INTERNATIONAL FINANCIAL REPORTING STANDARDS

Applicability of IFRS in India

What and Why IFRS?

International Financial Reporting Standards (IFRS), is a set of guidelines established by the International Accounting Standards Board (IASB). The IFRS lays certain general rules to make the financial statements of every company uniform, clear and identical around the globe. IFRS stipulates how companies should preserve and record their accounts specify the transactions and other proceedings under the financial influences.

IFRS in India

India has a booming economy, and it is on the fringe of convergence. 123 countries around the globe have merged with the IFRS hitherto. India soon will be a part of this new venture. In the press release on 25/02/2011, the Ministry of Corporate Affairs stated that 35 Indian accounting standard have been coincided with the IFRS, hence named DRAFT IND AS.

The DRAFT IND AS will be put into practice in India for companies excluding banking, insurance and NBFCs; published on February 2nd, 2015 by the press information bureau, Government of India. They released a detailed note on the outlining of the aforementioned. As a part of this, the Indian companies will have to change their accounts from Indian GAAP to IFRS.

WHY IFRS IN INDIA?

With introducing IFRS in India, the Indian economy will have many benefits. We may divide these benefits into three:

• Economy

Indian economy is a global market and as our market gets more worldwide, the need for international standards also rises. Introduction of IFRS will help the economy meet its international standard, which will cause the growth of business from overseas. It eases the up keeping of organized and efficient capital markets; this will help in the rise of capital growth and thus the economic.

• Investors

When companies invest in a foreign country, they take a lot of effort, time and money to convert the accounting standards of a specific country to the global market. When IFRS is implemented, it lessens these hardships of the company and intensifies their decision when the accounting standards are globally accepted. Every investor, ready to invest in India, is in the search of information which is more significant, related, updated and comparable across different parts. Financial statements prepared based on general standards help investors to get a better understanding of the opportunities rather than the financial statements drafted on the standards of a certain nation .

• Industry

The industries could make investments from global market at a lesser cost, if they could convince them that their accounting standards abide by the international accounting standards. The MNCs that operate on different countries find it difficult to prepare diverse financial statements from country to country. The introduction of IFRS will reduce their burden by making every economy a global market.

Plan of Action

• Voluntary adaption

Companies can voluntarily adopt Ind AS for accounting periods beginning on or after 1 April 2015 with comparatives for period ending 31 March 2015 or thereafter. However, once they have chosen this path, they cannot go back.

• Mandatory applicability

The mandatory applicability has 2 phases:

Phase 1 (starting on or after 1st1 April 2016, with comparatives for the period ending 31 March 2016 )

• Companies whose equity and/or debt securities are listed or are in the process of listed on any stock exchange in India or outside India and having a net worth of 500 crore INR or more.

• Companies having a net worth of 500 crore INR or more other than those covered above.

• Holding, subsidiary, joint venture or associate companies of companies covered above.

Phase 2 (beginning on or after 1 April 2017, with comparatives for the period ending 31 March 2017 )

• Companies whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having a net worth of less than rupees 500 Crore.

• Unlisted companies other than those covered in Phase I and Phase II, whose net worth are over 250 crore INR but less than 500 crore INR.

• Holding, subsidiary, joint venture or associate companies of above companies.

Other Factors

• Ind AS will be applicable to both merged and stand-alone financial statements of a company covered by the roadmap so that the companies need not have to maintain dual accounting systems.

• An overseas subsidiary, associate or venture of an Indian company isn’t required to organize its stand-alone financial statements as per the Ind AS, and instead, may continue with its jurisdictional requirements. However, these entities will still need to report their Ind AS adjusted numbers for his or her Indian parent company to organize merged Ind AS accounts.

• Insurance, banking and non-banking financial companies shall not be required to use Ind AS either voluntarily or mandatorily. However, it appears (though not clarified), that if these entities are subsidiaries, venture or associates of a parent company covered by the roadmap, they’re going to need to report Ind AS adjusted numbers for the parent company to organize merged Ind AS accounts.

When Ind AS In Conflict With the Law

The rules specify that just in case of conflict between Ind AS and a law, the law shall exist and therefore the financial statements shall be prepared in conformity with it