國際財務報告準則 (International Financial Reporting Standards)

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International Financial Reporting Standards 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. They are
progressively replacing the many different national accounting standards. 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, with the exception of IAS 29 Financial Reporting in Hyperinflationary Economies and
IFRIC 7 Applying the Restatement Approach under IAS 29, are authorized in terms of the
historical cost paradigm. IAS 29 and IFRIC 7 are authorized in terms of the constant
purchasing power paradigm. IFRS began as an attempt to harmonize accounting
across the European Union but the value of harmonization quickly made the concept attractive
around the world. They are sometimes still called by the original name of International
Accounting Standards. IAS were issued between 1973 and 2001 by the Board of the International
Accounting Standards Committee. On 1 April 2001, the new International Accounting Standards
Board took over from the IASC the responsibility for setting International Accounting Standards.
During its first meeting the new Board adopted existing IAS and Standing Interpretations
Committee standards. The IASB has continued to develop standards calling the new standards
International Financial Reporting Standards.
In the absence of a Standard or an Interpretation that specifically applies to a transaction,
management must use its judgement in developing and applying an accounting policy that results
in information that is relevant and reliable. In making that judgement, IAS 8.11 requires
management to consider the definitions, recognition criteria, and measurement concepts for assets,
liabilities, income, and expenses in the Framework.
Criticisms of IFRS are that they are not being adopted in the US, a number of criticisms
from France and that IAS 29 Financial Reporting in Hyperinflationary Economies had no positive
effect at all during 6 years in Zimbabwe´s hyperinflationary economy. The IASB offered
responses to the first two criticisms, but has offered no response to the last criticism
while IAS 29 is currently being implemented in its original ineffective form in Venezuela
and Belarus.
Objective of financial statements Financial statements are a structured representation
of the financial position and financial performance of an entity. The objective of financial statements
is to provide information about the financial position, financial performance and cash flows
of an entity that is useful to a wide range of users in making economic decisions. Financial
statements also show the results of the management's stewardship of the resources entrusted to
it. To meet this objective, financial statements
provide information about an entity's: assets; liabilities; equity; income and expenses,
including gains and losses; contributions by and distributions to owners in their capacity
as owners; and cash flows. This information, along with other information in the notes,
assists users of financial statements in predicting the entity's future cash flows and, in particular,
their timing and certainty. The following are the general features in
IFRS: Fair presentation and compliance with IFRS:
Fair presentation requires the faithful representation of the effects of the transactions, other
events and conditions in accordance with the definitions and recognition criteria for assets,
liabilities, income and expenses set out in the Framework of IFRS.
Going concern: Financial statements are present on a going
concern basis unless management either intends to liquidate the entity or to cease trading,
or has no realistic alternative but to do so.
Accrual basis of accounting: An entity shall recognise items as assets,
liabilities, equity, income and expenses when they satisfy the definition and recognition
criteria for those elements in the Framework of IFRS.
Materiality and aggregation: Every material class of similar items has
to be presented separately. Items that are of a dissimilar nature or function shall be
presented separately unless they are immaterial. Offsetting
Offsetting is generally forbidden in IFRS. However certain standards require offsetting
when specific conditions are satisfied. Frequency of reporting:
IFRS requires that at least annually a complete set of financial statements is presented.
However listed companies generally also publish interim financial statementsfor which the
presentation is in accordance with IAS 34 Interim Financing Reporting.
Comparative information: IFRS requires entities to present comparative
information in respect of the preceding period for all amounts reported in the current period's
financial statements. In addition comparative information shall also be provided for narrative
and descriptive information if it is relevant to understanding the current period's financial
statements. The standard IAS 1 also requires an additional statement of financial position
when an entity applies an accounting policy retrospectively or makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its financial statements.
This for example occurred with the adoption of the revised standard IAS 19 or when the
new consolidation standards IFRS 10-11-12 were adopted.
Consistency of presentation: IFRS requires that the presentation and classification
of items in the financial statements is retained from one period to the next unless: it is
apparent, following a significant change in the nature of the entity's operations or a
review of its financial statements, that another presentation or classification would be more
appropriate having regard to the criteria for the selection and application of accounting
policies in IAS 8; or an IFRS standard requires a change in presentation.
Qualitative characteristics of financial statements Qualitative characteristics of financial statements
include: Relevance
Faithful representation Enhancing qualitative characteristics include:
Comparability Verifiability
Timeliness Understandability
Elements of financial statements The elements directly related to the measurement
of the statement of financial position include: Asset: An asset is a resource controlled by
the entity as a result of past events and from which future economic benefits are expected
to flow to the entity. Liability: A liability is a present obligation
of the entity arising from the past events, the settlement of which is expected to result
in an outflow from the entity of resources embodying economic benefits, i.e. assets.
