Ind AS are issued by the Ministry of Corporate Affairs (MCA) of Government of India under the supervision of Accounting Standards Board (ASB) of ICAI and in consultation with National Advisory Committee on Accounting Standards (NACAS).
The term International Financial Reporting Standards (IFRS) comprises of
The Conceptual Framework for Financial Reporting
The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the Board in developing IFRS Standards. It helps to ensure that the Standards are conceptually consistent and that similar transactions are treated the same way, so as to provide useful information for investors, lenders and other creditors.
The Conceptual Framework also assists companies in developing accounting policies when no IFRS Standard applies to a particular transaction, and more broadly, helps stakeholders to understand and interpret the Standards.
International Accounting Standards Board
The International Accounting Standards Board (IASB) is the independent, accounting standard-setting body of the IFRS Foundation.
The IASB was founded on April 1, 2001, as the successor to the International Accounting Standards Committee (IASC). It is responsible for developing International Financial Reporting Standards (IFRS Standards), previously known as International Accounting Standards (IAS) and promoting the use and application of these standards.
The IASB originally had 14 full-time Board members, each with one vote. They are selected as a group of experts with a mix of experience of standard-setting, preparing and using accounts, market/financial regulation and academic work as well as from diverse geographical backgrounds.
International Accounting Standards Committee (IASC)
The International Accounting Standards Committee (IASC) was founded in June 1973 in London and was replaced by International Accounting Standards Board on 1 April 2001. It was responsible for developing the International Accounting Standards and promoting the use and application of these standards. The IASC was founded as a result of an agreement between accountancy bodies in various countries. International Accounting Standards (IAS) are older accounting standards
IFRS Interpretations Committee
The IFRS Interpretations Committee (Interpretations Committee) is the interpretative body of the International Accounting Standards Board (Board). The Interpretations Committee works with the Board in supporting the application of IFRS Standards.
The Interpretations Committee responds to questions about the application of the Standards and does other work at the request of the Board.
The Interpretations Committee comprises 14 voting members, appointed by the Trustees of the IFRS Foundation. The members provide the best available technical expertise and diversity of international business and market experience relating to the application of IFRS Standards.
The old Standard Interpretations Committee (SIC) is currently known as IFRS Interpretations Committee (IFRIC).
IFRS Foundation
The International Financial Reporting Standards Foundation, or IFRS Foundation, is a nonprofit accounting organisation. Its main objectives include the development and promotion of the International Financial Reporting Standards (IFRS Standards) through the International Accounting Standards Board (IASB), which it oversees.
The IFRS Foundation states that its mission is to develop IFRS Standards that bring transparency, accountability and efficiency to financial markets around the world, and that their work serves the public interest by fostering trust, growth and long-term financial stability in the global economy.
The foundation was formerly named the International Accounting Standards Committee (IASC) until a renaming on 1 July 2001. It is governed by a board of 22 trustees and the IFRS Foundation Monitoring Board.
Option of IFRS in India is a difficult task and India has to face various challenges in its implementation, primarily due to the differences that exist between IFRS and Accounting Standards in India. The major challenges before India are as follows:
IFRS
The IFRS is a set of standards developed by the International Accounting Standards Board (IASB). The IFRS govern how companies around the world prepare their financial statements. Unlike the GAAP, the IFRS does not dictate exactly how the financial statements should be prepared, but only provides guidelines that harmonize the standards and make the accounting process uniform across the world.
The IFRS are used in the European Union, South America, and in some parts of Asia and Africa.
GAAP
The GAAP is a set of principles that companies in the United States must follow when preparing their annual financial statements. The measures take an authoritative approach to the accounting process so that there will be minimal or no inconsistency in the financial statements submitted by public companies to the US Securities and Exchange Commission (SEC). This enables investors to make cross-comparisons of financial statements of various publicly-traded companies in order to make an educated decision regarding investments.
The following are some of the ways in which IFRS and GAAP differ:
Coverage
IFRS is implemented in more than 100 countries worldwide, whereas US GAAP is applicable only to United States of America.
