Journey from AS to Ind AS
1
- N P Sarda
10th June, 2015
Bombay Chartered Accountants Society
2
Indian Accounting Standards
AS - Existing mandatory Indian Accounting standards
(notified u/s 211 of the Companies Act, 1956 )
The Companies (Accounting Standards) Rules, 2006.
Ind AS - Indian Accounting Standards converged with IFRS
– with certain carve -outs (notified u/s 133 of the
Companies Act, 2013)
The Companies (Indian Accounting Standards)Rules,2015
Journey from AS to Ind AS
Scope of the discussion
Developments in Accounting Standards (AS) in India
Revised Roadmap for Ind AS implementation
Differences between existing Indian Accounting Standards(AS) and Accounting Standarda converged with IFRS (IndAS)
Carve-outs in converged Indian Accounting Standards (IndAS) from IFRS
Amendments in Carve-outs
Income Computation & Disclosure Standards
New IFRS project on Leasing
3
Developments in Accounting Standards (AS) in India
Developments
-- 1977 to 2007 ( New Concepts during 2000 to 2007)
-- 2007 to 2011
-- 2011 to 2014
-- 2015
Companies Act, 2013
Schedule III - ( Revised Schedule VI )
Schedule II
4
Revised Roadmap
Roadmap 2011
Budget Speech of FM in July, 2014
Adoption / Convergence
Revised Roadmap
-- Applicability -- Criteria based on Net Worth
-- Mandatory Application ( 2 phases ) / Voluntary Application
-- Comparatives / Previous GAAP Accounts
-- Transition Date / Reconciliation
-- other Conditions
Ind AS bridging gap with moving Target of IFRS
Carve-outs being reviewed and amended
5
Conceptual Differences
Varying degree of focus on / importance of :-
‒ Fair value - merits and demerits
‒ Time value of money
‒ Substance over Form
‒ Legal control / control in substance
‒ Legal obligation / constructive obligation
‒ Acconting treatment - based on judgment
Wide coverage of several new Issues and Situations.
6
Changing Concepts
Formulation of IndAS
-- Objective - Convergence with IFRS
IFRS -- Moving Target
-- Concepts in IFRS are changing
e.g. 1. Concept of Control in Consolidation (IFRS 10 )
2. Measurements of Financial Instruments (IFRS 9
Financial Instruments (IAS 39)
Investments (IAS 25)
7
Changing Concepts
IFRS -- Moving Target
-- Concepts in IFRS are changing (Contd..)
3. Revenue from Contracts ( IFRS 15)
Revenue in Construction Contracts ( IAS11)
Revenue from contracts for Goods and Services (IAS18)
4. Accounting for JV ( Equity Method / Proportionate
Consolidation)
5. Exception from Consolidation – for Investments by
Investment Co.
8
IFRS V/s IndAS
IFRS :-
28 IAS ( out of AS 1 to AS 41)
12 IFRS ( out of IFRS 1 to IFRS 15 )
40
3 IFRS 9,14 &15 will be effective from a later date
43
IndAS :-
24 (out of IndAS 1 to IndAS 41)
15 (indAs 101 to 115 corresponding to IFRS 1 to15)
39 ( 4 IndAS corresponding to IAS 11,18,39 and
26 not issued)
9
Differences between Ind AS and existing Indian
Accounting Standards (AS) – Contd…
Presentation of financial statements (Ind AS 1 / AS 1)
• Components of financial statements
-- Statement of Changes in Equity
‒ Profit & Loss a/c / Other Comprehensive Income
-- items included in Other Comprehensive Income
-- items to be / not to be later reclassified in P&L a/c
• Format of financial statements (Schedule VI / Schedule III)
• Classification of assets & liabilities
-- Current - non current
10
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Presentation of financial statements (Ind AS1 / AS 1) Contd.
• Classification of expenses
(Nature of Expenses v/s their Function )
• Extraordinary items
• Reclassification in financial statements
(Nature, Amount and Reason)
• Critical judgments
• Estimation of uncertainty
11
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Inventories (Ind AS 2 / AS2 )
* Work-in-progress
- in the business of Service Providers
* Purchase on deferred settlement terms
- interest expense)
* Same Cost Formula
- inventories having a similar nature and Use )
* Reversal of Write-down of Inventory.
