International Financial Reporting Standards (IFRS) Overview

International Financial Reporting
Standards (IFRS) Overview
Sambhasiva Rao Venkata Cheedella

IFRS Certified, Senior Consultant, Oracle.
Purpose
This document is regarding International Financial

Reporting Standards (IFRS), implication on regular
business transactions as per IFRS recommendations. Few
examples, case studies on IFRS. It is also one good
resource wishing to make use of accounts under IFRS.
Implementation pre-requisites on ERP (Oracle
Applications) to map according to IFRS.
IFRS Overview 2
Abbreviations
CESR Committee Of European Securities Regulators
EC European Commission
EEA European Commission Area (EU 27 + 3 countries)
EFRAG European Financial Reporting Advisory Group
EITF Emerging Issues Task Force (Of FASB)
EU European Union (27 countries)
FASB Financial Accounting Standards Board (US)
FEE Federation Of European Accountants
GAAP Generally Accepted Accounting Principles
IAS International Accounting Standards
IASB International Accounting Standards Board
IFRS Overview 3
IASC International Accounting Standards committee
(Predecessor to the IASB)
IASCF IASC Foundation (parent body of the IASB)
(From 1 March 2010 named as IFRS Foundation)
IFRIC International Financial Reporting Interpretations
Committee Of the IASB, and Interpretations issued by
that committee (from 1 March 2010 named as IFRS
Interpretations Committee)
IFRS International Financial Reporting Standards
IFRSF IFRS Foundation
NCI Non-Controlling interest (previously ‘minority’
interests)
IFRS Overview 4
SAC Standards Advisory Council (advisory to the IASB)
(from 1 March 2010 named as IFRS advisory council)
SEC Securities and Exchange Commission (US)
SIC Standing Interpretations Committee Of the IASC, and

Interpretations issued by that committee
IOSCO International Organization Of Securities Commissions
IFRS Overview 5
IASB and IFRS
IFRS Overview 6
IFRS Overview 7
Members Of IASB
2 Members in IASC from India out of 22.

Mr. Mohandas, Mr.Prabhakar Kalavacherla.
Kalavacherla was previously a partner at KPMG
LLP.
Sri David Tweedie, Chairman became the first

Chairman on 1 January 2001, having served from
1999-2000 as the first full time Chairman of UK
Accounting Standards Board. Term expires 30 June
2011.
IFRS Overview 8
IFRS Overview 9
IASB and its Objectives
International Accounting Standards Board (IASB)
-Independent, privately funded accounting standard setter based
in London.
- Responsibility to develop International Financial Reporting
Standards (IFRS)
The Objectives are:

-To develop a single set of accounting standards
(High quality, understandable, global and enforceable)
-To promote their use and rigorous application
- To work actively with national standard setters
(To bring about convergence of national accounting standards and IFRSs)
IFRS Overview 10
History
1973 IASC formed
1998 Core standards completed
2000 SEC review of core standards; concept release published Feb 2000
IASC approves new constitution
IOSCO review finalized
EU proposes that all EU listed companies (some 6,700) should apply IAS
by 2005
2001 IASB assumes accounting standard setting responsibilities from IASC
2002 EU’s decision to adopt IFRS from 1 Jan 2005
2005 Nearly 7,000 listed business in 25 countries switch to IFRS
2007 SEC accepts fillings from Foreign Private Issues (FPI) without reconciliation
to US GAAP
2010 US allows certain large filers to file IFRS accounts
2014? US converged for listed companies – decision to be taken in 2011
IFRS Overview 11
International Financial Reporting Interpretations
Committee (IFRIC)
Interpretation of contentious accounting issues
- Expand beyond interpretations of current standards to

include areas where there is no guidance
Interpretations are authoritative guidance
IFRS Overview 12
Timelines of achieving convergence
Phase I – Transaction date April 1, 2011
- NIFTY 50
- SENSEX 30
- Companies whose shares or other securities listed on stock
exchanges outside India
- Companies (listed or unlisted) with net worth in excess of
INR.1000 crores.
IFRS Overview 13
Phase II – Transaction date April 1, 2013
- Companies (listed or unlisted) with net worth in excess of

INR.500 crores but less than INR.1000 crores
Phase III – Transaction date April 1, 2014
- Listed companies with net worth in less than INR.500 crores
IFRS Overview 14
IFRS time lines for banks and insurance companies
Banks
SCB* and UCB# with

SCB* and UCB# with net worth > INR 200 crores
net worth > INR 300 crores but <= INR300 crores
April 1, 2013 April 1, 2014
•Scheduled commercial banks

• urban Co – Operative banks
IFRS Overview 15
Insurance
Companies
April 1, 2012
IFRS Overview 16
NBFCs
1. Part of Nifty 50/ BSE 30

Net worth > INR. 500 Crores
2. Net worth > INR. 1000Cr
April 1, 2013 April 1, 2014
IFRS Overview 17
MCA clarifications on IFRS adoption
Presentation of comparatives
Opening balance sheet prepared at 1 April 2011 and the financial statements for
the year ending 31 March 2012 shall be in accordance with the converged
accounting standards; but comparative period figures (I.e. for the year ending 31
March 2011) shall continue to be reported as per the non-converged accounting
standards.
Option to present comparatives voluntarily (2010-2011)

A company may however, voluntarily choose to report comparative period figures
(I.e. for the year ending 31 March 2011) as per the converged accounting
standards as an additional column in the financial statements. The opening balance
sheet (and therefore transaction adjustments) for companies in such a case shall
be 1 April 2010.
IFRS Overview 18
Voluntary adoption for Phase 2 and 3 companies
- Phase 2 and 3 companies will have an option to early adopt the converged
accounting standards, commencing on or after 1 April 2011
- All other companies can also early adopt IFRS
If, subsequent to the adoption, the company does not meet

the IFRS adoption criteria, should it discontinue IFRS?
- Once a company follows the converged accounting standards it shall continue
preparing financial statements in accordance with the converged accounting
standards. It shall not revert to the non-converged accounting standards.
IFRS Overview 19
Applicability to group companies
- The criteria for determination of various phases shall be based on the stand-alone
financial statements of various entities.
- Companies having subsidiaries, joint ventures and associates or covered in any of
the phases shall prepare consolidated financial statements in accordance with the
converged accounting standards.
- Group companies (subsidiaries, joint ventures or associates) not covered in the
phases similar to the parent company shall continue to prepare financial statements
according to the according to respective phases as applicable.
- However, such companies may voluntarily adopt the converged accounting
standards.
IFRS Overview 20
ICAI Standards – Converged progress (1)
S. Topic Standard Standard Differen Nature of
No under under ces difference
IGAAP IFRS noted
1 Abbreviations
Presentation of Financial
Statements AS 1 IAS 1 No -
2 Inventories AS 2 IAS 2 No -
3 Statement of Cash Flows AS 3 IAS 7 Yes GAAP
4 Events after the reporting IAS 10
period AS 4 IFRIC 17 No -
5 Accounting policies,
changes in accounting
estimates and errors AS 5 IAS 8 No -
6 Construction Contracts AS 7 IAS 11 Transactio
IFRIC 12 nal
& SIC 29 Yes provisions
IFRS Overview 21
S. Topic Standard Standard Differen Nature of
No under under ces difference
IGAAP IFRS noted
7 Abbreviations
Revenue recognition AS 9 IAS 18
SIC 31 Yes Terminolo
IFRIC 13, gy &
15 & 18 transaction
al
provisions
8 Property, plant & IAS 16 Yes
Equipment AS 10* IFRIC 1 - same as7-
9 Effect of Change in foreign - same as7-

exchange rates AS 11 IAS 21 Yes
* Includes AS 6
depreciation a/c ing
IFRS Overview 22
S. Topic Standard Standard Differ Nature of
No under under ences difference
IGAAP IFRS noted
10 Abbreviations
Government grant AS 12 IAS 20 No -
Terminology,
11 Business Combinations AS 14 IFRS 3 Yes Transactional
provisions
IAS 19
12 Employee benefits AS 15 IFRIC 14 Yes GAAP
13 Borrowing Costs AS 16 IAS 23 Yes GAAP
Transactional
14 Operating Segments AS 17 IFRS 8 Yes provisions
15 Related party disclosures AS 18 IAS 24 Yes GAAP
IAS 17
16 Leases AS 19 IFRIC 4 No -
IFRS Overview 23
IGAAP IFRS noted
17 Abbreviations
Earnings per share AS 20 IAS 33 Yes GAAP
18 Consolidated and separate IAS 27 Transactional
financial statements AS 21 SIC 12 Yes provisions
IAS 12
19 Income Taxes AS 22 SIC 21, 25 Yes GAAP
20 Investments in Associates AS 23 IAS 28 Yes GAAP
Non current assets held for
21 sale & discontinued AS 24 IFRS 5 Yes GAAP
operations
IAS 34
22 Interim financial reporting AS 25 IFRIC 10 No -
23 Intangible assets AS 26 IAS 38 Yes GAAP
IFRS Overview 24
IGAAP IFRS noted
Abbreviations Terminology,
24 Joint ventures AS 27 IAS 31 Yes Transactional
SIC 13 provisions
25 Impairment AS 28 IAS 36 Yes - Same as 24-
Provisions, contingent Transactional
26 liabilities & contingent AS 29 IAS 37 Yes provisions
assets
IAS 39 Terminology,
Financial instruments, AS 30 IFRIC 9, Yes Transactional
27 recognition & measurement 16 & 19 provisions
Financial instruments IAS 32
28 presentation AS 31 IFRIC 2 Yes GAAP
IFRS Overview 25
IGAAP IFRS noted
Abbreviations
Financial instruments:
29 Disclosures AS 32 IFRS 7 Yes GAAP
IFRS 2
30 Share based payments AS 33 IFRIC 8 Yes Transactional
IFRIC 11 provisions
Financial reporting in IAS 29
31 hyperinflationary economies AS 34 IFRIC 7 No -
Exploration of & evaluation Transactional
32 of mineral resources AS 35 IFRIC 6 Yes provisions
Accounting and reporting
33 by retirement benefit plans AS 36 IAS 26 Yes GAAP
IFRS Overview 26
IGAAP IFRS noted
Abbreviations Transactional
34 Investment property AS 37 IAS 40 Yes provisions
Terminology,
35 Agriculture AS 38 IAS 41 Yes Transactional
provisions
36 Insurance Contracts AS 39 IFRS 4 Yes Terminology
difference
Terminology
37 Financial Instruments AS 40 IFRS 9 Yes difference
38 First time Adoption AS 41 IFRS 1 Yes GAAP
IFRS Overview 27
IFRS Framework
IFRS Overview 28
Key points
The IASB uses its conceptual framework as an aid to drafting new
or revised IFRSs
- Objective and elements of financial statements
-Underlying assumptions and qualitative characteristics
- Definitions
The framework is a key point of reference in the absence of

specific guidance
-Specific guidance in IAS 8 applies
IFRSs do not apply to items that are “immaterial”

