31/12/2018 IFRS - International Financial Reporting Standards

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IFRS - International Financial Reporting Standards SHARE

IFRS Definition:
IFRS stands for International Financial Reporting Standards. IFRS are set of accounting policies and rules
developed by International Accounting Standard Board (IASB). In general, IFRS deals with the following:
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IFRS was introduced with an object to bring consistency in the accounting practices and principles followed by Exams, CA Final Exams. Read this article to
companies of various nations while preparing financial statements. Another object was to provide framework for know more.
nations across the globe on how companies and entities should prepare and present their financial statements. It
also brings synchronisation in accounting practices across various nations to facilitate comparison of financial
statements. It is of more significance for those companies which have dealings in several countries. Deduction Under Section 80C &

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under section 80 of income tax act 1961.

Benefits of IFRS:
IFRS have many benefits, some of which are discussed below:

• Wider acceptability: IFRS are widely acceptable. It is applicable to almost 166 jurisdictions out of which
approximately 144 jurisdictions have adopted IFRS Thus, financial statements prepared as per IFRS are widely
acceptable.

• Comparability of Financials: Since IFRS are global standards, companies of different nations following IFRS can
be easily compared.

• Elaborated Guidance: IFRS provides elaborated guidance on how to apply principles given in standards in
different situations.

• Changes in standards as per economic situations: Principles of IFRS are revised/modified in case there is any
major change in economy.

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31/12/2018 IFRS - International Financial Reporting Standards
Application of IFRS:
Countries can either adopt IFRS as it is (known as IFRS adoption) or it can be adopted after convergence. Let us
understand it in more detail:

1. Adoption of IFRS:
As the name suggests, adoption of IFRS means that the country will adopt IFRS in its original form (without any
deviation) and all the companies in that nation to whom IFRS are applicable will comply these standards
completely.

2. Convergence of IFRS:
Countries may deviate from IFRS issued by IASB to certain extent. Deviation can be change of terminology used,
modifying principles for recognising assets, liabilities, income or expense, addition or deletion of disclosures
(considering the local law of the country applying IFRS), addition or deletion of examples.

Logic of applying IFRS after applying convergence is that there can be many regulators of a country and in case
the rules and regulations of any law or Act of are in conflict of IFRS, it will create chaos in corporate reporting.
Hence, Ind AS are substantially similar to the IFRS but with some carve outs to ensure that these standards are
suitable for application in the environment of the country opting for convergence.

Applicability of IFRS in India:

India has opted to apply IFRS after making certain deviations from the original IFRS (also known as carve outs).
In India, IFRS in their converged form (after required modifications) are popularly known as Ind AS. Each
individual Ind AS contains an Appendix that explains the modifications. These Ind AS are applicable to specified
category of as discussed below:

In case of Companies:

1. Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange
in India or outside India;

2. Unlisted companies having net worth of Rs. 250 crore or more; and

3. Holding, subsidiary, joint venture or associate companies of companies covered in point (1) and (2) above.

Voluntary applicability: Company may voluntarily apply Indian accounting standards (Ind AS).

Companies on which Ind AS is not applicable will continue to follow existing Accounting Standards (AS) which
will be upgraded by ICAI.

Banking Companies and Insurance Companies:

Banking Companies and Insurance Companies have their statues and they shall apply the Ind ASs as notified by
the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA) respectively.

However, for the purpose of consolidation, insurance company shall provide financial statements in compliance
to Ind AS for the purposes of preparation of consolidated financial statements by its parent, investor or venturer,
as required by such parent or investor or venturer to comply with the requirements of these rules.

How ICAI will introduce new standard or amend existing standard?

The ICAI prepares an exposure draft of the Ind AS on the basis of IFRS Standards. After considering comments,
the proposed final Ind AS is approved by the ICAI Council and then adopted by the Ministry of Corporate Affairs
via public notification.

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Disclaimer: This information is updated till 28 August 2018.

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31/12/2018 IFRS - International Financial Reporting Standards

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