12
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Cash Flow Statements (Ind AS 7 / AS 3)
* Bank Overdrafts
- integral part of Cash Management
* No Extra-Ordinary items
* Interest and Dividend
- classified as Operating, Investing, or Financing activities
in a consistent manner.
13
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Accounting policies & Changes in Accounting Estimates
and Errors (Ind AS 8 / AS 5)
• Accounting treatment of changes in accounting policies
- Retrospective Application
- Adjustment to Opening Reserves
• Accounting treatment of changes in accounting estimates
- Impact in the Current Period
• Errors
- corrected retrospectively
14
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Events After the Reporting Period ( Ind AS 10 / AS 4 )
Treatment of Proposed Dividend
-- Current AS / Schedule III
Breach of Long-Term Loan Arrangement
-- Agreement by Lender - after the B/S date
-- adjusting event – classified as Non- Current Liability
( Carve – Out )
15
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Income taxes (Ind AS 12 / AS 22)
• Timing differences v/s temporary differences
(P&L approach v/s Balance Sheet Approach)
• C/F unused income-tax Losses & other Tax Credits
--Recognition as deferred tax assets
- Virtual Certainty - Convincing Evidence
- Reasonable Certainty - Probable
• Def. Tax Liability on Assets Revaluation
- Based on Sale (not Use)
16
Income taxes (Ind AS 12 / AS 22) (contd…)
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
• Def. Tax Liability on Unrealised Intra-Group Profits
-- on Consolidation
• Potential Tax Benefits of Acquiree’s C/F Losses and other Tax
Benefits
-- in Business Combination
• Classification of Deferred Tax Assets/Liabilities
Non-Current – (AS 22 / Sch. III)
• Tax effect of Income/Expenses recognized outside P&L a/c
• Numerical / tax rate reconciliation
17
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Property Plant and Equipment (Ind AS 16 / AS 6 / AS 10)
Componentisation of PPE
-- Depreciation based on major components
Replacements costs
Cost of major inspections / overhauls
Major Spare Parts
18
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Property Plant and Equipment (Ind AS 16 / AS 6 / AS 10)
( Contd.)
Revaluation – Cost / Fair Value Model
-- Sufficient Regularity
Treatment of revaluation reserve
Methods of Depreciation - (Sch.II)
Changes in method of depreciation
Decommissioning, Dismantling, restoration and similar
liabilities19
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Leases (Ind AS 17 / AS 19)
• Interest in leasehold land
• Initial direct costs / lease incentives
• Appendix A , B and C
20
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Employee benefits (Ind AS 19 / AS 15)
• Treatment of actuarial gains and losses
- Other comprehensive income
- Corridor approach (deleted)
- AS 15 – P&L a/c
• Discount rates
- Government bonds / high quality corporate bonds
• Termination Benefit Liability (V.R.S. Liability)
- Substance v/s Form
21
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Accounting for Government Grants and
Disclosure of Government Assistance ( Ind AS 20 / AS12)
* Deals with Disclosures of Govt. Assistance (Appendix A)
* Recognised as Deferred Income
-- to match related expenses
-- Not credited to Capital Reserve
-- Not deducted from Cost of Assets (Carve-out)
* Non-Monetary Grants
-- Fair Value v/s Nominal Value
-- Only Fair Value option – (Carve-out)
* Govt. Loans with below market Rate of Interest.
22
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
The effects of changes in foreign exchange rates
(Ind AS 21 / AS 11)
Concept -- Functional and presentation currency
Treatment of exchange differences
- Financing cost in P&La/c
- Previous History -- Schedule VI - Para 46 of AS 11
Carve – out in Ind AS
- On Transition to continue Policy adopted prior to Transition to
Ind AS
23
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
The effects of changes in foreign exchange rates
(Ind AS 21 / AS 11) ( Contd. )
Accounting Treatment for Exchange Difference on
Net Investment in a Foreign Operation
Forward Exchange Contracts -- Accounting Treatment provided in As11
-- Under Ind AS accounted as Derivatives
24
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Borrowing Costs ( Ind As 23 / AS16 )
* Not Capitalised
(a) for qualifying assets valued at FV
(e.g. Biological Assets)
(b) for Inventories – produced in large quantities on a
repetitive basis
* Concept of “Effective Interest Rate” used
25
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Related Party Disclosures (Ind AS24 / As 18)
Different Definition of Related Party
No. of Differences in Disclosures
Complex Requirements of Companies Act,2013
26
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Separate Financial Statements ( Ind AS 27)
Separate Financial Statements of the Parent
Accounting for Investments in Subsidiary
IFRS :- Accounted at Cost or in accordance with IAS39/IFRS9
or using the Equity method as described in IAS 28
Ind AS :- Equity method not permitted in separate financial
statements ( Carve-out )
27
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Investments in Associates and Joint Ventures
(Ind AS 28 / AS 23)
Investments by Joint Venture Org. MFs,Unit Trusts etc.