Transactions should be accounted for in accordance with their
substance, rather than only their legal form.
IFRS Overview 29
Presentation of Financial Statements
IFRS Overview 30
Required Components of Financial Statements
- Statement of Financial Position
- Statement of Comprehensive Income
- Statement of Chages in Equity
- Statement of Cash flows
- Notes
- Statement of financial position as at the beginning of the earliest

comparative period when an entity restates comparative
information, if material, following a:
- Changes in accounting policy
- Correction of an error, OR
- Reclassification of items in the financial statements
- Equal prominence for all of the financial statements
IFRS Overview 31
Identification of financial statements
Must be clearly identified and distinguished from other information
in annual report
Required disclosures
- Name of the entity
- Separate, individual or consolidated financial statements
- Date of the end of the reporting period or period covered by the
financial statements
- Presentation currency
- Level of rounding
Reporting Period
Financial statements to be presented at least annually
If shorted or longer period, disclose
- Reason
- Fact that amounts reported may not be comparable
No prohibition on 52-week period for practicality
IFRS Overview 32
Accrual basis of accounting
Financial statements, except for cash flow information, should be

prepared using the accrual basis
Assets, liabilities, equity, income and expenses recognized when

the definitions and recognition criteria in the framework are met
IFRS Overview 33
Offsetting
Assets and liabilities should not be offset unless

- Required or permitted by an IFRS
Items of income and expenses should not be offset unless

- Required or permitted by an IFRS
- Gains, losses and related expenses arising from the same or
similar items are not material
IFRS Overview 34
Comparative Information
Numerical comparative information for the previous period

required unless an IFRS requires or permits otherwise
Narrative comparative information required if relevant to
understanding of current period
Reclassify comparative amounts unless impracticable to change
presentation or classification
- Disclosure required
When an entity applies an accounting policy retrospectively, corrects
a prior year error, or reclassifies items in its financial statements, it
shall present, in addition a statement of financial position as of the
beginning of the earliest period presented, if material
IFRS Overview 35
Compliance with IFRSs
“Explicit and unreserved statement of compliance”

Compliance with all IFRSs
Disclose application of IFRSs before effective date

Inappropriate accounting treatments can not be rectified by
disclosure
IFRS Overview 36
Statement of financial position- Current/ non-
current
Present assets and liabilities in the statement of financial

position as
- Current/ non-current OR
- Broadly in order of liquidity (when reliable and more relevant)
Disclose amounts due for recovery or settlement after more

than 12 months for each asset and liability
Deferred tax assets and liabilities are never presented as
current
Assets current if: Liabilities current if:
All other assets and liabilities are non-current
Events might qualify for disclosure as non-adjusting events in
accordance with IAS 10
IFRS Overview 37
Statement of financial position- Sub-classifications
Sub-classifications of items presented, either

- In the statement of financial position; or
- In notes
Separate presentation of amounts payable to and receivable

from the parent, subsidiaries, associates and other related
parties
Further guidelines in individual standards
IFRS Overview 38
Statement of comprehensive income- Presentation
Single statement or income statement and a separate statement

of comprehensive income
Analysis of expenses (in SCI or notes): by nature or function
If classification based on function, additional information
required:
- Depreciation / amortization
- Employee benefits expense
Separate disclosure of nature and amounts of material items of
income and expense (in SCI or notes)
No extraordinary items
Other comprehensive income for the period
Other disclosures
IFRS Overview 39
Statement of comprehensive income- Unusual and
exceptional items
No definition of “exceptional” or “unusual” events or items of

income or expense given in IFRSs
Items not exceptional just because of requirement to disclose
separately
Exceptional items occur infrequently
Classification in same way as non-exceptional items of same
function or nature
Description of use of the term in notes, and applied consistently
IFRS Overview 40
Statement of changes in equity
Include
- Total comprehensive income for the period

- For each component of equity, the effect of retrospective
application or restatement recognized in accordance with IAS 8
- For each component of equity, a reconciliation between the carrying

amount at the beginning and the end of the period disclosing
separately
Profit or loss
Each item of other comprehensive income
Transactions with owners
IFRS Overview 41
Statement of changes in equity- additional
disclosure
Also present, either in the statement of changes in equity or in

the notes
- the amount of dividends recognized as distribution to owners during

the period, and the related amount per share
IFRS Overview 42
Information about share capital
For each class of share capital (in the statement of financial

position, statement of changes in equity or notes):
- Number of shares authorized
- Number of shares issued: fully paid and not fully paid
- Par value or no par value
- Reconciliation of movements in number of shares
- Rights, preferences and restrictions
- Treasury shares
- Share held for options and sale contracts (including terms/
amounts)
Nature and purpose of each equity reserve
IFRS Overview 43
Example Question
Which components of financial statement is NOT prepared

using the accrual basis of accounting?
a) Statement of financial position
b) Statement of comprehensive income
c) Statement of changes in equity
d) Statement of cash flows
e) Notes to financial statements
Ans: d
IFRS Overview 44
Statement
IFRS Framework
of Cashflows
IFRS Overview 45
Introduction
IAS 7 requires the provision of information about the historical

changes in cash and cash equivalents of an entity by means of a
statement of cash flows which cash cash flows during the period into:
- operating activities
- investing activities
- financing activities
IFRS Overview 46
Scope
IFRS Overview 47
Key definitions
IFRS Overview 48
Examples
IFRS Overview 49
Revenue
IFRS Overview 50
Types of income and related standards
IFRS Overview 51
Revenue recognition criteria
Common
- Inflow of future economic benefits to entity is probable
- Revenue is measurable reliably
- Costs (incurred and expected) are identifiable and measurable
reliably
Specific criteria for sale of goods

- Significant risks and rewards of ownership transferred
- Retain neither
. managerial involvement; nor
. effective control
IFRS Overview 52
Layaway sales
Recognize when goods are delivered
But:
If experience indicates that most such sales are consummated, then
recognize when
- Significant deposit has been received
- Goods are on hand, identified, ready for delivery
IFRS Overview 53
IFRIC: 13 Customer Loyalty Programs
IFRIC: 15 Agreements for the Construction of

Real Estate
IFRIC: 18 Transfer of Assets from Customers
IFRS Overview 54
Scope
Addresses accounting for customer loyalty award

credits
- Granted to customers as part of a sales transaction
- Can be redeemed in future for free or discounted goods or services
Include entities receiving consideration from a party other than

the customer to whom it grants credits
- Credit card companies are with in the scope
Excludes programs that grant the customer a financial asset or

do not include a sales transaction
IFRS Overview 55
Issues
Whether award credits are:
- Separately identifiable component for which revenue should be

deferred until awards are delivered (apply IAS 18.19) or
If separate component
- How much revenue to be allocated?

- When should revenue be recognized?
IFRS Overview 56
Separate Components
IFRS Overview 57
IFRIC 15 – Agreements for the Construction of
Real Estate
Divergence in practice
- IAS 11 vs IAS 18 accounting
Issues addressed by IFRIC 15

- Applicable standards (IAS 11 or IAS 18)
- Timing of revenue recognition
IFRS Overview 58
Continuing managerial involvement or effective
control?
IFRS Overview 59
IAS 11 or IAS 18?
IFRS Overview 60
Effective date and transition
Effective date
- Annual periods beginning on or after 1 January 2009
- Earlier application permitted, and shall be disclosed
Transition
- Retrospective application
- In accordance with IAS 8 Accounting Policies, changes in Accounting
Estimates and Errors
IFRS Overview 61
Revenue Vs principal
Revenue of the agent

- Amount of commission
- Plus any other amounts charged by the agent
Revenue of the principal
- Gross amount charged to the ultimate customer
IFRS Overview 62
Example:1
Company A operates an Internet site from which it will sells Company T's
products. Customers place their orders for the product by making a product
selection directly from the internet site and providing a credit card number
for the payment. Company A receives the order and authorization from the
credit card company, and passes the order on to Company T. Company T
ships the product directly to the customer.
Company A does not take title to the product and has no risk of loss or
other responsibility for the product. Company T is responsible for all product
returns, defects, and disputed credit card charges. The product is typically
sold for USD 175 of which Company A receives USD 25. In the event a
credit card transaction is rejected, Company A losses its margin on the sale
(i.e. the USD 25)
Should Company A revenue on a gross basis as USD 175 along with

costs of sales of USD 150 or on a net basis as USD 25, similar to a
commission?
Ans: Here company is an Agent, is not taking any risk.
IFRS Overview 63
IFRIC 18 – Transfer of Assets from Customers
Divergence in practice
- Recognize contributed PPE at fair value or cost of nil?
- Recognize credit as revenue immediately or over period of service / asset life?
Issues addressed by IFRIC 18

- Should asset be recognized by the entity receiving the transfer? At what amount?
- How to account for the credit? Cash contributions?
Scope
- Accounting by the entity receiving the transfer (contribution)
Effective date
- Transfer of assets on or after 1 July 2009
- Prospective application
IFRS Overview 64
Revenue by Category
- Sale of goods
- Rendering of services
- Construction contracts
- Interest
- Royalties
- Dividends
IFRS Overview 65
IAS 11 vs AS 7
There is major difference the Exposure draft of AS 7 (revised 20xx),

