International Financial Reporting Standards (IFRS)

International Financial Reporting Standards (IFRS) are principles-based standards, interpretations and the framework (1989) adopted by the International Accounting Standards Board (IASB). Different countries employ different accounting standards for computing profits of a company and as the business world coming closer in its financial and trade ties, many countries are moving towards International Financial Reporting Standards (IFRS), common accounting rules that define how transactions should be reported and what information should be disclosed in financial statements. Thus IFRS applies uniform laws across the world to arrive at uniform profits across the world. Advantages  • IFRS adoption worldwide will be beneficial to investors and other users of financial statements, by reducing the costs of comparing alternative investments and increasing the quality of information. • By adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors, making comparisons easier. • Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide. • Companies may also benefit by using IFRS if they wish to raise capital abroad. IFRS are used in many parts of the world, including the European Union, India, Hong Kong, Australia, Malaysia, Pakistan, GCC countries, Russia, South Africa, Singapore and Turkey. As of August 2008, more than 113 countries around the world, including all of Europe, currently require or permit IFRS reporting and 85 require IFRS reporting for all domestic, listed companies, according to the U.S. Securities and Exchange Commission. Indian Scenario The Institute of Chartered Accountants of India (ICAI) has announced that IFRS will be mandatory in India for financial statements for the periods beginning on or after 1 April 2012. This will be done by revising existing accounting standards to make them compatible with IFRS. Reserve Bank of India has stated that financial statements of banks need to be IFRS-compliant for periods beginning on or after 1 April 2011. The ICAI has also stated that IFRS will be applied to companies above INR 1000 crore (INR 10 billion) from April 2011. Phase wise applicability details for different companies in India: Phase 1:  • Companies which are part of NSE Index – Nifty 50 • Companies which are part of BSE Sensex – BSE 30 • Companies whose shares or other securities are listed on a stock exchange outside India • Companies, whether listed or not, having net worth of more than INR 1000 crore (INR 10 billion) Phase 2:  Companies not covered in phase 1 and having net worth exceeding INR 500 crore (INR 5 billion) Phase 3:  Listed companies not covered in the earlier phases.