Major Impact of IFRS on Indian Accounting Standard

Discuss the major impact of IFRS on the valuation of Fixed Assets and Intangible assets,Inventory and Investments and how the Financial Statements of the company will be affected.

Under IFRS, accounting is done for all assets including hidden intangibles at fair value. As the assets are recognized at fair value, amortization of these assets will reduce future year profits under IFRS. IFRS requires a financial instrument to be classified as a liability or equity in accordance with its substance. For example, mandatorily redeemable preference shares are treated as a liability and the preference dividend is recognized as interest cost. Under Indian GAAP, classification is normally based on form rather than substance. Compared to Indian GAAP, IFRS will show the firm as more geared and profits would be lower as a result of preference dividends being treated as interest.

impact of IFRS
under GAAP asset recognized at book value but UNDER IFRS asset are recognized at fair value and companies having high goodwill in balance sheet will see volatility in their earning . liability are also recognized at fair value.
in case of intangible asset,they will be tested annually.
under IFRS LIFO can not be used but GAAP, companies have choice between LIFO and FIFO .
for investment fair value through profit and loss calculated not the amortized cost.

The International Financial Reporting Standard(IFRS) has the major impact on the valuation of Fixed Assets and Intangible assets,Inventory and Investments.

It will impact how key financials such as revenue, operating profit, net profit, book value, goodwill, and return on equity will be computed. For instance, under the existing rules, sales are calculated after deducting excise duty. Under the new norms, excise duty will be treated as a tax on manufacturing activity.
Assets will be recognised at fair value,Fixed assets are not to be calculated on book value instead they will be calculated on fixed value, while investment are calculated from the profit and loss account.

IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.
IFRS are generally principles-based standards and seek to avoid a rule-book mentality. Application of IFRS requires exercise of judgment by the preparer and the auditor in applying principles of accounting on the basis of the economic substance of transactions.



The term IFRS comprises IFRS issued by IASB; IAS issued by IASC; and Interpretations issued by the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB.

Due to the significant differences between Indian GAAP and IFRS, adoption of IFRS is likely to have a significant impact on the financial position and financial performance of most Indian companies.

Companies also need to communicate the impact of IFRS convergence to their investors to ensure they understand the shift from Indian GAAP to IFRS.

As the enactment of IFRS in accounting, their has been a major impact on company's financial statements as wee as its position. There has been wide change in valuation of fixes assets, intangible assets, inventories and investments.
The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements.
The adaptation of IFRS is expected to result in better quality of financial reporting due to continuous adaptation of accounting principles. All the values of any assets are taken at fair value. Fixed assets are required to calculate on fair value rather than on book value, inventories are calculated on the basis of LIFO and FIFO, investments are valued through the calculation of profit and loss account.

Thus, IFRS have a great impact on Indian company's financial statements as company accounts are understandable and comparable across global boundaries.

Every country stipulates a method for companies to report financial data based on rules called accounting standards. India has so far followed Indian Generally Acceptable Accounting Principle (IGAAP). However, from FY17, it will follow Ind-AS whose principles are closely based on international accounting system called IFRS. This will increase comparability of Indian companies with their international counterparts. It result in better quality of financial reporting due to continuous adaptation of accounting principles.

International Financial Reporting Standards (IFRS) is considered as a global and universally accepted standard wherein the accounting terms are taken on an internationally accepted basis and helps in the effective understanding of the accounting norms of any particular country. It is an attempt to harmonize accounting standards.
It will result in a positive impact as now there would not be any confusion in relation to accounting procedure and will facilitate in easy understanding and comparability of accounting principles.

Conversion to IFRS entails more than merely changing accounting policies, and companies will need to carefully assess the readiness of their financial reporting systems and the potential business impact before making the change.Areas such as revenue recognition, financial instruments and fixed asset accounting will present practical challenges for companies making the change to Ind AS.The transition from Indian GAAP to IFRS is aimed at helping companies migrate to international accounting regime 1.This may have a positive or a negative impact on the net income and net worth of companies due to areas such as revenue recognition, financial instruments and taxes. Additionally, beyond accounting this would also have an impact on arrangements with customers, vendors, lenders, changes to IT system and internal control systems, said Sumit Seth,partner and IFRS Leader of Price Waterhouse. Over 350 companies from BSE 500 would be migrating from FY17. IFRS would bring material changes to the operating metrics and return ratios of companies besides providing more disclosures.

