PRESENTATION

ON
UNDERSTANDING OF ACCOUNTING
STANDARDS & IFRS

By:- Group No. 12

Members : Jitesh Kumar, Prateek Agarwal, Ram
Nandan Singh, Satish Biradar, Sakshi Zutshi,
Sumeet Sharma, Umang Arora, Piyush
Bahatkar, Priyanka Rana, Heena Shekhawat,
Prajit Dhagat, Parveen Gulia, Rohit Heda
Promesh Chouriwar and Rakesh Kumar Singh
AGENDA OF DISCUSSION
 Introduction of Accounting Standards
 Objectives of Accounting Standards
 Types of Accounting Standards
Introduction
 Written Documents issued by
Government or Regulatory Body
 In India, issued by ICAI on 21st April,1977
 Initiated by Kumar Mangalam Birla,
chairman committee of Corporate
Governance for Financial Disclosures
 Also initiated by Chair person of NACAS
Objectives
 Standardise the diverse Accounting Policies
 Add the reliability to the Financial Statement
 Eradicate baffling variation in treatment of
accounting aspects
 Facilitate inter-firm and intra-firm comparison
Accounting Standards in
Different Nations
 In India, 32 Accounting Standards as IAS
under NACAS
 As per International, there are 41 Accounting
Standards called as IFRS
 Adopted by 8 countries in the world
 70 to 80 countries planning to adhere IFRS
 Clause 50 added to the listing agreement
mandatory
Evolution and Types of AS

Accounting Standards Initiation

1. AS 1 to AS 15 1979 to 1995
2. AS 16 to AS 29 2000 to 2007
3. AS 30 to AS 32 Later part of 2007
AS 1-Disclosure of
Accounting Policies
 Specific policies adapted to prepare FS
 Should be disclosed at one place
Purpose :-
1. Better understanding of FS
2. Better comparison analysis
3. Mostly needed w.r.t Depreciation
AS 2- Accounting for
Inventories
 Used for computation of Cost of
inventories and to show in BS till it is sold
Consists of :-
1. Raw Materials
2. Work in progress
3. Finished goods
4. Spares, etc
Measurements of
Inventories
 Determination of Cost of Inventories
Cost of purchase (Purchase price,
duties
& taxes, freight inwards)
Cost of conversion
 Determination of Net realisable value
 Comparison of cost and net realisable
AS 3- Cash Flow
Statements
 Incoming and outgoing of cash
 Act as barometer to judge surplus and
deficit
 Explain Cash flow under 3 heads :-
1. Cash flow from operating activities
2. Cash flow from financing activities
3. Cash flow from investing activities
AS 4- Contingencies and
events occurring after BS
date
 For maintaining Provision of Bad debts
 Generally uses Conservative concepts of
Accounting like Bankruptcy, frauds &
errors.
the period, prior period
items and change in
Accounting policies
 Ascertain certain criteria for certain items
 Include income and expenditures of
Financial year
 Consists of 2 component
1. Profit and loss of ordinary activities
2. Profit and loss of extra ordinary activities
AS 6- Accounting for
Depreciation
 A non-cash expenditure
 Distribution of total cost to its useful life
 Occurs due to obsolescence
 Different methods of computation
1. Straight line method ( SLM )
2. Written-down value or diminishing value
(WDV)
AS 7- Construction
Contract
 Contract specifically negotiated for
construction of Asset or combination of
Assets closely inter-related
AS 8- Accounting for R&D
 To deal with treatment of Cost of
research and development in the
financial statements, identify items of
cost which comprise R&D costs lays
down condition R&D cost may be
deferred and requires specific
disclosures to be made regarding R&D
costs.
AS 9- Revenue
Recognition
 Means gross inflow of cash and other
consideration like arising out of :-
1. Sale of goods
2. Rendering services
3. Use of enterprise resources by other
yielding interest, dividend and royalities.
AS 10- Accounting for
Fixed Assets
 Called as Cash generating Assets
 Expected to used for more than a
Accounting period like land, building,
P/M, etc
 Shown at either Historical or Revalued
value
AS 11- Effect of change in
FOREX Rates
 Classification for Accounting treatment:-
1. Category I: Foreign currency transactions:
a) buying and selling of goods or services
b) lending and borrowing in foreign currency
c) Acquisition and disposition of assets
2. Category II: Foreign operations:
a) Foreign branch
b) Joint venture
c) Foreign Subsidiary
3. Category III: Foreign Exchange contracts:
a) For managing Risk/hedging
b) For trading and Speculation
AS 12- Accounting for
Govt. Grants
 Assistance provided by Govt. in cash or
in kind like
1. Grants of Assets like P/M, Land,etc
2. Grants related to depreciable FA
3. Tax exemptions in notified area
AS 13- Accounting for
Investments
 Assets held for earning incomes like dividend,
interest, rental for capital appreciation, etc
 It involves:-
1. Classification of Investment
2. Cost of Investment
3. Valuation of Investment
4. Reclassification of Investment
5. Disposal of Investment
6. Disclosure of Investment in FS
AS 14- Accounting for
Amalgamation
 Section 391 to 394 of Companies Act, 1956
governs the provision of amalgamation.
 Disclosures:
1. Names and nature of amalgamating companies
2. Effective date of amalgamation
3. Method of Accounting used
4. Particulars of scheme sanctioned under a
statute
AS 15- Employees
Benefits
 All forms of consideration given by
enterprise directly to the employees or
their spouses, children or other
dependants, to other such as trust,
insurance companies in exchange of
services rendered.
AS 16- Borrowing Costs
 Interest and cost incurred by an
enterprise in connection to the borrowed
funds.
 Availed for acquiring building, installed
FA to make it useable and saleable.
AS 17- Segment Reporting
 It consists of 2 segment:-
1. Business segment
2. Geographical segment
 Information and different risk and return
reporting.
AS 18- Related party
disclosure
 Related party are those party that controls or
significantly influence the management or
operating policies of the company during
reporting period
 Disclosure:
1. Related party relationship
2. Transactions between a reporting enterprises
and its related parties.
3. Volume of transactions
4. Amt written off in the period in respect of debts
AS 19- Accounting for
Leases
 Agreement between Lessor And Lessee
 Two types of leases:
1. Operating lease
2. Finance lease
 Different from Sale
 Classification to be made at the
inception
AS 20- Earning per share
 Earning capacity of the firm
 Assessing market price for share
 AS gives computational methodology for
determination and presentation of EPS
 2 types of EPS
AS 21- Consolidated
Balance Sheet
 Accounting for Parent and Subsidiary
company in single entity
 Disclosure:-
1. List of all subsidiaries
2. Proportion of ownership interest
3. Nature of relation whether direct or
indirect
AS 22- Accounting for
taxes and income
 Tax accounted for period in which are
accounted
 It should be accrued and not liability to
pay
 Deals in 2 measurements:-
1. Current tax
2. Deferred tax
AS 23- Accounting for
investments in Associates in
CFS
 Objectives to set out principles and
procedures for recognizing the
investment associates in CFS of the
investors, so that effect of investments in
associates on financial position of group
is indicated.
AS 24- Discontinuing
operations
 Establishes principles for reporting
information about discontinuing
operations
 Covers discontinuing operations rather
than discontinued operation
AS 25-Interim Financial
Reporting (IFR)
 Reporting for less than a year i.e 3
months
 Clause 41 says publish financial results
on quarterly basis
 Objective is to provide frequently and
timely assessment
AS 26- Intangible Assets
 No physical existence
 Can not be seen or even touched
 3 featured as per AS
1. Identifiable
2. Non-monetary assets
3. Without physical substance
AS 27- Financial Reporting
of interest in Joint Venture
 What is joint venture?
 Three types of JV in case of Financial
reporting
AS 28- Impairment of
Assets
 Weakening of Assets value
 Occurs when carrying cost more than
recoverable amt
 Carrying cost = Cost of assets –
Accumulated

