CHAPTER 1

INTRODUCTI
ON

1. INTRODUCTION TO IFRS
Users of financial statements have always demanded transparency in
financial reporting and disclosures. However, the willingness and need for
better disclosure practices have intensified only in recent times.
Globalization has helped Indian Companies raise funds from offshore
capital markets. This has required Indian companies, desirous of raising
funds, to follow the Generally Accepted Accounting Principles (GAAP) of
the investing country. The different disclosure requirements for listing
purposes have hindered the free flow of capital.

The policy makers in

India have also realized the need to follow IFRS and it is expected that a
large number of Indian companies would be required to follow IFRS from
2011. This poses a great challenge to the makers of financial statements
and also to the auditors.

1.1 Meaning of IFRS

International Financial Reporting Standards (IFRS) is 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. IFRS is a principles-based accounting
system, meaning it is objective-oriented allowing for more presentation
freedom.

1.2 Objectives of IFRS

to develop, in the public interest, a single set of high quality,
understandable and enforceable global accounting standards that
require high quality, transparent and comparable information in
financial statements and other financial reporting to help
2

 participants in the world's capital markets and other users make

economic decisions;
to promote the use and rigorous application of those standards; in
fulfilling the objectives associated with (1) and (2),
to take account of, as appropriate, the special needs of small and
medium-sized entities and emerging economies.
to bring about convergence of national accounting standards and
International Accounting standards and IFRS to high quality
solutions.

1.3BENEFITS OF IFRS

By adopting IFRS, you would be adopting a "global financial reporting"

basis that will enable your company to be understood in a global
marketplace. This helps in accessing world capital markets and promoting
new business. It allows your company to be perceived as an international

player.
A consistent financial reporting basis would allow a multinational company
to apply common accounting standards with its subsidiaries worldwide,
which would improve internal communications, quality of reporting and
group decision-making.
In increasingly competitive markets, IFRS allows a company to benchmark
itself against its peers throughout the world, and allows investors and
others to compare the company's performance with competitors globally.
In addition, companies would get access to number of capital markets
across the globe.

1.4 DISADVANTAGES OF IFRS

Despite a general consensus of the inevitability of the global
acceptance of IFRS, many people also believe something will be lost
with full acceptance of IFRS.
Further certain issuers without significant customers or may resist
IFRS because they may not have a market incentive to prepare IFRS
financial statements.
Some other issuers may have to stick with existing GAAP because it
is required for filings with other regulators and authorities, thus

resulting in extra costs than currently incurred by following only

existing GAAP.
Another concern is that many countries that claim to be converting
to

international

standards

may

never

get

to

100

percent

compliance.
Most reserve the right to carve out selectively or modify standards they do
not consider in their national interest, an action that could lead to
incomparability V one of the very issues that IFRS seeks to address.

2. BENEFITS TO STAKEHOLDERS
There are many beneficiaries of convergence with IFRSs such as the
economy, investors, and industry and accounting professionals.

The Economy
As the markets expand globally the need for convergence increases. The
convergence

benefits

the

economy

by

increasing

growth

of

its

international business. It facilitates maintenance of orderly and efficient

capital markets and also helps to increase the capital formation and
thereby economic growth. It encourages international investing and
thereby leads to more foreign capital flows to the country.

Investors
A strong case for convergence can be made from the viewpoint of the
investors who wish to invest outside their own country. Investors want the
information that is more relevant, reliable, timely and comparable across
the jurisdictions. Financial statements prepared using a common set of
4

accounting standards help investors better understand investment

opportunities as opposed to financial statements prepared using a
different set of national accounting standards. For better understanding of
financial

The industry
A major force in the movement towards convergence has been the
interest of the industry. The industry is able to raise capital from foreign
markets at lower cost if it can create confidence in the minds of foreign
investors that their financial statements comply with globally accepted
accounting standards. With the diversity in accounting standards from
country to country, enterprises which operate in different countries face a
multitude of accounting requirements prevailing in the countries. The
burden of financial reporting is lessened with convergence of accounting
standards because it simplifies the process of preparing the individual and
group financial statements and thereby reduces the costs of preparing the
financial statements using different sets of accounting standards.

The accounting professionals

Convergence with IFRSs also benefits the accounting professionals in a
way that they are able to sell their services as experts in different parts of
the world. The thrust of the movement towards convergence has come
mainly from accountants in public practice. It offers them more
opportunities in any part of the world if same accounting practices prevail
throughout the world. They are able to quote IFRSs to clients to give them
backing for recommending certain ways of reporting. Also, for accounting
professionals in industry as well as in practice, their mobility to work in
different parts of the world increases.

3. Impact of IFRS on current reporting practices of

Indian companies
Particulars

Standards
followed under
Indian GAAP

Standard

AS 1 Disclosure of IAS 1 Presentation of

Balance Sheet

Accounting Policies
Financial Statements
Required. The balance Required. An entity is
sheet

is

Impact on current
reporting
practices by
transition to
IFRS.

neither required

to

present

classified into current current

and

non-

and non-current nor is current

assets,

and

it in order of liquidity

current and noncurrent

liabilities, as

Separate classifications
in
Income Statement
Statement

the

statement

of

financial position.
Required
Required

Required
of Not required

Comprehensive
Income
Statement of changes No separate statement A separate statement
in

of

of

Equity

changes

required

Equity is required.
Cash flow Statement
Required
Accounting Policies
Required
Notes
to
financial Required
and Financial

Presentation

are

in

in shareholders equity is

shareholders

statements
Preparation

changes

Required
Required
Required

statements Financial

statements

are

presented on a single- presented on a

entity parent company

consolidated basis. On

(Standalone) basis. It is a
not

mandatory

to voluntary

prepare

basis,

an

entity

consolidated
statements

financial may
but

present

single-

must entity

use the consolidation parent company

standard if prepared.

