Lecture 1: IFRS - International Financial Reporting Standards PDF

Introduction Lecture 1 1 Topics to be covered today 1. Meaning and importance of IFRS. 2. Important Acronyms under IFRS 3. Need of IFRS. Meaning International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International...

Introduction Lecture 1 1 Topics to be covered today 1. Meaning and importance of IFRS. 2. Important Acronyms under IFRS 3. Need of IFRS. Meaning International Financial Reporting Standards (IFRS) are 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. A brief History of IFRS The IFRS is designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade. The IFRS is particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. Acronyms IAS – International Accounting Standards IASB – International Accounting Standards Board IFRS – International Financial Reporting Standards SIC – Standing Interpretation Committee IFRIC – International Financial Reporting Interpretations Committee Why do we need IFRS Demand for one set of common global reporting standards International companies desire to use one set of reporting standards throughout the world Growth in capital markets (IFRS enhances the ability of filers to raise capital outside their borders) Reducing cost of capital and reporting costs Why do we need IFRS India is one of the over 100 countries that have or are moving towards IFRS ( International Financial Reporting Standards) convergence with a view to bringing about a uniformity in reporting systems globally, enabling businesses, finances and funds to access more opportunities. Indian companies are listed on overseas stock exchanges and have to recast their accounts to be compliant with GAAP requirements of those countries. Foreign companies having subsidiaries in India are having to recast their accounts to meet Indian & overseas reporting requirements which are different. Foreign Direct Investors (FDI), overseas financial institutional investors (FII) are more comfortable with compatible accounting standards and companies accessing overseas funds feel the need for recast of accounts in keeping with globally accepted standards. Impact of IFRS IFRS implementation affects several areas of the business entity, such as presentation of accounts, the accounting policies and procedures, the way legal documents are drafted, the way the entity looks at its assets and their usage, as well as the its communications with its stakeholders and also the way it conducts its business. This fundamental and pervasive nature of impact of IFRS, makes it imperative that sufficient planning and thought is given to this aspect and choices made at the transition stage itself, as they determine the effect on the company and its operations. A detailed analysis of all aspects of impact and change as well as all legal documentation and communication becomes necessary. Requirements of IFRS IFRS financial statements consist of (IAS1.8) A Statement of Financial Position A Comparative Income Statement Either a statement of changes in equity (SOCE) or a statement of recognized income or expense ("SORIE") A Cash Flow Statement or Statement of Cash Flows Notes, including a summary of the significant accounting policies Comparative information is provided for the previous reporting period (IAS 1.36). An entity preparing IFRS accounts for the first time must apply IFRS in full for the current and comparative period although there are transitional exemptions (IFRS1.7). Helpful Websites www.iasb.org www.ifrs.com www.sec.gov www.icai.com Summary 1. Meaning of IFRS. 2. Importance of IFRS.