Depreciation
AS 29- Provision, contingent
liabilities and assets
 Provisions:-
It is a Liability
Settlement should result in outflow
Liability is result of obligating event
 Contingent liabilities:-
Obligation arises of past event
Existence confirmed when actually occurred of
uncertain future
 Contingent Asset
Same as Contingent liability
Financial Instruments
 AS 30 – Recognition and Measurement
 AS 31 – Presentation
 AS 32 – Disclosures
 Has not been made mandatory (expected
in 2009)
IFRS in INDIA
2009‐11
Time of transition

International Financial Reporting Standards

Why, When, What & How
WHY 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.

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.

ICAI has decided to implement IFRS in India. The

Ministry of Corporate Affairs has also announced its
commitment to convergence to IFRS by 2011.
IFRS ‐ WHOM
APPLICABLE ?
Compliance with IFRS in India is restricted to ‘Public
Entities’ which includethose companies & entities listed
on any stock exchange or have raised money from the
public, or have a substantial public interest, or public
sector companies. IFRS in India would cover the
following public interest entities in the first phase.

 Listed companies
 Banks, insurance companies, mutual funds, and financial
institutions
 Turnover in preceding year > INR 1 billion
 Borrowing in preceding year > INR 250 million
 Holding or subsidiary of the above

IFRS is not applicable to SME’s as of now.

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.
IFRS – THE PAIN AREAS
 IFRS is itself a moving target, with changes being
introduced continually, refining the provisions and adding
more areas for disclosures.

 The IFRS implementation requires a multi‐disciplinary

approach and is the responsibility of the management.

 There is a lack of awareness and understanding of the

requirements and implications of IFRS transition and
compliance.

 IFRS requires aligning business practices and policies to

the reporting requirements (including retrospective ones)

 Training the organizational components will be a huge

task.
 SKILLSETS FOR IFRS :
We bring together a useful combination of skill
sets required to address the issues arising out
of IFRS transition & compliance :

Accounting
• Understand of IFRS requirements
• Understanding of accounting systems, issues &
training
IFRS CONVERSION
The conversion methodology suggested
below puts a strong emphasis on planning,
study, preparation for transition,
evaluation, training and embedding the
change.

IFRS in INDIA
2011

The countdown has begun …….

THANK YOU