IFRS Course FAQ

1. What are International Financial Reporting Standards(IFRSs)?

International Financial Reporting Standards(IFRSs) are standards and interpretations issued by

the International Accounting Standards Board (IASB) and its predecessor body, viz.,
International Accounting Standards Committee(IASC). They comprise:

a) International Financial Reporting Standards;

b) International Accounting Standards, and
c) Interpretations developed by the International Financial Reporting Interpretations
Committee(IFRIC) or the former S tanding Interpretations Committee(SIC).
.

2. What is International Accounting Standard Board?

The IASB is an independent standard setting body with its headquarters at London. Its members
(currently 15 tull -time members) are responsible for the development and publication of IFRS,
including the IFRS for SMEs and for approving interpretations of IFRSs as developed by the
IFRS interpretations Committee (formerly called the IFRIC). All meetings of the IASB are held
in public and web- cast in fulfilling i ts standard setting duties the IASB follows a thorough open
and transparent due process of which the publication of consultative documents, such as
discussion papers and exposure drafts, for public comment is an important component. The
IASB engages close ly with stakeholders around the world, including investors, analysts,
regulators, business leaders, accounting standard -setters and the accountancy profession.

3. What is IFRS Interpretations Committee?

.The IFRS Interpretations Committee (formerly cal led the IFRIC) is the interpretative body of
the IASB. The Interpretations Committee comprises 14 voting members appointed by the
Trustees and drawn from a variety of countries and professional backgrounds. The mandate of
the Interpretations Committee is to review on a timely basis widespread accounting issues that
have arisen within the context of current IFRSs and to provide authoritative guidance (IFRICs)
on those issues. Interpretation Committee meetings are open to the public and webcast. In deve
loping interpretations, the interpretations Committee works closely with similar rational
committees and follows a transparent thorough and open due process.

4. Is India adopting IFRSs?

The term adoption of IFRSs signifies that no change is made in the IFRSs. In that sense, India is
not adopting IFRss. India has adopted the policy of converging with IFRSs.
5. What is convergence?

Convergence means to be as close to the IFRSs as local conditions permit . India has decided to
make changes in the IFRS which are permissible, viz., (1) removing options permitted under
IFRSs, i.e. prescribing only one of the options permitted under various IFRSs (2) prescribing
disclosures in addition to those required under IFRSs (3) changing the nomenclature of the terms
used in IFRSs such as use of the term ‘Balance Sheet’ in place of Statement of Financial
Position’. Making these changes does not amount to divergence from IFRSs. However, it is
possible that in a few si tuations, keeping in the Indian conditions, certain other changes may be
made which are absolutely essential, which may be to provide additional guidance to Indian
users. In rare cases, some changes may be made which may be different from IFRSs which may
result in deviations. Such changes would be taken up with the IASB. Changes may amount to
non - convergence with IFRSs.

6. What is the proposed nomenclature for the new Accounting

Standards?

The proposed nomenclature for the new accounting standards conv erged with
IFRSs is Indian Accounting Standards (IND AS)

7. What is the implementation schedule for the new Indian

Accounting Standards converged with IFRS? .

The Accounting Standards Board of ICAI has already issued Exposure Drafts of all accounting
stan dards converged with IFRSs. The Council of the ICAI is expected to approve most of the
accounting standards by the end of June 2010. These are simultaneously being considered by the
National Advisory Committee on the Accounting Standards(NACAS) constitut ed by the
Ministry of Corporate Affairs. The NACAS will recommend these accounting standards to the
Government, which is expected to notify the same before the end of the year
2010. The roadmap issued by the Ministry of Corporate Affairs in this regard is as follows:

(a) Phase-I:- The following categories of companies will convert their opening balance sheets as
at 1 st April, 2011, if the financial year commences on or after
1st April, 2011 in compliance with the notified accounting standards which are convergent with
IFRS. These companies are: -

a. Companies which are part of NSE – Nifty 50

b. Companies which are part of BSE - Sensex 30
c. Companies whose shares or other securities are listed on stock exchanges outside India.
d. Companies, whether list ed or not, which have a net worth in excess of
Rs.1,000 crores.

(b) Phase-II :- The companies, whether listed or not, having a net worth exceeding Rs. 500 crores
but not exceeding Rs. 1,000 crores will convert their
opening balance sheet as at 1 st April, 2013, if the financial year commences on or after 1st
April, 2013 in compliance with the notified accounting standards which are convergent with
IFRS.

(c) Phase-III :- Listed companies which have a net worth of Rs. 500 crores or less will convert
their o pening balance sheet as at 1 st April, 2014, if the financial year commences on or after 1
st April, 2014, whichever is later, in compliance with the notified accounting standards which are
convergent with IFRS

When the accounting year ends on a date other than 31st March, the conversion of the opening
Balance Sheet will be made in relation to the first Balance Sheet which is made on a date after 31
st March.