Equity: Nominal equity is the nominal residual interest in the nominal assets of the entity
after deducting all its liabilities in nominal value.
The financial performance of an entity is presented in the statement of comprehensive
income, which consists of the income statement and the statement of other comprehensive income
. Financial performance includes the following elements:
Revenues: 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.
Expenses: decreases in economic benefits during an accounting period in the form of outflows,
or depletions of assets or incurrences of liabilities that result in decreases in equity.
However, these don't include the distributions made to the equity participants.
Results recognised in other comprehensive income are limited to the following specific
circumstances: Remeasurements of defined benefit assets or
liabilities Increases or decreases in the fair value of
financial assets classified as available for sale(as defined in the standard IAS 39)
Increases or decreases resulting from the application of a revaluation of property,
plant and equipment or intangible assets Exchange differences resulting from the translation
of foreign operations according to the standard IAS 21
the portion of the gain or loss on the hedging instrument in a cash flow hedge that is determined
to be an effective hedge The statement of changes in equity consists
of a reconciliation of the changes in equity in which the following information is provided:
total comprehensive income for the period, showing separately the total amounts attributable
to owners of the parent and to non-controlling interests;
for each component of equity, the effects of retrospective application or retrospective
restatement recognised in accordance with IAS 8; and
for each component of equity, a reconciliation between the carrying amount at the beginning
and the end of the period, separately disclosing changes resulting from:
profit or loss; other comprehensive income; and
transactions with owners in their capacity as owners, showing separately contributions
by and distributions to owners and changes in ownership interests in subsidiaries that
do not result in a loss of control.
Statement of Cash Flows Operating cash flows: the principal revenue-producing
activities of the entity and are generally calculated by applying the indirect method,
whereby profit or loss is adjusted for the effects of transaction of a non-cash nature,
any deferrals or accruals of past or future cash receipts or payments, and items of income
or expense associated with investing or financing cash flows.
Investing cash flows: the acquisition and disposal of long-term assets and other investments
not included in cash equivalents. These represent the extent to which expenditures have been
made for resources intended to generate future income and cash flows. Only expenditures that
result in a recognised asset in the statement of financial position are eligible for classification
as investing activities. Financing cash flows: activities that result
in changes in the size and composition of the contributed equity and borrowings of the
entity. These are important because they are useful in predicting claims on future cash
flows by providers of capital to the entity. Notes to the Financial Statements: These shall
present information about the basis of preparation of the financial statements and the specific
accounting policies used;(b) disclose the information required by IFRSs that is not
presented elsewhere in the financial statements; and provide information that is not presented
elsewhere in the financial statements, but is relevant to an understanding of any of
them. Recognition of elements of financial statements
An item is recognized in the financial statements when:
it is probable future economic benefit will flow to or from an entity.
the resource can be reliably measured In some cases specific standards add additional
conditions before recognition is possible or prohibit recognition all together.
An example is the recognition of internally generated brands, mastheads, publishing titles,
customer lists and items similar in substance, for which recognition is prohibited by IAS
38. In addition research and development expenses can only be recognised as an intangible asset
if they cross the threshold of being classified as 'development cost'.
Whilst the standard on provisions, IAS 37, prohibits the recognition of a provision for
contingent liabilities, this prohibition is not applicable to the accounting for contingent
liabilities in a business combination. In that case the acquirer shall recognise a contingent
liability even if it is not probable that an outflow of reseources embodying economic
benefits will be required. Measurement of the elements of financial statements
Par. 99. Measurement is the process of determining the monetary amounts at which the elements
of the financial statements are to be recognized and carried in the balance sheet and income
statement. This involves the selection of the particular basis of measurement.
Par. 100. A number of different measurement bases are employed to different degrees and
in varying combinations in financial statements. They include the following:
(a) 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, at the amounts of cash or cash equivalents expected to be paid
to satisfy the liability in the normal course of business.
(b) 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. (c) Realisable 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.