(standalone) financial
statements along with
its
consolidated financial

Estimation Uncertainty

Not required.

statements.
The nature of the
uncertainty and the
carrying
such

amounts

of

assets and liabilities at

the
end of the reporting
period
are required to be
Income

disclosed.
Statement Disclosed as a separate Fringe Benefit tax is

Format

item after profit before included as a part of

tax

on

the

face

of related expense which

income statement

gives rise to incurrence

of tax.

Inventories
Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS

Cost Formulae

Inventories
Stated
at

Consistency
formulae

of
for

Valuation
cost

of IAS 2 Inventories
on No change required

weighted average basis.

cost Not specified
similar

Same cost formulae is

used for all inventories

inventories

that have similar

Cash Flow Statements

Particulars

Standards
8

On

transition

to

followed

IFRS

under

Indian

GAAP
Standard
Cash

AS
and

Cash

Flow IAS 7 Statement of

Statements
Cash No provision in AS 3 for

equivalents

classification

of

Cash Flows
Cash may include bank

bank overdrafts repayable on

overdrafts.

demand

but

not

shortterm
bank borrowings;
these are considered to
Format and content of

Indirect method

cash flow statement

Cash flows associated Separately disclosed.

be financing cash flows.

No change required.
Prohibited.

with extraordinary items

Disclosure of interest

Interest paid should be Interest paid should be

paid and received

disclosed as financing disclosed as operating

cash flow and interest or financing. Interest
received
disclosed

should
as

be received is disclosed as

investing either operating or

Disclosure of dividend

cash flow.
Financing.

investing cash flow.

Operating or financing.

Paid
Disclosure of dividend

Investing.

Operating or investing

Received
Disclosure of taxes paid Operating.
Disclosure
of
cash No such requirement.

Similar.
Additional disclosure of

payments

cash

payments

by

lessee
relating to finance lease
under
activities.

financing

Events after the Reporting Period

Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS 4 Contingencies IAS 10 - Events After the

and

Events

Occurring Reporting Periods

after the Balance Sheet

Date

Accounting Policies, Changes in Accounting Estimates

and Error
Particulars

Standards

On

transition

followed

IFRS

to

under Indian GAAP

Standard

AS 5 - Net Profit or Loss IAS

for

the

Period,

Period

Accounting

Prior Policies,

Items

and Changes in Accounting

Changes in Accounting Estimates and Errors

Policies
Definition of prior period AS 5 covers only items IAS
Items

covers

all the

of income and expenses items

under the definition of in financial statements
prior period items. AS 5
do not include balance
sheet

misclassification,

which do not have an

income
Prior period Items

statement

impact.
Reported
period
current

as

prior An entity shall correct

adjustment
year
10

in material

results. errors

prior

period

Comparatives

are

not retrospectively

restated.

in

the

first
set

of

financial

statements
authorized for issue by
restating

the

comparative
amounts for the prior
period(s) presented in
Errors

which the error occurred

Material prior period

Prior period errors are

included

in errors

determination of profit are corrected

or loss of the period in retrospectively by
which

the

error

is restating

discovered.

the

comparative
amounts

for

prior

periods
presented in which the
error occurred or if the
error

occurred

before

the
earliest

period

presented,
by restating the opening
statement of financial
position.

Property, Plant and Equipment

Particulars

Standards

On

followed

IFRS

under

Indian
11

transition

to

GAAP
Standard

AS

Depreciation IAS 16 - Property, Plant

Method of depreciation

Accounting
StraightLine

and Equipment
basis Similar
but

Method

other

methods
such as diminishing
balance method and the
units

of

production

method
are also available
retrospective Changes in useful life is

Change in method of Requires

depreciation

recompilation
depreciation
excess

or

of considered as change in
and

any accounting

deficit

estimate

on and

such re-computation be applied prospectively

required to be adjusted
in the period in which
(*)Reassessment

such change is affected.

of Not currently required

useful life and

Requires annual
reassessment of useful
life.

Revenue Recognition
Particulars

Standards

On

followed

IFRS

transition

to

under Indian GAAP

Standard

AS

Revenue IAS 18 - Revenue

Recognition
Revenue Definition

IFRIC 13 - Customer

Loyalty Programmes
Revenue is the gross Revenue is the gross
inflow

of

receivables

cash, inflow
or

economic

other benefits

consideration arising in during

12

of
the

period

the

course

of

the arising in

ordinary activities from the

course

of

the

the scheduled services ordinary

(such

as

passenger, activities of an entity

excess baggage, mail, when

and cargo), and from

those inflows result in

the use by others of increases

enterprise
yielding

in

equity,

resources other

handling

servicing

and than increases relating

revenue, to

manufacturers

credit contributions

and incidental revenue.

from

equity
participants.
Amounts collected on
behalf of third parties
such
as

sales

and

service

taxes
and value-added taxes
are
excluded

from

revenues.
Measurement
Revenue

of Passenger

revenue

recognized
basis.

While

revenue
on

on

is

uplift

making

flown from
Cargo sale

of

goods

and

recognized services
basis

the

after when the inflow of cash

necessary and cash equivalents is

adjustments

for deferred is determined

estimated
carriage

(IAS 18)
is Fair value of revenue

cargo by
beyond

year-end.

The
13

the discounting all future

Pool receipts

using

an

Revenue

is

accounted imputed

on accrual basis as per rate of interest. (IAS 18

the

arrangement

with

the airlines concerned.

Interest is recognized on Interest income is

Interest

a time proportion basis recognized using the

taking into account the effective

interest

amount outstanding and method.

(*)Customer

the rate applicable

(IAS 18)
Loyalty No specific guidance. Award credits granted

Programmes

The company operates to

joint

Frequent customers as part of a

FlyeProgramme
which
food

the
cost

for sales transaction are

estimated accounted for as a

and

legal separately identifiable

liability if any for free component of the sales

travel

under

this transaction(s), with the

programme is provided consideration

received

for and charged to Profit or

and Loss Account

receivable allocated
between

the

award

credits
and

the

components
of the sale.