-- If elected to FVTPL under Ind AS 109, exempted from
applying Equity Method
In Separate Financial Statements of Investor
-- Equity Method not permitted -- ( Carve-out )
Gain on Bargain Purchase
-- credited to Capital Reserve -- ( Carve-out )
Potential Voting Rights
-- considered in assessing Significant Influence
28
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Reporting in Hyper-Inflationary Economies
(Ind AS 29)
No equivalent AS
Where cumulative Inflation Rate in 3 years
-- is approaching or exceeds 100%
Measuring Unit Current as at BS Date
29
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments
AS 30,31,&32 -- Never notified, Recommendatory – AS13
Evolution of IFRS 9 –2008 crisis-G20 Declaration – 3 Issues-
Last Version of IFRS 9 issued in July,2014
IFRS 9 – Applicable from 1-1-2018
IndAS 109- Applicable from Transition to IndAS (1-4-2015)
Ind AS – Transition directly to IndAS 109 (IAS 39-skipped)30
AS IFRS Ind AS
Presentation 31 IAS 32 32
Disclosure 32 IFRS 7 107
Recognition and
Measurement
30 IAS 39
IFRS 9
109
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments – Presentation ( IndAS 32 / AS31 )
What is Financial Instrument ?
-- Distinction with Investments
Classification as a Liability or Equity
-- Substance over Form
-- Red. Pref. Shares / Convertible Debentures
Conversion Option embedded in Foreign Currency Conv. Bonds
-- FCCBs – to acquire fixed no. of Equity Shares for a fixed amount
-- In IFRS – Functional Currency - Equity
Foreign Currency - Debt
-- In IndAS - even Foreign Currency considered as Equity
Hence, no translation on B/s Date (Carve-out)
31
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments : Disclosures (Ind AS 107)
Requires Enhanced Disclosures of Information about
-- Significance of Financial Instruments on
Financial Information and Performance.
Requires :
-- Qualitative Disclosures
-- about exposures to each type of Risk
and how those Risks are managed
-- Quantitative Disclosures
-- about exposures to each type of Risk, seperately
for Credit Risk, Liquidity Risk, Market Riak etc
( including Sensivity Analysis )
32
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments - ( Ins AS 109 / AS13&AS30 )
Deals with Recognition and Measurement
A Contract – Financial Asset of one Entity
Financial Liability or Equity of another Entity
Covers three Issues :
(1) Classification of Financial Assets and Financial Liabilities
(2) Impairment
(3) Hedging
Initial Measurement
-- AT Fair Value
-- common to Financial Assets and Financial Liabilities
33
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments – (InsAS 109 / AS13&AS30 ) (Contd.)
Subsequent Measurement
Financial Assets
-- Amortised Cost or
-- Fair Value
-- FVTPL / FVTOCI
Debt Instruments
-- Business Model
-- to collect Contract cash flow - at Amortised Cost
-- to collect Contract cash flow
or to sell - at FVTOCI
34
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments – (IndAS 109 / AS13&AS30 ) (Contd.)
Option to designate Debt Inst. At FVTPL
Equity Shares / Instruments - At F V (Cost option not available)
-- normally valued at FVTPL
-- option to designate strategic Inv. In Equity Shares at FVTOCI
Measurement of Financial Liabilities
-- Initial
-- Subsequent Measurement
-- at Amortised Cost
-- at FVTPL ( option – conditions )
If Option for FVTPL exercised
Change in FV split in 2 parts
(Change attributable to own credit risk & the remaining amt.)35
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments - (Ind AS 109 / AS13&AS30 ) (Contd.)