Par. 101. The measurement basis most commonly adopted by entities in preparing their financial
statements is historical cost. This is usually combined with other measurement bases. For
example, inventories are usually carried at the lower of cost and net realisable value,
marketable securities may be carried at market value and pension liabilities are carried
at their present value. Furthermore, some entities use the current cost basis as a response
to the inability of the historical cost accounting model to deal with the effects of changing
prices of non-monetary assets. Concepts of capital and capital maintenance
Concepts of capital Par. 102. A financial concept of capital is
adopted by most entities in preparing their financial statements. Under a financial concept
of capital, such as invested money or invested purchasing power, capital is synonymous with
the net assets or equity of the entity. Under a physical concept of capital, such as operating
capability, capital is regarded as the productive capacity of the entity based on, for example,
units of output per day. Par. 103. The selection of the appropriate
concept of capital by an entity should be based on the needs of the users of its financial
statements. Thus, a financial concept of capital should be adopted if the users of financial
statements are primarily concerned with the maintenance of nominal invested capital or
the purchasing power of invested capital. If, however, the main concern of users is
with the operating capability of the entity, a physical concept of capital should be used.
The concept chosen indicates the goal to be attained in determining profit, even though
there may be some measurement difficulties in making the concept operational.
Concepts of capital maintenance and the determination of profit
Par. 104. The concepts of capital in paragraph 102 give rise to the following two concepts
of capital maintenance: (a) Financial capital maintenance. Under this
concept a profit is earned only if the financial amount of the net assets at the end of the
period exceeds the financial amount of net assets at the beginning of the period, after
excluding any distributions to, and contributions from, owners during the period. Financial
capital maintenance can be measured in either nominal monetary units or units of constant
purchasing power. (b) Physical capital maintenance. Under this
concept a profit is earned only if the physical productive capacity of the entity at the end
of the period exceeds the physical productive capacity at the beginning of the period, after
excluding any distributions to, and contributions from, owners during the period.
The concepts of capital in paragraph 102 give rise to the following three concepts of capital
during low inflation and deflation: (A) Physical capital. See paragraph 102&103
(B) Nominal financial capital. See paragraph 104.
(C) Constant item purchasing power financial capital. See paragraph 104.
The concepts of capital in paragraph 102 give rise to the following three concepts of capital
maintenance during low inflation and deflation: (1) Physical capital maintenance: optional
during low inflation and deflation. Current Cost Accounting model prescribed by IFRS.
See Par 106. (2) Financial capital maintenance in nominal
monetary units: authorized by IFRS but not prescribed—optional during low inflation
and deflation. See Par 104 Historical cost accounting. Financial capital maintenance
in nominal monetary units per se during inflation and deflation is a fallacy: it is impossible
to maintain the real value of financial capital constant with measurement in nominal monetary
units per se during inflation and deflation. (3) Financial capital maintenance in units
of constant purchasing power: authorized by IFRS but not prescribed—optional during
low inflation and deflation. See Par 104(a). Capital Maintenance in Units of Constant Purchasing
Power is prescribed during hyperinflation in IAS 29: i.e. the restatement of Historical
Cost or Current Cost period-end financial statements in terms of the period-end monthly
published Consumer Price Index. Only financial capital maintenance in units of constant purchasing
power in terms of a daily index per se can automatically maintain the real value of financial
capital constant at all levels of inflation and deflation in all entities that at least
break even in real value—ceteris paribus—for an indefinite period of time. This would happen
whether these entities own revaluable fixed assets or not and without the requirement
of more capital or additional retained profits to simply maintain the existing constant real
value of existing shareholders´ equity constant. Financial capital maintenance in units of
constant purchasing power requires the calculation and accounting of net monetary losses and
gains from holding monetary items during low inflation and deflation. The calculation and
accounting of net monetary losses and gains during low inflation and deflation have thus
been authorized in IFRS since 1989. Par. 105. The concept of capital maintenance
is concerned with how an entity defines the capital that it seeks to maintain. It provides
the linkage between the concepts of capital and the concepts of profit because it provides
the point of reference by which profit is measured; it is a prerequisite for distinguishing
between an entity's return on capital and its return of capital; only inflows of assets
in excess of amounts needed to maintain capital may be regarded as profit and therefore as
a return on capital. Hence, profit is the residual amount that remains after expenses
have been deducted from income. If expenses exceed income the residual amount is a loss.
Par. 106. The physical capital maintenance concept requires the adoption of the current
cost basis of measurement. The financial capital maintenance concept, however, does not require
the use of a particular basis of measurement. Selection of the basis under this concept
is dependent on the type of financial capital that the entity is seeking to maintain.
Par. 107. The principal difference between the two concepts of capital maintenance is
the treatment of the effects of changes in the prices of assets and liabilities of the
entity. In general terms, an entity has maintained its capital if it has as much capital at the
end of the period as it had at the beginning of the period. Any amount over and above that
required to maintain the capital at the beginning of the period is profit.
