Question

please help me in the question below.

explain in detail what changes have been brought in the international financial reporting standard (IFRS) ? Especially in IFRS 9, 15 16 why is it important to have a good knowledge of IFRS.

Answer 1

INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS) :

IFRS are the standards issued by the IFRS Foundation. IASB (INTERNATIONAL ACCOUNTING STANDARD BOARD) is to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

IFRS are the rules to be followed by the accountants to maintain books of accounts which are comparable, understandable, reliable, relevant as per the users internal or external.

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) has announced that IFRS will be mandatory in India for financial statements for the periods beginning on or after 1 April 2016 in a phased manner. There is a roadmap issued by MCA for adaption of IFRS. It was also stated that IFRS would be applicable for the companies above INR1000 crore from April 2011.

RESERVE BANK OF INDIA (RBI) has stated that financial statements of banks need to be IFRS compliant for periods beginning on or after 1April 2011.

Therefore IFRS is very much necessary for the preparation of financial statements, it is mandatory for every responsible person or an accountant to have a good knowledge in it.

IFRS 9 - FINANCIAL INSTRUMENTS :

All financial instruments are initially measured at fair value. It divides all financial assests into 2 classifications. those measured at amortised cost and those measured at fair value. The classification is made at the time of recognition.

THE CHANGES MADE IN IFRS 9:

On 12 November 2009, the IASB introduced IFRS 9 financial statements as first step in its project to replace IAS 39 financial instruments recognition and measurement.

On 28 October 2010, the ISB reissued IFRS 9 incorporating new requirements of accounting for financial liabilities.

On 16 December 2011, the IASB issued Mandatory effective date and transition disclosures, which amended the effective date of IFRS 9 to annual reports for period beginning on or after 1 January 2015.

On 19 November 2013, the IASB issued IFRS 9 financial instruments to include new general accounting hedge model which allow early adaption of the treatment of fair value changes due to own credit on liabilities.designated at fair value through profit or loss.

On 24 July 2014, the IASB issued the final version IFRS 9 incorporating a new expected loss impairment model and introducing limited amendments to the classification and measurement requirements for financial assets. This version supersedes all previous versions.

IFRS 15 - REVENUE FROM CONTRACTS WITH CUSTOMERS :

This standard applies to all contracts to customers except for leases within the scope of IAS 17. The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.

A contract with the customer may be partially within the scope of IFRS 15 and partially within the scope of other accounting standard.

CHANGES IN IFRS 15:

IFRS 15 was issued in may 2014 and applies to an annual reporting period beginning on or after 1 January 2018. On 12 April 2016 clarifying amendments were issued with the same effective dates as the standard itself.

IFRS 16 - LEASES :

IFRS 16 applies to all leases including sub leases. except for exploration for or use minerals, natural gas and non regenerative resources, biological assets held by the lessee, service concession arrangements.

It establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions.

This standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.

IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019.

Thus it is necessary to have a good knowledge in IFRS to deal with all the accounting aspects and clarifying the situations arising in it.