PRESENTED BY: H. MD. ZAHEER ASSISTANT MANAGER (FINANCE) DIOM, DONIMALAI

PRESENT SCENARIO At Present NMDC is preparing Accounts as per the Companies Act, 1956 These are prepared based on Accounting Standards and Guidance Notes issued by ICAI These are called INDIAN GAAP

If we want to enter in to the business in another country, we have to re-draft our Financial Statements as per their Standards and Act. Example: MOU’s with Legacy Iron Ore Ltd, Australia, OJSC Severstal-Russia) Hence to avoid the complexity IFRS is been introduced

What is IFRS? IFRS stands for “International Financial Reporting Standards”. Standards and Interpretations issued by IASB (International Accounting Standard Board). IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

WHY IFRS ? Company Single Set of Accounting Standards would enable internationally to standardise and assure better quality on global screen Government It would also permit International Capital to flow more freely Investors It gives better understanding to Financial Statements and Assess the investment opportunities other than home Country

NEED FOR IFRS? FDI’s and FII’s are more comfortable with one global accounting language which can be understood globally (i.e., IFRS) IFRS works on Fair Value basis for PPE (Property, Plant and Equipment), where as Indian GAAP works on Historical cost for PPE

Applicability ICAI is of the view that IFRS to be adopted for public interest entities such as listed Co, Banking Companies, Insurance entities and large size entities from the Accounting period beginning on or after April The view is further strengthened by convergence process being initiated by Ministry of Corporate Affairs. For this purpose, public interest entities are the entities falling under the Category level 1 as defined by ICAI which exceed threshold of INR 1000 crs networth subsequent to March 31, 2009

Status of IFRS reporting in India Not for statutory reporting US listing (foreign filers only) ► IFRS optionally replaces US GAAP European listing ► IFRS or IGAAP currently permitted (IFRS only from 2011) ‘Phase I’ companies ► Those designated as Phase I ► Voluntary adopters ► Subsidiaries and joint ventures of those designated (optional) ‘Phase II’ companies ► Companies with net worth of 500 Crores ► Note – Phase III (remainder of listed companies) convert in 2014 Status and key decisions ► Little time remains for conversion of April 2010 balance sheet ► Good proportion of companies have a project underway ► Many are preparing comparatives for and will decide later on publication Status and key decisions ► Reviewing implementation of key competitors in Phase I ► Can choose to adopt in 2011 or 2012 (e.g. if competitors are all Phase I) ► May apply different versions of key standards than Phase I companies (e.g. financial instruments) 2007 or earlier &

How to present Indian GAAP comparatives in first IFRS financial statement? IFRS format for the income statement and balance sheet are significantly different from the Schedule VI formats. Redraw the Indian GAAP financial statements based on IFRS presentation requirements. Book2.xls

Example AreaPresentation under Indian GAAPPresentation under IFRS Redeemable preference sharesShare CapitalLiability Bank loanEntire loan disclosed under head “secured loan” Loan amount broken into current and non-current liability Investment PropertyInvestmentAs a separate line item in balance sheet

ADVANTAGES TO OUR CORPORATION Financial Statements prepared with IFRS are accepted to almost all of the World’s Stock exchanges Improved clarity in Communication to the Stake Holders. Decrease Investor Uncertainty

Universally understood and comparable, can both improve and initiate new relationships with customers and suppliers across national borders Eliminates barriers to Cross-Border trading in Securities, as the Financial Statements are more transparent Financial Statements are more comparable with companies with which we are signing MOU’s (eg: Legacy Iron Ore Ltd – Australia, OJSC Severstal-Russia)

Financial Statements can also be compared with the companies having same business in other countries (eg: Vale - Brazilian Company, BHP Biliton & Rio Tinto Group- Australian Companies etc.,) Component Accounting to recognize the major parts of property, plant and equipment to depreciate separately. Depreciation is calculated based on the useful life of the Asset.

STEPS BY NMDC In view of the requirement, NMDC rightly is in the process of convergence of AS to IFRS. Earnest & Young has been appointed as a consultant for implementation of the same. Phase wise training programs will be conducted to executives