Par. 108. Under the concept of financial capital maintenance where capital is defined in terms
of nominal monetary units, profit represents the increase in nominal money capital over
the period. Thus, increases in the prices of assets held over the period, conventionally
referred to as holding gains, are, conceptually, profits. They may not be recognised as such,
however, until the assets are disposed of in an exchange transaction. When the concept
of financial capital maintenance is defined in terms of constant purchasing power units,
profit represents the increase in invested purchasing power over the period. Thus, only
that part of the increase in the prices of assets that exceeds the increase in the general
level of prices is regarded as profit. The rest of the increase is treated as a capital
maintenance adjustment and, hence, as part of equity.
Par. 109. Under the concept of physical capital maintenance when capital is defined in terms
of the physical productive capacity, profit represents the increase in that capital over
the period. All price changes affecting the assets and liabilities of the entity are viewed
as changes in the measurement of the physical productive capacity of the entity; hence,
they are treated as capital maintenance adjustments that are part of equity and not as profit.
Par. 110. The selection of the measurement bases and concept of capital maintenance will
determine the accounting model used in the preparation of the financial statements. Different
accounting models exhibit different degrees of relevance and reliability and, as in other
areas, management must seek a balance between relevance and reliability. This Framework
is applicable to a range of accounting models and provides guidance on preparing and presenting
the financial statements constructed under the chosen model. At the present time, it
is not the intention of the Board of IASC to prescribe a particular model other than
in exceptional circumstances, such as for those entities reporting in the currency of
a hyperinflationary economy. This intention will, however, be reviewed in the light of
world developments. Requirements
IFRS financial statements consist of 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 a Cash Flow Statement or Statement of Cash
Flows notes, including a summary of the significant
accounting policies Comparative information is required for the
prior reporting period. An entity preparing IFRS accounts for the first time must apply
IFRS in full for the current and comparative period although there are transitional exemptions.
On 6 September 2007, the IASB issued a revised IAS 1 Presentation of Financial Statements.
The main changes from the previous version are to require that an entity must:
present all non-owner changes in equity either in one Statement of comprehensive income or
in two statements. Components of comprehensive income may not be presented in the Statement
of changes in equity. present a statement of financial position
as at the beginning of the earliest comparative period in a complete set of financial statements
when the entity applies the new standard. present a statement of cash flow.
make necessary disclosure by the way of a note.
The revised IAS 1 is effective for annual periods beginning on or after 1 January 2009.
Early adoption is permitted. Criticisms of IFRS
1. The US Securities and Exchange Commission Staff issued a 127-page report stating reasons
why not to adopt IFRS in the United States. The staff of the IFRS Foundation provided
a detailed answer on the main criticisms in the SEC report.
2. A number of criticisms were voiced in the beginning of 2013 in the French media to which
the IASB Board member Philippe DANJOU responded in his document 'AN UPDATE ON INTERNATIONAL
FINANCIAL REPORTING STANDARDS. 3. It is widely acknowledged that IAS 29 Financial
Reporting in Hyperinflationary Economies had no positive effect during the six years it
was implemented during hyperinflation in Zimbabwe. [5] This leads people to ask what the purpose
of IAS 29 is when it had no positive effect during hyperinflation in Zimbabwe. IAS 29
is currently being implemented in its original ineffective form in Venezuela and Belarus.
