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Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University Notes

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University Notes

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University :  India’s commitment to convergence with International Financial Reporting Standards (“IFRS”) moved a step closer with the publication of 35 Indian IFRS standards (“Ind AS”) by the Ministry for Corporate Affairs (MCA) in late February 2011. However, Ind AS are different from IFRS in several important areas.

All companies are likely to be affected by changes in respect of first-time adoption and presentation: a high level summary to Ind AS can be found here.  A detailed guide to Ind AS is forthcoming.

It will take some time for companies to analyze these changes.

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University :  Furthermore, the respective bodies need to decide whether interpretations on leasing and infrastructure would be ultimately included in Ind AS, and how companies reporting under Ind AS will be taxed. Therefore it seems likely that the published in January 2010 would be replaced with a new timeline.

Companies can use the additional time to embed Ind AS fully in their systems, train finance teams in the new standards, and prepare fully for the change to ensure a full transition. Companies may also like to consider converting the finance systems fully to IASB IFRS so that, if required, financial information can be presented under both IASB IFRS and Ind AS.

Areas such as revenue recognition, financial instruments and fixed asset accounting will present practical challenges for companies making the change to Ind AS.

Conversion to Ind AS or IFRS entails more than merely changing accounting policies, and companies will need to carefully assess the readiness of their financial reporting systems and the potential business impact before making the change.

First step: IFRS/Ind AS diagnostic

The starting point of the journey is to conduct an IFRS/Ind AS diagnostic to assess the impact that conversion will have on your business.

Download here Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Semester 3 Delhi University Notes in pdf format 

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University Notes

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University :  Meaning of Accounting Standards: In order to ensure transparency consistency, comparability, adequacy and reliability of financial reporting, it is essential to standardize the accounting principles and policies, Accounting Standards provide framework and standard accounting polices so that the financial statements of different enterprises become comparable.

Accounting Standards are selected set of accounting policies or broad guidelines regarding the principles and methods to be chosen out of several alternatives. The Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) formulas Accounting Standards to be established by the Council of the ICAI.

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University : 

Objective of Accounting Standards: Objective of Accounting Standards is to standarize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statements and the reliability to the financial statements.

The institute of Chartered Accountants of India, recognizing the need to harmonize the diverse accounting policies and practices, constituted at Accounting Standard Board (ASB) on 21st April, 1977.

IFRS:

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

IFRS are generally principles-based standards and seek to avoid a rule-book mentality. Application of IFRS requires exercise of judgment by the preparer and the auditor in applying principles of accounting on the basis of the economic substance of transactions.

IFRS are issued by the International Accounting Standards Board (IASB).

The term IFRS comprises IFRS issued by IASB; IAS issued by IASC; and Interpretations issued by the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB.

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University : 

“FOR THE EFFECTIVE STUDY OF ACCOUNTING STANDARDS AND IFRS THERE IS A STRONG NEED TO STUDY THE LINKAGE BETWEEN THESE TWO TERMS THAT MEANS CONVERGENCE.”

MEANING of convergence:The convergence of accounting standards refers to the goal of establishing a single set of accounting standards that will be used internationally, and in particular the effort to reduce the differences between the US generally accepted accounting principles (USGAAP) and the International financial reporting standards (IFRS)

Convergence of Indian accounting standards with International financial reporting standards (IFRS):

Meaning of convergence with IFRS: Convergence means to achieve harmony with IFRSs; in precise terms convergence can be considered “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 IFRSs”, i.e., when the national accounting standards will comply with all the requirements of IFRS.

But convergence doesn’t mean that IFRS should be adopted word by word, e.g., replacing the term ‘true & fair’ for ‘present fairly’, in IAS 1, ‘Presentation of Financial Statements’. Such changes do not lead to non-convergence with IFRS.

The reason behind convergence is:

As,    Availability of essential financial information about a company to its shareholders and other stakeholders in accordance with internationally accepted financial norms is considered as an integral and important part of good corporate governance. To ensure this and to implement the G-20 commitment to achieve a single set of high quality global accounting standards, the Government has taken decision to achieve convergence of Indian accounting standards with International financial reporting standards (IFRS) in a phased manner in accordance with the roadmap suggested by the Government.

Convergence in Indian Scenario:

With regard to India, the Ministry of Corporate Affairs (MCA) has committed to converge the Indian Accounting Standards with the IFRS effective 1st April 2011. The convergence process is picking up momentum with the credit going to the Ministry of Corporate Affairs. The Ministry has extended its unstinted support and guidance to the various regulatory and legal bodies that are spearheading a smooth transition process. Laudably, the highest authorities of the Indian Government have concluded that convergence of Indian Accounting Standards with IFRS is very vital for the country to take a lead role in the global foray.

Entities covered under convergence;

Keeping in view the complex nature of IFRSs and the extent of differences between the existing ASs and the corresponding IFRSs and the reasons therefore, the ICAI is of the view that IFRSs should be adopted for the public interest entities from the accounting periods beginning on or after 1st April, 2011.

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University : 

Public interest entities:

With a view to determine which entities should be considered as public interest entities for the purpose of application of IFRSs, the criteria for Level I enterprises as laid down by the Institute of Chartered Accountants of India and the definition of ‘small and mediumsized company’ as per Clause 2(f) of the Companies (Accounting Standards) Rules, 2006, as notified by the Ministry of Company Affairs (now Ministry of Corporate Affairs) in the Official Gazette dated December 7, 2006, were considered. The ICAI is of the view that in view of the complexity of recognition and measurement principles and the extent of disclosures required in various IFRSs, and the fact that about four years have elapsed since the ICAI laid down the criteria for Level I enterprises, as far as the size is concerned, it needs a revision. Accordingly, the ICAI is of the view that a public interest entity should be an entity:

(i) Whose equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India; or

(ii) Which is a bank (including a cooperative bank), financial institution, a mutual fund, or an insurance entity; or

(iii) Whose turnover (excluding other income) exceeds rupees one hundred crore in the immediately preceding accounting year; or

(iv) Which has public deposits and/or borrowings from banks and financial institutions in excess of rupees twenty five crore at any time during the immediately preceding accounting year; or

(v) which is a holding or a subsidiary of an entity which is covered in (i) to (iv) above.

Role of ICAI in convergence:

  • India, though being an important emerging economy in the world, is yet to adopt the IFRS. Internationally, in so far as cross-border investments are concerned, a non-IFRS compliant country is perceived as an additional risk factor.
  • After a series of discussion with various legal and regulatory authorities, the Ministry of Corporate Affairs has committed itself for convergence of Indian entities with IFRS from April 2011. ICAI was given the responsibility of formulating the convergence process and ensure smooth convergence.
  • For this purpose, the Accounting Standard Board (ASB) of ICAI constituted a Task Force in the year 2006 to explore the approach for convergence with IFRS and lay down the road map for convergence with IFRS.
  • Since then, ICAI has been relentlessly making extensive analysis of various phases the convergence process would go through. It has identified the legal and regulatory requirements arising out of convergence with IFRS.
  • ICAI has also recommended changes in the respective Acts, guidelines and other regulatory provision related to RBI, SEBI, NACAS and IRDA and has submitted its recommendations to the respective authorities. This would eventually pave the way to a smooth transition process.
  • In addition, the ICAI Accounting Board has pointed out several national issues requiring debates and conclusions that would enable the convergence process to meet the deadline.

Unit V Accounting Standards In India And IFRS For Financial Analysis And Reporting Bcom Sem 3 Delhi University Notes

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