Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: due date for vat payment :: VAT Audit :: cpt :: ACCOUNTING STANDARD :: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: Central Excise rule to resale the machines to a new company :: empanelment :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: form 3cd
« News Headlines »
  10 incomes you need not pay any tax on
 How To File Income Tax Returns In Three Steps By March 31, 2018
 10 things about income tax every taxpayer should know
 What to do if your TDS is not deposited with the government
 What if you forget to verify your Income Tax return?
 TDS on rent and other tax tasks to complete before March 31
 5 income tax changes which will come into effect from April 1, 2018
 Why you shouldn't be a last-minute tax filer
 How to calculate income tax for this assessment year on Moneycontrol
 6 Tax notices you may get and how to cope with them Income Tax Notice
 Deadline to pay advance tax ends tomorrow: Here is a step-by-step guide

Convergence is the road ahead
January, 28th 2008
Convergence towards international accounting standards has become a concrete reality now with the Institute of Chartered Accountants (ICAI) deciding that entities such as listed entities, banks and insurance entities and large-sized entities will be required to apply International Financial Reporting Standards (IFRS) from the accounting period beginning on or after April 1, 2011.
IFRS-1, First Time Adoption of Financial Reporting Standards, addresses the issue of how first-time adopters should make transition to IFRS. The first step is the preparation of a balance sheet according to the IFRS at the transition date.
This transition date is earlier than the date of the company's first financial statements under the IFRS since such a statement would have to carry comparative figures from earlier periods as well. Transition date is the beginning of the comparative period.
In India, companies give comparative figures for one previous fiscal year only. The comparative year for the reporting year 2011-2012 will be the year 2010-2011. Therefore, the first balance sheet to be prepared using IFRS by a company which has adopted financial year as the fiscal year will be the balance sheet as at March 31, 2010. IFRS-1 requires the preparation of this balance sheet even though it will not be published.
It also requires full retrospective application of IFRSs in force at the companys reporting date which is March 31, 2012, though there are some exceptions. This latter requirement has significant cost.
The International Accounting Standards Board (IASB) expects that most first-time adopters will begin planning on a timely basis for transition to IFRSs. Accordingly, in balancing benefits and costs, the Board took as its bench-mark an entity that plans the transition well in advance and collects most information needed for its opening IFRS balance sheet at, or very soon after, the date of transition to IFRS.
Companies should start planning for adoption of IFRS and building the appropriate environment immediately. The IASB has decided that it will not make any new or revised IFRS effective before January 1, 2009. However, after January 1, 2009, the IASB may issue new IFRSs or revise the existing ones at frequent intervals.
Companies should take advantage of the stabilisation period till 2009 and prepare a detailed manual mapping the process towards adoption of IFRS. They should also strengthen their documentation systems to avoid difficulties in explaining assumptions and estimates to auditors. It may be a good idea to prepare two sets of financial statements, one based on Indian GAAP and the other based on IFRS, starting from the accounting year 2008-2009.
One issue that often crops up in discussions of the transition to IFRS is that most corporate accountants find it difficult to keep up with current developments in accounting and auditing. The first reason given for this is that the pressure of day-to-day work leaves them with hardly any time for professional development. The second reason is the very pace of change itself.
Given this predicament, corporate accountants often turn to their auditors for knowledge and advice about the fast changing accounting rules. However, the relationship is one of give and take. Implementation of new accounting rules is as much a challenge for auditors as it is for accountants. They must clearly understand the way in which the formal rules must be applied in the context of a particular firm and its specific environment.
In this, auditors get help from corporate accountants and managers in terms of insight into business models and the economic substance of complex transactions.
The environment of mutual learning will definitely facilitate the process of building the capabilities that will be required to implement IFRS effectively. However, both corporate accountants and auditors will have to increase the pace of learning.
Companies should focus on training both accountants and managers. The Institute of Chartered Accountants of India (ICAI) has made it compulsory even for non-practicing members to earn continuing professional education (CPE) hours.
In its recent announcement, CPE credit requirements for the rolling period of three years starting from the calendar year 2008, it has mandated that a non-practicing member is required to complete 45 hours of structure/unstructured learning in each rolling three year period. This is an important step towards capability building. However, this is not enough. Corporate accountants should go back to the class-room to learn application of new accounting rules.
Audit firms should accelerate investment in technology and capability building. Small audit firms should establish formal network and should resort to mergers for survival and growth. A stand-alone small audit firm will find it difficult to mobilise adequate resources.
One area in which new skills will have to be developed is fair value accounting. International Financial Reporting Standards (IFRS) relies on the fair value principle much more intensely than the Indian GAAP.
Corporate accountants are still uncomfortable in using fair value to measure assets and liabilities in many situations. An example is the fair value measurement of investment held for trading.
At present, investments which are acquired with an intention to be sold within a year from the date of acquisition are measured at cost or market value, whichever is lower. Under IFRS, most of these investments will be classified as 'held for trading, investments' and those will be measured at fair value. Any change in fair value will be considered as profit or loss for the year.
For example, if the fair value at the beginning of the period was Rs. 1,00,000 and the same at the end of the period was Rs 1,50,000, Rs 50,000 will be recognised as gain for the year and will be included in net profit. Thus, the un-realised profit of Rs 50,000 will be available for distribution as dividend.
This makes the corporate accountants uncomfortable, particularly because of the volatility in the stock market. A little analysis reveals that fair value measurement really does not change the situation. Even today, if the company wants to use the gain of Rs 50,000 for distribution of dividends, it will realise the gain by selling the investment at the close of the period and will re-purchase those securities at the beginning of the next period. In the process, it will incur transaction cost twice. Therefore, in this situation, adoption of IFRS will actually help to avoid wasteful transaction costs.
Managing the transition is well within the capability of the Indian accounting provided it starts working right now both on professional development and corporate planning.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - We Bring IT. Offshore software outsourcing company. We use Global Delivery Model (GDM) and believe in Follow The Sun principle

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions