Convergence with IFRS

All listed companies will have to report their FY12 numbers in compliance with International Financial Reporting Standards ('IFRS') issued by IASB.

how different is IFRS from the existing Indian GAAP ?

Valuation of Investments:
Indian GAAP classifies Investments as Current & Long Term.
IFRS requires classification into AFS, HFT and HTM. Both AFS and HFT are recorded at MARKET VALUE under IFRS. only HTM is allowed to be recorded at carrying cost.

Aditya Bhartia & Aniruddha Dutta of CLSA have analysed it very well in their Dec09 report.

Under IFRS, Reedemable Preference Shares carrying fixed dividend is treated as Debt Funds

Goodwill Amortisation:
Unlike Indian GAAP, IFRS does not require amortisation of goodwill. Instead, it needs to be tested annually for impairment indicators.

Impairment provisions are stricter under IFRS


IFRS requires an additional disclosure of Customer Concentration, which is not made mandatory by Indian GAAP.

M&A Accounting
Indian GAAP allows Purchase Method as well as Pooling of Interests method.
IFRS does NOT allow pooling of interest method. Thus Assets & Liabilities need to be recorded in the new books at Fair Values only

Indian GAAP requires negatve Goodwill on amalgamation (difference between net worth and price paid) to be added to Capital Reserve.
IFRS allows such gain to be credited to P&L.

Contingent Liabilities are required to be recognised under IFRS in the new books.