Fixed Assets
14

other

Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS 10 - Accounting for IAS 16 - Property, Plant

Component accounting

Fixed Assets
and Equipment
AS 10 does not require IAS 16 mandates
full

adoption

component

of

the component accounting.

approach. Under component

Aircraft are stated at accounting

purchase

price.

approach,

Other each

assets including aircraft major part of an item of

notables are capitalized equipment with a cost
and stated at historical that
cost

is significant in relation
to
the total cost of the
item is

Sale/scrap
Assets

of

depreciated separately
Fixed Gain or loss arising out Non-current assets
of sale/scrap of Fixed classified

as

held

for

at

the

Assets including aircraft sales

over

the

depreciated

net are
value

measured

is lower

taken to Profit & Loss of its carrying value and

account

as

Non- fair value less costs to

Operating Revenue or sell.

Expenses.

Non-current assets to be
disposed

of

are

classified
as held for sale when
the
asset is available for
15

immediate sale and the

sale is highly probable.

Foreign Exchange
Particulars
Standard

Standards

On

followed

IFRS

AS 11 - The Effects of

IAS 21 - The Effects of

Changes
Exchange Differences

in

to

Foreign Changes in Foreign

Exchange Rates
Exchange differences on
conversion

transition

of

Exchange Rates
Similar to Indian GAAP,

foreign exchange differences

currency loans/liabilities arising on translation or

taken/incurred

after settlement of foreign

April 01, 2004 in respect currency

of qualifying assets is

monetary

items

recognized in the Profit are recognized in profit

&

Loss

Account;

or or

before 31 March 2004 loss in the period in

are capitalized in the which
carrying
Translation

in

amount

these assets.
the Foreign

of they arise.

currency Assets and liabilities

consolidated financial

denominated

current should

Statements

assets

current from

and

liabilities
the

balances

year-end

be

translated

at functional currency to
are presentation currency at

translated at the year the closing rate at the

16

end

exchange

circulated

by

rate date
Foreign of the statement of

Exchange

Dealers financial

Association
(FEDAI),

of

position;

India income

and

the and expenses at

gains/losses arising out actual/average rates for

of

fluctuations

in the period; exchange

exchange rates are

differences

are

recognized in the Profit recognized

and Loss Account.

in other comprehensive
income and recycled to
profit or loss on disposal
of

Forward Contracts

the operation.
exchange Accounted
as

Forward
contract
trading

intended
or

for derivative.

speculation It is covered in IAS 39:

purposes: The premium Financial Instrument

or

discount

on

the Recognition and

contract is ignored and

Measurement

at each balance sheet

date, the value of the
contract is marked to its
current

market

value

and the gain or loss on

the

contract

is

recognized.

Accounting for Investments

Particulars

Standards

On

followed

IFRS

under

Indian
17

transition

to

GAAP
Standard

AS 13 - Accounting for

IAS 39 - Financial

Investments

Instruments:
Recognition

Investments

and Measurement
are Financial
instruments

Investments

classified as long-term are

or

current.

Long-term classified

as

at

fair

investments are carried value

at cost less provision

through profit or loss if

for diminution in value.

it is

Current investments are

held for trading or has

carried at lower of cost been designated as at

and fair value. Financial

fair
value through profit or
loss
upon initial recognition.
Financial

instruments

are
classified as held for
trading if these are
acquired or incurred
principally

for

the

purpose
of selling or repurchase
in
the near future, is part
of a
portfolio

that

is

managed
together and for which
there

is

evidence

of

recent
actual
18

pattern

of

shortterm
profit taking or
derivative that is not a
financial guarantee
contract or is not
designated

as

an

effective
hedging instrument.
Financial

instruments

can
be designated at fair
value
through profit or loss
only
if

it

eliminates

or

reduces
measurement or
recognition
inconsistency
or a group of financial
instruments

are

managed
and its performance
evaluated

on

fair

value
basis in accordance with
a
documented risk
management

strategy

and
information about this
group

of

instruments

are provided to key

19

management personnel.
Held-to-maturity
investments

are

nonderivative
financial assets
with

fixed

or

determinable
payments and fixed
maturity that an entity
has
positive

intent

and

ability
to hold to maturity. Held
to
maturity investments is
measured at amortized
cost using effective
Investment
convertible bonds

in The entire instrument is

interest method.
The holder may:

accounted for as debt

designate the hybrid

investment

instrument as at fair
value through profit or
loss subject to certain
conditions, or
designate the debt
element as available for
sale with changes in fair
value recognized in
equity and the
conversion option as a
derivative with changes
in fair value recognized
in profit or loss, or

20

recognize the debt

element as loans and
receivables and
measure at amortized
cost and the conversion
option as a derivative
with changes in fair
value recognized in
profit or loss.

Borrowing Costs
Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard
Recognition

AS 16 - Borrowing Costs
Borrowing cost that are

IAS 23 - Borrowing Costs

Similar but borrowing

directly attributable to

costs

acquisition, construction are also expensed as

or

production

qualifying

of incurred (not permitted

assets for

including capital work- qualifying

in-progress
capitalized

assets

for

are which
up

to

the the capitalization date

date of commercial use falls

of

the

Recognizing,

assets. in annual periods

as

an beginning on or after 1

expense when incurred January 2009).

Capitalization Rate

is not permitted.
No disclosure required

The disclosure
requirements of IAS 23
require the entity to
disclose separately the

21

capitalization rate used

to
determine the amount
of
borrowing costs.

Segment Reporting
Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard
Determination
segments

AS

17

Segment IFRS 8 Operating

Reporting
of AS 17 requires
enterprise

to

Segments
an IFRS
8

identify operating

two sets of segments segments

(business

requires
to

be

and identified

geographical), using a on the basis of internal

risks

and

rewards reports

about

approach. The company components

is

engaged

in

airline of the group that are

related business, which regularly

is its primary business
22

the

reviewed

by

segment,

and

hence, chief operating decision

segment results are not

maker

disclosed. The details of

allocate

geographical

in

wise resources

order
to

to
the

revenue earned based segment

on either the location of and to assess its
production
facilities

or

service performance. For each

and

other operating

segment

assets of an enterprise; profit

or the location of its or loss needs to be
customers are specified recognized by the chief
for

areas

such

as decision-maker.

