Comparison of IFRS and Indian Accounting Standards
IFRS is a novel way of looking at accounting. IFRS is a “principle-based” standards rather than “rule-based” standard which are currently followed.
Under IFRS there is need to apply professional judgment consistent with intent and spirit of standards.
Various countries have adapted to IFRS in different ways, often embedding local cultures and that is why there are no standard rules; only broad principles which define the outer boundary of accounting.
IFRS fixed assets rules questions valuation on historical cost basis, questions application of uniform rates of depreciation on all components of a fixed asset as also the amortization of intangible assets such as goodwill or patents.
In IFRS off-balance sheet transactions had been made as part of accounts; it brings a whole new meaning to the reported numbers.
It defines control of entities not through percentage of holdings but by the decision-making power inherent in the parent company.
Top management has, thus, to work out new targets of earnings depending on the direction of impact caused by the new accounting principles and recognising the IFRS GAAP differences.
Earnings will no more be a steady figure that can be easily targeted depending as it is not just on sales and expenses but also changes in asset values and the ability to measure those correctly.
To be adequately prepared for IFRS, senior management has to also shape up by analyzing which management models and strategies will work best for their organizations facing a huge level of turbulence and thus should prepare an IFRS roadmap.
Financial statement will include:
• Consolidated Income Statement
• Consolidated Statement of other comprehensive income
• Consolidated Balance sheet
• Consolidated statement of changes in equity
• Consolidated cash flow statement
Comprehensive Income includes the following:
• Profit/Loss for the year from Continuing Operations
• Profit/Loss for the year from Discontinuing Operations
• Other Comprehensive income
- Exchange differences in translating foreign operations
- Gain/Loss on fair value changes in AFS financial instruments, Cash Flow hedges
- Actuarial Gain/Loss on Defined benefit pension plans
- Share of other comprehensive income of Associates
- Income tax relating to items of other comprehensive income
• Total Comprehensive Income for the year
In Indian GAAP the Balance Sheet format is to start with Liabilities. Within the liabilities, the Capital is shown first. After the Liabilities, the Asset is shown.
Under IFRS the treatment is reverse as given below:
• First Assets in the order of liquidity.
• Next is Liability and to start with all the borrowings are taken first.
• Last item will be Equity Capital, which is the net worth of the entities.
Author : CA Shalini Tibe
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about 1 year ago
All I have to say about this post is that the topic chosen for discussion is one of the most challenging and is really very less talked about, I will help with some resources as well and I hope you will get enough information from the experts here. I will keep it concise and best to my knowledge. Please reply and post here if you really find this information helpful, also write about how you applied this, so that it can help other people as well. Thanks for starting the topic, here is what you need to do….
about 1 year ago
Hi, I am a PGDBM student. I want to make a Grand Project on IFRS. Can you suggest me which area should i take for the better understanding of IFRS in Indian context.
waiting for reply..
about 1 year ago
U can concentrate on Treatement of Fixed assets, its valuation, component accounting, it has impact on all capital intensive industries. Also you can concentrate on Financial Instrument IAS39 / IFRS 9 the evolving standard and fair value
about 1 year ago
This does not excite me but this is what the IRS has to say.
The tax statutes were re-codified by an Act of Congress on February 10, 1939 as the “Internal Revenue Code” (later known as the “Internal Revenue Code of 1939″). The 1939 Code was published as volume 53, Part I, of the United States Statutes at Large and as title 26 of the United States Code. Subsequent permanent tax laws enacted by the United States Congress updated and amended the 1939 Code.
ALL taxes are theft. The government will continue to take more money from the rich AND middle class as long as we are okay with the idea of services provided at the barrel of a gun. Propaganda is the only thing propping up the idea of government.