International Financial Reporting Standard [IFRS] and [AS]


International financial reporting Standards (IFRS) are global accounting standards used by more than 125 countries throughout the world. The international accounting standards board (IASB), a private sector body, develops and approves IFRS. The IASB replaced the international accounting standards committee (IASC) in 2001. IASC issued international accounting standards (IASC) from 1973 to 2000. Since then, IASB has replaced some IAS with new IFRS, adopted IAS or proposed new IFRS on topics for which there was no previous IAS. The focus in IFRS is more towards getting the balance sheet right and hence makes the income statement subject to sudden changes


The term IFRS has both, a narrow i.e small and a broad meaning. Narrowly, IFRS refers to the new numbered series of pronouncements that the IASB is issuing, as distinct from the IAS series issued earlier. Till now, IASB has issued 41 IAS and 15 IFRS.

Framework for financial statements:-

The framework for the preparation and presentation of financial statements issued by the IASB ( which is the basis for the framework issued by the ICAI ) keeps out the concepts that underlie the preparation and presentation of financial statements for external users.

  • *Purpose
  • *Status
  • *Accounting standards
  • *Revision
  • *Scope


The following are the purposes;

  • a)They guide and prepares the financial statements in applying Accounting Standards and they deal with titles that have yet to form the subject of an accounting standard.
  • b)Assist in the development of future accounting standards
  • c)They also guide in promoting harmonization of regulation
  • d)They guide the auditors in reframing the accounting standards to conform
  • e)They guide the users of financial statements in interpreting the information contacted in financial statements


This framework is not an accounting standard and hence does not define standards for any measurement taken up or disclosed. Nothing in this framework is overwritten in any specific accounting standard.

Accounting standard:-

The accounting standards board recognizes that in a limited number of cases there may be a conflict between the framework and an accounting standard. In those cases where there is a conflict, the requirements of the accounting standards prevail over those of the framework.


The framework will be revised from time to time on the basis of the experience of the accounting standards boards working with it.


The framework deals with-

  • ¤the objectivism of financial statement
  • ¤the qualitative features
  • ¤the quantitative features
  • ¤definition
  • ¤recognition
  • ¤measurements
  • ¤capital and capital maintenance

IFRS compliant standards (IND AS)

ICAI has already completed the process of issuing IFRS equivalent AS and revising the existing standards and guidance notes to bring them at par with IFRS. The date of implementation of the IND AS has been noticed by the ministry.

☆Converging with IFRS

  • -First-time adoption of Indian accounting standards
  • -Share-based payment
  • -Business combinations
  • -Insurance contracts
  • -Noncurrent assets held for sale and discontinued operations
  • -Exploration for and evaluation of minerals resources
  • -Financial instruments: disclosure
  • -Operating segment
  • -Financial instruments
  • -Consolidated financial statements
  • -Joint arrangement
  • -Disclosure of interests in other entities
  • -Fair value measurement
  • -Regulatory Deferral accounts
  • -Revenue from contracts with customers

☆Converging with IAS

  • -Presentation of financial statements
  • -Inventories
  • -Statement of cash flows
  • -Accounting policies, changes in accounting estimates, and errors
  • -Events after the reporting period
  • -Construction contracts
  • -Income taxes
  • -Property, plant, and equipment
  • -Leases
  • -Revenue
  • -Employees benefit
  • -Accounting for government grants and disclosure of government assistance
  • -The effects of changes in foreign exchange rates
  • -Borrowing costs
  • -Related party disclosures
  • -Consolidated and separate financial statements
  • -Investment in association
  • -Financial Reporting in hyperinflationary economies
  • -Interests in joint ventures
  • -Financial instrument presentation
  • -Earnings per share
  • -Interim financial reporting Impairment of assets
  • -Impairment of assets
  • -Provisions, contingent liabilities, and contingent assets
  • -Intangible Assets
  • -Financial instruments: recognition
  • -Investment property

Core group by MCA:-

A core was established by the ministry of corporate affairs (MCA) for the collaboration of Indian Accounting Standards with International Financial Reporting Standards (IFRS). It was meant for various officials from the Institute of Chartered Accountants of India (ICAI), ministry of finance, (SEBI) Securities and Exchange Board of India, Insurance Regulatory and Development Authority (IRDA). Reserve Bank of India (RBI), Comptroller and Auditor General(C&AG), Pension Fund Regulatory and Development Authority (PFRDA), Industry representatives, and many other experts.