USA/Canada;
UK/Europe; Asia, Africa,
Measurement

& Australia; and India.

The
major
revenue- Segment profit or loss is
earning

asset

of

the reported on the same

company is the aircraft measurement basis as

fleet, which is flexibly that
deployed

across

worldwide

route operating

network.
There

its used by the chief

decision-

maker.

is

no

suitable There is no definition of

basis for allocation of segment revenue,

assets to geographical segment expense,
segments.

segment result, and

Consequently, area-wise segment

asset

or

disclosure

of

assets are not disclosed. segment

Entity wide disclosures

Disclosures

of

liability.
airline Requires

related business as its (a)

primary

business external revenues from

segment

each product or service;

(b) revenues from
23

customers

in

the

country
of domicile and from
foreign countries; (c)
geographical
information
on non-current assets
located in the country of
domicile and foreign
countries.

Related Party Disclosures

Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS 18 Related Party

IAS 24 - Related Party

Identification

Disclosures
Disclosures
Post
employment Related party includes
benefit plans are not post
included

as

related employment

parties

benefit

plans
for the benefit of
employees

of

the

reporting
entity or any entity that
is
a related party of the
Key Management

No

Personnel

with

other
key

personnel

reporting entity.
transactions Compensation of key
managerial management personnel
except is

Remuneration and
24

disclosed in total and

Perquisites to Chairman separately

&

Managing

and

for

(a)

Director shortterm
Functional employee benefits;

Directors.

Transactions (b) post-employment

such as providing Airline benefits;

(c)

other

services in the normal longterm

course of Airline
business

benefits; (d)

are

included.

not termination

benefits;

However, and

compensation

of

key (e)

management personnel

share-based

payments

needs to be disclosed in
total as an aggregate of
all items.
AS 18 includes specific IAS 24 adopts a more

Close relatives

relations as relatives.

'substance over form'

based

approach

in

defining
relatives

as

close

members
of the family, i.e., who
influence and can be
influenced by the
individual in his/ her
dealings

with

the

reporting
Information
disclosed

to

be Name

of

the

entity.
related Relationships between

party and nature of the parents and subsidiaries

related

party shall be disclosed and if

relationship
control

where neither
exists

disclosed

for

managerial
25

the

entity's

is parent
key nor

the

personnel controlling

ultimate

and relatives.

party produces financial

statements available for
public use, the name of
the next most senior
parent

that

does

so

shall
also be disclosed

Earnings per share

Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS 20 Earnings Per IAS 33 - Earnings per

Basic EPS

Share
share
Basic earnings per share An entity shall calculate
are

calculated

by basic earnings per share

dividing the net profit or amounts for profit or

loss

for

the

period loss

attributable to equity

attributable to ordinary

shareholders

by

the equity holders of the

weighted

average parent entity and, if

number of equity shares presented, profit or loss

outstanding during the from
period.

continuing

operations
attributable

to

those

equity
holders.
requires IAS 33 permits that such

Disclosure in separate

AS

20

Financial statements

disclosure of basic and disclosure be made only

diluted EPS information in
both
and

in

the

separate the

consolidated financial
26

consolidated

financial statements of statements

the parent.

of

the

parent
i.e. an entity being a
parent who presents
consolidated
statements

financial
may

elect

not
to

make

these

disclosures
in its separate financial
IAS

33,

Earnings

share - disclosure

per AS 20 does not require

these disclosures

statements
IAS
33

requires

additional
disclosures for EPS from
continuing and
discontinued operations.
Disclosure

is

also

required
for

instruments

that

could
potentially dilute basic
earnings per share in
the
future, but were not
included

in

the

calculation
of diluted earnings per
share because they are
anti-dilutive

for

the

periods
IAS

33,

Earnings

Per The control number for

presented.
The control number for

Share - Extraordinary

determining dilution is determining dilution is

Items

net profit or loss from

27

net

continuing ordinary

profit or loss from

activities. EPS with and

continuing

without
items

activities

extraordinary since
is

to

be no

presented.

item

can

be

presented
as extraordinary item.

Consolidated Financial Statements

Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS 21 Consolidated

IAS 27 (2008) -

Financial Statements

Consolidated

and

Separate
Financial Statements
SIC 12 Consolidation Special
)Scope

Purpose

Indian GAAP does not

Entities
A parent is required to

specify entities that are

prepare consolidated

required

to

consolidated
28

present financial statements to

financial consolidate all its

statements.

subsidiaries.
A

parent

prepare

need

not

consolidated

financial
statements only if all
the
following conditions are
met:
the entity's debt or
equity instruments are
not traded in a public
market;
the entity is not in
a
process of filing its
financial statements for
the purposes of issuing
any

class

of

instruments
in a public market; and
any

intermediate

parent
of the entity produces
consolidated financial
statements

available

for
public use that comply
Control

Control

is:

(a)

with IFRSs.
the Control is the power to

ownership, directly or govern

indirectly

the

financial

through and

subsidiaries,

of

more operating policies of an

than one-half of the entity so as to obtain

29

voting

power

enterprise;

of
or

control

from

its

(b) activities.

of

composition

an benefits
the

of

the

board of directors in
the case of a company
or of the composition
of the
Corresponding
governing body so as
to

obtain

benefits
Potential voting Rights

economic
from

its

activities.
Potential voting rights The effect of potential
are not considered in voting rights that are
assessing control.

currently exercisable or
convertible, including
potential voting rights
held
by another entity, are
considered

when

assessing
Exclusion

control.
from If on acquisition a

of Excluded

subsidiaries, associates consolidation,

and joint ventures

equity subsidiary

accounting

the

or criteria to be classified

proportionate

as

consolidation if the

held

subsidiary

meets

for

sale

in

5,

is

was accordance

acquired

with

IFRS

it

with intent to dispose included

of

in the consolidation but

within twelve months is

or if it operates under accounted
30

for

under

severe

long-term that

restrictions which

standard.

significantly impair its

ability to transfer funds
to the parent
The difference between The difference between

Reporting dates

the reporting date of the reporting date of

the

the

subsidiary and that of subsidiary and that of

the parent shall be no the
more than six months.
Accounting

for Accounted at cost less

parent shall be no more

than three months.
Accounted either

at

investments

in impairment loss

cost

subsidiaries

in

less impairment loss or

separate

as

Financial statements of

available for sale with

the parent

changes in fair value

recognized in other

(*)Goodwill

Goodwill

or

comprehensive income.
capital Goodwill
or
capital

reserve is determined reserve

on historical cost basis.

is determined on the
basis
of assets or liabilities
considered at their fair
value, amortization is
also
provided.