Change in FV of Liabilities on a/c of Own Credit Risk
-- recognised in OCI
earlier IFRS – in P&L a/c – Carve out
now IFRS -- in OCI -- Carve out deleted
Reclassification of Financial Assets -change in business model
-- Not permitted – Eqity Inst. Opted for FVTOCI
-- FV option exercised for FA/FL
No Reclassification of Financial Liabilities permitted
Derecognition – Financial Assets
-- Financial Assets on Securitisation
-- Financial Liabilities36
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments - (Ind AS 109 / AS13&AS30 ) (Contd.)
Impairment of Financial Assets
-- on the basis of Expected Credit Losses
( not Incorred Credit Losses )
-- Differs from Prudential Norms of RBI
Interest Revenue
-- Application of Effective Interest Rate on Amortised Cost of
Impaired Assets ( other Assets on Gross carrying amount )
Derivatives
-- valuation at Fair Value
Embedded Derivatives - Hybrid Contracts
-- If host Fin.Inst. , Embedded Derivative not separated 37
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Financial Instruments - (Ind AS 109 / AS13&AS30 ) (Contd.)
Hedge Accounting - Risk Management Activity
Matching gains/losses on Hedging Instrument
with losses/gains on the Hedged Assets & Liabilities
Elaborate rules for Hedge Accounting
38
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Earning per Share ( Ind AS 33 / AS 20 )
Seperate Disclosure of EPS
-- from Continuing and Dis-continuing Operations
Extra-Ordinary items
-- no consideration
Mandatory Convertible Instruments (Debentures)
-- considered in computation of EPS
39
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Interim Financial Reporting (Ind AS 34 / AS25 )
Applicability to Quarterly Financial Information
-- under Clause 41
Recognition and Measurement Pinciples
40
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Impairment of Assets (Ind AS 36 / AS28 & AS26 )
Impairment Loss recognised for Goodwill
-- Prohibited from Reversal in a subsequent period
Goodwill impaired in an interim period
-- not reversed in subsequent interim/annual Financial
Statements.
41
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Provisions, Contingent Liabilities and Contingent Assets
( Ind AS 37 / AS 29 )
Legal v/s Constructive Obligations
Termination Liability / Restructuring Plan
--- Constructive Obligation
Discounting of Liability
--- if time value of Money considered material
Appendix A,B and C
-- covers special situations42
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Intangible Assets (Ind AS 38 / AS 26 )
Measurement at Cost or Revalued Amount
Useful Life may be finite or infinite
-- AS 26 - Rebuttable presumption-10 years
Amortization or Impairment ? Or Both
-- Impairment but not Amortisation
-- AS14 – amortisation – 5 years
Intangible Assets arising in Service Concession Arrangements
-- can continue policy of amortisation adopted prior to
Transition to Ind AS ( Carve-out )
Appendix A – Intangible Assets-Web Site Costs
43
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Investment Property (Ind AS 40 / AS13 )
Land or Building or both
-- to earn rental or capital appreciation or both
Measured initially at Cost
Subsequent measurement
-- IFRS 40 -- Option for Cost or Fair Value Model
-- Ind AS 40 -- Fair Value Model not allowed – (Carve-out)
( Detailed Disclosures of FV required)
44
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Agriculture ( Ind AS 41 )
Biological Assets
-- measured at Fair Value (less cost to sell)
Cost Model as an exception to FV Model
-- No active market
-- FV can not be reliably measured
Bearer Plants
-- PPE -- IFRS amended – Carve-out in Ind AS dropped.
45
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
First Time Adoption of Ind AS (Ind AS 101)
* Date of transition
* Comparatives
-- Definition of Previous GAAP Accounts
* Reconciliation to explain transition to Ind AS
* Previous GAAP carrying value can be considered as
deemed cost
( for PPE, Intangible assets and Investment properties)
* Other Exemptions
46
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Share-based payments ( Ind AS 102 )
Guidance Note of ICAI / SEBI
-- applicable to Employees only
Ind AS 102 covers share-based payments
-- to employees and to others for goods and services
Recognised as expense over the vesting period
Computation at Fair Value
-- GN of ICAI gave option of Cost / FV
( recommended FV )47
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…
Business Combinations ( Ind AS103 / AS14 )
Acquirer obtains control over other Entity
IFRS does not cover Amalgamation between entities under
common control -- Ind AS 103 covers -- ( Carve-out )
Acquisition Method v/s Pooling of Interest Method
-- Pooling of Interest Method not permitted
( except for Common Control transactions )
48
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…
Business Combinations ( Ind AS103 / AS14 ) (Contd.)
