Converging In To International Financial Reporting Standards

Infosys technologies LTD- it was founded on july 2,1981 in pune by NR Narayana Murthy and 6 other people .the company was incorporated as private company and went public in 1993.in its recent annual reports , infosys technologies limited also provides its balance sheet as per the inter national financial reporting standards



IFRS are standards ,interpretations and framework adopted by the international accounting standards board [IASB] which was issued between 1973 and 2001 byIASC

Structure of IFRS  Framework  Role of framework  Objective of financial statement  Assumptions  Qualitative characteristics of financial statement  Elements of financial statement 

Generally accepted accounting principles is the term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction GAAP includes the standards conventions and rules accountants follow In recording and summarizing transactions and in the prepration of financial statements

Financial accounting is information that must be assembled and reported objectively. The third parties who must rely on such information have a right to be assured that the data are free from bias and inconsistency, whether deliberate or not .for this reason financial accounting relies on certain standards or guides called GAAP. In any report of financial statements [audit, compilation and review etc] the auditor must indicate to the reader whether or not the information contained within the statements complies with GAAP

PRINCIPLE OF REGULARITY – regularity can be defined as confirmity to enforced rules and laws  PRINCIPLE OF CONSISTENCY- this principle states that when a business has once fixed a method for the accounting treatment of an item, it will enter all similar items that follow in exactly the same way  PRINCIPLE OF SINCERITY- according to this principle, the accounting unit should reflecting good faith the reality of the company’s financial status 

PRINCIPLE OF PERMANENCE OF METHOD – this principle aims at allowing the coherence and comparison of financial information published by the company  PRINCIPLE OF NON-COMPENSATION OF THE COMPANY- one should show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense etc  PRINCIPLE OF PRUDENCE- this principle aims at showing the reality ‘as is’ one should not try to make things look prettier than they are . Typically , a revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable 

PRINCIPLE OF CONTINUITY –when stating financial information , one should assume that the business will be interruped. This principle mitigates the principle of prudence, assets do not have to be accounted at their disposable value ,but it is accepted that they are their historical value  PRINCIPLE OF PERIODICITY- each accounting entry should be allocated to a given period and split accordingly if it covers several periods . If a client prepays a subscription the given revenue should be split to the entire time span and not counted for entirely on date of the transaction  PRINCIPLE OF FULL DISCLOSURE- all informations and values pertaining to the financial position of a business must be disclosed in the records 

IFRS & Indian GAAP • The IFRS or the International Finance Regulation Standards are defined by the International Accounting Standards Board. The IFRS is increasingly being adopted by companies across the globe for preparing their financial statements. IFRS comprises of International Financial Reporting Standard, International Accounting Standard, and Interpretation originated by the International Financial Reporting Interpretations Committee. • Indian GAAP are the standards notified by the central govt. under the companies (Accounting Standard)Rules,2006 (applicable to all companies) vide notification G.S.R.739(E) dated 7 Dec. 2006 and to the relevant requirements of the companies Act,1956.

Differences between IFRS &Indian GAAP IFRS

Indian GAAP

1. IAS 1 (2007)-Presentation of Financial statements

1.AS 1-Disclosure of accounting policies/schedule VI to companies act,1956.

2.Financial Statements under IFRS comprises of (a)A statement of financial position (b)A statement of comprehensive income (c)A statement of cash-flows (d)A statement of changes in equity (e)Notes including summary of accounting policies and explanatory notes

2. The components of financial statement are(a)Balance sheet (b)Statement of profit & loss (c)Cash flow statement.(not mandatory for small and medium sized companies). (d)Explanatory notes including summary of accounting policies

3.Omission or misstatements 3. Financial statement should are material if individually or disclose all “material” items, collectively they could i.e. items the knowledge of influence the economic which might influence the decisions of users taken on decisions of the user of the the basis of financial financial statements. statements. 4. An entity is required to present 4. No such classification are current & non-current assets required and liabilities, as separate classifications in the statement of financial position 5. Fair presentation requires faithful representation of the effects of the transaction, other events and conditions in accordance with the definitions of and recognition criteria for assets, liabilities, income and expenses set out in the frame work.

5. Fair presentation requires compliance with the applicable requirements of the companies Act,1956 and the other regulatory requirements and the application of the qualitative characteristics of the accounting standard framework.

31.03.05

31.03.06

Absolute Percentage increase/decre change ase

Capital

135

138

3

+2.22

Res. & surplus

5090

6828

1738

+34.14

Total Sh.holder fund

5225

6966

1741

+33.32

68

-26

-27.65

Sources of fund: Sh.holder’s fund

Other L.T.Liability 94 C.Liabilities & Prov. Liabilities

656

934

278

+42.37

Provisions

777

1412

635

+81.72

2346

913

+63.71

Total C.L. & Prov. 1433

Application of fund: Fixed Assets Net Gross Block

1256

1655

399

+31.76

Capital work in progress

318

571

253

+79.55

Investments

1211

755

-456

-28.97

65

20

+44.44

Deferred Tax Assets 45 C.A.,loans & Adv. S. Debtors

1322

1608

286

+21.63

Cash & Bank balance

1576

3429

1853

+117.57

Loans & Advances

1024

1297

273

+26.66

Total C.Assets

3922

6334

2412

+61.49

Total Application of 6752 fund

9380

2628

+38.92

In current Assets total increase amounts to 2412 crores (61.49%). The increase in cash was the most i.e. Rs.1853 crores(117.57%)  Current Liabilities increases up to Rs 913 crores(63.71%).This increase is greater than increase in current asset that means in 05-06 the liquidity of Infosys has decreased.  During the yr. 05-06 reserves & surplus have increased by Rs 1738 crores(34.14%). The Sh. Holder fund have increased by Rs 1741 crores (33.32%) which represent the financial soundness of the business.  During the year the investment has been decreased & is used to pay off its other long term liability. 

change

change

Assets: Current Assets Cash & cash equivalents

410

889

479

116.8%

Investment in liquid mutual fund unit

278

170

-108

-38.8%

Trade account receivable

303

361

58

19.14%

Unbilled revenue

32

48

16

50%

Other C.A. &prepaid exp.

35

40

5

14.2%

Total C.A.

1058

1508

450

42.5%

Property, Plant & equipments

352

491

139

39.4%

Goodwill

8

8

0

0%

Deferred tax asset

10

14

4

40%

Advance Income Tax

_

18

18

_

Other assets

26

27

1

3.8%

Total Assets

1454

2066

612

42%

abilities & . Holder’s uity

rrent Liability

count yable

1

3

2

200%

ome tax yable

23

_

-23

-100%

ent deposits 7

2

-5

-71.4%

earned venue

20

44

24

120%

her accrued bilities

124

160

36

29%

tal current bilities

175

209

34

19.4%

_

-21

-100%

n-current bility

eferred stock 21 subsidiary

Stock holder’s equity Equity shares

31

31

0

0%

Additional paid 279 in capital

428

149

53.4%

Accumulated 33 other comprehensive income

9

-24

-72.7%

Retained earning

1369

459

50.4%

Minority interest_

15

15

_

Total Liability

2066

612

42%

910

1454

A/c to Indian GAAP Deferred tax asset= Rs 65 crores A/c to IFRS Deferred tax asset= 14 million $ Comparing both, we get 1$=650000000/14000000 =Rs 46.42 Thus currency rate is 1 USD = Rs 46.42

Indian GAAP has followed the Accounting standard of India (AS1) while IFRS has followed International Accounting Standards (IAS1).  A/c to IFRS total CA has increased up to 42.5 % while a/c to Indian GAAP the increase in CA is up to 61.49%.  IFRS has made differentiation regarding CA, non CA, liabilities & non liabilities however its not in Indian GAAP. 