Construction Contracts and International Accounting Standard (IAS) 11,
Construction Contracts, IFRIC 12, Service Concession Arrangements
and SIC 29, Service Concession Agreements: Disclosures, except that
the transactional provisions given in IFRIC 12 have not been given in
the Exposure Draft of AS 7 (Revised 20xx), keeping in view that
Accounting Standard corresponding to IFRS 1, First-time Adoption of
International Financial Reporting Standards, will deal with same.
IFRS Overview 66
IAS 18 vs AS 9
IFRS AS 9
Terminology used is 'Statement of financial Different terminology is used, as used in

position' and 'Statement of Comprehensive existing laws e.g. term 'balance sheet' and
income'. 'Statement of profit & loss'
The transactional provisions given in SIC 31, IFRIC 13, IFRIC 15 regarding
changes in accounting policy have not been given in the Exposure draft of AS 9
(Revised 20xx), since IFRS 1, First time Adoption of International Financial
Reporting Standards, provides that transitional provisions in other IFRSs do not
apply to a first time adopters transition to IFRSs, unless otherwise permitted in
IFRS 1. It is noted that IFRS 1does not permit use of these transactional
provisions. Accordingly, deleting or retaining the said paragraph would have the
same effect. Transitional provisions given in IFRIC 18 have not been given in the
Exposure draft of AS 9 (Revised 20xx), since the Accounting Standard
corresponding to IFRS 1, First time Adoption of International Financial
Reporting Standards, will deal with the same.
IFRS Overview 67
Example 2
“Bill and hold” sales, in which delivery is delayed at the buyer's request but
the buyer assumes title and accepts invoicing, should be recognized when
a) The buyer makes an order
b) The sales starts manufacturing the goods
c) The title has been transferred but the goods are kept on the seller's premises
d) It is probable that the delivery will be made, payment terms have been
established, and the buyer has acknowledged the delivery instructions
Ans: d
IFRS Overview 68
Example 3
X ltd, a large manufacturer of cosmetics, sells merchandise to Y ltd, a retailer, which

in turn sells the goods to the public at large through its chain of retail outlets. Y ltd.
Purchases merchandise from X ltd. Under a consignment contract. When should
revenue from the sale of merchandise to Y ltd be recognized by X ltd ?
a) When goods are delivered to Y ltd
b)When goods are sold by Y ltd
C) It will depend on the terms of delivery of the merchandise by X ltd
d) It will depend on the terms of payment between Y ltd and X ltd (Cash or credit)
Ans: b
IFRS Overview 69
Example 4
Considering the provisions of IAS 18 for Multiple Deliverable Contracts,

which of the following statement is true?
a) In case of multiple deliverable contracts, transaction should be segmented into

individual transactions and recognition criteria must be applied to each of them
b) In case of multiple deliverable contracts, recognition criteria needs to be

applied on the combined transaction as a whole
Ans: a
IFRS Overview 70
Property, Plant & Equipment
IFRS Overview 71
Definition and Scope
•Definition
–Tangible items
•Held for production or supply of goods or services, or
•Rental to others, or
•For administrative purposes
–Expected to be used during more than one period
•Scope: accounting for all PPE
–Unless another standard requires or permits a different accounting treatment
IFRS Overview 72
Recognition
•PPE is recognized as an asset when

–Future economic benefits are probable, and
–Cost can be measured reliably
•Criteria apply to all costs when incurred, including

–Initial acquisition or construction costs
–Subsequent costs (covered later)
•PPE is measured initially at cost
IFRS Overview 73
Cost of acquired or self-constructed assets
•Purchase price (including import duties and non-refundable

purchase taxes)
–Less any discounts or rebates deducted

–Less implicit interest in deferred payment
–Plus borrowing costs in the case of “qualifying assets” (refer IAS 23)
–Plus any other directly attributable costs
•Excludes abnormal amounts of wasted material, labour and

other resources
IFRS Overview 74
Expenses not recognized as cost of PPE
•Feasibility assessment costs
•Costs of opening new facility
•Costs of introducing new product or service
•Costs of conducting business in new location or with new class of customer
•Costs of staff training
•Administration and other general overhead costs
•Costs incurred in using or redeploying an item
•Amounts related to certain incidental operations
•Costs incurred while construction is interrupted, unless certain criteria are met
IFRS Overview 75
Asset exchange transactions
•Cost of exchanged asset is measured at fair value unless

–Exchange transaction lacks commercial substance, or
–Fair value of neither asset received nor given up can be measured reliably
•Fair value of asset given up is used, unless fair value of asset

received is more clearly evident
•If not measured at fair value, then carrying amount of asset
given up becomes new cost basis
IFRS Overview 76
Subsequent costs
•Subsequent costs are capitalized only if meet general

recognition criteria
–Future economic benefits are probable
–Cost can be measured reliably
•Costs of day-to-day servicing are expenses as incurred

•Recognize cost of replacing part of PPE item when incurred
•Recognize major inspection cost as replacement
IFRS Overview 77
Parts of an item –“Component accounting”
•on initial recognition, allocate cost to significant parts of asset,

including non-physical parts
• Separate depreciation of each “component”

Ship costs 150, useful life 10 yrs. Estimated docking cost 15, planned after 3 yrs.
IFRS Overview 78
Measurement after recognition
IFRS Overview 79
Depreciation
•Systematic allocation of cost to profit or loss over useful life

•Depreciable amount determined after deducting residual value
•Review at least at each balance sheet date
–Residual value
–Useful life
–Depreciation method
•Changes are changes in estimate, so adjust current and future

periods only
IFRS Overview 80
Revaluation model (1)
•Revalue regularly
•Revalue all assets of the same class
•To adjust accumulated depreciation at the date of the
revaluation either:
–Restate it proportionately with the change in the gross carrying amount of the asset,
or
–Eliminate it against the gross carrying amount of the asset and restate the net amount
to the revalued amount of the asset
IFRS Overview 81
Revaluation model (2)
•Revaluation increases credited to

–Profit or loss to the extent they reverse previous revaluation decrease of that asset
recognized in profit or loss
–Otherwise, equity (revaluation surplus)
•Revaluation decreases debited to

–Equity to the extent of any revaluation surplus in equity related to that asset
–Otherwise, profit or loss
•The revaluation surplus maybe transferred to retained earnings

when the asset is derecognized or as it is used by the entiry
IFRS Overview 82
Example (1) Revaluation Model
•Company A owns a building with the initial cost of 1000,

accumulated depreciation of 600. The fair value of the asset on
the same date is assessed at 800
•Entries to recognize revaluation of the asset should be:
OPTION 1: PROPORTIONATE RESTATEMENT
Dr Revaluation reserve 600
Cr Accumulated depreciation 600
Dr Building, cost 1,000

Cr Revaluation reserve 1,000
IFRS Overview 83
Example (2) Revaluation Model
•Company A owns a building with the initial cost of 1000,

accumulated depreciation of 600. The fair value of the asset on
the same date is assessed at 800
•Entries to recognize revaluation of the asset should be:
OPTION 2: ELIMINATION AGAINST ASSET COST
Dr Accumulated depreciation 600

Cr Building, cost 600
Dr Building, cost 400

Cr Revaluation reserve 400
IFRS Overview 84
IFRIC 1 Changes in Existing Decommissioning,
Restoration and Similar Liabilities(1)
•Changes due to a change in
–Estimated timing and amount of payments
–Estimated amount of payments
–Discount rate
•Added to / deducted from cost of underlying asset and
depreciated prospectively over remaining useful life
•Foreign exchange gains and losses may be recognised in profit
or loss or adjusted against cost of PPE
•Applies regardless of accounting policy (cost or revaluation
model) but implementation varies
•New obligations: in our view, accounting analogous to change in
estimates
IFRS Overview 85
IFRIC 1 Changes in Existing Decommissioning,
Restoration and Similar Liabilities(2)
•Cost model
–Changes in liability added/deducted from asset cost in current period

–No negative carrying amount possible; any excess recognised immediately in profit
or loss
–Increase in carrying amount triggers consideration of impairment, including, if
necessary, calculation of recoverable amount
IFRS Overview 86
IFRIC 1 Changes in Existing
Decommissioning,Restoration and Similar Liabilities(3)
•Revaluation model
- Change in liability does not affect valuation of asset (impact on valuation reserve)
- Changes in liability: indication that asset might have to be revalued.
IFRS Overview 87
Impairment assessment
IFRS Overview 88
Impairment loss recognition
•Recognize impairment loss as expense immediately
–Unless carried at revalued amount (treat as revaluation)

–Use “new” carrying amount to calculate future depreciation
•Refer to IAS 36 for impairment loss calculation
IFRS Overview 89
Derecognition
•Derecognize:
–On disposal, or
–When no future benefits expected from use or disposal
•Difference between carrying amount and net disposal proceeds
recognized as gain/loss in profit or loss
•Gains (or proceeds) are not classified as revenue
•Exception: when an entity routinely sells assets it has held for
rental, it transfers them to inventory when they cease to be
rented.
IFRS Overview 90
Compensation for impairment, loss or surrender
IFRS Overview 91
IAS 16 –Key learning points (1)
•Analyze costs carefully to determine what can be capitalised

•Use cost or revaluation model to account for assets in the same
class
•Adjust changes in existing decommissioning, restoration and
similar liabilities to cost of underlying asset:
–Cost model: to asset cost in current period
–Revaluation model: to revaluation surplus
IFRS Overview 92
IAS 16 –Key learning points (2)
•Allocate cost to significant components and depreciate

separately
•Depreciation method, useful life, residual value reviewed at
each balance sheet date
•Specific disclosure requirements for revalued assets
•Should capitalize borrowing costs on “qualifying assets” in
accordance with IAS 23 (R). The revised standard applies for
accounting periods beginning on or after 1 January 2009
IFRS Overview 93
IAS 16 vs AS 10
There is no major difference between the exposure draft of AS

10 (revised 20xx), property, plant and equipment and
International Accounting Standards (IAS) 16, Property, plant
and equipment and IFRIC 1, changes in existing
decommissioning, restoration and similar liabilities except that
the transitional provisions given in IAS 10 (revised 20xx),
keeping in view that Accounting Standards corresponding to
IFRS 1, First-time Adoption of International Financial
Reporting Standards, will deal with the same.
IFRS Overview 94
Impairment of Assets
IFRS Overview 95
Cash-generating unit –Definition
•Determine recoverable amount for the individual asset if

possible
•Apply the CGU concept if the asset does not generate cash
inflows independent from other assets
•CGU is smallest identifiable group of assets that generates cash
inflows that are largely independent from other (groups of)
assets.
IFRS Overview 96
CGU –Factors to be considered
•Key factor: ability to generate independent cash inflows