Deferred Tax Asset

Particulars

Standards

On

followed

IFRS

31

transition

to

under

Indian

GAAP
Standard

AS 22 - Accounting for IAS 12 - Income Taxes

Taxes on Income
Guidance

SIC 21 - Income Taxes -

Note

on Recovery

of

Revalued

Accounting for Fringe

Non-

Benefits Tax

Depreciable Assets
SIC 25 - Income Taxes Changes

in

the

Tax

Status
of an Entity or its
Deferred income taxes

Deferred

taxes

Shareholders
are Deferred
taxes

are

computed for timing

computed for temporary

differences in respect of

differences between the

recognition of items of carrying amount of an

profit or loss for the asset or liability in the
purposes

of

reporting

financial statement of financial

and

income taxes.
Recognition of deferred Deferred
taxes
tax assets and liabilities

for position

and

its

tax

base.
are Deferred income taxes

generally recognized for are

all timing differences.

recognized for all

temporary differences
between accounting and
tax base of assets and

liabilities.
(*)Recognition of taxes No specific guidance in Current
on items recognized in

AS 22

or

directly

and

deferred

Other comprehensive
income

tax

tax
in

is

recognized

outside

equity

profit or loss if the tax

relates to items that are
recognized in the same
32

or
a

different

period,

outside
profit or loss. Therefore
the
tax on items recognized
in
other comprehensive
income or directly in
equity, is also recorded
in
other comprehensive
income or in equity, as
Recognition of deferred Deferred tax asset for

appropriate.
Deferred tax asset is

tax assets

unused tax losses and

recognized for carry

unabsorbed

forward

depreciation
that

virtual

there

and unused tax credits

is to

certainty the extent that it is

supported

by probable that future

convincing

evidence taxable profit will be

that

tax

is losses

recognized only to the

extent

unused

sufficient

future available against which

taxable income will be the

available against which unused tax losses and
such deferred tax assets tax
(*)Deferred tax business

can be realized.
No specific guidance.

combinations

credits can be utilized.

If the potential benefit
of
the acquiree's income
tax
loss carry-forwards or
other

33

deferred

tax

assets
did

not

satisfy

the

criteria
in IFRS 3 for separate
recognition when the
business

combination

was initially accounted

but if
such benefit is
subsequently
recognized,
goodwill is reduced to
record pre-acquisition
deferred

tax

assets

which
are recognized within 12
months

of

the

acquisition
date as result of new
information on facts and
circumstances

that

existed
Classification

on the acquisition date.

Deferred tax assets are Always
classified
as
to be disclosed on the noncurrent,
face

of

the

balance if

sheet

current

and

noncurrent

separately

after

the classification is

head

presented

'Investments'. Deferred
tax liabilities are to be
disclosed after the head
(*)Disclosure

'Unsecured Loans'.
No such requirement
34

Reconciliation

is

presented
between the income tax
expense

(income)

reported
and the product of
accounting profit
multiplied by the
applicable tax rate.
Unrecognized

deferred

tax
liability on undistributed
earnings of subsidiaries,
branches,

associates

and
joint ventures.
Fringe benefit tax is to Does
not

Fringe Benefit Tax

be

disclosed

separate

as

item

meet

a definition of

after income taxes and is

determining

profit reported as part of the

before tax for the period underlying expense.

in

which

fringe
SIC

21,

Recovery

Revalued

the

related

benefits

recognized.
of No specific guidance.
Non

are
Measurement

of

deferred

Depreciable Assets

tax

liability

or

asset

arising
from

revaluation

is

based
on

the

tax

consequences
from the sale of asset
(*)SIC 25, Changes in No specific guidance.
35

rather than through use.

Current and deferred

Tax Status of an Entity

tax

or its Shareholders

consequences

are

included in the profit or

loss of the
period of change unless
the consequences relate
to
transactions or events
recognized

outside

profit
or loss either in other
comprehensive

income

or
directly in equity in the
same

or

different

period.

Interim Financial Reporting

Particulars

Standards

On

followed

IFRS

under

transition

to

Indian

GAAP
Standard

AS 25 - Interim Financial

IAS

34

Reporting

Financial

Interim

Reporting. Similar and

there are no material
differences between two
(*)Compliance with
requirements
etc.

of

Condensed
law, Sheet,

standards.
Balance Similar but Condensed
Condensed Statement of Changes

Income

Statement, in

Condensed Cash Flow, Equity is required

36

Explanatory Notes and

disclosures like EPS etc.
Minimum content of

is required.
A statute governing an Does not recognize law/

Interim financial

entity

Reporting

may require an entity to format of financial

or

prepare
certain

regulator regulator prescribing

and

present statements.

information

at

an interim date, which

may be different in form
and

/or

content

as

required by AS 25.

Intangible Assets
Particulars

Standards

On transition to

followed

IFRS

under

Indian

GAAP
Standard

AS

26

Intangible IAS 36 Impairment of

Assets

Assets
IAS

Measurement

Measured only at cost

38

Intangible

Assets
Intangible assets can
be
measured

at

either

cost or
Useful life

Intangible

assets

amortized

over

revalued amounts.
are Useful life may

be

their finite or

useful life or five years indefinite.

