Highlights of IFRS in India.

 

• Companies can comply with the new norms voluntarily from 1^st April, 2015 but following classes of Companies will have to comply mandatorily with the New Ind AS from the prescribed dates, as mentioned below:

• Companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of Rs 500 crore or more shall have to follow the new norms from 1st April, 2016. Comparatives for the year ending 31^st March, 2016, to be prepared because all the opening balances should also comply with IFRS.

• Companies having a Net-worth of less than Rs 500 crore but are listed or in the process of getting listed shall have to follow the new accounting norms from April 1, 2017 And Comparatives for the year ending 31^st March, 2017.

• Other Companies, that are Unlisted having a Net-worth of Rs 250 crore or more but less than Rs 500 crore, shall have to start implementing the new accounting norms from April 1, 2017.
• The deadline mentioned above shall also apply to Holding, Subsidiary, Joint Venture or Associate Company of the company; in all the cases mentioned above.

• Banking Companies, NBFCs and Insurance companies are exempted from complying with these new norms.The Finance Minister had said in his Budget speech that the Regulators will separately notify the date of implementation for them, on the basis of an international consensus.

• Companies whose securities are listed or in the process of listing on SME exchanges shall not be required to apply New Accounting Standards. Such companies shall continue to comply with the existing accounting norms.

• Companies shall follow the Ind AS for all the subsequent financial statements ,if they opted once.

• Companies not covered by the above roadmap shall continue to apply existing accounting standards prescribed in Annexure to the Companies (Accounting Standards) Rules, 2006.

Significant differences between Existing Indian AS and IFRS:-

Basis of Difference	Existing Indian AS	IFRS
First time adoption of accounting frameworks	In India, there is no specific guidance on first time adoption.	There is a specific statement by IASB to apply IFRS for the first time. First time adoption of IFRS requires full retrospective application of IFRS at the reporting date for IFRS based financial statements of an entity.
Extraordinary Items	Disclosure of events or transactions, distinct from the ordinary activities of the entity, which are not expected to recur frequently.	Not allowed
Business Combinations	No particular AS has been issued by ICAI till date.	All business combinations are Combinations as per IFRS 3.
Minority interests at acquisition	Stated at minority’s share of pre- acquisition carrying value of net assets.	Stated at minority’s share of the fair value of acquired identifiable assets, liabilities and contingent liabilities.
Pooling of interest Method	Required for certain amalgamations when all the specified conditions are met.	Prohibited.
Capitalisation of borrowing costs	There is no choice rather than to capitalize the borrowing cost.	Permitted as a policy choice for all qualifying assets, but not required.
Biological assets	No specific guidance. Historical Cost is used, in general.	Measured at fair value less estimated point-of-sale costs.
Dividends on ordinary equity shares	Accounted in the year of proposal.	Accounted in the year of Declaration.
Events occurring after the Balance Sheet date	Non adjusting events are not required to be disclosed in the financial statements.	Non adjusting events are required to be disclosed in the financial statements.

 Our Analysis:

Para 6 of IFRS-1 states:

“An entity shall prepare and present an opening IFRS Statement of financial position at the date of transition to IFRSs. This is the starting point for its accounting in accordance with IFRSs.”

As per our view, if an entity is implementing IFRS from FY 2016-2017, then it actually has to implement it from FY 2015-2016 for the purpose of Comparatives, because the Opening Balances should also be IFRS compliant. Though it has been stated as optional to implement IFRS from FY 2015-2016, it seems that it is de-facto mandatory w.e.f. 1st April, 2015, i.e., from FY 2015-2016.

Adoption of IFRSs still cannot ensure a perfect accounting world:

Uniformity in Accounting Standards is a gigantic step towards understanding financial statements prepared in different nations; however, uniformity alone is not a total solution. Environmental factors such as culture, language, legal system and economic conditions are also of paramount importance.

No set of Accounting Standards can replace the necessity for accountants to have the highest level of ethical character. Corporate financial scandals like Enron, Satyam, and the like, rarely occur from deficiencies in Accounting Standards alone; but frequently result from weaknesses in the ethical character of the perpetrators, which include top management, accountants and auditors. Greed and over-reaching ambition have led to disastrous consequences for the affected entities and their stakeholders.

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