–If an active market exists for the output of an asset group, then it is a CGU even if
the output is only sold to another division with the entity
–The focus is on cash inflows, not net cash flows
•Consider how management makes decisions about continuing
or disposing of assets / operations
•Consider how management monitors operations
IFRS Overview 97
Goodwill
•Future economic benefits arising from assets that are not

capable of being individually identified and separately
recognized
•Does not generate independent cash flows
IFRS Overview 98
Indications of impairment
•External sources
–Significant decline in market value
–Technological, market, economic, legal environment
–Increases in interest rates or rates of return
–Lower market capitalization than equity book value
•Internal sources
–Evidence of obsolescence or physical damage
–Discontinuance, disposal, restructuring plans
–Asset performance declining or expected to decline
–Receipt from a dividend of a subsidiary, jointly controlled entity or associate when
the carrying amount of the investment exceeds the share of underlying net assets
(including goodwill) in the consolidated accounts or when the dividend exceeds total
comprehensive income of the investee
IFRS Overview 99
Frequency and timing of testing (1)
•CGU to which goodwill has been allocated

•Intangible assets with an indefinite useful life
•Intangible assets not yet available for use
IFRS Overview 100

Frequency and timing of testing (2)
•Recent calculation can be used if the following criteria are met:

–CGU did not change substantially
–Most recent recoverable amount was significantly greater than carrying amount
–Analysis of events and circumstances –no elimination of the difference
Note: A recent calculation can only be used in the case of

intangible assets with an indefinite useful life and cash-
generating units to which goodwill has been allocated
IFRS Overview 101

Recoverable amount
•Recoverable amount is the greater of:

–Value in use (VIU): present value of estimated future cash flows to be derived from
an asset/CGU (continuing use and ultimate disposal)
–Fair value less costs to sell (FVLCS): amount obtainable from the sale of asset/CGU
in an arm’s length transaction less costs of disposal
•If FVLCS is determinable, then not required to measure VIU or
test at CGU level when:
–an asset’s FVLCS is higher than the carrying amount; or
–an asset’s FVLCS can be estimated to be close to VIU (e.g. asset held for disposal)
IFRS Overview 102

Allocating impairment loss –Step by step
IFRS Overview 103

Reversal of impairment loss
IFRS Overview 104

Key disclosures
•By category of asset

–Amount of impairment losses recognized / reversed during the period in
•Profit or loss or
•Other comprehensive income
–If recognized in profit or loss, disclosure of where items are included
–Segment reporting information
•By category of asset

–Disclosures when impairment losses are material for an individual asset
–Information on basis used for determining recoverable amount
–Discount rate used
IFRS Overview 105

Key learning points
•IAS 36 covers impairment of PPE, goodwill, intangible assets

and investments in subsidiaries, joint ventures and associates
•Detailed impairment testing generally is required only when
there is an indication of impairment
•Annual impairment testing:
–Intangible assets not yet available for use
–Intangible assets with indefinite useful life
–Goodwill
•Recognize impairment loss
IFRS Overview 106

IAS 36 vs AS 28
IFRS Converged Standard

Terminology used is Different terminology is
'Statement of financial used, as used in existing
position' and 'Statement of laws e.g. term 'Balance
comprehensive income' sheet' is used instead of
'Statement of profit and
losses' is used instead of
'Statement of comprehensive
income'
The transitional provisions have not been include in the

exposure draft of AS28 (revised 20xx), since these are not
relevant in the present Indian context as they relate to
amendments made in the standard from time to time.
IFRS Overview 107

Example 1
•Which of the following assets are within the scope of IAS 36?
A. Assets held for sale
B. Inventories
C. Property, plant and equipment
D. Financial assets
Ans: c
IFRS Overview 108

Example 2
•What is the most appropriate definition of the “value in use”?
A. The higher of an asset’s fair value less cost to sell and its market value
B. The market quote
C. The asset’s carrying value in the statement of financial position
D. The discounted present value of future cash flows arising from use of the asset and
from its disposal
Ans: d
IFRS Overview 109

Example 3
•Under IAS 36, which is the most appropriate conclusion when

fair value less costs to sell cannot be determined?
A. The asset is not impaired

B. The value-in-use is the only measure of the recoverable amount
C. The net realizable value should be used as an approximation
D. The carrying value of the asset does not change
Ans: b
IFRS Overview 110

Example 4
•What is normally the maximum period for which estimates of

future cash flows can be reasonably developed?
A. Five years
B. Eight years
C. Ten years
D. Three years
Ans: a
IFRS Overview 111

Example 5
•Which of the following cash flows should NOT be included

when calculating the estimates of future cash flows?
A. Cash flows from the sale of assets produced by the asset
B. Cash flows from disposal
C. Income tax payments
D. Cash outflows on the maintenance of the asset
Ans: c
IFRS Overview 112

Income Taxes
IFRS Overview 113

Income Taxes
Income tax
Current tax + Deferred tax
IFRS Overview 114

Recognition of current tax
●
In the statement of financial position current tax for
current and prior periods should be recognized as an asset
or liability
●
Tax Payable = liability
●
Tax paid but recoverable = asset
- Tax assets may arise in some jurisdictions through the ability to redeem
current period tax losses against tax paid in earlier periods
IFRS Overview 115

Recognition of current tax (continued)
Unless relates to item

outside profit or loss
Profit or Loss (either in other
comprehensive
income or in equity)
If relates to item either

in other comprehensive
OCI/Equity Income or in equity
IFRS Overview 116

Measurement of current tax
Applicable tax rate for

that type of income
Enacted or substantively •
Generate rate
enacted by end of the •
Specific rates (e.g. capital gains tax rate)
reporting period •
Assume no distribution
IFRS Overview 117

Distribution of profit - Example
- Taxable income as at 31 Dec 20x7 is 100,000

●
- Subsequently, on 15 Mar 20x8 proposed dividends of
10,000 are approved and recognized as a liability
Tax rate for undistributed Tax rate for distributed

earnings 50% earnings 35%
What tax rate?
Measure tax on undistributed earnings at 50% as at 31 Dec 2007

- Recognize current income tax liability and expense of 50,000
- Expectation of future distribution irrelevant
Remeasure when distribution recognized as at 15 Mar 2008

- Credit 1,500 (15%) as at 15 Mar 20x8 to profit or loss
IFRS Overview 118

Deferred tax: overview
IFRS book value Vs Tax base = Temporary differences
Deductible Taxable
Tax rate applicable
- OCI / Equity
Profit or loss OR
- Goodwill
Deferred tax asset recognition?
IFRS Overview 119

Tax base
●
The tax base of an item is the amount attributed to that
item for tax purposes
●
Tax base of an asset:
- Amount deductible for tax purposes when the asset is recovered
- Example:
Interest receivable of 100 (carrying amount)
Related interest revenue are taxed on a cash basis
Tax base is nil
IFRS Overview 120

Tax base (continued)
●
Tax base of liability:
- Carrying amount less any amount that will be deductible for tax purposes in
respect of that liability
- Example:
Loan payable of 100 (carrying amount)
Repayment of the loan has no tax consequences
Tax base is 100
IFRS Overview 121

Temporary differences
Temporary
= Accounting - Tax
differences IFRS Book value Base
Taxable Taxable Deferred tax

Amount on recovery/ → Temporary difference
→ LIABILITY
settlement
Deductible Deductible Deferred

amount on recovery/ → Temporary → tax ASSET
settlement differences
IFRS Overview 122

Typical Temporary Differences
Account Potential temporary differences

Marketable Securities Recorded at fair value for financial statement
purposes, generally recorded at historical cost for tax
purposes
Allowance for doubtful Allowance for tax purposes, if permitted, generally
accounts different from the financial statement allowance
Inventory Valuation reserves for financial statement purposes but
not for tax purposes
Property, plant and Costs capitalized for financial statement purposes but
equipment not for tax purposes
Different depreciation lives or methods for financial
statement and tax purposes
Pension liability (for asset) Generally not deductible for tax until paid
IFRS Overview 123

Taxable temporary difference- Solution 1
●
PPE with original cost of 150
- Accounting treatment: depreciate straight line zero residual value over 5
years
- Tax treatment: original cost tax deductible straight line over three years
●
At the end of year 1
- Accounting: carrying amount=120
- Tax: tax base=100
●
Taxable temporary difference: 120-100=20
●
Deferred tax liability
IFRS Overview 124

Taxable temporary difference- Solution 2
●
Transaction costs of 20 on loan received
- Accounting treatment: deduct from loan proceeds and amortize over the
loan term to accounting profit
- Tax treatment: tax deductible when loan was first paid
●
Immediately after receiving the loan
- Accounting: carrying amount = 0
- Tax: tax base = 20
●
Taxable temporary difference:- (0-20)=20
●
Deferred tax liability
IFRS Overview 125

Deductible temporary difference – Situation 1
●
Revaluation of PPE for tax purposes 100
- Accounting treatment: no revaluation recognized
- Tax treatment: tax deductible in future years through tax depreciation
●
At period end
- Tax: tax base = 100
●
Deductible temporary difference: 0-100= -100
●
Deferred tax asset
IFRS Overview 126

Deductible temporary difference – Situation 2
●
Warranty provision of 100
- Accounting treatment: expense as incurred
- Tax treatment: tax deductible upon reversal (when claims are actually paid)
●
Immediately after incurred
- Tax: tax base = 0
●
Deductible temporary difference:- (100-0) = 100
●
Deferred tax asset
IFRS Overview 127

Temporary differences and consolidation
Group level
Temporary
difference
Entity level
Local tax base
IFRS Overview 128

Recognition of deferred tax
Profit or Loss All cases, unless;
If releases to item either

OCI/ Equity in other comprehensive
income or in equity
If arises on a
Goodwill business combination
IFRS Overview 129

Recognition of deferred tax outside profit or loss -
Examples
●
Revaluation of
- Property, plant and equipment (IAS 16)
- intangible assets (IAS 38)
OCI
- available for sale securities (IAS 39)

●
Foreign exchange differences on the translation
of a foreign entity (IAS 21)
●
Cash flow hedge (IAS 39)
●
Compound financial instruments (IAS 39)
Equity
●
Adjustment to the opening balance of retained
earnings (IAS 8/ IFRS 1)
●
Share based payments (IFRS 2)
IFRS Overview 130

Recognition of deferred tax asset/ liability
Liability Asset
Recognize in full Recognize if recoverable
IFRS Overview 131

Deferred tax asset - Examples
●
Deductible temporary differences
●
Unused tax losses
●
Unused tax credits
IFRS Overview 132