Annual impairment test
for

goodwill

whichever is lower.
Intangible assets are Goodwill and indefinite

and amortized

over
37

their life

intangibles

useful life or five years intangible assets are

whichever is lower to required to be tested
be

assessed

for for

impairment at least at impairment at least on

each

financial

year an

end.

annual basis or earlier

if
there is an impairment
indication.

Financial Instruments Presentation

Particulars

Indian GAAP

On

transition

to

IFRS
Standard

Classification
Financial Liabilities

AS 31 Financial

IAS 32 - Financial

Instruments:

Instruments:

Presentation
Of Capital instruments are

Presentation
Capital instruments are

classified based on legal

classified as liability or

form - redeemable

equity depending on the

preference

shares

will issuer's contractual

be classified as equity.

obligation

to

deliver

cash or
other financial asset, for
example redeemable
preference

shares

be
classified as financial
liability.
38

will

Treasury

Shares

Acquiring own shares is

permitted only in limited
circumstances. Shares
repurchased should be
cancelled

immediately

and
cannot

be

held

as

treasury
shares.
Treasury Shares

Acquiring own shares is

If an entit
If an entity reacquires

Permitted only in limited its

circumstances.

Shares own shares (treasury

repurchased should be shares),

cancelled

these

are

immediately shown as

and cannot be held as Deduction from equity.

Offsetting

treasury shares.
There are no

offset Financial asset and

rules.

financial

liability

can

only
be offset if the entity
has a
legally enforceable right
to
set off the recognized
amounts and intends to
either settle on a net
basis,
or to realize the asset
and
settle the liability
Classification

of Currently, the entire

39

simultaneously.
Split the instrument in

Convertible Debts

instrument is classified liability and equity

as debt based on its component at issuance.
legal

form

interest

and

expense

any
is

recognized based on the

coupon rate.

40

CHAPTER -2
REVIEW OF
LITERATURE

REVIEW OF LITERATUR

Dr. Bansal; [2009] Indian Infrastructure and Real Estate companies are
booking revenues even before they start the construction. This is possible
under the currently used percentage of completion method of accounting,
which allows companies to book revenues provided an agreement of sale
has been signed with the buyer and a specified percentage of the project
cost has been incurred. As a result, Indian Infrastructure and Real Estate
41

companies revenues are higher by as much as 30% as compared to the

work done by them. The adoption of International Financial Reporting
Standards (IFRS) will reflect more appropriately the revenues of Indian real
estate developers and their ability to deliver projects. We also believe that
IFRS deals with market risks that are related to real estate projects more
effectively than the percentage completion method.
Preiato and Brown ; [2010]

(1) whether analysts forecast accuracy

and the extent to which they disagree have declined since the mandatory
adoption of International Financial Reporting Standards (IFRS) in the
European Union (EU) in 2005, and (2) whether differences between
countries in their enforcement of accounting standards are a contributing
factor. Based on a sample of 40,123 firm-month observations from 13
European countries during 2002-2007, we find analysts forecast errors
and dispersion are indeed significantly smaller in the post-IFRS period,
implying an increase in overall quality of financial reporting following
widespread mandatory adoption of IFRS. We show enforcement proxies
that focus on accounting enforcement (we use a self constructed proxy
that distinguishes between countries based on legal aspects, statutory
audit and independent oversight of financial reporting) and public and
private enforcement in securities markets (La Porta et al. 2006) are more
closely associated with properties of analysts forecasts than more general
regulation proxies such as Kaufmann et al. (2007). The accounting
enforcement proxies are statistically significant variables in our models,
indicating analysts forecasts are more accurate and less disperse when
enforcement

is

more

developed.

However,

overall

we

find

that

enforcement proxies do not strongly influence the size of the forecast

error or the extent to which analysts disagree, suggesting that country
institutional differences may be less important than is commonly believed.
Larson and Street [2011] The International Accounting Standards Board
(IASB) acquired greater legitimacy and stature when the European Union
(EU) decided to require all listed companies to prepare consolidated

42

accounts based on International Financial Reporting Standards (IFRS)

beginning in 2005. This study
examines the progress and perceived impediments to convergence in 17
European countries directly affected by the EUs decision. These include:
(1) the 10 new EU member countries, (2) EU candidate countries, (3)
European Economic Area (EEA) countries, and (4) Switzerland. We utilize
data collected by the six largest international accounting firms during
their 2002 convergence survey. Additionally, we analyze subsequent
events and studies. While all surveyed countries will either require or
effectively allow listed companies to prepare consolidated financial
statements in accordance with IFRS by 2005, few are expected to require
IFRS for non-listed companies. This suggests the development of a twostandard system. The two most significant impediments to convergence
identified by the survey appear to be the complicated nature of particular
IFRS (including financial instruments) and the tax-orientation of many
national accounting systems. Other barriers to convergence include
underdeveloped national capital markets, insufficient guidance on firsttime application of IFRS, and limited experience with certain types of
transactions (e.g. pensions).

43

CHAPTER NO
-3
RESEARCH
METHODOLOGY
44

NEED OF STUDY
International Financial Reporting Standards is a set of accounting
standards developed by International Accounting Standards Board
(IABS). That is being the global standards for the preparation for public
companies financial statements. So it is implemented in India from April,
2011.when India economy is robust and vibrant with GDP growth of
around 8%. It is become imperative for Indian companies to go in tune
with global standards. A comparative study of different standard with real
time Indian case studies make the reading not education but also very
interesting
It is new topic. So it is very necessary to do study that topic to get
familiarity with it and also to know the impact on Indian companies
reporting practices and stakeholders and to know the benefits and
challenges of IFRS.

45

OBJECTIVES OF STUDY

To know the change that will come after implementation of IFRS in

Indian companies.
To know the perception of professionals regarding IFRS.
Impact on the stakeholders after the conception of IFRS.

46

 Research design- in this project I am using the three types of

research design.
Exploratory

research to collect the information

about IFRS is done by exploratory research.