Adoption of IFRS means that the entire set of financial statements will be required to undergo a drastic change. The differences are wide and very deep routed.It would be a challenge to bring about awareness of IFRS and its impact among the users of financial statements.Lack of training facilities and academic courses on IFRS will also pose challenge in India.There is a need to impart education and training on IFRS and its application.:Currently, the reporting requirements are governed by various regulators in India and their provisions override other laws. IFRS does not recognize such overriding laws.
The regulatory and legal requirements in India will pose a challenge unless the same is been addressed by respective regulatory.:IFRS convergence would affect most of the items in the financial statements and consequently the tax liabilities would also undergo a change. Thus the taxation laws should address the treatment of tax liabilities arising on convergence from Indian GAAP to IFRS.

International Financial Reporting Standards has a very great impact on the company's across the globe because it is considered as a global accepted standards in which the accounting terms are taken.The term IFRS comprises IFRS issued by IASB.It will impact many financial terms such as revenue, net profit , goodwill etc. It will have a positive impact in the books.

There is a major impact of IFRS on Indian Accounting Standards in valuation of intangible assets. Earlier intangible assets could be distinguished clearly from goodwill if the asset was separable but now it Provides detailed guidance in respect of identifiability. There is also an impact on valuation of inventories as there is difference in respect with subsequent recognition of cost/carrying amount of inventories as an expense.
Other impact can be it requires disclosure of contingent assets in the financial statements when the inflow of economic benefits. The disclosure, however, should avoid misleading indications of the likelihood of income arising.

The major impact of IFRS on valuation of fixed assets is that now they deal with the situation where entities hold the items of property, plant and equipment for rental to others and subsequently sell the same but earlier it was not.
In case of inventory it defines fair value and provides an explanation in respect of distinction between ‘net realisable value’ and ‘fair value’.
The Indian Accounting Standard states that an entity shall not reclassify a derivative out of the fair value through profit or loss category while it is held or Issued.

The use of IFRS as a universal financial reporting language is gaining momentum across the globe. Adopting IFRS by Indian corporate is going to be very challenging but at the same time could also be rewarding.  The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements. This, in turn, will lead to increased trust and reliance placed by investors, analysts and other stakeholders in a company’s financial statements. The researchers have pointed out several beneficiaries to the convergence of Indian Generally Accepted Accounting Principles (GAAP) with IFRS but there are some problems and challenges involved also. IFRS are formulated by International Accounting Standard Board. However, the responsibility of convergence with IFRS vests with local government and accounting and regulatory bodies, such as the ICAI in India. Thus ICAI need to invest in infrastructure to ensure compliance with IFRS. However, senior management at many companies views IFRS as a Finance priority because of the required changes in accounting practices but Indian Corporate World which has been preparing its Financial Statements on Historical Cost Basis will have tough time while shifting to Fair Value Accounting.

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.
It is a single set of accounting standards, developed and maintained by the International Accounting Standards Board (the Board) with the intention of those standards being capable of being applied on a globally consistent basis—by developed, emerging and developing economies—thus providing investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers.

It will impact how key financials such as revenue, operating profit, net profit, book value, goodwill, and return on equity will be computed. For instance, under the existing rules, sales are calculated after deducting excise duty. Under the new norms, excise duty will be treated as a tax on manufacturing activity. Hence, it should be a part of revenue. This will increase the revenue of companies, but depress operating margin. However, EPS will remain unchanged.

The International Financial Reporting Standards the "IFRS" aims to make international financial reporting comparisons as easy as possible because each country has its own set of accounting rules. A set of international accounting and reporting standards that will help to harmonize company financial information, improve the transparency of accounting, and ensure that investors receive more accurate and consistent reports. IFRS has been found to have little
impact on the accounting quality of smaller firms, and a larger impact on the accounting quality of
larger firms. IFRS caused increases in liabilities and leverage ratio and decreases in equity and earnings.

IFRS, International Financial Reporting Standards. It is a global accounting standard. India today has become an international economic force. Indian companies has surpassed in several sectors of the industry. Some companies have adopted this method voluntarily. But now this is becoming more of a necessity. In the coming years, critical decisions will need to be made regarding the use of global accounting standards in India. The investors and corporate will be benefited. Challenges are that investors need to be educated about the change, implementing will be a little difficult, financial statements will be more complex under IFRS and thus it will be a challenge in making useful decision.