Asset recognition: When?
●
Sufficient taxable profit:
- Taxable temporary differences
- Taxable profits
- Tax planning opportunities
- Carry back income
IFRS Overview 133

Presentation
●
Minimum line items to be presented separately in the
statement of financial position
- Current tax assets and liabilities
- Deferred tax assets and liabilities
●
Deferred tax assets/ liabilities to be classified as non
current items in a classified statement of financial
position
●
Tax expense to be presented separately in the statement
of comprehensive income
IFRS Overview 134

Presentation - Offsetting
●
Current tax assets/ liabilities offset only if
- Legally enforceable right; and
- Intention to settle on a net basis or simultaneously
●
Deferred tax assets/ liabilities offset only if
- Legally enforceable right to offset current tax
assets and liabilities; and
- Income taxes relating to same taxation
authority and from:
The same taxable entity
Different taxable entities intending to settle/
realize net or simultaneously
IFRS Overview 135

Convergence – Income taxes
●
Convergence project FASB/ IASB
- Tentative Board decisions
- Exposure Draft of amendments expected in 2009
- A final standard expected in 2010
- www.iasb.org for latest details
IFRS Overview 136

IAS 12 Vs. Converged AS 22

Terminology used is 'Statement of financial Different terminology is used as used existing laws e.g. term
position','Statement of Comprehensive income' and 'balance sheet' is used instead of 'Statement of financial position',
'authorization of financial statements for issue' 'Statement of Profit or loss' is used instead of 'Statement of
comprehensive income' . Words 'approval of the financial
statements for issue' have been used instead of 'authorization of
financial statements for issue' in the contest of financial statements
considered for the purpose of events after the reporting period.
IAS 12 requires presentation of tax expense Such requirements have been deleted. This change is
(income) in the separate income statement, where consequential to the removal of option regarding two statement
separate income statement is presented. approach in AS 1 (Revised 20XX). AS 1 (Revised 20XX) requires
that the components of profit or loss and components of other
comprehensive income shall be presented as a part of the
statement of profit and loss.
The transitional provisions given in SIC 21 and SIC 25 regarding changes in accounting policy have not been given
in the Exposure Draft of AS 22 (Revised 20xx), since IFRS 1, First-time Adoption of International Financial Reporting
Standards, provides that transitional provisions in other IFRSs do not apply to a first-time adopter's transition to IFRSs,
unless otherwise permitted in IFRS 1. It is noted that IFRS 1 does not permit use of these transitional provisions.
Accordingly, deleting or relating the said paragraph would have the same effect.
IFRS Overview 137

Example 1
Company A reported pre-tax accounting income of 90,000,

but due to temporary differences arising in the year,
taxable income is only 50,000. Assuming a tax rate of 40%,
statement of comprehensive income should report net
income of:
a) 70,000
b) 40,000
c) 30,000
d) 54,000
Ans: d
IFRS Overview 138

Example 2
Assume that Company C has accrued several

speeding fines for its salespeople. Fines are never
deductible for tax purposes. This will result in which
of the following?
a) Deductible temporary difference and future income tax liability
b) No temporary difference
c) Taxable temporary difference and future income tax liability
d) Taxable temporary difference and future income tax asset
Ans: b
IFRS Overview 139

Example 3
With respect to deferred taxes:

1. Deferred tax liability and assets must be offset if the entity
has a legally enforceable right to offset current tax liabilities
and assets, they relate to taxes levied by the same tax authority
and the entity intends either to settle on a net basis, or to
realize the asset and settle the liability simultaneously;
2. Deferred tax assets and liabilities have to be discounted.
a) 1 is true, 2 is false
b) 1 is false, 2 is true
c) 1 is true, 2 is true
d) 1 is false, 2 is false
Ans: a
IFRS Overview 140

First-time Adoption of IFRS
IFRS Overview 141

When to apply IFRS 1
• Apply IFRS 1
- In the first set of financial statements that contain an explicit and unreserved
statement of compliance with IFRSs
- In any interim financial statements for a period covered by those financial statements
that are prepared under IFRS
IFRS Overview 142

Why does IFRS 1 apply to?
• Entity A stated compliance with all IFRSs except IAS 39

(Financial instruments)
• Entity B claimed compliance, but it was IFRSs “lite” (i.e. only

selected standards were applied)
• Entity C followed IFRSs for group reporting only
IFRS Overview 143

Transition date
• The beginning of the earliest period for which an entity presents full
comparative information under IFRSs
Date of transition Reporting date

= IFRS opening statement of financial position
Comparative period First IFRS financial statements
1 Jan 2008 31 Dec 2008 31 Dec 2009
IFRS Overview 144

General Requirements
• Step 1 – Select IFRS accounting policies

- Latest version of IFRSs only
• Step 2 – Recognize/ derecognize an necessary, for example

- Liabilities (e.g. future losses, decommissioning obligations, leases)
- Special purpose entities
• Step 3 – Remeasure, for example

- Basis same, but measured differently (e.g IFRS cost not equal to previous GAAP
cost)
- Basis changed (e.g. from cost to fair value)
- Discounting is required / prohibited (e.g. deferred tax, provisions, impairments)
• Step 4 – Reclassify, for example

- Between captions (e.g. debt/ equity)
- Current/ non-current
IFRS Overview 145

Opening IFRS statement of financial position
Adjustments as a result of applying IFRSs for the first-time
Exemptions
Retained earnings Another equity category
Goodwill
IFRS Overview 146

Mandatory exceptions
• Derecognition of non-derivative financial instruments
• Hedge accounting
• Estimates
IFRS Overview 147

Derecognition of non-derivative financial instruments
Information needed to
apply IAS 39 retrospectively
Derecognized after No
obtained at the time of
No Do not apply IAS 39
1 Jan 2004? initially accounting for
transactions?
Yes
Yes
No
Does the entity elect
Apply IAS 39 to apply IAS 39 retrospectively?
Yes
IFRS Overview 148

Hedge accounting
Measure all derivatives at fair value and remove all deferred gains and losses arising on
derivatives recognised under previous GAAP
Designated as a hedge under

previous GAAP and is the hedge effective? No
Yes
Do not reflect hedging

On transition apply the relationship in opening IFRS statement
following adjustments of financial position → recognise effect
in retained earnings
Fair value hedge: adjust carrying Cash flow hedge and hedge of a net
amount of the hedged item in opening investment: recognize deffered gains
IFRS statement of financial position and losses on the hedging instrument
→ recognize effect in retained earnings in equity as seperate item
IFRS Overview 149

Estimates in the opening IFRS statement of
financial position
No estimates under previous GAAP
Use information available at Conditions arising after

the date of transition to the date of transition
IFRSs (i.e no hindsight)
“Wrong”
“Right”
Apply also to the end of the comparative period
IFRS Overview 150

Estimates in the opening IFRS statement of
financial position (continued)
Previous GAAP estimate Error
Adjust, but
No error
do not use hindsight
Apply IFRS methodology

to estimate made
Apply also to the end of the comparative period
IFRS Overview 151

Overview of optional exemptions
• Deemed Cost • Share-based payments

• Compound financial instruments • Day 1 gain or loss
• Cumulative translation differences • Arrangements containing a lease
• Business Combinations • Defined benefit obligation pension disclosures
• Employee benefits • Insurance Contracts
• Designation of previously • Service concession
recognized financial instruments arrangements
• Decommissioning liabilities • Borrowing Costs
• Transfers of assets from customers
IFRS Overview 152

IFRS 1 vs Converged AS 41 (1)
IFRS 1 First-time Adoption of International Financial To that extent Ind-AS 41 reflects only the current set of
Reporting Standards was first issued by the provisions and exemptions and does not present all the
International Accounting Standards Board in June evolution
2003 and thereafter has been amended many times to
accommodate the changes to other relevant IASs and
IFRSs and the first time
Accommodation required arising from those changes.
For the purposes of Ind-AS 41, the IFRS 1 as
restructured and issued in 2008 has been used as the
basis and updated to reflect subsequent amendments
up to November 2009 excluding the amendments so
far as they relate to changes arising from instruction of
IFRS 9 – Financial Instruments
IFRS Overview 153

IFRS 1 vs Converged AS 41 (2)
Generally, there is only one transition date for a country In India, as the converged IFRS standards become applicable in a phased
transitioning to IFRS. manner it is expected that Ind-AS 41 would be available to each company
IFRS 1 defines transitional date as beginning of earliest considering its relevant transition date.
period for which an entity presents full comparative Ind-AS41, however provide an entity with a choice to either consider the
information under IFRS. It is this date which is the beginning of the current period or the comparative period as the transition
starting point for IFRS and it is on this date the date. Thus, the transition date has been defined as the beginning date of
cumulative impact of transition is recorded based on financial year on or after 1April 2011 for which an entity presents financial
assessment of conditions at that date information under Ind-AS in its first Ind-AS financial statements but where
an entity voluntarily decides to provide a prior period comparatives in
accordance with Ind-AS then the date of transition would be the beginning
of the earliest period for which an entity presents for full comparative
information under Ind-AS in its first Ind-AS financial statements i.e.
beginning of financial year on or after 1 April 2010. Arising from this
fundamental change, there are other consequential changes to Ind-AS 41.
For example, disclosures required under paragraph 21 and reconciliations
under paragraphs 24 to 26 Ind-AS 41 have been modified to accommodate
this option available under Ind-AS 41. The relevant Implementation
Guidance and illustrative examples have been appropriately modified to
reflect the option provided to transitioning entities.
IFRS Overview 154

Key Learning Points
●
IFRS 1 sets out all transitional requirements and exemptions
available on the first-time adoption of IFRSs
●
An opening statement of financial position is prepared at the
date of transition of IFRSs
●
Accounting policies are chosen from IFRSs in effect at the end
of the first IFRS reporting period
●
A number of exemptions are available
●
At least one year of comparative information must be presented
●
First-time adoption of IFRSs may be reported in annual or
interim financial statements
IFRS Overview 155

Example 1
Under which one of the following circumstances can we

conclude that the entity prepared IFRS financial statements
in the previous year?
a) Financial statements were prepared under IFRSs in the previous year;
however, these were meant for internal purposes only
b) Previous year's financial statements were prepared under the entity's national
GAAP
c) Previous year's financial statements were prepared in conformity with all

requirements of IFRSs; however, these statements that they compiled with IFRSs
d) Previous year's financial statements were prepared in conformity with all

requirements of IFRSs, and these statements contained an explicit and unreserved
statement that they compiled with IFRSs.
Ans: d
IFRS Overview 156