Descriptive research To know the perception of
professionals about IFRS that is second object of study is
done by descriptive research.
Causal research it is cause and effect research. To
know the impact of IFRS on Indian companies is done by
causal research.

DATA SOURCE
Primary data

second object of study to know the

perception of professionals is covered by primary data.

QUESTIONS I am using close ended question.
Both types of questions are used in this research.
Questions are structured and proper analysis of the dada is done
Secondary data first object to know the changes that will
come after implementation of IFRS in Indian companies. and
third question impact on the stakeholders after the conception
of IFRS is covered by secondary data.

ANALYSIS AND INTERPRETATION

The data will be collected by questionnaire then analyzed, interpreted
and appropriate tools and techniques like graphs and chi square test and
z-test are used to interpret the data

47

 SAMPLE DESIGN:
Population for the convenient of research data would be
collected throughout the Punjab.
Sample unit industrialists, charted accountants,
Simple size 60s

LIMITATIONS OF STUDY
Presence of human error: Some respondents have not given the
proper answers, they are not aware of the objectives.
Non co-operation of some Respondent: Some Respondents do
not properly Cooperated for giving answers the basic reason they
are giving for non-cooperation was non-availability of time.
Respondent biasness: Some respondents gave answers according
to their own perception or what they want to be proved.
Sample Size: The sample size was small and may not represent
the whole universe.
Perception of Respondents: At the time the questions had to be
explained to the respondents due to they are not aware about it.

48

CHAPTER
-4
ANALYSIS
OF
THE
SURVEY
49

QUESTIONNAIRE

Charted accountant, Industrialist

1) Investors wosuld have benefits by implementing IFRS?
Table no. - 1
Response
Definitely

Percentage
60

yes
Probably yes
Undecided
Probably no
Definitely no

20
15
5
0

INTERPRETATION above table shoes that 60% respondents say

definitely yes and 20% say probably yes and only 15% are undecided and
5% say probably no and no respondents say no.
Table no 1.1 Chi square (X2)
Chi square (X2)

7.57

Result

Highly significant

INTERPRETATION

Null

hypothesis is rejected and there is highly

significant difference the data. Alternative is accepted. It means IFES

would be beneficial for the investors.

50

2) Would it beneficial for the economic growth of the country?

Table no - 2
Response

Percentage

Definitely yes

65

Probably yes

15

Undecided

15

Probably no

Definitely no

INTERPRETATION above table represent that 65% respondents

say definitely yes and 15% say probably yes and 15% are undecided
and 5% agree that probably no and no one say definitely no. it
means most of respondents accept that IFRS would beneficial for
economic growth of country.
Table no 2.1 Chi square
X2
Result

7.59
Highly significant

INTERPRETATION from above tale it shows that there is highly

significant between the data. And null hypothesis is rejected and
alternative is accepted so it means IFRS would beneficial for
economic growth of the country.

51

3) Would it helpful for the foreign investment in India?

Table no. - 3
Answers
Yes
No

Percentage
65
35

INTERPRETATION - above table shows that 65% respondents are

agree that yes it would beneficial for the foreign investment and
only 35% respondents are no agree.
Table no 3.1 Z Test
Z Test

Result

Highly significant

INTERPRETATION above table reveals that there is highly

significant difference between data and it means null hypothesis is
rejected and IFRS would beneficial for the foreign investment in
India.

4) Would accountants and auditors have to face the challenges in

accounting and auditing?
Table no -4

52

Answers

percentage

Yes

70

No

30

INTERPRETATION it can be seen from the above table that 70%

respondents are agree and only 30% respondents are no agree.
Table no 4.1 Z Test
Z - Test

Result

Highly significant

INTERPRETATION above tale shows that null hypothesis is rejected

and alternative is accepted and accountants and auditors would have to
face the challenges in accounting and auditing.

5) Would it helpful to access the world market and promotion of

business?
Table no -5
Answers

Percentage

Definitely yes

65

Probably yes

15
53

Undecided

10

Probably no

Definitely no

INTERPRETATION above table shows that 65% respondents says

definitely yes and 15% say probably yes and 10% are undecided
and 5% are probably no and definitely yes.
Table no- 5.1 Chi - Square
X2

6.66

Result

Highly significant

INTERPRETATION it can be seen from the above table that null

hypothesis is rejected and alternative accepted and IFRS would
helpful to access the world market and promotion of business.

(6)Would it helpful to promote the new business?

TABLE NO -6
Answers
Definitely yes
Probably yes
Undecided
Probably no
Definitely no

percentage
60
20
10
5
5
54

INTERPRETATION above table shows that 60% respondents are

definitely agree and 20% probably yes and 10% are undecided and
5% are disagree with it. It means most of respondents are agree
with it.
Table no 6.1 Chi Square
X2

6.47

Result

Highly significant

INTERPRETATION it can be seen from the above table that there

is highly significant between the data and null hypothesis is rejected
and be IFRS would beneficial for the promotion of new business.

7) Would some fundamentals changes required in the corporate law

and regulations?
Table no - 7
Answers
Definitely yes
Probably yes
Undecided
Probably no
Definitely no

Percentage
40
20
5
20
15

INTERPRETATION above table reveals 40% respondents are

agree and 20% are % probably yes and only 5% are undecided and
55

20% are probably and 15 are disagree. Most of the respondents are
agree with it.
Table no. 7.1 Chi Square
X2

5.67

Result

Highly significant

INTERPRETATION above table shows that there is highly significant

difference between data and null hypothesis is rejected it is accepted that
some fundamentals changes would be required in the corporate law and
regulations.

8) Would there be lack of professionals with adequate valuation skill in

accounting and auditing?
Table no -8
Answers

Percentage

Yes

60

No

40

INTERPRETATION above tale shows that60% respondents says yes

and only 40% says no. so it means most of respondents are agree that
there would be lack of professionals with adequate valuation skill in
accounting and auditi
56

Table no 8.1 Z Test

Z Test

3.45

Result

Highly significant

INTERPRETATION -

it can be seen that there is highly significant

difference between that data and null hypothesis is rejected and

alternative is accepted and it means that there would be lack of
professionals with adequate valuation skill in accounting and auditing.