Benefits of adopting IFRS for Indian Companies:-

  • ¤International capital markets
  • ¤Lower cost of capital
  • ¤Enable benchmarking
  • ¤Multiple reporting
  • ¤True value
  • ¤Opportunities

International capital markets:-

There are many Indian companies that are expanding and some are thinking to expand outside India for which they need a huge amount of capital that will be invested to start. As we see the majority of world stock exchanges require financial information prepared under the guidance of IFRS. The financial statements prepared with IFRS will enable Indian companies to have an entry in international capital markets as IFRS is globally accepted.

Lower cost of capital:-

The change to IFRS will automatically lower the cost of raising funds in the market as there will be no need for preparing two sets of financial statements (one under IFRS and another one in Indian accounting standards). It will also reduce the auditor’s fees and a higher rate of interest paid to the shareholders of the company.

Enable benchmarking:-

After adopting the IFRS they will enable the companies to gain a broader and deeper understanding level of its relative standing in the global market. With the adoption of IFRS, companies can set the target and milestones based on the global business environment, rather than the local ones.

True value:-

In Indian GAAP business combinations, amalgamation, and absorption, with few exceptions are recorded at costs and not fair values of net assets taken over. Purchase consideration paid for intangible assets not recorded in the seller’s book is usually not reflected separately in the financial statements.
It also requires recognition of intangible assets, even though they have not been recorded in the vendor’s financial statements


IFRS will open up an immense number of opportunities in the service sector. As IFRS emphasizes fair value, it will provide jobs to professional workers, including accountants the valuers, and actuaries. With the help of BPO (business process outsourcing) concerns in India.

Mandatory for accounting periods beginning on or after 1st April 2016.

Companies whose equity shares or debt securities are listed
Companies who are in the process of listing on any stock exchange in or outside India
Companies having a net worth of 500 crore INR or more than that

Unlisted companies having a net worth of 500 crore INR or more

Holding, subsidiaries, joint ventures, or associate companies of companies covered in (A) and (B).
Mandatory for accounting periods beginning on or after 1st April 2017

Companies whose equity share or debt Securities are listed
Companies who are in the process of listing on any stock exchange in or outside India
Companies having a net worth of less than 500 crore INR

Unlisted companies having a net worth of 250 crore INR or more but less than 500 crore INR and not covered in any of the other categories

Holding, subsidiaries, joint ventures, or associate companies of companies covered in(D) and (E)
Accounting standard board


Accounting standards are those accounting principles which are made and recommended or enforced by any authority such as the Institute of Chartered Accountants of India(ICAI) or under any law such as the companies act 1956 or Income tax act

The ICAI has explained the basic concepts related to the accounting standards as follows:-

  • *Accounting standard board
  • *Format for accounting standards
  • *Compliance with accounting standards
  • *Needs for accounting standards
  • *Reduce variation in treatment
  • *Additional disclosures
  • *Facilitates comparison

Accounting standard board:-

The main function of ASB is to operate and prepare accounting standards taking into consideration the Indian laws, customs, and business environment, the international accounting standards issued by the international accounting standards committee, the purposes and limitations of published final accounts, and the role of the auditors.

Format of Accounting standards:-

Following are the format of accounting standards

  • *Statement of concepts
  • *Fundamental Accounting principles
  • *Manner in which the accounting principles have been applied
  • *Formulating the standards
  • *Presentation and disclosure
  • *Class of concern
  • *Date from which the standard will be effective

Compliance with the accounting standards:-

A chartered accountant has to ensure that the accounts audited by him comply with the accounting standards or to report on non-compliance if any. In the initial years, the standards were recommendatory; however, in course of time, many have been made compulsory (mandatory).

Needs for accounting standards:-

The Accounting standard seeks to describe the accounting principles the valuation techniques and the methods of applying the accounting principles in the preparation and presentation of financial statements so that they may give a true and fair view.