Example 2
Which one of the following is a required adjustment in

preparing an opening IFRS statement of financial
position?
a) Present at least two years of comparative information in the financial
statements
b) Derecognize items as assets or liabilities if IFRSs do not permit such a

recognition
c) Disclose as comparative information all figures for the current year

presented under IFRSs
d) Measure all recognized assets and liabilities at fair value
Ans: b
IFRS Overview 157

Example 3
Which one of the following does NOT qualify for an

exemption allowed by IFRS 1?
a) cumulative translation differences
b) Inventories
c) Business combinations that occurred before the date of transition to

IFRSs
d) Compound financial instruments
Ans: b
IFRS Overview 158

Implementation pre-requisites on ERP
IFRS Overview 159

Implementation pre-requisites on ERP
Implementation pre-requisites on ERP (Oracle

Applications) to map according to IFRS.
a) Detailed Segment Structure
b) Currencies
c) One more Secondary Ledger for IFRS (Adjustment)
IFRS Overview 160

Detailed Segment Structure
Need to prepare detailed segments according to the business and

reporting requirements.
Need to prepare detailed segment values according to IFRS

standards.
While preparing segments consider the points like business units,

operating units, business operations & processes etc..
IFRS Overview 161

Currencies
Need to review and assign required currencies for

reporting.
Assign reporting currencies to particular ledger.
IFRS Overview 162

One more Secondary Ledger for IFRS (Adjustment)
We need to maintain two ledgers. One ledger (Primary ledger)

for GAAP and another ledger (secondary ledger) for IFRS.
Define a new ledger for IFRS as a secondary ledger with type as
adjustment. With this we are mainly doing adjustment entries for
IFRS reporting (detailed reporting).
IFRS Overview 163

Example (from Insurance domain)
Please find below the details of the IFRS ledger:

1. The IFRS ledger will contain the Chart of accounts structure
and values as per IFRS requirement.
2. Transactions shall be accomplished in the specific sub ledgers

like AP, AR from which they shall be transferred to the primary
ledger (as per GAAP).
3. The account balances then shall be transferred to IFRS ledger

from the primary ledger, where users will pass manual entries to
make adjustments in accounts balances from one account to
another as per IFRS requirement.
IFRS Overview 164

Continue (1)
The above points can be understood through an Insurance Industry
example:
Case Study - In case of Insurance, IGAAP just asks for a consolidated
premium booking amount to be booked in the premium revenue
account, while in IFRS it needs to be bifurcated into three heads -
premium main(50%), premium mortality charges(25%) and premium
bid charges(25%)
Thus when we book a receivable Invoice of Rs 100 in AR the

accounting entry to IGAAP ledger would be:
Receivable Dr 100
To Premium Revenue Cr 100
IFRS Overview 165

Continue (2)
These balances would then be transferred to IFRS ledger, where the
user shall pass the following manual adjustment:
Premium Revenue Dr 50
To Premium mortality charges Cr 25
To Premium bid charges Cr 25
Effect in IFRS Ledger :
Receivable Dr 100
To Premium Revenue Cr 50
To Premium mortality charges Cr 25
To Premium bid charges Cr 25
IFRS Overview 166

IFRS with Oracle E-Business
Suite ERP
IFRS Overview 167

Introduction
Oracle EBS standard model is mostly similar to US GAAP, in this

chapter we are discussing about US GAAP and IFRS.
In the fall of 2008, the SEC (Securities and Exchange Commission

(US)) published a discussion road map for the adoption of IFRS by US
public companies in which early IFRS adopters could file as soon as
2011, and regular filing under IFRS would begin in 2014. In March
2010, the SEC announced that in 2011 they would consider accepting
IFRS into the US Financial Reporting system if certain readiness
conditions were met and IFRS and US GAAP had reached convergence
by mid 2011. This would mean that 2015 might be the earliest possible
date for IFRS reporting.
IFRS Overview 168

Much is the Same …But There are Differences
US GAAP is always more specific, plus:
Similarities Differences
Approach IFRS US Approach IFRS US
(Some Examples)
GAAP (Some Examples)
GAAP
ü ü
Revenue Fair Market Fixed Assets Only Certain
Recognition Revaluation & Fixed
Investments Assets
ü ü
Fair Market (e.g. AR
or Inventory Extraordinary Items None Rare
Valuation) Consolidation Control 2 Models
ü ü
Detailed Disclosure
Joint Ventures Proportional Only Equity
OK
ü ü
Segment Reporting “Development” Capitalized Expensed
Fixed Assets Components Unitary
ü ü
Chart of Accounts
Not Mandated Leasing Financing Cap vs. Op
Inventory No LIFO LIFO OK
ü ü
Distinction
Between Tax and Impairment 1 Step, 2 Step, No
External Reporting Reversible Reversal
IFRS Overview
From a system view point the following lists are
important:
• Financial Statements
• Revenue Recognition
• Lease Accounting
• Financial Instruments
IFRS Overview 170

“Comprehensive Income,” a proposed modification to IAS 1.
In the area of financial reporting, the Boards published a series of proposals that require
more disclosure, in particular distinguishing operating and investment assets and
requiring the use of direct cash flow reporting.
Regarding Revenue Recognition, there are proposals to replace US GAAP revenue

recognition and IFRS revenue recognition (IAS 18) with a Performance
Obligation model. The proposal is not yet definitive, and the Boards have not yet agreed
on a final proposal for public review.
According to this Oracle EBS follows mostly US GAAP. Once finalize the changes more
changes will effect on application.
IFRS Overview 171

In the area of Lease Accounting, the proposals clarify the difference
between long-term financing of assets and short-term rental of assets.
While neither Board is keen on the current standards, the existing
standards in US GAAP and IFRS are quite similar. It is anticipated that
a proposal will be published in the summer of 2010.
Regarding financial instruments, the Boards are deep in consultation

with the financial industry, regulators, and authorities around the world
to determine the best way to value and report on complex financial
instruments and transactions. Both Boards have published standards
and proposals covering elements of this topic, but the overall position is
not definitive, and the community is not in agreement on what is
generally acceptable.
IFRS Overview 172

Background
Over 12,000 companies in a hundred countries have successfully

adopted IFRS. They include countries in the European Union (EU),
China, Australia, Russia, South Africa, Brazil and Chile. India, Canada,
and Japan will adopt IFRS starting in 2011. The US joins Mexico in
adopting IFRS within the next few years, thereby completing the
worldwide adoption.
IFRS Overview 173

CHALLENGES OF TRANSITIONING TO IFRS
Although there will be significant challenges along the way, the
transition to IFRS will bring considerable benefits to worldwide
businesses. A single set of global accounting and financial reporting
standards applied consistently will not only increase comparability
for investment purposes and reduce accounting complexity, but it will
also increase the competitiveness of companies and capital markets. As
with any significant change, companies will need to plan for it to
address challenges and obstacles.
IFRS Overview 174

Impact of the Differences between US GAAP and
IFRS
From an operational point of view, the post-Convergence differences

between IFRS and US GAAP remain substantial. IFRS are statements
of principles and do not include the detailed guidance that is a hallmark
of US GAAP.
A company reporting under IFRS is likely to recognize a different

amount of revenue, expense and income than it did under US GAAP.
Certain assets and liabilities have different recognition and
measurement criteria. Disclosure rules are different and there
are more disclosure data points. In some cases, a business model
implicitly based on US GAAP will produce different results under IFRS
and will need to be changed.
IFRS Overview 175

Implications of the Time-line
It appears that American companies will have a two-step transition to
IFRS. Around 2013 or 2014, US GAAP will implement the
Convergence standards (“Convergence”), and around 2015 and 2016,
adoption of IFRS (“Adoption”) will occur.
In June 2010, the FASB and IASB wrote to the SEC, G20 and others
suggesting the establishment and discussion of the timing implications
of Convergence. Nothing has been decided at this time.
IFRS Overview 176

Geographic Variances in Accounting Compliance
IFRS are standards that define shareholder reporting for a complete

enterprise, both domestic and overseas. While the standards have been
adopted worldwide for public company shareholder reporting, not all
countries have adopted them for private company reporting. In fact,
some 30 countries actually disallow the use of IFRS for subsidiary
statutory reporting.
During the migration period, many companies may have to
simultaneously comply with three regulations: local statutory, US
GAAP and IFRS. There will likely be three channels of transaction
data:
• In the US, where no statutory reporting is required, certain IFRS data will be captured in the
subsystems.
• In countries where IFRS is permitted for statutory filing, local general ledgers will be IFRS
compliant. However, consolidation adjustments and currency conversion will still be necessary.
• In countries where IFRS is not permitted for statutory filing, local compliance might be the daily
operational routine and the accounts from such subsidiaries may need substantial conforming
adjustments – as companies do today with their non-GAAP subsidiaries.
IFRS Overview 177

Customers using IFRS in ERP
•
E-Business Suite Supporting IFRS
–
Emirates Airlines (since 2001) since Release 10.7
–
Hilton Hotels PLC
–
Michelin
–
Reuters (since 2002)
–
Societe National De Chemin De Fer Francais
–
Westpac
Supporting IFRS
•
PeopleSoft since Release 8.4
–
AXA International
–
Carrefour
–
European Bank of Investment
–
John Lewis PLC
–
Societe Generale
Supporting IFRS
•
JD Edwards since Release Xe for
–
Chevron E1 and Release A7.3
–
Juken New Zealand Ltd for World
–
LaFarge
–
Pernod Ricard
IFRS Migration Plan
Achieve “early mover” advantage
Stage 3
Stage 1 Stage 2 Stage 4
Record
Study Impact & Determine Enable Top End Transform Your
Transactions
Strategy Reports Business& Win with IFRS
I in both GAAPS
Determine impact
Perform Preliminary Collect GAAP Determine changes
on accounting in
Study financial results to business model
subsystems
Adjust and Configure Transform

Assess Impact consolidate under accounting rules operations using
GAAP & IFRS and set up ledgers IFRS results
Report, reconcile Process and report Report IFRS

Determine Strategy using dual results, increase
and audit results
accounting shareholder value
geme
y and
Mana
Polic
Cont
rol
nt
y
Milestone 1 Milestone 2 Milestone 3 Milestone 4

