INTERNATIONAL FINANCING

REPORTING
STANDARDS(IFRS)

By Sugufta M,
Anitha

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. The rules to be followed by
accountants to maintain books of accounts which
is comparable, understandable, reliable and
relevant as per the users internal or external.

History
International Accounting standards (IAS) were
issued between 1973 and 2001 by the Board of
the International Accounting Standards
Committee(IASC).
On 1 April 2001, the new International
Accounting Standards Board took over from the
IASC the responsibility for setting International
Accounting Standards.
The IASB has continued to develop standards
calling the new standards International Financial
Reporting Standards (IFRS).

Objectives for IFRS

Objectives of IFRS is to make a common
platform for better understanding of
accounting, internationally.
Synchronization of accounting standards
across the globe. To create comparable,
reliable, and transparent financial
statements. To facilitate greater crossborder capital raising and trade. To having
company-wide one accounting language
which have subsidiaries in different
countries.

Why IFRS?
Investors are acting on global market!!
National Standards dont work on global
market.
Cross border business is hindered by
national standards
Small and medium-sized entities (SMEs)
that do not have public accountability
may use a simplified version of IFRS
known as IFRS for SMEs

Who will be benefited

The Investors:-The investor will be benefited in
as the way accounting information made available
to them will be more reliable, relevant, timely and
most importantly the information will be
comparable across different legal framework. It will
develop better understanding and confidence
among the investors.
The Professional:-The professional, both in
practice and in employment will get benefits as
they will be able to provide their services in various
part of the world, as few years after everybody will
follow the same reporting standards.

The Corporate world:-The Indian corporate reputation

and relationship with international finance community will
elevate because of achievement of higher level of
consistency between reporting structure and requirements;
better access to international markets; improving confidence
among the international investors. The international
comparability will also get improve strengthening the
industrial and capital markets in the country.
INDIAN GAAP

In India , Generally Accepted Accounting Principles(GAAP)

standards are set by the Institute of Chartered
Accountants of India (ICAI). ICAI continually updates GAAP
as new accounting issues and concerns arise.

Difference between Indian

GAAP and IFRS
Indian GAAP

Accounting Standard
prescribe any format
balance sheet.

Accounting standards and

the Companies Act prescribe
disclosure norms for certain
income and expenditure
items. Expenses are
presented by either function
or nature. Other industry
regulations prescribe
industry-specific format of
income statement.

do not
of

IFRS
Current and non-current assets,
and current and non-current
liabilities are to be presented
separately except when a
liquidity presentation provides
more relevant and reliable
information.
Expenses presented by either
function or nature . Portion of
profit and loss attributable to the
minority interest and to the
parent entity is separately
disclosed. Disclosure of expenses
by nature is required in footnotes
if functional presentation is used
on income statement.

Indian GAAP

IFRS

The Indian Companies Act

does not prescribe a
particular format. The
Company law and
accounting standards
however, prescribes certain
disclosure norms for income
and expenditures. For
certain industries, industry
specific laws specify formats
Schedule VI to the
Companies Act, 1956
specifies Indian Rupees as
the reporting currency.
Changes in shareholders
equity are disclosed by way
of a schedule.

Does not prescribe a particular

format. However, expenditure
must be presented in one of two
formats (function or nature).
Certain items must be
presented on the face of the
income statement.
Requires the measurement of
profit using the functional
currency. Entities may, however,
present financial statements in
a different currency.
Statement showing capital
transactions with owners, the
movement in accumulated
profit and a reconciliation of all
other components of equity. The
statement must be presented as
a primary statement.

Indian GAAP
Inflow & outflow of
cash & Cash
equivalent are
reported in fund flow
statement. It can be
prepared by two ways:
Direct or indirect
methodHowever only
indirect method is
prescribed for listed
enterprises & direct for
insurance companies.

IFRS

It is similar to Indian
GAAP . However,
Indirect is more
common

ADOPTION OR CONVERGENCE
Adoption- is process of adopting IFRS as issued by
IASB, with or without modifications. Modifications
being, generally in the nature of additional
disclosures requirement or elimination of
alternative treatment.
Convergence- is harmonization of national GAAP
with IFRS through design and maintenance of
accounting standards in a way that financial
statements prepared with national accounting
standards are in compliance with IFRS.

Advantages
By adopting IFRS, a business can present
its financial statements on the same basis
as its foreign competitors, making
comparisons easier.
Companies also may need to convert to
IFRS if they are a subsidiary of a foreign
company that must use IFRS, or if they
have a foreign investor that must use
IFRS.

Disadvantage
Despite a belief by some of the inevitability of
the global acceptance of IFRS, others believe
that U.S. GAAP is the gold standard, and that a
certain level of quality will be lost with full
acceptance of IFRS. Further, certain U.S.
issuers without significant customers or
operations outside the United States may
resist IFRS because they may not have a
market incentive to prepare IFRS financial
statements. They may believe that the
significant costs associated with adopting IFRS
outweigh the benefits.

THANK YOU