Chinnsamy Ganesan B.Com FCA DISA(ICA)

1. Milestones in the journey from AS to IFRS Presentation at the Regional Conference organised by the NIRC of ICAI and hosted by the Ludhiana Branch of NIRC on 22.08.2009 Chinnsamy Ganesan B.Com FCA DISA(ICA)

2. IFRS Structure of the discussion • Relevance of IFRS • IFRS – the Indian Business Case • Miles to go – issues in change over • Opportunities for Professionals • Milestones so far in the journey • Fast forward - Getting ready for IFRS

3. IFRS IFAC Survey IFRS how important for economic growth? 143 leaders from 91 countries

4. IFRS Complexity of financial reporting • Complex transactions and business arrangements • Volume and detail of GAAP and GAAS • Different measurement attributes • specialized industry accounting • Treatment alternatives, transition alternatives, and exceptions • Disclosure vs. recognition

5. IFRS IFRS – the Indian Business Case Most listed companies in India are Family owned Not overly large Limited investors

6. IFRS Relevance of IFRS - India • IFRS should be adopted for all public interested entities (PIEs) from accounting periods commencing on or after April 1, 2011 • The criteria for PIEs is broadly similar to existing Level I entities • Exception to economic criteria • Turnover Rs.100 Cr (Rs.50 Cr) • Borrowing Limits Rs.25 Crs (Rs.10 Cr)

7. IFRS Issues in changeover • Magnitude of change anticipated • ICAI convergence paper • Only 5 Standards in line with IFRS • 8 Standards require minor changes • 10 Standards conceptually differs • 8 Standards require regulatory changes

8. Issues in change over No change Minor changes Conceptual Difference Regulatory changes AS 7 AS 16 AS 30 AS 31 AS 32 AS 2 AS 3 AS 9 AS 12 AS 20 AS 24 AS 26 AS 28 AS 13 AS 15 AS 17 AS 18 AS 19 AS 21 AS 22 AS 23 AS 27 AS 29 AS 1 AS 4 AS 5 AS 6 AS 10 AS 11 AS 14 AS 25

9. IFRS Issues is change over Debt covenants Forecasts – Internal Reporting I T Systems 2011?? Measure of performance Training M & A Management compensation Stat. accounts & taxes

10. IFRS Issues in changeover • Accounting and technical issues • Major accounting policy changes • IFRS 1 – • application and choice of optional exemptions • one-time opportunity to comprehensively reassess financial reporting and take “a clean sheet of paper” approach to financial policies and processes • Consolidation • Definition of control is beyond equity ownership and board control • JCE will have to be equity accounted • SPEs to be consolidated • Exclusion from consolidation almost remote

11. IFRS Issues in changeover • Property, Plant and Equipment • Periodic assessment of useful life and residual value • Component approach mandatory – assessment to be carried out • Revaluation model – depreciation through income statement • Taxation • Changes in tax legislations due to change in accounting language • Subsidiary level implications

12. IFRS Issues in changeover • Financial Instruments • Classifying and treating your financial instruments • Embedded derivatives • Hedge accounting • Valuation issues • 50 to 75% of the Balance Sheet can be fair value • Availability of fair valuation experts • Assessing the impact of impairment of assets

13. IFRS Opportunities for Professionals • A new line of professional opportunity • Complexity of IFRSs • Lack of adequate skills amongst the preparers and users of Financial Statements to apply IFRSs • Leveraging resources on an international scale • Opportunity to specialise as consultants • Proper implementation requires extensive education of preparers • Training the preparers to reach a critical mass with relevant skill sets • Encash on the need for large pool of valuation experts, since IFRSs are fair value driven

14. IFRS IFRS – Are we ready? Indian CAs prepared for IFRS? NACAS moving faster? ICAI initiatives on training ICAI initiatives On New Standards Some questions Still unanswered?

15. IFRS Professional Constraints Reaching Critical IFRS Client base is time consuming Training Staff Involves time and money Building IFRS Bench strength will be a commitment Sharing knowledge Across firm Valuation Expertise Networking initiatives?

16. IFRS IFRS – Professional Strengths Consistency Of staff Heavy Partner Involvement Networking & Tie-ups

17. IFRS Getting ready with a product Preliminary assessment of the impact of adopting IFRS - identifying areas that appear to be most sensitive to conversion Quantify the impact of adopting IFRS on the financial statements Develop a strategy, including a timeline, to properly implement the conversion Develop systems to properly accumulate and report financial information in accordance with IFRS Perform the conversion, including adjusting historical financial statements for comparative purposes Implement IFRS 1, First-time Adoption of International Financial Reporting Standards

18. IFRS Relevance of IFRS for SMEs • Why for private companies/ SMEs? • the private company is owned by a foreign parent • the private company has a foreign investor • the private company is a supplier to foreign companies • the private company has a foreign venture partner

19. IFRS for SMEs IFRS New IFRS for SMEs No Economic Criterion General Purpose financial statements No public accountability Simplified; Self contained Set

20. Questions?

21. Thank you ganesanca@yahoo.com