Ifrs ppt

IFRS

1. INTERNATIONAL FINANCIAL REPORTING STANDARDS BY – ABHINAV SINHA (MBA HR & IR) SEC - A

2. INTERNATIONAL FINANCIAL REPORTING STANDARDS The International Financial Reporting Standards , usually called the IFRS Standards , are standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB) to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. They are the rules to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external.

3. FEATURES OF IFRS FAIR PRESENTATION AND COMPLIANCE WITH IFRS: Fair presentation requires the faithful representation of the effects of the transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework of IFRS. GOING CONCERN : Financial statements are present on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. ACCRUAL BASIS OF ACCOUNTING : An entity shall recognize items as assets, liabilities, equity, income and expenses when they satisfy the definition and recognition criteria for those elements in the Framework of IFRS. MATERIALITY AND AGGREGATION : Every material class of similar items has to be presented separately. Items that are of a dissimilar nature or function shall be presented separately unless they are immaterial.

4. FEATURES OF IFRS OFFSETTING : Offsetting is generally forbidden in IFRS. FREQUENCY OF REPORTING : IFRS requires that at least annually a complete set of financial statements is presented. However listed companies generally also publish interim financial statements COMPARATIVE INFORMATION : IFRS requires entities to present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements. In addition comparative information shall also be provided for narrative and descriptive information if it is relevant to understanding the current period's financial statements.

5. ELEMENTS OF FINANCIAL STATEMENTS

6. STATEMENT OF FINANCIAL POSITION The elements directly related to the measurement of the statement of financial position include: Asset : An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Liability : A liability is a present obligation of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits, i.e. assets. Equity : Nominal equity is the nominal residual interest in the nominal assets of the entity after deducting all its liabilities in nominal value.

7. STATEMENT OF COMPREHENSIVE INCOME The financial performance of an entity is presented in the statement of comprehensive income , which consists of the income statement (Statement of Profit/Loss) and the statement of other comprehensive income (usually presented in two separate statements Revenues : increases in economic benefit during an accounting period in the form of inflows or enhancements of assets, or decrease of liabilities that result in increases in equity. However, it does not include the contributions made by the equity participants (for example owners, partners or shareholders). Expenses : decreases in economic benefits during an accounting period in the form of outflows, or depletions of assets or incurrence of liabilities that result in decreases in equity. However, these don't include the distributions made to the equity participants.

8. STATEMENT OF CHANGES IN EQUITY The statement of changes in equity consists of a reconciliation of the changes in equity in which the following information is provided: total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests; for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from: profit or loss; other comprehensive income; and transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

9. CASH FLOW STATEMENT Operating cash flows : the principal revenue-producing activities of the entity and are generally calculated by applying the indirect method, whereby profit or loss is adjusted for the effects of transaction of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments, and items of income or expense associated with investing or financing cash flows. Investing cash flows : the acquisition and disposal of long-term assets and other investments not included in cash equivalents. These represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures that result in a recognized asset in the statement of financial position are eligible for classification as investing activities. Financing cash flows : activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. These are important because they are useful in predicting claims on future cash flows by providers of capital to the entity.

10. NOTES TO FINANCIAL STATEMENTS Notes to the Financial Statements : These shall ( a) present information about the basis of preparation of the financial statements and the specific accounting policies used; (b) disclose the information required by IFRSs that is not presented elsewhere in the financial statements; and (c) provide information that is not presented elsewhere in the financial Statement of Cash Flow statements, but is relevant to an understanding of any of them.

11. REQUIREMENTS OF IFRS IFRS financial statements consist of :- a Statement of Financial Position a Statement of Comprehensive Income separate statements comprising an Income Statement and separately a Statement of Comprehensive Income, which reconciles Profit or Loss on the Income statement to total comprehensive income a Statement of Changes in Equity (SOCE) a Cash Flow Statement or Statement of Cash Flows notes, including a summary of the significant accounting policies.

12. MERITS OF IFRS Improved Flow of Capital International Financial Reporting Standards, or IFRS, facilitates the convergence and transparency of accounting practices. This boosts the flow of capital across the international markets. Investors and other stakeholders find it more convenient to compare their business performance with other international companies. This makes it easier and cheaper for them to raise business capital from investors across the globe. Globalized Orientation Using IFRS frees a business from the restrictive scope of national-level accounting standards. Financial reports become automatically acceptable in IFRS-compliant countries, and companies don't need to prepare alternative sets of financial statements when pursuing business interests in these countries. This reduces a business's costs of preparing financial statements destined for international audiences.

13. MERITS OF IFRS Generalized Standard-Setting IFRS stipulations are flexible to both expected and unexpected changes in the global business environment because they are based on broad principles. The generalized stipulations are designed to be applicable and accommodative to varying jurisdictional circumstances and traditions, with minimal interventions of the IASB. For example, the IASB does not recommend any specific formats for preparing financial statements. This gives a business the discretion of choosing the presentation format that best suits it and users of its financial reports. Enhanced Financial Reporting The use of IFRS enhances the quality of financial reports because it leaves little room for undermining the objectives of the set standards. This is unlike country-specific accounting rules that are susceptible to circumventions. Quality financial reports boost investor confidence in a business.

14. ADOPTION OF IFRS IFRS are used in many parts of the world, including the South Korea , European Union , India , Hong Kong , Australia , Malaysia , Pakistan , GCC countries , Russia , Chile , Philippines , South Africa , Singapore and Turkey , but not in the United States. It is generally expected that 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. Companies are also expected to benefit, as investors will be more willing to provide financing. Companies that have high levels of international activities are among the group that would benefit from a switch to IFRS. Companies that are involved in foreign activities and investing benefit from the switch due to the increased comparability of a set accounting standard.

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