It was suggested to the IASB in 2012 that IAS 29 should be corrected to require daily
indexation which would result in effective Capital Maintenance in Units of Constant Purchasing
Power and would stabilize the non-monetary economy during hyperinflation. The IASB has
offered no response to date to this criticism and has not yet corrected IAS 29 to require
daily indexation. Adoption
IFRS are used in many parts of the world, including the European Union, India, Hong
Kong, Australia, Malaysia, Pakistan, GCC countries, Russia, Chile, South Africa, Singapore and
Turkey, but not in the United States. As of August 2008, more than 113 countries around
the world, including all of Europe, currently require or permit IFRS reporting and 85 require
IFRS reporting for all domestic, listed companies, according to the U.S. Securities and Exchange
Commission. It is generally expected that IFRS adoption
worldwide will be beneficial to investors and other users of financial statements, by
reducing the costs of comparing alternative investments and increasing the quality of
information. Companies are also expected to benefit, as investors will be more willing
to provide financing. Companies that have high levels of international activities are
among the group that would benefit from a switch to IFRS. Companies that are involved
in foreign activities and investing benefit from the switch due to the increased comparability
of a set accounting standard. However, Ray J. Ball has expressed some skepticism of the
overall cost of the international standard; he argues that the enforcement of the standards
could be lax, and the regional differences in accounting could become obscured behind
a label. He also expressed concerns about the fair value emphasis of IFRS and the influence
of accountants from non-common-law regions, where losses have been recognized in a less
timely manner. To assess progress towards the goal of a single
set global accounting standards, the IFRS Foundation has developed and posted profiles
about the use of IFRSs in individual jurisdictions. These were based on information from various
sources. The starting point was the responses provided by standard-setting and other relevant
bodies to a survey that the IFRS Foundation conducted. Currently, profiles are completed
for 124 jurisdictions, including all of the G20 jurisdictions plus 104 others. Eventually,
the plan is to have a profile for every jurisdiction that has adopted IFRSs, or is on a programme
toward adoption of IFRSs. Australia
The Australian Accounting Standards Board has issued 'Australian equivalents to IFRS',
numbering IFRS standards as AASB 1–8 and IAS standards as AASB 101–141. Australian
equivalents to SIC and IFRIC Interpretations have also been issued, along with a number
of 'domestic' standards and interpretations. These pronouncements replaced previous Australian
generally accepted accounting principles with effect from annual reporting periods beginning
on or after 1 January 2005. To this end, Australia, along with Europe and a few other countries,
was one of the initial adopters of IFRS for domestic purposes. It must be acknowledged,
however, that IFRS and primarily IAS have been part and parcel of accounting standard
package in the developing world for many years since the relevant accounting bodies were
more open to adoption of international standards for many reasons including that of capability.
The AASB has made certain amendments to the IASB pronouncements in making A-IFRS, however
these generally have the effect of eliminating an option under IFRS, introducing additional
disclosures or implementing requirements for not-for-profit entities, rather than departing
from IFRS for Australian entities. Accordingly, for-profit entities that prepare financial
statements in accordance with A-IFRS are able to make an unreserved statement of compliance
with IFRS. The AASB continues to mirror changes made
by the IASB as local pronouncements. In addition, over recent years, the AASB has issued so-called
'Amending Standards' to reverse some of the initial changes made to the IFRS text for
local terminology differences, to reinstate options and eliminate some Australian-specific
disclosure. There are some calls for Australia to simply adopt IFRS without 'Australianising'
them and this has resulted in the AASB itself looking at alternative ways of adopting IFRS
in Australia. Canada
The use of IFRS became a requirement for Canadian publicly accountable profit-oriented enterprises
for financial periods beginning on or after 1 January 2011. This includes public companies
and other "profit-oriented enterprises that are responsible to large or diverse groups
of shareholders." European Union
In 2002 the European Union agreed that from 1 January 2005 International Accounting Standards
/ International Financial Reporting Standards would apply for the consolidated accounts
of the EU listed companies. In order to be approved for use in the EU,
standards must be endorsed by the Accounting Regulatory Committee, which includes representatives
of member state governments and is advised by a group of accounting experts known as
the European Financial Reporting Advisory Group (fr). As a result IFRS as applied in
the EU may differ from that used elsewhere. Parts of the standard IAS 39: Financial Instruments:
Recognition and Measurement were not originally approved by the ARC. IAS 39 was subsequently
amended, removing the option to record financial liabilities at fair value, and the ARC approved
the amended version. The IASB is working with the EU to find an acceptable way to remove
a remaining anomaly in respect of hedge accounting. The World Bank Centre for Financial Reporting
Reform is working with countries in the ECA region to facilitate the adoption of IFRS
and IFRS for SMEs. Whilst the IASB set the effective dates for
the new consolidation standards IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements
and IFRS 12 Disclosure of Interests in Other Entities at the 1st of January 2013, the ARC
decided to delay the mandatory effective date for the companies listed in the European Union
by one year. The standards therefore only became effective on the 1st of January 2014.
The European Commission has launched a general analysis of the impacts of 8 years of use
of international financial reporting standards in the EU for preparers and users of financial
statements from the private sector. The study will include an overall assessment of whether
the Regulation 1606/2002 of the European Parliament and the Council has met the two-fold initial
objectives of ensuring a high degree of transparency and comparability of the financial statements
of European companies and an efficient functioning of the market, in comparison with the situation
before IFRS implementation in 2005. It will also include a cost-benefit analysis and an
assessment and analysis of the benefits and drawbacks brought by the IAS Regulation for
different stakeholder groups. India
The 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/IND-AS
are still not applicable. There was a roadmap as given below but still Indian companies
are following old Indian GAAP. There is no clear new date of adoption of IFRS.
