IFRS/IAS

The International Financial Reporting Standards (IFRS) is, as all we know, is posed as the global
language of accountancy which is aimed to make the comparison and interpretation of the financial
statements across the world easier. This, however, is only possible if all the countries prefer the IFRS
reporting. Till now, more than 100 countries of the world have adopted the IFRS as their standards of
accounting.
 
 
India:
 
India has also committed itself at the G-20 to make it's companies IFRS compliant from April 1st,
2011. Now, there are two ways to make the reporting structure of a country IFRS compliant. Either
you adopt the IFRS in their entirety, or you converge your local standards in lines with the IFRS. The
India has adopted the latter.
 
 Convergence Vs. Adoption:
 
It means, India has not adopted the IFRS in full but it is revising it's Accounting Standards (AS) to get
them in line with the international reporting standards. The premier standard setting body in India is
the Institute of Chartered Accountants of India (ICAI) which has already issued the "Exposure Drafts
of Converged Accounting Standards". They can be read here. 
 
The perceived reason by many for why India has not adopted the IFRS in it's original form is the
concerns of India over some critical issues in the original standards. Indian Government and the
Industry feel that it would not be possible to implement IFRS as they are in some areas like
agricultural accounting, foreign exchange transactions, pension accounting etc. Therefore, India
has preferred the convergence road-map. The final destination seems to be full adoption but it will
take some time after once the businesses of the country get used to converged standards.
 
The Road-map for Convergence in India:

Road-map for convergence in respect of Companies other than Banking

Companies, Insurance Companies and NBFCs

Phase-I
Conversion of opening balance sheets as at April 1, 2011, if the financial year commences
on or after April 1, 2011:

o Companies which are part of NSE - Nifty 50

o Companies which are part of BSE - Sensex 30

o Companies whose shares or other securities are listeon stock exchanges outside India

o Companies, whether listed or not, which have a net worth in excess of Rs.1,000 crore

These companies are required to prepare their financial statements for the financial year 2011 - 12 in
accordance with converged Accounting Standards, but will show previous years’ figures as per the
financial statements prepared by them previously for 2010 - 11 i.e. as per non-converged Accounting
Standards. However, such companies shall have the option to add an additional column to
indicate what these figures could have been if converged Accounting Standards had 
been applied in that previous year.

Phase-II
Conversion of opening balance sheets as at April 1, 2013, if the financial year commences
on or after April 1, 2013

o The companies, whether listed or not, having a net worth exceeding Rs. 500 crore but
not exceeding Rs. 1,000 crore.

Phase-III
Conversion of opening balance sheets as at April 1, 2014, if the financial year commences
on or after April 1, 2014
o Listed companies which have a net worth of Rs. 500 crore or less

The companies which are not affected by the convergence:

 
Non-listed companies which have a net worth of Rs. 500 crore or less and whose shares or other
securities are not listed on Stock Exchanges outside India and Small and Medium Companies (SMCs)
will not be required to follow the notified Accounting Standards which are converged with the IFRS
(though they may voluntarily opt to do so) but need to follow only the notified Accounting  Standards
which are not converged with the IFRS.
 
While the Insurance, Banking and NBF Companies are given some relaxation for now, they will also
have to adopt the converged IFRS over the time in phased manner.
 Convergence with IFRS by 2011:
Government

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Read more on »international financial reporting standards|ifrs|corporate affairs ministry|accounting standards

NEW DELHI: The government today said that Indian accounting standards will converge with International Financial
Reporting Standards (IFRS) by 2011, even as issues like fair value and depreciation are being ironed out.

"We are still working on fair value concepts and other issues like depreciation, but I can assure you that we will stick
to the roadmap laid for the convergence of Indian standards with the IFRS," Corporate Affairs Minister Salman
Khurshid said on the sidelines of an Assocham seminar on International Financial Reporting Standards (IFRS) here.

Even though the government has announced that companies with a turnover of more than Rs 1,000 crore will
converge by 2011, the industry and accountants still have differences on how to determine the "fair value" of assets
and liabilities.

In accounting, fair value is used as an estimate of the market value of an asset or liability. While some accountants
are of the view that the historical cost should be taken into account while entering the value of an asset, some believe
the current value should be taken into account.

"Users are for the fair value concept, while accountants prefer the historical concept," Deloitte Haskins & Sells
Chairman N P Sarda said.

According to the roadmap laid out by the Corporate Affairs Ministry , companies listed on the BSE or NSE or whose
shares or other securities are listed on a stock exchange outside India, besides listed and unlisted companies with a
net worth of more than Rs 1,000 crore, are to converge with IFRS from April 1, 2011.

Companies having net worth of exceeding Rs 500 crore will join the regime from April 1, 2013, while all other listed
companies with a net worth of less than Rs 500 crore will converge with IFRS by April 1, 2014.

While all insurance companies will convert their opening balance sheets with IFRS from April, 2012, scheduled
commercial banks and urban cooperative banks with a net worth of over Rs 300 crore will adopt it from April 1, 2013.

In addition, non-banking finance companies (NBFCs) which are part of the NSE or BSE or have a net worth of over
Rs 1,000 crore will converge their opening books of accounts with IFRS norms from April 1, 2013. All listed and
unlisted NBFCs with a net worth of over Rs 500 crore will convert their opening balance sheet from April 1, 2014.

According to the ministry's roadmap, urban cooperative banks with a net worth of less than Rs 200 crore, unlisted
NBFCs with a net worth of under Rs 500 crore and regional rural banks need not follow the converged accounting
norms.
Commercial banks with a net worth of over Rs 300 crore and those UCBs with a net worth between Rs 200-300 crore
will be required to convert their balance sheets to the new norms from April 1, 2014, onwards