With my limited knowledge on the IFRS, I try to post articles and would like experienced persons to give their valuable feedback.
What is IFRS and why IFRS?
The International Financial Reporting Standards (IFRS) are becoming a globally accepted with over 100 countries mandating it. The listed companies in European Union started adopting these standards. Following the EU, major countries in Asia Pacific ( like Australia, Hong Kong, China, Philippines) have started mandating the IFRS for publicly listed companies. The latest development being SEC allowing to file IFRS statements and started moving towards IFRS from their GAAP.
In India, IFRS would be made mandatory from 1st of April 2011. The Institute of Chartered Accountants of India (ICAI) is working towards the convergence. The recent Accounting Standards are being made in line with the IFRS, so that the convergence could be made easy.
I would like to start wrting on the IFRS (both for Indian as well as other countries) methodology. Though the standards are supposed to be uniform throughout the globe, there exists some minor deviations country-wise, without taking out the essence.
Let us go step by step in getting to know about the various IFRS!
Cheers,
Gopal
What is IFRS and why IFRS?
The International Financial Reporting Standards (IFRS) are becoming a globally accepted with over 100 countries mandating it. The listed companies in European Union started adopting these standards. Following the EU, major countries in Asia Pacific ( like Australia, Hong Kong, China, Philippines) have started mandating the IFRS for publicly listed companies. The latest development being SEC allowing to file IFRS statements and started moving towards IFRS from their GAAP.
In India, IFRS would be made mandatory from 1st of April 2011. The Institute of Chartered Accountants of India (ICAI) is working towards the convergence. The recent Accounting Standards are being made in line with the IFRS, so that the convergence could be made easy.
I would like to start wrting on the IFRS (both for Indian as well as other countries) methodology. Though the standards are supposed to be uniform throughout the globe, there exists some minor deviations country-wise, without taking out the essence.
Let us go step by step in getting to know about the various IFRS!
Cheers,
Gopal
9 comments:
Hi Gopal,
Its a perfect topic to start with... thanks, will wait for your further updates :)
Satish
Wow, it's a good start Gopal. I'm sure it would benefit the readers to a large extent.
My heartiest wishes !!
Regards
Bala
www.cogzidel.in
Hi Gopal,
It is really heartening to see your blog on IFRS. IFRSs convergence being the buzz topic #!@#@!# currently and given your knowledge on the subject, I am sure it would benefit all the readers.
Thank you and looking forward to the articles and updates on IFRSs.
Regards
Raghavan
Dear Gopal,
Thank you very much for sharing and taking initiating an informative topic... We are all having fingers crossed on the mess it is going to create during the transition time and loss companies may incur...
Also as an accounting consulting firm we need to be early birds to learn the standards and provide service/solution, so that we might have huge market... But we must know if it will be implemented for sure, as we cannot afford to waste time...
Also we would like to know the expansion of GAAP & SEC... Also what is the GAP between existing Indian standards and the IFRS, is is huge or minimal...
I think it would be nice if you can write a blog explaining all these...
Thank you,
Regards,
Anand
http://www.cogzidel.in
Thanks Anand for the inputs. This is what I require to improve upon!I will make it a point to expand the abbreviations hereafter!
SEC - Securities and Exchange Commission (our SEBI equivalent in US).
GAAP - Generally Accepted Accounting Principles. This is equivalent to our Indian Accounting Standards.
EU : European Union
Cheers,
Gopal
Disseminate knowledge on IFRS to various stakeholders including persons involved with preparation of preparing Financial statements and using them. Presently a very tiny fraction of preparers and users of financial statments have accessability to information on IFRS. This has to change if IFRS has to be implemented successfully.
Srirama
http://ifrsinindia.blogspot.com/
For the complete article visit http://ifrsinindia.blogspot.com/
The article makes an effort to understand basic concepts of “Revenue recognition” as stated by IAS 18 in a question and answer mode.
IAS 18 -- Revenue Recognition
What is “Revenue” ?
Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.
Note that IAS refers to “inflow of economic benefits” which is wider than “cash, receivables or other consideration” used by AS 9.
Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes / value added taxes and amounts collected on behalf of principal are not economic benefits which flow to the entity and do not result in increases in equity.
How to measure revenue?
Revenue shall be measured at the fair value of the consideration received or receivable.
Note that IAS refers to “fair value” which is a wider concept and primary concept referred to in every IFRS.
What is “Fair value” ?
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
What if cash flow from revenue is deferred?
If the inflow of cash or cash equivalents is deferred, the fair value of the consideration may be less than the nominal amount of cash received or receivable. For example, an entity may provide interest free credit to the buyer or accept a note receivable bearing a below-market interest rate from the buyer as consideration for the sale of goods. When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest.
What if revenue is having more than one component?
Recognition criteria are applied to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. Example, when the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as revenue over the period during which the service is performed. Conversely, the recognition criteria are applied to two or more transactions together. For example, an entity may sell goods and, at the same time, enter into a separate agreement to repurchase the goods at a later date, thus negating the substantive effect of the transaction; in such a case, the two transactions are dealt with together.
When is revenue from the sale of goods recognized?
All below conditions have been satisfied:
• Entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
• Entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• Amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the entity; and
• Costs incurred or to be incurred in respect of the transaction can be measured reliably.
Note that definition is more specific and wider than that given in AS 9.
Great initiative, Gopal...i wish all the best to your efforts..it will be a boon to all the readers..our fellow members in the fraternity included!
-Nagarajan, Kochi.
Thanks for sharing useful Information. Being Best One of the Leading Coaching Centres in mumbai for Chartered Accountancy.
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