Fact box: IFRS
Investors prefer accounting levels close to IFRS: Survey
Majority of investors want the government to keep national accounting standards as close to the international norms (called IFRS) as possible, says a survey conducted by the global accounting firm Ernst & Young.
What is IFRS ?
International Financial Reporting Standards (IFRS):
- A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.
- IFRS are issued by the International Accounting Standards Board (IASB).
- The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external.
What is the need of IFRS?
Now, when huge number businesses are going global the international shareholding is also increasing. However, international investors face difficulties in understanding a company’s financial statements as companies in different countries follow different kinds of financial reporting standards like the US GAAP which is different from Canadian GAAP. Hence, the need was felt to evolve such standards in the form of IFRS which can even out these disparities across international boundaries.
- IFRS was started with an aim to synchronize accounting across the European Union but the value of harmonization quickly made the concept attractive around the globe. IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. (IAS were issued from 1973 to 2000).
How is IFRS being implemented in India?
- India is also gradually trying to comply with IFRS.
- Indian companies had been till now using the U.S. GAAP (Generally Accepted Principles of Accounting) for reporting financial statements.
- As per RBI banks were to become IFRS-compliant for periods beginning on or after April 1, 2011. Companies are to comply with the new set of rules in a phased manner.
As per the plan IFRS proposed Roadmap for INDIA:
Opening balance sheet as at April 1* using IFRS-converged accounting standards.
*If the financial year of a company commences n a date other than April 1, then the opening balance sheet needs to be prepared from the beginning of the new financial year of the company.
- NSE – NIFTY 50 companies
- BSE – Sensex 30 companies
- Companies whose shares or other securities listed outside India
- Companies listed or NOT having a net worth in excess of Rs 1,000 Crore <This excludes insurance companies, banks and non-banking companies (NBFCs)>
- All Insurance Companies
- Companies listed or Not, but having a net worth between Rs 500 Crores and Rs 1000 Crores <This excludes insurance companies, banks and non-banking companies (NBFCs)>
- All Scheduled Commercial Banks
- Urban Co-operative banks having a networth in excess of Rs 300 crores
- NBFCs – Nifty 50 or Sensex 30
- NBFCs listed or NOT, but having a networth more than 1,000 Crores
- Listed companies having a networth less than Rs 500 Crores <This excludes insurance companies, banks and non-banking companies (NBFCs)>
- Urban co-operative banks having a networth between Rs 200 to Rs 300 crores
- NBFCs (all other Listed)
NBFCs (Other Unlisted) haveing net worth between Rs 500 to Rs 1000 Crores.