Everything you need to know about IFRS

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What is and why IFRS?

International Financial Reporting Standards (IFRS):

  • IFRS is a financial reporting framework that is reliable, transparent, and can be comparable across the other companies around the globe. Prior to IFRS, every country had different Generally Accepted Accounting Principles (GAAP) i.e., financial reporting framework for businesses in their own country. With globalization, it was becoming difficult to undertake cross border transactions, investments, raise funds etc. because it was difficult to understand financial statements prepared in different GAAP.
  • To bring harmony in the accounting language and bring ease in doing business internationally, the International Accounting Standards Committee (IASC) was established in the year 1973 and started developing the International Accounting Standards (IAS). They formulated IAS 1 to 41 and SICs. However, their work was not spread and was not used by the companies across globe.

  • The structure of IASC was required to be changed to spread the work of IASC internationally and hence IASB was established during the year 2000. IASB adopted the guidance formulated and issued by IASC i.e., IAS and SICs. Subsequently, they issued a new reporting standard in the name IFRS and interpretations as IFRS IC. Currently, the entire guidance of IAS, IFRS, SIC and IFRS IC together is known as IFRS.

  • IFRS has picked up some foothold over the most recent few years, which is proved by the way that around 144 out of 166 countries of the world have adopted IFRS for all or most domestic publicly accountable entities (listed companies and financial institutions). (Facts are taken from IASB website).

What is Ind AS?
  • India made a commitment to G20 nations in their summit in 2009 towards convergence to IFRS. Accordingly, India decided to adopt a reporting framework similar to IFRS i.e., Ind AS, Indian Accounting Standards Converged with IFRS.

  • On 16 February 2015, the Ministry of Corporate Affairs (MCA) issued a notification for adoption and implementation of Ind AS for Corporate sector in India in phased manner vide companies (Indian Accounting Standards) Rule, 2015.

  • Ind AS are based on the IFRS with some deviations in the provisions of IFRS. Deviation / changes are made to suit the economic conditions in India. This approach of applying IFRS is called as “Convergence approach”. Another approach is “Adoption approach” where IFRS in a country could be adopted as it is without any deviations or changes.

  • Any deviations from the IFRS in Ind AS are commonly called “Carve-outs” or “Cave-ins”. Other than these carve outs, Ind AS has maintained exactly same standard numbers, paragraph numbers and other provisions for financial reporting that as IFRS.

  • Carve-out is the deviation where IFRS contains certain provisions which may not be required under Ind AS and hence not included in Ind AS. Similarly, carve-in is the deviation where a provision is not present in the IFRS, however, is required under Ind AS and hence included separately under Ind AS.

  • Ind AS to be adopted in a phased manner from the financial year 2016-17 with comparatives for the year financial year 2015-16 for certain class of companies. Applicability of Ind AS is discussed subsequently in this chapter.

Considering the applicability and use of IFRS and Ind AS, professionals pursuing their career in finance and accounts, does not have choice but to learn the IFRS / Ind AS. Diploma in IFRS is a well-recognised qualification across the world in the field of IFRS and is accredited by ACCA, UK for all commerce graduates. In previous blog, we have seen the eligibility for course and exam pattern in detail, you can refer the same.

At FinPro Consulting, we specialise in delivering training and consulting services related to IFRS, Ind AS and US GAAP. FinPro is Registered Learning Partner (RLP) with ACCA, UK and has conducted more than 30 retail training batches for Diploma IFRS course. In the next blog we will deal with frequently asked question related to DipIFR examination and DipIFR training course conducted at FinPro.

Thank you reading the article and stay tuned to our next blog!

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