Assets and liabilities acquired -- Valued at Fair Value -- ( all identifiable A/L)
Excess of A/L acquired over Consideration
-- if Bargain Purchase, recognized in Other Comprehensive
Income and accumulated in Equity as Capital Reserve
-- Otherwise directly in Equity as Capital Reserve
Business combination achieved in stages
49
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Insurance Contracts ( Ind AS 104 )
Liability Adequacy Test
-- to assess that recognised insurance liabilities are adequate
Re-insurance assets are tested for Impairment
Insurance liabilities
-- not to offset against the related re-insurance assets
50
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Non-Current Assets held for Sale
and Discontinued Operations (Ind AS 105 / AS 24& AS10 )
Measured at lower of :
-- its carrying value
-- Fair Value less Cost to Sale
Statement of Comprehensive Income
-- is effectively divided into two Sections :
(Continuing Operations and Discontinuing Operations)
51
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Exploration for and Evaluation of Mineral Resources
( Ind AS 106 )
Measured at Cost or Revaluation
( less accumulated amortisation and Impairment Loss)
52
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Operating Segments (Ind AS 108 / AS17 )
Identification of Segments
-- based on the Financial Information that is regularly reviewed
by the Chief Operating Decision Maker in deciding how
(a) to allocate resources and
(b) in assessing performance.
( AS 17 covered Risk and Rewards approach and internal financial
reporting to KMP. )
53
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Consolidated Financial Statements (IndAS 110 / AS 21)
• Changes the criteria for determination of control
‒ Earlier – Power to govern operating and financial policies
‒ Now – Whether the investor is exposed or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee
• Prescribes‒ The criteria for preparation of consolidated financial statements
‒ Consolidation procedures
‒ Presentation of Non-controlling interests
‒ Treatment for changes in ownership interests
54
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Consolidated Financial Statements (IndAS 110 / AS 21)
(Contd..)
Applicability :
-- Earlier SEBI requirements for Listed Companies
Now Companies Act,2013 for all the Companies
-- Exemptions in AS21 not available
-- Intermediate Holding Company
Investment Companies ( New Concept )
-- No Consolidation
Investments valud at FV under INDAS109
Uniform Accounting Policies
Reporting Dates – interval – not more than 3 months
55
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Consolidated Financial Statements ( IndAS 110 / AS 21)
(Contd.)
Substantive Potential Voting Rights
Dual Control
Partial Disposal of Inv. In Subsidiary
-- When Control retained
-- When Control lost
Presentation of Non-Controlling Interest
Special Purpose Entities
56
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Joint Arrangements ( Ind AS 111 & Ind AS 28 / AS 27 )
* Joint Arrangement -- has two characteristics
- A contractual arrangement and
- 2 or more parties have joint control
* Joint arrangement ‒ Is either a Joint Operation / a Joint Venture
* Joint Operation‒ The parties that have a Joint Control have rights to the assets
and obligations for the liabilities relating to the arrangement
* Joint Venture‒ The parties that have Joint Control have rights to the Net
Assets of the arrangement57
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Joint Arrangements (Ind AS 111 ) (Contd…)
• Existence of a separate vehicle - Joint operation / Joint venture ?
‒ A joint arrangement that is not structured through a separatevehicle is a Joint Operation
‒ If assets and liabilities held in a separate vehicle, it can be eithera Joint Venture or Joint Operation
• Accounting treatment under Joint operation Each Operator recognises in its separate accounts -- assets it controls,expenditure and liabilities it incurs and its share of income earned
• Accounting Treatment under Joint Venture In Separate Accounts :- At Cost or FV (under Ind AS 109)
Equity Method not permitted (Carve-out)In CFS :- Valued at Equty Method
( Proportionate Consolidation ruled out) 58
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Disclosure of Interests in Other Entities Ind AS 112
• Disclosure of interest in any of the following
‒ Subsidiaries
‒ Joint arrangements (Joint operations or Joint ventures)
‒ Associates
‒ Unconsolidated structured entities
• Disclosure requirements excluded from Ind AS 110 and
Ind AS 111 - combined in this standard
59
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Disclosure of Interests in Other Entities. Ind AS 112(Contd.)
