The Impact of IFRS on Industry. Lavi Mohan R.

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      Mohan R. Lavi

      The Impact of IFRS on Industry

      The Impact of IFRS

      on Industry

      Mohan R. Lavi

      This edition first published 2016

      © 2016 Mohan R. Lavi

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      Library of Congress Cataloging-in-Publication Data is Available

      Names: Lavi, Mohan R., author.

      Title: The impact of IFRS on industry / Mohan R. Lavi.

      Description: Hoboken: Wiley, 2016. | Series: Wiley regulatory reporting | Includes index.

      Identifiers: LCCN 2015043944 (print) | LCCN 2015044761 (ebook) | ISBN 9781119047582 (paperback) | ISBN 9781119047551 (ePDF) | ISBN 9781119047483 (epub)

      Subjects: LCSH: Financial statements – Standards – Handbooks, manuals, etc. | Accounting – Standards – Handbooks, manuals, etc. | BISAC: BUSINESS & ECONOMICS / International / Accounting.

      Classification: LCC HF5626 .L384 2016 (print) | LCC HF5626 (ebook) | DDC 657/.320218 – dc23

      LC record available at http://lccn.loc.gov/2015043944

      Cover Design & Image: Wiley

      Preface

      During the course of my lectures across India and abroad on International Financial Reporting Standards (IFRS) and other accounting related topics, I was always fascinated by the questions that the participants put forward. Each session was different and so was each question. There were, of course, questions that were not in any way related to accounting or standards but that is to be expected anywhere. Probably what fascinated me more was that accountants were able to pose questions on how, for instance, a refractor should be accounted considering its use, or whether an internally generated brand qualifies for recognition as an intangible asset when the brand has been hypothecated to a bank and funds obtained. Most of my employment was with companies that were based in the United States and hence I had exposure to the industry-specific provisions of US GAAP. As IFRS grew in importance, my mind was filled with thoughts as to how different industries would be impacted if they transitioned to IFRS. Those thoughts are set out in this book.

      Having worked in different industries, I have extrapolated an IFRS-implementation scenario in these industries to ascertain the impact. For other industries, I have researched the annual reports of large companies operating in these industries and asked questions of friends and associates working in these industries. As always, the internet threw up way too much information – I have digested this information and present only the relevant parts of which I am absolutely sure, and which are supported by other tangible evidence.

      This book is primarily intended for entities that are yet to transition to IFRS and are considering an impact assessment. Entities that have already moved over to IFRS could find the book useful in the impact of revised IFRS Standards that are to come out in the future or the impact that annual impairment tests or fair valuation would have. Others who are interested in IFRS as academics or students could find the book useful for their areas of work.

      The book is divided into six chapters. Chapter 1 discusses the origin of accounting standards and how they appear to be moving to an industry-based era. Chapter 2 summarizes all the disclosure requirements of IFRS. Chapter 3 details the impact that IFRS Standards would have on all industries while Chapter 4 discusses this impact for specific industries. Chapter 5 discusses the collateral impact of IFRS while Chapter 6 concludes with a discussion on how future IFRS Standards could impact specific industries. The book concludes with an appendix that contains a tabular summary of the impact discussed.

      Readers are encouraged to read the book in any order they prefer.

      I do hope readers enjoy this book.

BangaloreJanuary 31, 2016

      Acknowledgements

      The easy part of writing this book was to complete the chapters on industries in which I have worked – software, retail and industries where property, plant and equipment constitute a significant component of the balance sheet. The not-so-tough part was writing the chapters on industries whose business model everyone is familiar with – airlines, for instance. The tough parts were the chapters on industries which were highly technical in nature – pharmaceutical and the oil and gas industries are examples.

      As in other things, the internet has a lot of information on the impact of IFRS on industry – sometimes there is too much information. Deloitte, KPMG, EY, PWC, GT, BDO and other large accounting firms have a number of publications on how IFRS would impact certain industries. There are quite a few research publications written by researchers at different universities that analyse issues with regard to IFRS. Many regulators across the world have published their impact analysis of IFRS in their area of regulation.

      This book would have remained only an idea if not for the support received from the entire team at John Wiley and Sons. It commenced with a person (I am not sure who) @ Wiley responding and forwarding my Twitter message on July 10, 2014 to the right people very fast. Then, Steven Mullaly, Executive Commissioning Editor and Gemma Valler, Commissioning Editor, interacted with me and have been very supportive throughout this project that has taken about a year to finish. They have been extremely patient with me though I delayed sending them this book by quite a bit. In IFRS-speak, their patience was not impaired and they dealt with my delays at fair value. All credit for this book being published should go to them.

      A word of immense thanks is also due to John Duggan who patiently proofread the book, identified and corrected the many errors I had made in the book. Thanks, John.

      My