*Reduce variation in treatment:-

Standards reduce to a reasonable extent or determine altogether confusing variations in the accounting treatments used to prepare financial statements.

Additional Disclosures:-

There are certain areas where important information is not statutorily required to be disclosed. Standards may call for disclosure beyond that required by law

Facilitate comparison:-

The application of accounting standards would, to a limited extent, facilitate the comparison of financial statements of companies situated in different parts of the world and also of different companies situated in the same country.
The council of the institute of chartered accountants of India has so far issued 32 accounting standards. However, AS 8 on accounting for research and development has been withdrawn consequent to the issuance of AS 26 on intangible assets

Mandatory accounting standards:-

In assessing whether an accounting standard is applicable one must find the correct answer to the following three questions:-

  • *Does it apply to the enterprise concerned
  • *Does it apply to the financial statement concerned
  • *Does it apply to the financial item concerned

The preferences to the statements of accounting standards answers the above questions:-

  • -Commercial, business, industrial enterprise
  • -Enterprise mandated to apply accounting standards by law
  • -Listed companies
  • -Insurance companies
  • -Enterprise not mandated to apply accounting standards by law
  • -Compliance with income-tax law
  • -Compliance with the law
  • -Material items

IND AS 23 stands for Borrowing cost

The qualifying asset are given below:-

°Manufacturing plants
°Intangible assets
°Power generation facilities
°Investment properties

The non-qualifying asset is given below:-

°Financial assets
°Inventories that are manufactured
°Inventories that are produced
°Asset that are ready to use or for sale when acquired

Indian accounting standard (Ind AS 23) Borrowing cost is applied in accounting for borrowing cost.

Capitalization begins when an entity meets all of the following conditions:-

-Expenditure for the asset
-Borrowing cost is incurred
-Prepare the asset for use

If we talk about IND AS 108 i.e operating segments:-

Aggregation criteria:-
-Segments have similar economic characters

The segments are similar in each of the following respects:-

  • -Nature of the products and services
  • -Nature of the production processes
  • -Type or class of customer for their products snd services
  • -Methods used to distribute their products
  • -Provide services
  • -If applicable the nature of the regulatory environment, for example, banking, insurance, or public utilities.
  • -General information about segments profit/loss, assets/liabilities, basis of measurement
  • -Revenues from external customers
  • -Revenue from transactions with other operating segments of the same entity
  • -Interest revenue
  • -Interest expense
  • -Depreciation
  • -Amortisation
  • -Material items of income and expense
  • -Entity interest in the profit or loss of associates and joint
  • -Ventures accounted for by the equity method
  • -Income tax expense
  • -Income
  • -Material non-cash items other than depreciation and amortization


  • -Total of the reportable segment’s revenues to the entity revenue
  • -Total of the reportable segments measurement of profit and loss
  • -Total of the reportable segments’ assets to the entity assets
  • -Total of the reportable segments liabilities to the entity liabilities
  • -Total of the reportable segments amount for every other material item of information

Value and valuation:-

  • -Value
  • -Price value
  • -Cost value
  • -Standard of value
  • -Book value
  • -Market value
  • -Economic value
  • -Valuation
  • -Basis of valuation
  • -Premise of valuation

Contents of CFS:-

  • -Consolidated balance sheet
  • -Consolidated statements of profit and loss
  • -Notes, other statements, and explanatory material that form an integral part thereof
  • -Consolidated cash flow statement

Steps in consolidation vide AS 21:-

  • 1)Eliminate parents cost of investment and portion of equity share
  • 2)Calculate goodwill
  • 3)Capital reserve arising on investment
  • 4)Calculate minority interest
  • 5)Analyse profits of the subsidiary into profits before and after the acquisition
  • 6)Make intra group adjustments
  • 7)Treatment of investment
  • 8)Consolidate profit and loss statements
  • 9)Hamonise Reporting dates
  • 10)Harmonise Accounting policies

Consolidated profit and loss statement:-

  • a]From the date of control
  • b]Till the date of cessation of control
  • c]Cumulative preference dividend
  • d]Profit and loss on disposal of investment
  • e]Notes in CFS

Leave a Reply

Your email address will not be published.