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
from April 2011. Phase wise applicability details for different companies in India:
Phase 1: Opening balance sheet as at 1 April 2011*
i. Companies which are part of NSE Index – Nifty 50
ii. Companies which are part of BSE Index – Sensex 30
a. Companies whose shares or other securities are listed on a stock exchange outside India
b. Companies, whether listed or not, having net worth of more than INR 1000 crore
Phase 2: Opening balance sheet as at 1 April 2012*
Companies not covered in phase 1 and having net worth exceeding INR 500 crore
Phase 3: Opening balance sheet as at 1 April 2014*
Listed companies not covered in the earlier phases * If the financial year of a company
commences at a date other than 1 April, then it shall prepare its opening balance sheet
at the commencement of immediately following financial year.
On 22 January 2010, the Ministry of Corporate Affairs issued the road map for transition
to IFRS. It is clear that India has deferred transition to IFRS by a year. In the first
phase, companies included in Nifty 50 or BSE Sensex, and companies whose securities are
listed on stock exchanges outside India and all other companies having net worth of INR
10 billion will prepare and present financial statements using Indian Accounting Standards
converged with IFRS. According to the press note issued by the government, those companies
will convert their first balance sheet as at 1 April 2011, applying accounting standards
convergent with IFRS if the accounting year ends on 31 March. This implies that the transition
date will be 1 April 2011. According to the earlier plan, the transition date was fixed
at 1 April 2010. The press note does not clarify whether the
full set of financial statements for the year 2011–12 will be prepared by applying accounting
standards convergent with IFRS. The deferment of the transition may make companies happy,
but it will undermine India's position. Presumably, lack of preparedness of Indian companies has
led to the decision to defer the adoption of IFRS for a year. This is unfortunate that
India, which boasts for its IT and accounting skills, could not prepare itself for the transition
to IFRS over last four years. But that might be the ground reality.
Transition in phases Companies, whether listed or not, having net
worth of more than INR 5 billion will convert their opening balance sheet as at 1 April
2013. Listed companies having net worth of INR 5 billion or less will convert their
opening balance sheet as at 1 April 2014. Un-listed companies having net worth of Rs5 billion
or less will continue to apply existing accounting standards, which might be modified from time
to time. Transition to IFRS in phases is a smart move.
The transition cost for smaller companies will be much lower because large companies
will bear the initial cost of learning and smaller companies will not be required to
reinvent the wheel. However, this will happen only if a significant number of large companies
engage Indian accounting firms to provide them support in their transition to IFRS.
If, most large companies, which will comply with Indian accounting standards convergent
with IFRS in the first phase, choose one of the international firms, Indian accounting
firms and smaller companies will not benefit from the learning in the first phase of the
transition to IFRS. It is likely that international firms widll
protect their learning to retain their competitive advantage. Therefore, it is for the benefit
of the country that each company makes judicious choice of the accounting firm as its partner
without limiting its choice to international accounting firms. Public sector companies
should take the lead and the Institute of Chartered Accountants of India should develop
a clear strategy to diffuse the learning. Size of companies
The government has decided to measure the size of companies in terms of net worth. This
is not the ideal unit to measure the size of a company. Net worth in the balance sheet
is determined by accounting principles and methods. Therefore, it does not include the
value of intangible assets. Moreover, as most assets and liabilities are measured at historical
cost, the net worth does not reflect the current value of those assets and liabilities. Market
capitalisation is a better measure of the size of a company. But it is difficult to
estimate market capitalisation or fundamental value of unlisted companies. This might be
the reason that the government has decided to use 'net worth' to measure size of companies.
Some companies, which are large in terms of fundamental value or which intend to attract
foreign capital, might prefer to use Indian accounting standards convergent with IFRS
earlier than required under the road map presented by the government. The government should provide
that choice. Japan
The minister for Financial Services in Japan announced in late June 2011 that mandatory
application of the IFRS should not take place from fiscal year-ending March 2015; five to
seven years should be required for preparation if mandatory application is decided; and to
permit the use of U.S. GAAP beyond the fiscal year ending 31 March 2016.
Montenegro Montenegro gained independence from Serbia
in 2006. Its accounting standard setter is the Institute of Accountants and Auditors
of Montenegro. In 2005, IAAM adopted a revised version of the 2002 "Law on Accounting and
Auditing" which authorized the use of IFRS for all entities. IFRS is currently required
for all consolidated and standalone financial statements, however, enforcement is not effective
except in the banking sector. Financial statements for banks in Montenegro are, generally, of
high quality and can be compared to those of the European Union. Foreign companies listed
on Montenegro's two stock exchanges are also required to apply IFRS in their financial
statements. Montenegro does not have a national GAAP. Currently, no Montenegrin translation
of IFRS exists, and because of this Montenegro applies the Serbian translation from 2010.