9) Convergence with IFRS should be stage wise. How strongly do you

agree or disagree with it?
Tale no. -9
Answers
Strongly agree
Agree
Neither agree nor

Percentage
70
15
10

disagree
Disagree
Strongly disagree

5
0

57

INTERPRETATION above table shows that most of the

respondents are strongly agree and 10% are undecided and 5% are
disagree and no one is strongly disagree.
Table no.-9.1 Chi Square
X2

11.55

Result

Highly significant

INTERPRETATION above table reveals that there is highly significant

in the data and null hypothesis is rejected it is accepted that
Convergence with IFRS should be stage wise.

10)

Convergence should be all at once approach wise. How

strongly do you agree or disagree?

Table no - 10
Answers
Strongly agree
Agree
Neither agree nor

Percentage
5
10
5

disagree
Disagree
Strongly disagree

25
55

INTERPRETATION - it able t can be seen from the above that most

of the respondents are disagree with it and less percentage of the
respondents are agree with it and only 5% are undecided.
58

Tale no.-10.1 Chi Square

X2

3.58

Result

Highly significant

INTERPRETATION above table shows that null hypothesis is rejected

because there is highly significant in the data. And alternative is that
Convergence should not be all at once approach wise.

CHAPTER - 5
59

FINDINGS

FINDINGS
Findings of the study have been summarized as follows:
1)

After the survey conducted, it was found that charted

accountants and industrialist accept that IFRS is beneficial for the

Indian economy.
2) 85% respondents said that it would definitely beneficial for the
investors.
3) Most of the respondents said that It would also helpful for the
economic growth of the country and promotion of business.
4) 70% respondents also accept that it would helpful for the
foreign investment in India
5) It was also found that by implementing the IFRS in India
accountants and auditors would have to face the challenges in
accounting and auditing.
6) In addition to it, it was also found that there is lack of
professionals with adequate valuation skills in accounting and
auditing

60

7) Most of charted accountants and industrialist prefer the stage

wise approach for implementing the IFRS.

61

CHAPTER 6
CONCLUSIO
N

62

CONCLUSION
There is a great impact of IFRS on current reporting practices of
Indian companies now companies have to use the faire value and
other new practices in reporting. It helpful for the investors and
economic growth of the country. Stakeholders have also benefits by
implementing the IFRS.

Though convergence with IFRS will improve the overall

financial reporting and transparency of companies and safeguard
the interests of stakeholders, there are various challenges which
Indian Inc will have to face while converging with IFRS. The major
challenge is to train the staff according to new accounting standards
and to make sure that there is proper mechanism for implementing
such strategy.

63

BIBLIOGRAPHY
ARTICALS ;
Robert K. Larson, Donna L. Street; [2007]Convergence with IFRS in
an expanding Europe: progress and obstacles identified by large
accounting firms Journal of International Accounting, Auditing and
Taxation Vol. 3, No. 4; pp-203-211
Dr. Atul Bansal; [2009] Impact of IFRS on Indian Infrastructure and
Real Estate Industry Indian Journal of Commerce & Management
Studies Vol. 2; pp 164 176.
John Preiato, Philip Brown ; [2010]

Mandatory IFRS and properties

of analysts forecasts: How much does enforcement matter?

International Journal of Accounting Vol. 43(4): pp 425-447.

BOOKS
Pandy I M, Financial Management, Vikas Publication House Pvt.
Ltd., 10th Edition
Khan and Jain, Financial Management,

Tata McGraw-Hill

Publishing Co. Ltd., New Delhi, 7th Edition

IFRS Convergence, Challenges and Implementation Approaches
for Banks in India, KPMG Report 2008.

WEBSITES
1. www.iasplus.com

2. www.caclubindia.com
3. www.wikipedia.com
4. www.feeismind.com
5. www.icai.
64

QUESTIONNAIRE
Impact of IFRS on current reporting practices of Indian
companies

Occupation

Time spent in present occupation

Age

.
Qualification
.
Sex

1) Investors would have benefits by implementing IFRS?

A.
B.
C.
D.
E.

Definitely they would have benefits.

Probably they would have benefits.
Undecided.
Probably they would not have benefits.
Definitely they would not have benefits.

2) Would it be beneficial for the economic growth of the country?

A.
B.
C.
D.
E.

Definitely it would be beneficial

Probably it would be beneficial
Undecided
Probably it would not be beneficial
Definitely it would not be beneficial.

3) Would it helpful for the foreign investment in India?

A. Yes
B. No
C. Dont

65

4) Would accountants and auditors have to face the challenges in

accounting and auditing?
A. Yes
B. No
C. Dont know
5) It would be helpful to access the world market and promotion of
business?
A.
B.
C.
D.
E.

Definitely would be helpful.

Probably would be helpful.
Undecided.
Probably would not be helpful.
Definitely would not be helpful.

6) Would it be helpful to promote the new business?

A.
B.
C.
D.
E.

Definitely helpful.
Probably helpful.
Might/might not.
Probably not helpful.
Definitely not helpful.

7) Would some fundamental changes required in the corporate law and

regulations?
A.
B.
C.
D.
E.

Definitely required
Probably required
Might/might not
Probably not required
Definitely not required?

8) Would there be lack of professionals with adequate valuation skills

in accounting and auditing?
A. Yes.
B. No.
C. Dont know.

9) Convergence with IFRS should be stage wise. How strongly do you

agree or disagree with it?
A. Strongly agree
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B.
C.
D.
E.

Agree
Neither agree nor disagree
Disagree
Strongly disagree

10)
Convergence should be all at once approach wise. How
strongly do you agree or disagree with it?
A. Strongly agree
B. Agree
C. Neither agree nor disagree.
D. Disagree
E. Strongly disagree.
THANKS

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