8. What is the Road Map for convergence by Insurance Companies?

All insurance companies will co nvert their opening balance sheet as at 1 st April,
2012 in compliance with the converged Indian Accounting Standards.

9. What is the Road Map for convergence by Banking Companies?

(a) All scheduled commercial banks and those urban co -operative banks ( UCBs) which have a
net worth in excess of Rs. 300 crores will convert their opening balance sheet as at 1 st April,
2013 in compliance with the converged Indian Accounting Standards.

(b) Urban co-operative banks which have a net worth in excess of Rs. 200 crores but not
exceeding Rs. 300 crores will convert their opening balance sheets as at
1st April, 2014 in compliance with the converged Indian Accounting Standards.

(c) Urban co-operative banks which have a net worth not exceeding Rs. 200 crores and Regional
Rural banks (RRBs) will not be required to apply the first set of Accounting Standards i.e. the
converged Indian Accounting Standards (though they may voluntarily opt to do so) and need to
follow only the existing notified Indian Accounting Standards which are not converged with
IFRSs .

10. What is the Road Map for convergence by Non -Banking Finance
Companies?

(a) The following categories of non -banking financial companies (NBFCs) will convert their
opening balance sheet as at 1 st April, 2013 if th e financial year commences on 1st April (or if
the financial year commences on any other date, then on the date immediately following 1 st
April, 2013) in compliance with the converged Indian Accounting Standards. These NBFCs are:
-

i. Companies which ar e part of NSE – Nifty 50

ii. Companies which are part of BSE - Sensex 30
iii. Companies, whether listed or not, which have a net worth in excess of
Rs.1,000 crores.

(b) All listed NBFCs and those unlisted NBFCs which do not fall in the above categories and
which have a net worth in excess of Rs. 500 crores will convert their opening balance sheet as at
1 st April 2014 if the financial year commences on 1st April (or if the financial year commences
on any other date, then on that date following 1 st April 2014) in compliance with the converged
Indian Accounting Standards).

(c) Unlisted NBFCs which have a net worth of Rs. 500 crores or less will not be required to
follow the converged Indian accounting standards, though they may voluntarily opt to do so, bu t
need to follow only the notified Indian accounting standards which are not converged with the
IFRSs.

11. Who will follow the existing Accounting Standards as notified by the Companies
(Accounting Standards) Rules, 2006?

The companies which are not re quired to follow the converged accounting standards would
continue to follow the existing accounting standards as notified by the Companies Accounting
Standards Rules, 2006.

12. Can a company not included in the Road Map voluntarily adopt the new Accoun ting
Standards?

Companies not included in the Road Map can voluntarily adopt the new Accounting Standards
converged with IFRSs but not before the financial years commencing 1st April, 2010 and 2011.

13. The companies, covered in the phase I, would be re quired to convert their opening balance
sheet as at 1 st April 2011 in compliance with the converged Accounting Standards.
Accordingly, companies are not required to provide comparative figures for the year 2010 -11 as
the converged Accounting Standards. W hether companies can voluntarily opt to provide
comparative figures for 2010 -11 as per the converged Accounting Standards?

The entity has the option to add an additional column to indicate what these figures could have
been if the converged accounting st andards had been applied in that previous year. Companies
which make this additional disclosure will, for this purpose, convert their opening balance sheet
as at the date on which this previous year commences and, in that case, a further conversion of
the opening balance sheet for the year for which the financial statements are prepared will not be
necessary.

14. Whether companies covered in 2 nd / 3rd phase for application of the converged Accounting
Standards can voluntarily opt to apply the same w.e.f. accounting year beginning on 1 -4-2011 ?

Such Companies will have an option for application of the converged Accounting Standards only
for the financial year commencing on 1 st April, 2011 and thereafter.
15. As per the roadmap, in phase 1, the following categories of companies(other than banking
companies, insurance companies and NBFCs) will convert their opening balance.

a. Companies which are part of NSE – Nifty 50

b. Companies which are part of BSE – Sensex 30
c. Companies whose shares or other securities are listed on stock exchanges outside India
d. Companies, whether listed or not, which have a net worth in excess of Rs.1,000 crores.

What is the cut -off date on which the aforesaid criteria shall be applied in order to determine the
companies falling in each o f the aforesaid four categories of companies which will convert their
opening balance sheet as at 1 st April, 2011 in compliance with the converged Accounting
Standards?

The date for determination of the criteria is the Balance Sheet as at 31 st March
2009 or the first Balance Sheet prepared thereafter when the accounting year ends on another
date.