IFRS for SMEs is not currently applied in Montenegro.
Pakistan All listed companies must follow all issued
IAS/IFRS except the following: IAS 39 and IAS 42: Implementation of these
standards has been held in abeyance by State Bank of Pakistan for Banks and DFIs
IFRS-1: Effective for the annual periods beginning on or after 1 January 2004. This IFRS is being
considered for adoption for all companies other than banks and DFIs.
IFRS-9: Under consideration of the relevant Committee of the Institutes. This IFRS will
be effective for the annual periods beginning on or after 1 January 2013.
Russia The government of Russia has been implementing
a program to harmonize its national accounting standards with IFRS since 1998. Since then
twenty new accounting standards were issued by the Ministry of Finance of the Russian
Federation aiming to align accounting practices with IFRS. Despite these efforts essential
differences between Russian accounting standards and IFRS remain. Since 2004 all commercial
banks have been obliged to prepare financial statements in accordance with both Russian
accounting standards and IFRS. Full transition to IFRS is delayed but starting 2012 new modifications
making Russian GAAP converging to IFRS have been made. They notably include the booking
of reserves for bad debts and contingent liabilities and the devaluation of inventory and financial
assets. Still, several differences between the two
sets of account still remain. Major reasons for deviation between Russian GAAP and IFRS
/ US-GAAP are the following: 1) Booking of payables in the General Ledger
according to national accounting standards can only be made upon receipt of the actual
acceptance protocol. Indeed in Russia, in contrast to IFRS and US-GAAP, the invoice
is not an official tax or accounting document and does not trigger any boolking. There is
also no provision to book in the General Ledger any expense for goods and services that according
to a contract are effectively received but for whom documents are still not exchanged.
2) There is no possibility under Russian GAAP to recognise the good-will as an intangible
asset in the balance sheet of a company. This has a major consequence when a company in
sold. Indeed, if a company is sold at a higher value than its book value, the selling party
need to pay tax at the relevant profit tax rate on the difference in value between selling
and accounting value and the buyer has no possibility to ammortize the cost and deduct
it from present and future revenues. 3) There is no equivalent of IAS 37 in the
Russian GAAP. Loans and monetary securities are not discounted, so the present value of
such financial assets is not discounted for the relevant interest rates at the different
maturities of the loans. Singapore
In Singapore the Accounting Standards Committee is in charge of standard setting. Singapore
closely models its Financial Reporting Standards according to the IFRS, with appropriate changes
made to suit the Singapore context. Before a standard is enacted, consultations with
the IASB are made to ensure consistency of core principles.
South Africa All companies listed on the Johannesburg Stock
Exchange have been required to comply with the requirements of International Financial
Reporting Standards since 1 January 2005. The IFRS for SMEs may be applied by 'limited
interest companies', as defined in the South African Corporate Laws Amendment Act of 2006,
if they do not have public accountability. Alternatively, the company may choose to apply
full South African Statements of GAAP or IFRS. South African Statements of GAAP are entirely
consistent with IFRS, although there may be a delay between issuance of an IFRS and the
equivalent SA Statement of GAAP. Taiwan
Adoption scope and timetable (1) Phase I companies: listed companies and
financial institutions supervised by the Financial Supervisory Commission, except for credit
cooperatives, credit card companies and insurance intermediaries:
A. They will be required to prepare financial statements in accordance with Taiwan-IFRS
starting from 1 January 2013. B. Early optional adoption: Firms that have
already issued securities overseas, or have registered an overseas securities issuance
with the FSC, or have a market capitalization of
greater than NT$10 billion, will be permitted to prepare additional consolidated financial
statements in accordance with Taiwan-IFRS starting from 1 January 2012. If a company
without subsidiaries is not required to prepare consolidated financial statements, it will
be permitted to prepare additional individual financial statements on the above conditions.
(2) Phase II companies: unlisted public companies, credit cooperatives and credit card companies:
A. They will be required to prepare financial statements in accordance with Taiwan-IFRS
starting from 1 January 2019 B. They will be permitted to apply Taiwan-IFRS
starting from 1 January 2013. (3) Pre-disclosure about the IFRS adoption
plan, and the impact of adoption To prepare properly for IFRS adoption, domestic
companies should propose an IFRS adoption plan and establish a specific taskforce. They
should also disclose the related information from 2 years prior to adoption, as follows:
A. Phase I companies: (A) They will be required to disclose the
adoption plan, and the impact of adoption, in 2011 annual financial statements, and in
2012 interim and annual financial statements. (B) Early optional adoption:
a. Companies adopting IFRS early will be required to disclose the adoption plan, and the impact
of adoption, in 2010 annual financial statements, and in 2011 interim and annual financial statements.
b. If a company opts for early adoption of Taiwan-IFRS after 1 January 2011, it will
be required to disclose the adoption plan, and the impact of adoption, in 2011 interim
and annual financial statements commencing on the decision date.
