International Financial Reporting Standards and Indian GAAP

8/14/2019 International Financial Reporting Standards and Indian GAAP

1/18

PRESENTED

BY:- ABBAS

ANSARI MORADABAD [email protected]

IFRS AND GAAPIFRS AND GAAP


2/18

Converging in toConverging in tointernational financialinternational financial

reporting standardsreporting standardsInfosys technologies LTD- it was founded

on july 2,1981 in pune by NR Narayana

Murthy and 6 other people .the companywas incorporated as private company and

went public in 1993.in its recent annual

reports , infosys technologies limited alsoprovides its balance sheet and p/l a/c asper the inter national financial reporting

standards


3/18

IFRS are standards ,interpretations andframework adopted by the internationalaccounting standards board [IASB] whichwas issued between 1973 and 2001 by

IASB

International financialInternational financialreporting standardsreporting standards


4/18

IFRS & Indian GAAP

The IFRS or the International Finance Regulation Standards aredefined by the International Accounting Standards Board. The IFRSis increasingly being adopted by companies across the globe forpreparing their financial statements. IFRS comprises of InternationalFinancial Reporting Standard, International Accounting Standard,

and Interpretation originated by the International Financial ReportingInterpretations Committee.

Indian GAAP are the standards notified by the central govt. under thecompanies (Accounting Standard)Rules,2006 (applicable to allcompanies) vide notification G.S.R.739(E) dated 7 Dec. 2006 and to

the relevant requirements of the companies Act,1956.


5/18

Differences between IFRS &IndianGAAP

IFRS Indian GAAP

1. IAS 1 (2007)-Presentation ofFinancial statements

1.AS 1-Disclosure of accountingpolicies/schedule VI tocompanies act,1956.

2.Financial Statements underIFRS comprises of

A statement of financial positionA statement of comprehensiveincomeA statement of cash-flowsA statement of changes in equityNotes including summary ofaccounting policies andexplanatory notes

2. The components of financialstatement are-

Balance sheetStatement of profit & lossCash flow statement.(notmandatory for small and mediumsized companies).Explanatory notes includingsummary of accounting policies


6/18

3.Omission or misstatements arematerial if individually or

collectively they could influencethe economic decisions of userstaken on the basis of financialstatements.

3. Financial statement shoulddisclose all material items, i.e.

items the knowledge of whichmight influence the decisions ofthe user of the financialstatements.

4. An entity is required to present

current & non-current assets andliabilities, as separateclassifications in the statement offinancial position

4. No such classification are

required5. Fair presentation requiresfaithful representation of theeffects of the transaction, otherevents and conditions inaccordance with the definitions

of and recognition criteria forassets, liabilities, income andexpenses set out in the framework.

5. Fair presentation requirescompliance with the applicablerequirements of the companiesAct,1956 and the otherregulatory requirements and the

application of the qualitativecharacteristics of the accountingstandard framework.


7/18

INCOME STATEMENT AS PER IFRSINCOME STATEMENT AS PER IFRS

31.03.05 31.03.06 Absoluteincrease/decrease

Percentagechange

REVENUES 1592 2152 560 35.17COST OFREVENUES

908 1248 340 37.44GROSS PROFIT 684 904 220 32.16OPERATINGEXPENCESSELLING ANDMARKETINGEXPENCES

104 137 33 31.73ADMINS.EXPENCES

128 173 45 35.15AMORTAIZATION OFINTANGIBLEASSESTS

2 - 2 (100)TOTALOPERATINGEXPENCES

234 310 76 32.47OPERATINGINCOME

450 594 144 32GAIN ON SALEOF LONGTERMINVESTMENT

11 - (11) (100)FOREIGNCURRENCYEXCHANGE

(2) (18) (16) (800)


8/18

OTHER INCOMENET

26 49 23 88.46

INCOME

BEFOREINCOME TAX

485 625 140 28.86

PROVISION FORINCOME TAX

72 70 (2) (2.77)

NET INCOME 413 555 142 34.38

NET INCOME

ATTRIBUTE TOMINORITYINTEREST

- 5 5 100

NET INCOMEATTRIBUTE TOSHAREHOLDERSOF PARENTCOMPANY

413 550 137 33.17


9/18

vRevenue increased in 2006 in comparisonto 2005 by 35% which is good forcompany.

vGross profit is also increased in 2006 by 32%

Which is good for company.The co. had paid interest to minorities which

will help in tax reduction. The net profit is increased at very high rate.

Interpretations as per IFRSInterpretations as per IFRS

h h


10/18

the IFRS basedthe IFRS basedB/S ofB/S of

InfosysInfosys ininmillion dollarsmillion dollars

change changeREVENUES

SOFTWAREFINANCIALSERVICESEGMENT

2466 3427 961 38.96

SOFTWARE

MANAGEMENTSEGMENT

1032 1324 292 28.29

SOFTWARETELECOMSEGMENT

1320 1568 248 18.78

SOFTWARERETAILSEGMENT

698 968 270 38.68

SOFTWAREOTHERS

1614 2236 622 38.53

TOTALREVENUE

7130 9521 2391 33.53

EXPENSES

SOFTWAREDEV.BUSS.P

ROCESSMANAGEME

3765 5066 1301 34


11/18


12/18

A/c to Indian GAAP selling expenses= Rs 461 croresA/c to IFRS

selling expenses= 104 million $Comparing both, we get 1$=4610000000/104000000 =Rs 44.32Thus currency rate is 1 USD = Rs 44.32

Currency rateCurrency rate


13/18

The cost of production and gross profit isalmost same in both the years instead ofincrease in sales that means the co. isincurring some per unit cost during both

the years. In 2006 the co. had not charged

depreciation to P/L which may createproblem in future.

Income before interest & tax in both theyears is almost same.

The net profit after tax & interest is almost

same that means co. is showing constantgrowth.

INTERPETATIONINTERPETATION


14/18

TATA WIPRO

NIIT MAHINDRA & MAHINDRA BOMBAY DYING DR. REDDY LABORATORIES

NAME OF COMPANIES USINGNAME OF COMPANIES USINGIFRSIFRS


15/18

IFRS has become mandatory for listing inthe European markets after 2007.

The other reason is that the new normsprovide for stiffer provisioning for mark-to-market losses, also known as AS-30standards.

For companies with exposure in Europeanmarkets through equity or debt, suchtransparency is essential to raise capitalcheap and hence

Institute of Chartered Accountants of India

(ICAI), has set a time line of 2011

REASON FOR ADAPTING IFRSREASON FOR ADAPTING IFRS


16/18

Indian GAAP has followed the Accountingstandard of India (AS1) while IFRS hasfollowed International AccountingStandards (IAS1).

In IFRS foreign currency exchange gainshas been taken but in GAAP it is nottaken.

Gain on sale of long term investment hasbeen considered in IFRS but not in GAAP.

Attribution from income to minority interestis considered in IFRS .

Comparison b/w both p/lComparison b/w both p/l


17/18

1.Indian gaap has followed the accountingstandard of india(Asi) while ifrs hasfollowed international accountingstandard,

2.According to ifrs the gross profit isincreased by 32.16% and according togaap it is 31.79.

3.In ifrs statement selling and distributionexpenses are 31.73% and in gaapstatement it is increased by 30.15%.

comparisoncomparison


18/18

1.According to ifrs the other income is increased by88.46% and in gaap it is only increased by12.09%.

2.According to ifrs the net income is increased by

34.38% and in gaap it is increased by34.29%.there are only minor differencebetween them in net income

comparisoncomparison

Documents

International Financial Reporting Standards and Indian GAAP