS 40 Investment Property

IAS 41 Agriculture

Page 17: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

NO AS IN IGAAP

IFRS 1 First Time Adoption of International Financial Reporting Standards

IFRS 2 Share Based Payment

IFRS 3 Business Combination

IFRS 4 Insurance Contracts

IFRS 5 Non-Current Assets Held for Sale and Discontinuing operations

IFRS 6 Exploration for and Evaluation of Mineral Resources

Page 18: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

NO AS IN IGAAP

IFRS 7 Financial Instruments : Disclosures

IFRS 8 Operating Segments

IFRS 9 Financial Instruments

IFRIC 2 Members’ Share in Co-operative Entities and Similar Instruments

IFRIC 15 Agreements for the Construction of Real Estate

SIC 32 Intangible Assets – Website Costs

Page 19: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS FRAMEWORK

Principles & objective based; less voluminous “Framework” setting out principles – discusses 5 elements

– assets, liabilities, equity, income, expenses. Conceptual Framework applied when no specific guidance

in any standards Substance over form

Sets out the concepts that underlie the preparation & presentation of financial statements

A platform from which standards are developed

The Framework is not an accounting standard and it does not contain detailed requirements

Page 20: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

PARADIGM SHIFT IN THE WAY BUSINESS IS CARRIED OUT

New types of transactions

Novel agreements

Competitive world

Truly global practices

Thus, required additional standards to make them more understandable and apply it consistently by all entities

Page 21: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

BASICS OF IFRS

Substance over Form

Fair Value Oriented

Principle based not rule based

Predominance of Statement of Financial Position

Page 22: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

IFRS FRAMEWORK

Principles & objective based; less voluminous

“Framework” setting out principles – discusses 5 elements – assets, liabilities, equity, income, expenses.

Conceptual Framework applied when no specific guidance in any standards

Substance over form

Sets out the concepts that underlie the preparation & presentation of financial statements

A platform from which standards are developed

The Framework is not an accounting standard and it does not contain detailed requirements

Page 23: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

OBJECTIVE OF FINANCIAL REPORTS

Providing information about the financial position, performance and changes in financial position

Providing information enabling user to take economic decisions

Providing results of stewardship of management and accountability of management for resources entrusted.

Components of financial statements - SOFP ( BS), SOCI(PLA) , OCI, Cash Flows,

Notes,Disclosures, Explanatory statemets etc. BUT NOT Directors Report, MDA

Various USERS OF FINANCIAL STATEMENTS

Page 24: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

FRAMEWORK - QUALITATIVE

CHARACTERISTICS OF IFRS

SUBSTANCE OVER FORM

Economic Reality rather than its legal form

NEUTRALITY

PRUDENCE ( Conservatism)

COMPLETENESS

CONSTRAINTS

Timeliness, Balance between Cost and Benefit, Balance Qualitative characteristics, True and Fair

Page 25: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

FRAMEWORK – DEFINITIONS

Asset : A resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Liability ; A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of the entity’s resources

Equity ; The residual interest in an entity’s assets after deducting all its liabilities

Income : Increases in economic benefits not resulting from contributions made by equity holders.

Expenses : Decreases in economic benefits not resulting from distributions to equity holders.

Page 26: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

FRAMEWORK – RECOGNITION

An item is classed as 'recognised' when it is included in the financial statements.

An item should be recognised if it is probable that there will be an inflow or outflow of economic benefits associated with the asset or liability and the asset or liability can be measured reliably.

Revenue should be earned before it is recognised in the income statement.

Expenses are recognised when there is a decrease in an asset or an increase in a liability.

Page 27: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

FRAMEWORK – MEASUREMENT

The measurement bases referred to in the IASB Framework and commonly used are:

Historical cost. Assets are recorded at their original cost. Liabilities are recorded at their original amount received or the cash expected to be paid out to settle them;

Current cost. Assets are recorded at the amount that would have to be paid out at the balance sheet date for an equivalent asset. Liabilities are recorded at the value that they could be settled for at the balance sheet date;

Realisable or settlement value. Assets are recorded at the amount that they could be sold for now and similarly liabilities are recorded at the amount expected to be paid out; and

Present value. This measurement basis involves discounting future cash flows to take account of the time value of money.

Although the IASB Framework includes an explanation of the different measurement options, IFRS are primarily based on historical cost and present value (though later standards move towards fair value approach)

Page 28: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

BASIC TECHNIQUES EMBEDDED IN IFRS

Substance over the Form Fair Value, and Present Value Cash and Cash Equivalent Policy V/S Estimates Depreciation is Estimates Investment Property Combining and Segmenting Transactions

OVERALL PRINCIPLE BASED AND NOT RULE BASED UNDERSTAND THE ECONOMIC REALITY OF THE

TRANSACTIONS LOGICAL CONCLUSION APPLYING FRAMEWORK

PRINCIPLES

Page 29: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

CONCEPTS – FAIR VALUE

The PRICE that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date i.e. Exit Price

Price : At the Principle mkt ( or most advantageous market under current market conditions)

Asset or Liability : stand alone or group (CGU); Highest and best use

Transaction : in a principal or most advantageous mkt

Mkt Participants : Buyers and sellers in principal mkt, are Independent of each other , knowledge abt asset or liability, willing to enter into transaction

THUS MAKT BASED AND NOT ENTITY SPECIFIC MEASUREMENT

Page 30: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

FEW TRANSACTIONS – CLARITY REQUIRES

Preference Share Capital – Is it Capital ?

Zero % Debentures / Loans – Is it a reality ?

Proposed Dividend – Liability arises when ?

Convertible Debenture – Value of Option ?

Decommissioning Cost -When to Account? Reversal of Impairment Loss / NRV of

Inventory in subsequent period

Page 31: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

NEW WAY

Vehicle with Additional Warranty – Segmenting Goods sold and repurchase at a later date -

Combining SIC 15 – Operating Lease - Incentives IFRIC 4 : Determining whether an arrangement

contains lease IFRIC 13 – Customer Loyalty Program IFRIC18 – Transfer of Assets from Customers IFRIC 15 ; Agreements for the Construction of

Real Estate

Page 32: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

PPE – Definition of Cost , Replacement of Major Part, Decommissioning Cost

Depreciation to reflect the pattern in which asset’s economic benefits are consumed

Life of the Assets is a entity specific and not be confused with the economic life of the PPE

IFRIC 12 : Service Concession Arrangement

Page 33: WEBCAST ON IFRS INTRODUCTION TO IFRS CA MAYUR CHOKSHI Mumbai, India.

ANY QUESTIONS??

By:

CA MAYUR CHOKSHIMumbai , India

[email protected]