16. As per the proposed roadmap for Banks and NBFCs, in phase I, the following categories will
convert their opening balance sheet as at 1 st April,
2013 in compliance with the notified accounting standards which are converged with IFRS:

i) Banks
All scheduled commercial banks and those urban co -operative banks which have a net worth in
excess of Rs. 300 crores will convert their opening balance sheet as at 1 st April, 2013 in
compliance with the converged accounting standards.

ii) NBFCs
a. Companies which are part of NSE – Nifty 50
b. Companies which are part of BSE – Sensex 30
c. Companies, whether listed or not, which have a net worth in excess of Rs.1,000 cr ores

What is the cut -off date on which the aforesaid criteria shall be applied in order to determine the
scheduled commercial banks/ urban co-operative Banks/ NBFCs falling in each of the aforesaid
categories which will convert their opening balance sheet as at 1st April, 2013 in compliance
with the converged Accounting Standards?

The date for determination of the criteria is the Balance Sheet as at 31 st March
2011 or the first Balance Sheet prepared thereafter when the accounting year ends on another dat
e

17. There might be a situation where the parent company is covered in any one of the here
phases for specified class of companies for applying the. converged Accounting Standards, while
the other group companies (subsidiaries, joint ventures or associates)are not covered under such
phasing plan.

In such a scenario, whether it would be permissible for the companies, which are not individually
covered under the phasing plan for application of the converged Accounting Standards to
voluntarily opt for ap plication of the converged Accounting Standards, even for their standalone
financial statements? May also clarify the position in a situation where the phasing plan for
application of the first set of Accounting Standards the converged Accounting Standard s gets
attracted to one of the entity in the group while the parent company is not covered.

The criteria is to be considered for each company’s standalone accounts. The companies covered
in a particular phase having subsidiaries, joint ventures or associates not covered in those
phase/phases will prepare their consolidated financial statements according to the converged
Accounting Standards.

When one or more group fall in a phase other than the phase applicable to the parent company,
they will continue to prepare standalone accounts according to the phase applicable to them but
the parent may need to make amendments to these accounts for the purposes of consolidation as
per converged accounting standards. Such subsidiaries, joint ventures or associate co mpanies
may have the option for early adoption of converged accounting standards.

18. Once a company gets covered in the specified class of companies in any one of the phases, as
identified in the roadmap issued by the Ministry and converts its opening Balance Sheet as per
the specified date in accordance with the converged Accounting St6andards whether it would
have to continue to follow the same set of accounting standards in the future as well even if it no
longer satisfies the specified criteria? Will it be possible for such a company to revert to existing
Indian Accounting Standards?

Once a company starts following the converged Accounting Standards on the basis of the
eligibility criteria it will be required to follow such Accounting Standards for all the subsequent
financial statements even if any of the eligibility criteria does not subsequently apply to it.

19. What are the rules for calculation of qualifying net worth in order to determine applicability
for applying the Converged accountin g standards?

For the purpose of calculation of qualifying net worth of companies, the following rules will
apply:

a. The net worth will be calculated as per the audited balance sheet of the company as at 31 st
March 2009 or the first balance sheet for accoun ting periods which end after that date.
b. The net worth will be calculated as the Share Capital plus Reserves less Revaluation Reserve,
Miscellaneous Expenditure and Debit Balance of the Profit & Loss Account.
c. For companies which are not in existence on 31 st March, 2009, the net
worth will be calculated on the basis of the first balance sheet ending after that date.

The calculation of net worth is for the purpose of the criteria only since “net worth” is a part of
the criteria.

20. What are the rules fo r calculation of qualifying net worth to be recommended to the
scheduled commercial Banks/urban cooperative Banks/NBFCs in order to determine their
applicability for applying the converged Accounting Standards?

For the purpose of calculation of qualifying net worth of scheduled commercial

Banks/urban cooperative Banks/NBFCs, the following rules will apply:

a. The net worth will be calculated as per the audited balance sheet of the scheduled commercial
Banks/urban cooperative Bank/NBFC as at 31 st March 2011 or the first balance sheet for
accounting periods which ends after that date.
b. The net worth will be calculated as the Share Capital plus Reserves less Revaluation Reserve,
Miscellaneous Expenditure and Debit Balance of the Profit and Loss Account.
c. For scheduled commercial Banks/urban cooperative Banks/NBFCs which are not in existence
on 31 st March 2011, the net worth will be calculated on the basis of the first balance sheet
ending after that date.

The calculation of net worth is for the purpose of the crit eria only since “net worth” is a part of
the criteria.

21. In case the notified converged accounting standard is not fully consistent with the IAS/IFRS
(i.e. despite intention to converge, some deviations remain), as issued by the IASB, Indian
companies continue to follow the converged Accounting Standard as notified by the Government
of India and not adopt IFRS in toto ?

Companies will have to follow the converged Accounting Standards and not the
IFRS.