IFRS in INDIA

2009 11
2009‐11
Time of transition

International Financial Reporting Standards

Why, When, What & How

IFRS – a roadmap to transition
WHY IFRS ?
India is one of the over 100 countries that have or are moving towards IFRS
((International Financial Reporting
p g Standards)) convergence
g with a view to
bringing about a uniformity in reporting systems globally, enabling
businesses, finances and funds to access more opportunities.
Indian companies are listed on overseas stock exchanges and have to recast
their accounts to be compliant with GAAP requirements of those countries.
Foreign companies having subsidiaries in India are having to recast their
accounts to meet Indian & overseas reporting requirements which are
different.
different
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
g to IFRS byy 2011.

IFRS – a roadmap to transition
IFRS ‐ WHOM APPLICABLE ?

Compliance with IFRS in India is restricted to ‘Public Entities’ which include

th
those companiesi & entities
titi listed
li t d on any stock
t k exchange
h or have
h raised
i d
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.

ƒListed companies
ƒBanks, insurance companies, mutual funds, and financial institutions
ƒTurnover in preceding year > INR 1 billion
ƒTurnover in preceding year > INR 1 billion
ƒBorrowing in preceding year > INR 250 million
ƒHolding or subsidiary of the above

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

IFRS – a roadmap to transition
WHEN IFRS ?

IFRS for public entities in India is applicable from 01/04/2011. The opening
IFRS balance
b l sheet
h t att the
th date
d t off transition
t iti to
t IFRS – 01/04/2010,
01/04/2010 which
hi h is
i
the start date for full comparative information presentation in IFRS.

IFRS – a roadmap to transition
WHAT DOES IFRS AFFECT?

Legal agreements  Business risk 
Revenue 
Revenue Property & Assets 
Property & Assets & wording
& wording assessment
Recognition & Equipment

Business
Accounting

M
Management  Product Design & 
P d D i &
Financial  team structure business vaibility
Consolidation
Instruments

Board & investor 
Valuation 
communications

Reporting
p g

MIS & Management 
Disclosures
reporting

IFRS – a roadmap to transition
IMPACT OF IFRS ‐

IFRS implementation affects several areas of the business entity,

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
d l d analysis
l off allll aspects off impact and
d change
h as wellll as allll legal
l l
documentation and communication becomes necessary.

IFRS – a roadmap to transition
IFRS –THE GREY AREAS

While IFRS compliance date has been declared by the ICAI, there are several
areas which
hi h are still
till nott in
i consonance with
ith such
h implementation
i l t ti and
d
several accounting standards and statutes will need amendment.

Full & unreserved compliance with IFRS is the objective. However, not many
entities are aware about the significance or ramifications thereof, which
may lead to a rush for compliance later with some undesirable
consequences.

The Government may at any point in time simply effect all requisite changes
for the implementation by saying ‘ IFRS norms are applicable w.e.f. a
certain date. The onus will be on the management to comply with the
requirements and the auditors will only have to comment on whether the
management has properly complied with the norms or not.

IFRS – a roadmap to transition
IFRS – THE PAIN AREAS

ƒIFRS is itself a moving target, with changes being introduced continually,

refining
fi i the
th provisions
ii andd adding
ddi more areas for
f disclosures.
di l
ƒThe IFRS implementation requires a multi‐disciplinary approach and is the
responsibility of the management.
ƒThere are not many trained resources to effect the requisite change.
ƒThere is a lack of awareness and understanding of the requirements and
implications of IFRS transition and compliance.
ƒCommunicating the change and managing the transition properly attains
importance in this regard.
regard
ƒIFRS requires aligning business practices and policies to the reporting
requirements (including retrospective ones)
ƒTraining the organisational components will be a huge task.

IFRS – a roadmap to transition
HOW ARE IFRS STATEMENTS PRESENTED?

IFRS – a roadmap to transition
HOW ARE IFRS STATEMENTS PRESENTED?

IFRS – a roadmap to transition
HOW CAN WE HELP YOU ?

Penta Consulting will help you walk through the entire process of planning,
preparing
i and d transition
t iti tot IFRS and
d help
h l you in
i educating
d ti your internal
i t l&
external stakeholders for managing the change.

Assess

H d
Handover C
Compare

Educate Present

IFRS – a roadmap to transition
SKILLSETS FOR IFRS :
Penta Consulting’s team brings together a useful combination of skillsets
required to address the issues arising out of IFRS transition & compliance

Accounting
• Understand of IFRS requirements
• Understanding of accounting systems, issues & training

Legal
• Understanding impact of legal  issues on IFRS
fl l
• Re‐drafting legal contracts if necessary

Engineering & IT systems

Engineering & IT systems
• Valuation of assets based on useful life
• Project & Technology experts

IFRS – a roadmap to transition
PEOPLE FOR IFRS :
Penta Consulting’s team brings a relevant combination of people & skillsets
to address the issues arising out of IFRS transition & compliance

Accountants
• Chartered Accountants conversant with IFRS requirements
gy y
• Chartered Accountants with Information Technology & systems 
background & experience

Legal & Other professionals
• Lawyers with understanding of impact of legal issues on IFRS
Lawyers with understanding of impact of legal issues on IFRS
• Company secretary, ICWA, MBA for reporting systems, business 
communications & MIS

Engineers & Systems experts
g y p
• Engineers, ISO, valuation experts
• Project planning  & Training experts

IFRS – a roadmap to transition
IFRS CONVERSION

The conversion methodology suggested below puts a strong emphasis on

planning,
l i study,
t d preparation
ti f
for t
transition,
iti evaluation,
l ti t i i
training and
d
embedding the change.

IFRS – a roadmap to transition
IFRS in INDIA
2011

The countdown has begun.

IFRS – a roadmap to transition
 IFRS in INDIA
2011

ifrs@penta.co.in
PENTA CONSULTING PVT. LTD.
www.penta.co.in

IFRS – a roadmap to transition