Completed Preliminary IFRS Reports Produced Transactions Recorded Business Model
Study in Multiple GAAPs Optimized
Oracle Enables Key Stages in IFRS Action Plan
Stage 1 Stage 3 Stage 4

Stage 2
Study Impact & Determine Record Transactions Transform Your Business &
Enable Top End Reports
Strategy in both GAAPS Win with IFRS
Oracle Enterprise Performance Management
Oracle ERP Financials Other ERP Oracle

Financials Industry
Custom, Specific
Legacy, Applications
Competitor
Oracle Governance, Risk, & Compliance Suite

geme
y and
Mana
Polic
Cont
rol
nt
y
Oracle Hyperion Financial Management (HFM) helps organizations
align the processes for collecting financial results, operating results, and
sustainability information in response to investor demands for increased
disclosures of both financial and non-financial metrics. HFM
streamlines the collection, consolidation, and reporting of financial
and non-financial information. The result is more control and
consistency over financial and non-financial reporting, improved data
integrity and audit trails, as well as savings in time, effort, and costs.
HFM supports standardized consolidation and reporting processes in
compliance with US GAAP, IFRS, and local statutory requirements. It
provides inter company eliminations,multi-currency translations, and
minority interest calculations, delivering them quickly and
cost-effectively out of the box. HFM is comprised of entity structures
which define the group structure, i.e., the management or statutory
hierarchies of reporting units and a chart of accounts hierarchy, which
maintains the relationship or roll-up of account lines used in
management and statutory reporting.
IFRS Overview 181
Enable Top End IFRS Reporting
CORE CONSOLIDATION FEATURES CUSTOM DIMENSIONS
Multiple reporting standards in a
single solution Enables tracking of
GAAP vs. IFRS
GAAP IFRS adjustments
Flexible Rules Engine
Journal Entries and Audit
DOCUMENT ATTACHMENTS FLEXIBLE REPORTING
Creates “Electronic Easy to

Binder” of all reconcile and
adjustments trend GAAP vs.
IFRS results
Lead slide for our EPM and IFRS presentation: happy to arrange a showing
Customization
An IFRS-compliant consolidation model must be able to analyze results from different
sets of GAAP, and report those results side by side with their quantified differences.
IFRS Overview 183

Multi-GAAP reporting compares results and
quantifies the differences
IFRS Overview 184

Satisfy IAS 14: Segmented reporting with Oracle
Hyperion Financial Management’s sub forms
IFRS Overview 185

Key capabilities of HFM
• Core consolidation features, such as a flexible rules engine and journal

adjustments to support multi-GAAP reporting
• Custom dimensions to roll up data under different reporting standards to
easily track IFRS vs. GAAP adjustments
• Document attachments feature that allows users to document the details
behind adjustments. These then become part of an electronic briefing
book which includes the original data, adjustments, and supporting details
with full audit trails.
• Flexible reporting tools which allow easy viewing, reporting and
reconciling of your financial results under IFRS vs. GAAP Oracle
Hyperion Financial Management integrates directly with Oracle and non-
Oracle transactional systems and can be deployed quickly to address your
Stage 2 transition requirements.
IFRS Overview 186

Oracle Governance, Risk, and Compliance
Oracle Governance, Risk, and Compliance (GRC) Applications provide a
central documentation repository that aligns any changes to the business
processes and the corresponding control policies to IFRS. Organizations
can manage IFRS compliance documentation with the same platform they
would use to manage compliance with SOX or environmental compliance
regulations.
Specific IFRS features will be examined, such as Componentized Assets.

In addition, this chapter will discuss the dual accounting and reporting
capabilities of EBS.
IFRS Overview 187

Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls
GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance
APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates Monitor status of testing and
multiple accounting representations exceptions
Control
changes to
ERP
applications
Lead slide for our GRC and IFRS presentation: happy to arrange a showing
History of E-Business Suite Support for IFRS
Oracle has participated in the IFRS adoption process along with other
software companies as members of an International Accounting Standards
Board (IASB) System Company Discussion Group since its founding.
Oracle’s accounting domain experts monitor developments in the
regulatory environment to ensure our software reflects best
practice and compliance.
Oracle E-Business Suite had customers reporting under the IFRS

standards in the United Arab Emirates and in Switzerland in the early
years of the twenty-first century with many customers doing so in the
European Union, Australia, and other IFRS stock markets around the
world.
IFRS Overview 189

ERP Products Designed for IFRS
E-Business Suite, PeopleSoft, JD Edwards
IAS/IFRS SUPPORT SINCE 2000 SPECIFIC IFRS FEATURES

Thousands of customers overseas Specific functionality developed for IFRS
reporting under IFRS
•
Asset Componentization
IAS 2 Inventory Inventory, Costing
ü
Parent & Child Assets
IAS 16 Property, Plant FA, ALM
ü
Child Depreciation rates differ
IAS 18 Revenue Rec. OM, AR, BI, CA
•
Impairment Processing
IAS 21 Currency Multibook, MRC,GL
ü
Impairment identification
More Segments, etc. Flex / ChartFields
… … … ü
Unplanned depreciation
DUAL GAAP ACCOUNTING IFRS MIGRATION PATH

Multiple Ledgers or Multi-GAAP
Ledger Set/Code:
GAAP
US Principles Differences
Expanded COA Expanded COA
Calendar Calendar
USD USD
Familiar Features Support IFRS Requirements
Many external reporting features are not specific to IFRS but can be used
to support IFRS. For example, Oracle E-Business Suite Release 12
includes Sub-ledger Accounting (SLA), a rules based accounting engine
that can be used to ensure consistency with accounting and data gathering
across the world, while at the same time recording transactions in
compliance with local regulations. SLA allows companies to record the
same business transaction under multiple accounting conventions. For
example, a supplier invoice to record the purchase of goods can
simultaneously be recorded using three conventions: US GAAP, IFRS,
and local statutory.
There are many other features Oracle E-Business Suite customers will be
familiar with that are currently used to support US GAAP environments.
Some reconfiguration may be necessary to comply with IFRS principles.
For example, Oracle Inventory supports a variety of inventory valuation
methods. However, to comply with IAS 2, inventory cannot be valued
using the LIFO method.
IFRS Overview 191

For “development” expenses, expenses that might have been expensed
immediately under US GAAP would need to be posted to the balance
sheet and later released onto the P&L according to the IFRS principles.
Customers can comply with this IFRS principle by deploying Oracle
Projects, creating cost centers on the balance sheet and using allocations
to release the expense; they could also track the development costs into
bills of material using Oracle Inventory. The appropriate choice will
depend on the circumstances of the customer, the products involved, the
underlying business process, etc.
IFRS Overview 192

Unique IFRS Features
IFRS does have some principles that translate into requirements that are
not required by other GAAP or regulatory standards. Oracle E-Business
Suite includes specific features designed to meet these requirements as
well.
An important example of a feature not widely used outside of IFRS

compliance is “componentized assets” where an asset is tracked by its
components when those components have different useful lives, (e.g.,
roof, elevator and frame of a building may have different lives). Under
IFRS, each component would be depreciated under its own useful life.
Oracle Assets within Oracle E-Business Suite facilitates the grouping of
child assets (depreciated separately) into parent assets (managed as one)
and further into asset groups.
IFRS Overview 193

The process of deriving and populating the componentized asset values is
quite an issue for many customers. In Europe, many had to use real estate
appraisers and other asset valuation experts. Oracle provides spreadsheet
integration that facilitates importing and updating the revised valuations
of the individual components.
"As per my observation we can do componentized asset depreciation by

using many segments/ separate segment value for each component (make
component is another segment)" .
Another example is the IFRS approach to asset impairment. The IFRS

valuation method is different from US GAAP, and the impairment can be
reversed. Asset impairment in Oracle E-Business Suite accommodates
both of these options.
IFRS Overview 194

1: IFRS Sub-ledger Data Capture in EBS
IFRS Standards that require transaction level data tracking either in
generic ERP or in Industry Specific products
Relevant IAS & IFRS •

Product Support
Principles §
Standard Features in
EBS GL & Sub-ledgers
•
IAS 02 Inventories –
Specific features in sub
•
IAS 11 Construction Projects
ledgers and IBU offerings
•
IAS 16 PP&E
•
IAS 17 Leases • Inventory
•
IAS 18 Revenue • Receivables
•
IAS 19 Employee Benefits • Assets
•
IAS 23 Borrowing Costs • Projects, HCM
•
IAS 41 Agriculture
•
IAS 32 & 39, IFRS 07 & 09 –
General support through
Financial the data model and with
Instruments features like sub ledger
•
IFRS 04 Insurance Contracts accounting
Reconfigure Existing Features
•
Using LIFO? Need to reconfigure for IFRS
–
Costing & Inventory support
 Standard Cost
 Actual Cost
–
Watch that inventory cost the same way worldwide
•
Expensing Development? Need to capitalize for
IFRS
–
In GL, assign cost centers to balance sheet accounts
–
Use allocations or BoM to eventually bring to P&L
–
Or
–
In Projects, set up projects as Capitalized…
Special IFRS Sub ledger Features
Asset Componentization & Impairment
•
IFRS unlike other GAAPs in the way it handles Assets
•
Componentization
–
Assets componentized by “useful life”

Needs Parent-Child asset feature
–
Generates many more assets
þ
Need an API to import data from assessor, realtors, etc.
þ
Need to be grouped for ease of management
•
Impairment
•
Impairment is costed differently
•
Can be reversed
þ
Need an impairment tool
2: Corporate Accounting for IFRS in EBS
Specifies the handling of major transactions & situations:

Product Support
Principles §
In EPM
–
Model corporate adjustments
•
IAS 10 Post balance sheet §
Standard Features in
•
IAS 20 Government Grants
EBS GL & Sub-ledgers
•
IAS 21 Foreign Currency
•
IAS 29 Hyperinflation
–
Flexfields, segments and
other chart of accounts
•
IAS 36 Impairment
features
•
IAS 37 Provisions, Contingent
•
IAS 38 Intangibles
–
Reporting Currencies &
•
IAS 40 Investment Property Revaluation for translation or
•
IFRS 01 First Time Adoption re-measurement
•
IFRS 05 Discontinued For Sale –
Multiple Ledgers
•
IFRS 06 Mineral resources –
The Accounting Engine, SLA
•
IFRS 08 Operating segments
Approaching IFRS Compliance in ERP
Example: IAS 21, Foreign Currency
•
IAS 21 Summary (Converged with FAS 52)
–
Two routes from local accounting to shareholder currency:
“re-measurement” @ historic rates, “translation” @ current rates
–
Depending on the company’s circumstances and IAS 21 tests
•
Product Support
–
R12 “Reporting Currencies” and “Revaluation” together designed to do both
IAS 21 and FAS 52 Re-measurement and Translation
–
The company chooses, at each overseas location:
• Transaction Level, if they need to manage the detail in home currency
• GL Activity Level, if they populate a “fat GL” or analytic cube
• GL Balance level, for a traditional statement oriented approach
–
HFM also includes IAS 21 and FAS 52 capability
That is: 8 IFRS Compliant options at each location

