INTRODUCTION

International Financial Reporting Standards (IFRS) are designed as 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. 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.

 IFRS began as an attempt to harmonise accounting across the European Union but the value of harmonisation quickly made the concept attractive around the world. They are sometimes still called by the original name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC).

On 1 April 2001, the new International Accounting Standards Board took over from the IASC the responsibility for setting International Accounting Standards. The IASB has continued to develop standards calling the new standards International Financial Reporting Standards(IFRS)

MEANING
IFRS are a set of accounting standards developed by the INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB).

IFRS are referred to as principles-based accounting standards.

These standards are often referred to as rule-based accounting standards.

WHY IFRS?
India is one of the over 100 countries that have or are moving towards IFRS convergence with a view to bringing about a uniformity in reporting systems globally, enabling businesses, finances and funds to access more opportunities. Foreign companies having subsidiaries in India are having to recast their accounts to meet Indian & overseas reporting requirements which are different. Foreign Direct Investors (FDI), overseas financial institutional investors (FII) are more comfortable with compatible accounting standards and companies accessing overseas funds feel the need for recast of accounts in keeping with globally accepted standards.

OBJECTIVES
To standardize accounting methods and procedures. To lay down principles for preparation and presentation. To establish benchmark for evaluating the quality of financial statements prepared by the enterprise.

To ensure the users of financial statements get creditable financial information.

To attain international levels in the related areas.

IFRS TO WHOM APPLICABLE ?

Compliance with IFRS in India is restricted to Public Entities which include those companies & entities listed on any stock exchange or have raised money from the public, or have a substantial public interest, or public sector companies. IFRS in India would cover the following public interest entities in the first phase.
Listed companies Banks, insurance companies, mutual funds, and financial institutions Turnover in preceding year > INR 1 billion Borrowing in preceding year > INR 250 million

Holding or subsidiary of the above

IMPACT OF IFRS
IFRS implementation affects several areas of the business entity, such as presentation of accounts, the accounting policies and procedures, the way legal documents are drafted, the way the entity looks at its assets and their usage, as well as the its communications with its stakeholders and also the way it conducts its business. This fundamental and pervasive nature of impact of IFRS, makes it imperative that sufficient planning and thought is given to this aspect and choices made at the transition stage itself, as they determine the effect on the company and its operations. A detailed analysis of all aspects of impact and change as well as all legal documentation and communication becomes necessary.

ASSUMPTIONS IN IFRS
1. ACCRUAL ASSUMPTION The transactions are recorded in the books of account on accrual basis i.e. as and when they occur and not when the settlement of transactions takes place. 2. GOING CONCERN ASSUMPTION

It is assumed that the life of the business is infinite i.e. the entity will continue its operations for an infinite period.

3.MEASURING UNIT ASSUMPTION

Measuring unit for valuation of capital is the current purchasing power. It means assets should be reflected at current i.e. fair value.

4.CONSTANT PURCHASING POWER ASSUMPTION

Constant purchasing power means value of capital be adjusted to inflation in the economy at the end of the financial year.

IFRS Based Financial Statements

1.STATEMENT OF FINANCIAL POSITION
i. ASSET : An asset is a resource controlled by the enterprise as a result of past events from which future economic benefits are expected to flow to the enterprise.

ii. LIABILITY : A liability is a present obligation of the enterprise arising from the past events, the settlement of which is expected to result in an outflow from the enterprise' resources, i.e., assets.

iii. EQUITY : Equity is the residual interest in the

assets of the enterprise after deducting all the liabilities under the historical cost accounting model. Under the units of constant purchasing power model equity is the constant real value of shareholders equity.

2. STATEMENT OF COMPREHENSIVE INCOME i. REVENUE : 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, i.e., proprietor, partners and shareholders. during an accounting period in the form of outflows, or depletions of assets or incurrences of liabilities that result in decreases in equity.

ii. EXPENSE : Decreases in economic benefits

3. STATEMENT OF CHANGES IN EQUITY.

4. STATEMENT OF CASH FLOW.

5. NOTES AND SIGNIFICANT ACCOUNTING POLICIES.

MEASUREMENT OF THE ELEMENTS OF FINANCIAL STATEMENTS

1. HISTORICAL COST
Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances (for example, income taxes), at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.

2. CURRENT COST
Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.

3. REALISABLE (SETTLEMENT) VALUE

Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal. Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business. Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business.

REQUIREMENTS OF IFRS
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

DIFFERENCE BETWEEN IFRS AND INDIAN GAAP

IFRS are principal based while Indian GAAP or Accounting Standards are rule based. IFRS are based on Fair Value Concept while Indian GAAP or Accounting Standards are based on Historical Cost Concept.

INDIA AND IFRS

The Institute of Chartered Accountants of India (ICAI) has announced that IFRS will be mandatory in India for financial statements for the periods beginning on or after 1 April 2012, but this plan has been failed and IFRS is still not applicable.

Reserve Bank of India has stated that financial statements of banks need to be IFRS-compliant for periods beginning on or after 1 April 2011.
The ICAI has also stated that IFRS will be applied to companies above INR 1000 crore (INR 10 billion) from April 2011. Phase wise applicability details for different companies in India.