1. International Financial Reporting Standards Team Professional Times
IFRS
International Financial Reporting Standards
By-
Team Professional Times

2. IFRS
IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.
Issued by IASB (International Accounting Standard Board)
IFRS consists of:
IFRSs - International Financial Reporting Standards
IFRICs – International Financial Reporting Interpretation Committee
SICs – Standing Interpretations Committee
Currently 8 IFRSs, 29 IASs, 16 IFRICs and 10 SICs are effective.

3. Convergence to IFRS
Convergence means to achieve harmony with IFRS i.e. to design the national accounting standards in such a way that financial statements prepared in conformity with national accounting standards will comply with IFRS.
“All at once approach” has been adopted for convergence with IFRS

4. Ind AS
ICAI issued the “Concept paper on Convergence with IFRS in India” in 2007
In February 2011, MCA notified 35 Indian Accounting Standards (Ind AS) converged with IFRS.
Ind AS are substantially similar to IFRS. However, they have some carve outs to ensure that they are suitable for India’s economic environment.
Initially, these standards were applicable for accounting periods commencing on or after 1 April 2011 in a phased manner. Implementation date has now been deferred.
MCA has recently announced the implementation date of Ind AS to be April 2013.
Till the implementation date, current accounting standards (notified under the “Companies Accounting Standard Rules, 2006”) will be applicable. After the implementation date, existing AS shall be applicable to SMCs.

5. Opportunities for CAs Provide trainings Develop softwares
Access to global markets
More jobs
Increased remuneration
Increased opportunities for tax experts
So it becomes imperative for us to have knowledge of the IFRS and its impact in the financial statement so we can capitalize the opportunities available due to convergence.

6. Lease Accounting
IAS 17 Leases

7. Lease An arrangement whereby : Lessor conveys to the lessee
In return for a payment or series of payment
Right to use an asset
For an agreed period of time
Right to use asset
Payments
Lessor
Lessee

8. Classification of Leases
Types of leases
Finance Leases- A lease that transfers substantially all risks and rewards incidental to the ownership of the leased asset
Operating Leases – Leases other than finance lease
Classification is to be made at the inception* of the lease
* Inception of the lease is the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease

9. Finance Leases Indicators of a finance lease Some more indicators
Lease transfers ownership of asset to the lessee by the end of lease term
Lessee has option to purchase the asset a price sufficiently lower than the FV at the date the option becomes exercisable and at the inception of the lease it is reasonably certain that the option will be exercised.
lease term is for the major part of the economic life of the asset
PV of the minimum lease payments amounts to substantially all of the FV of the leased asset at lease inception
lease assets are of a specialised nature such that only the lessee can use them without major modifications being made
Some more indicators
Lessee is entitled to cancel the lease and lessor’s losses on cancellation are borne by the lessee
Risk of fluctuations in the fair value of the residual fall to the lessee
Lessee has the ability to continue to lease for a secondary period at a rent that is substantially lower than market rent

10. Accounting for Finance Leases
Lessee
Lessor
Initial recognition
(on commencement of lease)
Recognize leased asset
Recognize liability
Record a receivable
Initial measurement
Lower of FV of the asset or PV of MLPs
Net investment in the lease
Discount rate to calculate PV of MLPs
Interest rate implicit in the lease, if not available, lessee’s incremental borrowing rate
Not applicable
Subsequent measurement
Depreciate leased asset as per entity’s depreciation policy for owned assets (if ownership is not reasonably certain, over shorter of lease term or useful life)
Apportion MLPs to finance charge and reduction of liability
Allocate finance charge to lease term in order to produce constant period rate of interest on remaining liability.
Recognize finance income so as to reflect a constant periodic rate of return on the lessor's net investment in the finance lease

11. Accounting for Operating Leases
Lessee
Lessor
Recognition and measurement
Recognize lease payments (excluding executory costs) as expense on a straight line basis over the lease term
Recognize leased asset
Recognize lease income on straight line basis over the lease term

12. Definitions
Commencement of lease term - date from which lessee is entitled to exercise its right to use the leased asset
Lease term – non cancellable period (+) further period for which lessee has the option to lease the asset and at the lease inception it is reasonably certain that lessee will exercise this option
Minimum lease payments- lease rentals, excluding contingent rent and cost of services and taxes to paid by and reimbursed to the lessor together with guaranteed residual value
Net investment in lease - gross investment (MLPs receivable + unguaranteed residual value) in the lease discounted at the interest rate implicit in the lease
Contingent rent – Not fixed portion of lease rental

13. IFRS vs. Indian GAAP vs. Ind AS
Particulars
IFRS
Indian GAAP
Ind AS
Primary literature
IAS 17 – Leases
IFRIC 4 – Determining whether an arrangement contains a lease
SIC 15 – Operating leases – Incentives
SIC 27 – Evaluating the substance of transactions involving the legal form of a lease
AS 19 – Leases
Ind AS 17 – Leases
Appendix A – Operating leases – Incentives
Appendix B - Evaluating the substance of transactions involving the legal form of a lease
Appendix C- Determining whether an arrangement contains a lease (Applicability deferred till further notice)

14. Thank You