The Institute of Chartered Accountants of India has sent out recently 35 near-final Indian Accounting Standards (Ind-AS) — the Indian version of IFRS - to the National Committee on Accounting Standards (NACAS) for deliberation and finalisation, to emable transition to International Financial Reporting Standards. Over the past year, it has trained accountants on IFRS and issued a draft of the revised Schedule XIV to the Companies Act. It is now left to the regulators to take this forward and legislate on them.
IFRS Taxonomy 2011
The International Accounting Standard Board (IASB) has issued IFRS Taxonomy 2011, the translation of IFRSs into XBRL (eXtensible Business reporting language) which is expected to be the language that filers of financial statements would be speaking with regulators soon. From an architectural framework perspective, the 2011 taxonomy is consistent with the architecture established for the 2010 taxonomy as part of the Interoperable Taxonomy Architecture project, which will support existing users of the taxonomy and also software developers.
In terms of financial reporting content, the scope of the 2011 taxonomy has been expanded to include IFRS application and implementation guidance and IFRS illustrative examples that are commonly used by entities. This is intended to reflect IFRSs more comprehensively, thereby supporting preparers of IFRS financial statements in XBRL format. One can view the Taxonomy as per IFRSs or as per the contents of the IFRS financial statements and there is one for small and medium enterprises too.
e-files
Taxonomies by themselves are nothing but electronic files but the IASB does not make it look like Greek and Latin to the common user. “The IFRS Taxonomy Illustrated” enables the viewer to have a look at the structure and content of the Taxonomy files. The Taxonomy files contain three columns — hierarchy, disclosure format and IFRS reference.
The hierarchy contains column headings that are numbered which represent the name of an IFRS or an IFRS component — Business Combinations for instance has been assigned the number 817000. The Taxonomy clarifies that these numbers are random and are in place only with the intent to providing ease of viewing and sorting. There could be multiple rows below the heading that contain elements belonging to the row component — description of factors that make up Goodwill in a Business Combination being an example.
The Disclosure format contemplates the possible formats a disclosure may take. These could be a text or text block, date, decimalised, positive or negative monetary value, shares, line items etc. A blank column denotes that no disclosure is required — a rare possibility under IFRS.
The IFRS reference Column acts like a ready-reckoner, providing corresponding IFRS/IAS paragraph and section number together with the nature of reference- which could be a example, disclosure requirement, presentation requirement or common-practice reference.
Having a draft of IFRS-compliant standards with them, regulators in India would need to act to provide some guidelines to the first set of entities that are to move over to IFRS from this year. Though an Ind-AS taxonomy appears some time away, they would have to give a nod to the draft standards issued by the ICAI, Schedule XIV and think of the necessity of a Schedule VI ( IFRS lays down only broad parameters for the format of financial statements) and deliberate on a new CARO ( not contemplated under EU IFRS) if felt necessary. Sector-specific regulators such as the Reserve Bank of India and the Insurance Regulatory and Development Authority would have to do likewise. Since any new legislation takes time to adapt to, the regulators can ill-afford to think that March 31, 2012 is the date when IFRS-compliant financial statements need to be issued as Ind-AS 101 provides an optional waiver of comparative figures.
(The author is a Bangalore-based chartered accountant.)