There are many ways to comply with IFRS in all product areas
3: IFRS Financial Statement Preparation in EBS
Defines what’s included on Financial Statements, and how they
should be presented; work done by CPAs in EPM or GL

Product Support
Principles §
In EPM
–
Hyperion Financial
•
IAS 01 Financial statements Management
•
IAS 27 Consolidate / Separate –
E-Business Suite OFA
•
IAS 28 Associates
•
IAS 31 Joint Ventures
§
Standard Features EBS
•
IAS 33 Interims GL & Sub-ledgers
•
IAS 34 EPS –
E-Business Suite General
•
IAS 07 Cash Flow Statements Ledgers
•
IFRS 01 First Time Adoption • Consolidation features like
•
IFRS 03 Business GCS
Combinations • Reporting features like FSG
•
SEC IFRS Regulations under with BI Publisher
discussion • Multiple Ledgers & Ledger
Sets
Dual GAAP Reporting
One of the most commonly asked questions about IFRS in regards to ERP
systems is “how is dual or multiple GAAP reporting supported?”
Oracle E-Business Suite Release 12 and 12.1 have powerful multiple

ledger reporting supported by alternative accounting in sub-ledgers with
which an IFRS company can automate dual GAAP reporting. Release 11
also supported dual GAAP capabilities but to a lesser degree. In addition,
Oracle Hyperion Financial Management provides consolidation and
reporting capabilities oriented to support dual GAAP reporting.
IFRS Overview 201

Approaching Dual GAAP Reporting
•
Depends on the customer’s circumstances vis-à-vis IFRS & US
GAAP
–
Top Down approach in EPM Products
–
Bottom Up approach in ERP Products
•
EPM Solutions
–
Ask if the legacy supports the IFRS functionality in Hyperion
–
Specific IFRS Dimensionality, IFRS rules engine, etc.
–
See our EPM show!
•
ERP Solutions
–
EBS: SLA, Ledgers, Multiple Ledgers, Ledger Sets
–
PeopleSoft: Book Code, Multiple Ledgers, Multi-Book
–
JDE: Multiple Ledger Types
R11 Dual Reporting example
Release 11 : Balancing Segment
Balancing Segment
Value example: 99
•
Manual Adjustment
•
Adjustment from sub-
ledger data
•
Recurring Adjustment
Other R11 Multiple

Compliance
Tools
•
AX, the Accounting
Engine
•
MRC Ledgers at FX
rate = 1
•
GCS Ledgers
All other segments Ledger Total

R12 Dual Reporting : What’s different to 11
Release 12: Sub-ledger Accounting, Multiple Ledgers, Ledger Sets
Primary Ledger
Ledger Set: Account Balance Debit Credit US GAAP
Development Expense 500,000 1,500 501,500
Employee Payables (100,000) 1,500 (101,500)
Primary GAAP Adjusting

Adjusting Ledger Adjustment
Capitalized Development 500,000 1,500 501,500
US Principles Differences Development Expense (500,000) 1,500 (501,500)
Expanded COA Expanded COA Ledger Set IFRS
Calendar Calendar Development Expense
Employee Payables
-
(100,000)
1,500
-
1,500
1,500
-
(101,500)
USD USD Capitalized Deveopment 500,000 1,500 - 501,500
Accounting
Dr Cr
Subledger Can choose to use:

Accountin •
A (full) Secondary Ledger
g •
Complete alternative accounting
or
•
An Adjusting Ledger, (or Segment)
•
Automatic business reconciliation
•
Fewer adjusting entries
Operating Unit
•
Easier feed to Hyperion
R12 Dual Reporting Example
Release 12 : Adjusting Ledger in a Ledger Set
Ledger Set
Ledger 1 = Base
Ledger 2 = Adjusting
Adjusting Ledger
•
Automatic Adjustment
from subledger data
•
Recurring Adjustment
•
SLA Driven
Adjustments
Base Ledger Total Ledger Set Total

Endgame: Adopting IFRS, walking away from
GAAP
A function of your Dual Reporting Choices
1. Many subsidiaries will retain GL and subsystems in

Hyperion compliance with either
• Statutory requirements (foreign subsidiaries)
• Regulatory legislation (utilities, financial services, etc.)
2. Some will find that their existing GL is quite
appropriate, but that they have a few subsystem
ERP GL
Multi-GAAP areas that will require adjustment
Features
3. Others will require that they need to do something
more substantial, for example restructuring their
ERP Sub- business, up to the point of reimplementing
ledgers
Macro-Level in EPM solution, Transaction-Level
in E-Business Suite
During the comparative reporting period of the IFRS transition,
companies will need to report under dual or multiple GAAPs. Depending
on the complexity of the change from GAAP to IFRS compliance, the
differences can be managed in a variety of ways.
Customers will find themselves on a spectrum from a macro level
approach to a detailed transaction approach when it comes to dual GAAP
reporting. If a top-down approach is best, they can look to an Enterprise
Performance Management (EPM) solution, such as HFM; whereas if a
transaction level approach is more appropriate, they can address dual
GAAP reporting within their ERP solution. Customers should work with
their accounting compliance advisors to identify their circumstances and
the appropriate approach.
IFRS Overview 207

To support multiple ledgers in Oracle E-Business Suite, Subledger
Accounting will be used to automatically populate the necessary dual
accounting entries. Ledgers with similar characteristics can belong to a
“Ledger Set” which facilitates treating distinct ledgers as if they were one
for reporting and accounting purposes. Together, these features provide
powerful dual reporting capabilities.
IFRS Overview 208

Dual Reporting System Strategies
= Companies migrating
Typical Considerations
IFRS facilitates WW
system stratification
Structured for
GAAP, not IFRS
Valuation different
in IFRS Your IFRS Situation
Many IFRS:US
GAAP differences
Limited IFRS:US
System Choices
GAAP differences
GL for National or xity
p le
Regulatory compliance m
Co
System Choices: HFM Only GL& Adjusting New GL
From “Top-down” through Non sub-ledger easy reconciliation Major difference
Multi-GAAP ledgers and sub-
ledger reconfiguration, to the 1 GL Only 2 Distinct GLs Re-implement
possibility of a do-over minor differences over 50% New ballgame
different
Transform Your Business & Win with IFRS
Going beyond compliance
IFRS Change Potential for Business Transformation
IFRS OK for • Improve dramatically your reporting process, consistency,

SEC and for and management vision
60+ countries’
statutories • Consider instance, ledger, data consolidation
• Consider shared service accounting & reporting centers
IFRS book • Consider buying that fleet of planes you use
leases as
liabilities • Evolve your leasing revenue business to an equipment
sales business
Capitalize R&D • Move those 2009 Development expenses to the Balance
Sheet – recognize in P&L, matched to Revenue, in 2010-
2011
IFRS Overview
Q&A
IFRS Overview 211

Thank you
To Learn more:
Sambhasiva Rao.V.CH
sambhasnk@gmail.com
http://orclappsfunctional.blogspot.com/
IFRS Overview 212

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International Financial Reporting Standards (IFRS) Overview

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International Financial Reporting

Standards (IFRS) Overview

Sambhasiva Rao Venkata Cheedella

This document is regarding International Financial

SEC Securities and Exchange Commission (US)

SIC Standing Interpretations Committee Of the IASC, and

IOSCO International Organization Of Securities Commissions

2 Members in IASC from India out of 22.

Sri David Tweedie, Chairman became the first

The Objectives are:

Interpretation of contentious accounting issues

- Expand beyond interpretations of current standards to

Interpretations are authoritative guidance

Phase I – Transaction date April 1, 2011

- Companies (listed or unlisted) with net worth in excess of

Phase III – Transaction date April 1, 2014

- Listed companies with net worth in less than INR.500 crores

SCB* and UCB# with

April 1, 2013 April 1, 2014

•Scheduled commercial banks

1. Part of Nifty 50/ BSE 30

April 1, 2013 April 1, 2014

Option to present comparatives voluntarily (2010-2011)

If, subsequent to the adoption, the company does not meet

9 Effect of Change in foreign - same as7-

38 First time Adoption AS 41 IFRS 1 Yes GAAP

The framework is a key point of reference in the absence of

IFRSs do not apply to items that are “immaterial”

- Statement of financial position as at the beginning of the earliest

Financial statements, except for cash flow information, should be

Assets, liabilities, equity, income and expenses recognized when

Assets and liabilities should not be offset unless

Items of income and expenses should not be offset unless

Numerical comparative information for the previous period

“Explicit and unreserved statement of compliance”

Disclose application of IFRSs before effective date

Present assets and liabilities in the statement of financial

Disclose amounts due for recovery or settlement after more

Sub-classifications of items presented, either

Separate presentation of amounts payable to and receivable

Single statement or income statement and a separate statement

No definition of “exceptional” or “unusual” events or items of

- Total comprehensive income for the period

- For each component of equity, a reconciliation between the carrying

Also present, either in the statement of changes in equity or in

- the amount of dividends recognized as distribution to owners during

For each class of share capital (in the statement of financial

Which components of financial statement is NOT prepared

b) Statement of comprehensive income

c) Statement of changes in equity

d) Statement of cash flows

e) Notes to financial statements

IAS 7 requires the provision of information about the historical

Specific criteria for sale of goods

Recognize when goods are delivered

IFRIC: 15 Agreements for the Construction of

IFRIC: 18 Transfer of Assets from Customers

Addresses accounting for customer loyalty award

Include entities receiving consideration from a party other than

Excludes programs that grant the customer a financial asset or

Whether award credits are:

- Separately identifiable component for which revenue should be

- How much revenue to be allocated?

Issues addressed by IFRIC 15