There is a significant effect of IFRS on Indian accounting standards as the company having a net worth of 500 crore or above IFRS is mandatory applicable for them to follow from 1st April 2016, whereas a company having net worth of 250 crore or above but less than 500 crore should follow IFRS from 1st April 2017 and there should be standalone and consolidated financial statements, this should help companies as they don't have to maintain dual accounting systems. This will lead to higher revenues, lower margins, increase employee cost and lower the ROE of high dividend paying companies which will result in high debt to equity ratio and lower the earning per share.

Firstly this transition will have a considerable impact on on the computation of revenue, operating profit, net profit, and net worth of the companies. IFRS are designed as a common global language for business affairs so that it is easy to understand ad compare accounts across international boundaries. This was announced by RBI on the beginning of the financial year on or after 1 April 2011. It was made mandatory for the companies to prepare their financial statements according to IFRS standards from the periods beginning from April 2016. This implementation of IFRS came with different conditions and changes for different types of companies which were to be implemented immediately. In this the companies would be measured on their net worth which in turn means that the value of intangible assets won't be measured. This would help certain Indian companies to compare themselves at a global level with different countries. IFRS has come into India with positive aspects.

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.
. There has been wide change in valuation of fixed assets, intangible assets, inventories and investments.
The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements.
All the values of assets are taken at fair value. Amortization of these assets will reduce future year profits under IFRS.
Thus, IFRS will greatly impact Indian company's financial statements as company accounts will now be understandable and comparable across global boundaries.

India today has become an international economic force. Indian companies has surpassed in several sectors of the industry that includes, ITES, software, pharmaceutical, auto spare part to name a few. And to stay as a leader in the international market India opted the changes it need to interface Indian stakeholders', the international stakeholders' and comply with the financial reporting in a language that is understandable to all of them. In response to the need several Indian companies have already been providing their financial statements as per US GAAP and/or IFRS on voluntary basis. But, however this is becoming more of a necessity then just being a best practice.

In the coming years, critical decisions will need to be made regarding the use of global accounting standards in India. Market participants will be called upon to determine whether achieving a uniform set of high-quality global accounting standards is feasible, what sort of investments would be required to achieve that outcome, and whether it is a desirable goal in the first place. This dialogue will be critical to the future of financial reporting and of fundamental importance to the long-term strength and stability of the global capital markets.

Performance measures, based on Indian GAAP may need revisiting as it may change in IFRS adoption by fair amount on account of valuation aspect. Expectation of investor and market will also be required to be of paramount importance to manage in the adoption of process.

In the era of Globalization, India is one of the top developing nations in the world attracting large number of Multi national companies to invest in India.
International Financial Reporting Standards (IFRS) is a global and universally accepted standard wherein the accounting terms are accepted internationally and helps in the effective understanding of the accounting norms and policies of any particular country. It may lead to a standardized accounting terms world wide. It will result in a positive impact as now there would not be any confusion in relation to accounting procedure and will facilitate in easy understanding and comparability of accounting principles and allow MNC from different parts of the world to invest in India and also big Indian companies will be able to expand to any other part of the world without changing its accounting policies and terms.

Under IFRS, accounting is done for all assests including hidden intangibles at fair values of high goodwill in balance sheet. The adaption of IFRS is expected to result in better quality of financial reporting due to continuous adaption of accounting principles.
Fixed assets are required to calculate on fair value rather than book value. IFRS would bring material changes to operating metrics and return ratio of companies besided providing more disclousers.

The International Financial Reporting Standard (IFRS) has the major impact on co's financial statements.

There has been a wide change in valuation of fixed assets and intangible assets, inventories and investments.
Under this fixed assets are required to calculated on fair valur instead of book value, investments are valued through the calculation of profit and loss account.

The adoption of IFRS is expected to result in better quality of financial statements as now there would not be any confusion in relation to accounting procedure and will facilitate an easy understanding and comparability across global boundries.

GAAP was the Accounting System followed in India, But due to Globalization there is a need to Change in Accounting System for the betterment and Transparency.It gives a great choice and flexibility in preparing Company's Financial Statements.
Talking about Fixed Assets It gives permission of Revaluation, Different patterns of Charging Depreciation,and seprately identified Investment Property.On the Other hand for Intangible assets, Promotional costs are expensed as incurred and Revaluation is permitted at fair value except Goodwill. For Inventory, IFRS has strictly prohibited LIFO method and Inventory is carried at Net Realizable value.
IFRS will impact more to Larger Firms as compared to Smaller Firms.It has a positive impact on Financial Reporting and entities.On the Contrary IFRS caused increases in liabilities and leverage ratio and decreases in equity and earnings researched by Goodwin And Ahmed.