B. Phase II companies will be required to disclose the related information from 2 years
prior to adoption, as stated above. ^ To maintain the consistency of information
declaration and supervision with other companies, the early adopted companies should still prepare
individual and consolidated financial statements in accordance with domestic accounting standards.
Year Work Plan 2008
Establishment of IFRS Taskforce 2009~2011
Acquisition of authorization to translate IFRS
Translation, review, and issuance of IFRS Analysis of possible IFRS implementation problems,
and resolution thereof Proposal for modification of the related regulations
and supervisory mechanisms Enhancement of related publicity and training
activities 2012
IFRS application permitted for Phase I companies Study on possible IFRS implementation problems,
and resolution thereof Completion of amendments to the related regulations
and supervisory mechanisms Enhancement of the related publicity and training
activities 2013
Application of IFRS required for Phase I companies, and permitted for Phase II companies
Follow-up analysis of the status of IFRS adoption, and of the impact
2014 Follow-up analysis of the status of IFRS adoption,
and of the impact 2015
Applications of IFRS required for Phase II companies
Expected benefits (1) More efficient formulation of domestic
accounting standards, improvement of their international image, and enhancement of the
global rankings and international competitiveness of our local capital markets;
(2) Better comparability between the financial statements of local and foreign companies;
(3) No need for restatement of financial statements when local companies wish to issue overseas
securities, resulting in reduction in the cost of raising capital overseas;
(4) For local companies with investments overseas, use of a single set of accounting standards
will reduce the cost of account conversions and improve corporate efficiency.
Above is quoted from Accounting Research and Development Foundation, with the original
here PDF (18.9 KB) . Turkey
Turkish Accounting Standards Board translated IFRS into Turkish in 2005. Since 2005 Turkish
companies listed in Istanbul Stock Exchange are required to prepare IFRS reports.
See also List of International Financial Reporting
Standards Chinese accounting standards
Philosophy of Accounting International Public Sector Accounting Standards
Indian Accounting Standards Generally Accepted Accounting Principles
Generally Accepted Accounting Principles Generally Accepted Accounting Principles
Generally Accepted Accounting Principles Philosophy of accounting
Capital Center for Audit Quality
Constant Purchasing Power Accounting References
Further reading International Accounting Standards Board:
International Financial Reporting Standards 2007) and Interpretations as at 1 January
2007), LexisNexis, ISBN 1-4224-1813-8 Original texts of IAS/IFRS, SIC and IFRIC
adopted by the Commission of the European Communities and published in Official Journal
of the European Union http:ec.europa.euaccounting/ias_en.htm#adopted-commission Case studies of IFRS implementation in Brazil,
Germany, India, Jamaica, Kenya, Pakistan, South Africa and Turkey. Prepared by the United
Nations Intergovernmental Working Group of Experts on International Standards of Accounting
and Reporting. Wiley Guide to Fair Value Under IFRS [6],
John Wiley & Sons. External links
The International Accounting Standards Board—Free access to all IFRS standards, news and status
of projects in progress PwC IFRS page with news and downloadable documents
The latest IFRS news and resources from the Institute of Chartered Accountants in England
and Wales Initial publication of the International Accounting
Standards in the Official Journal of the European Union PB L 261 13-10-2003
Directorate Internal Market of the European Union on the implementation of the IAS in
the European Union Deloitte: An Overview of International Financial
Reporting Standards The American Institute of CPAs in partnership
with its marketing and technology subsidiary, CPA2Biz, has developed the IFRS.com web site.
RSM Richter IFRS page with news and downloadable documents related to IFRS Conversions in Canada
U.S. Securities and Exchange Commission Proposal for First-Time Application of International
Financial Reporting Standards by Foreign private issuers registered with the SEC
IFRS for SMEs Presented by Michael Wells, Director of the IFRS Education Initiative
at the IASC Foundation Educated Pakistan - Free IAS, International
Accounting Standards, Summaries Available IFRS Questions & Answers - IFRS Discussion
Forum What is IFRS Summary of IFRS
Pricewaterhousecoopers's map of countries that apply IFRS