Treatment of inventory
One of the key differences between these two accounting standards is the accounting method for inventory costs. Under IFRS, the LIFO (Last in First out) method of calculating inventory is not allowed, while under the GAAP, either the LIFO or FIFO (First in First out) method can be used for estimating inventory. The reason for not using LIFO under the IFRS accounting standard is because it does not show an accurate flow of inventory and may portray lower levels of income than is the actual case.
Intangibles
The treatment of intangible assets such as research and goodwill also feature when differentiating between IFRS vs US GAAP standards. Under IFRS, intangible assets are only recognized if they will have a future economic benefit. In such a way, the asset can be assessed and given a monetary value. GAAP, on the other hand, recognizes intangible assets at their current fair market value and no additional (future) considerations are made.
Rules vs. Principles
The other distinction between IFRS and GAAP is in how they assess the accounting processes – i.e., whether they are based on fixed rules or principles that allow some space for interpretations. Under GAAP, the accounting process is prescribed highly specific rules and procedures, offering little room for interpretation. The measures are devised as a way of preventing opportunistic entities from creating exceptions with the goal of maximizing their profits.
On the contrary, IFRS sets forth principles that companies should follow and interpret to the best of their judgment. Companies enjoy some leeway to make different interpretations of the same situation.
Recognition of revenue
With regards to how revenue is recognized, IFRS is more general, as compared to GAAP. The latter starts by determining whether revenue has been realized or earned, and it has specific rules on how revenue is recognized across multiple industries.
The guiding principle is that revenue is not recognized until the exchange of a good or service has been completed. Once a good has been exchanged, and the transaction recognized and recorded, the accountant must then consider the specific rules of the industry in which the business operates.
Conversely, IFRS is based on the principle that revenue is recognized when the value is delivered. It groups all transactions of revenues into four categories, i.e., the sale of goods, construction contracts, provision of services, or use of another entity’s assets. Companies using IFRS accounting standards use the following two methods of recognizing revenues:
Classification of liabilities
When preparing financial statements based on the GAAP accounting standards, liabilities are classified into either current or non-current liabilities, depending on the duration allotted for the company to repay the debts.
Debts that the company expects to repay within the next 12 months are classified as current liabilities, while debts whose repayment period exceed 12 months are classified as long-term liabilities.
However, in IFRS, there is no plain distinction between liabilities, so short-term and long-term liabilities are grouped together.
Initially Ind AS were expected to be implemented from the year 2011. However keeping in view of certain issues including tax issues, the ministry of corporate affairs decided to postpone the date of implementation.
Financial reporting in India has undergone a momentous transformation owing to the adoption of Ind AS. This paradigm shift has made the Indian financial reporting framework at par with the global standards of reporting.
Ind AS has become a reality now with Phase I and Phase II companies have already published/ are publishing their financial statements as per Ind AS
Transition to Ind AS has improved the transparency and comparability of the financial statements.
Initially, banks and insurance companies were required to implement Ind AS from FY 2018-19 onwards, however, IRDAI has deferred the implementation of Ind AS for insurance companies to financial year 2020-21 and RBI has deferred the implementation of Ind AS for banks to financial year 2019-20.
The Government of India in consultation with the ICAI decided to converge and not to adopt IFRS issued by the IASB. The decision of convergence rather than adoption was taken after the detailed analysis of IFRS requirements and extensive discussion with various stakeholders.
The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Rules, 2015 vide Notification dated February 16, 2015 covering the revised roadmap of implementation of Ind AS for companies other than Banking companies, Insurance Companies and NBFCs. As per the Notification, Indian Accounting Standards (Ind AS) converged with International Financial Reporting Standards (IFRS) shall be implemented on voluntary basis from 1st April, 2015 and mandatorily from 1st April, 2016. Further, the MCA on March 30, 2016, has also notified the Roadmap for implementation of Ind AS for Scheduled Commercial Banks, Insurance companies and NBFCs from 1st April, 2018 onwards and also amendments to Ind AS in line with the amendments made in IFRS/IAS vide Companies (Indian Accounting Standards) Amendment Rules, 2016. However, IRDAI vide press release dated June 28, 2017 has deferred the implementation of Ind AS for the Insurance Sector in India for a period of two years and the same shall now be implemented as effective from 1st April 2020
The Commerce Lecturer 