• Significant judgments and assumptions made in
determining
‒ Control
‒ Joint Control or Significant Influence
‒ The type of joint arrangement (i.e. Joint operation or Joint
venture) when arrangement has been structured through a
separate vehicle
• Prescribes separate lists of requirements of disclosure
in case of
‒ Interest in Subsidiaries
‒ Interest in Joint arrangements & Associates
‒ Interest in unconsolidated structured entities60
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Fair Value Measurements ( Ind AS 113)
• Ind AS 113
‒ Defines Fair Value
‒ Sets out in a single IFRS a framework for measuring fair value
‒ Requires disclosures about fair value measurement
• Definition of Fair Value
‒ Exit price
‒ To sell asset or paid to transfer a liability
‒ An orderly transaction
‒ At the measurement date
61
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Fair Value Measurements (Ind AS 113) (Contd.)
• Objective of IFRS 13
‒ To increase consistency and comparability through “Fair Value
hierarchy”
‒ Fair Value hierarchy categorizes and describes the inputs
used in valuation techniques in 3 levels - Level 1 Input, Level
2 Input and Level 3 Input
• Overview of Fair Value measurement approach
• Guidance on Measurement
• Valuation techniques
‒ Market approach / Cost approach / Income approach
• Elaborate disclosure requirements
62
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Regulatory Deferral Accounts Ind AS 114
Interim Solution – limited scope Standard
First time adopters can continue
-- to account “Regulatory Deferral Account balances”
as per previous GAAP.
( Guidance Note of ICAI on the subject considered as previous GAAP )
63
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Revenue from Contracts with customers Ind AS 115
(Contd..)
The Standard replaces the following Standards :
AS 9 Revenue Recognition IAS18
AS 7 Construction Contracts IAS 11
Includes : Revenue from Contracts with Customers
-- for sale of goods
-- for sale of services
-- for other income
-- for construction
Scopes out : lease contracts
insurance contracts
financial instruments etc64
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Revenue from Contracts with Customers (Ind AS 115)
• Uniform revenue recognition in complex transactions such
as long term service contracts and multiple element
arrangements
• A company should recognise revenue when it satisfies a
performance obligation by transferring a good or service to
a customer. A good or service is transferred to a customer
when the customer obtains control of that good or service.
65
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Revenue from Contracts with customers Ind AS 115 (Contd .)
When multiple elements / contracts are bundled together, apply
the following steps :
‒ Identify the contract(s) with the customer
‒ Identify the separate performance obligations in the
contract
‒ Determine the transaction price
‒ Allocate the transaction price to the separate performance
obligations
‒ Recognise revenue when (or as) the entity satisfies each
performance obligation
66
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Revenue from Contracts with customers Ind AS 115 (Contd..)
Combination of Contracts
Guidance for evaluation of performance obligations
Allocation of the transaction price to separate obligations
Revenue recognised :
as “ Control “ of the goods and services underlying the performance
obligation is transferred to the customer
Need to determine - Whether control is transferred
over time, if not, at a point of time
67
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Revenue from Contracts with customers Ind AS 115 (Contd..)
If performance obligation satisfied over time,
revenue is recognised by measuring progress towards complete
satisfaction ( by using either output or input methods )
---- and only if it can reasonably measure its progress, else,
revenue should be recognised,
only to the extent of contract costs incurred of which recovery is
probable
Application guidance for transactions, such as,
-- Sale with a right to return,
-- Warranties etc.
68
Differences between Ind AS and existing Indian
Accounting Standards (AS) (Contd…)
Revenue from Contracts with customers Ind AS 115 (Contd..)
Service Concession Arrangements (Appendix C & D )
Private sector operators
involved in provision of
public sector infrastructure assets and services
Grantor specifies the services for public
-- controls the infrastructure and the price
Recognition :
-- a financial asset (right to cash/other financial asset)
-- an intangible asset (right to receive cash from public on use
-- both.69
Carve-outs in Ind AS from IFRS
Carve-outs (continuing)
Conversion option embedded in FCCB (IndAs32/109)
Previous GAAP carrying value of PPE, Intangible Assets and
Investment Properties
--- deemed cost (IndAS 101)
Unrealised foreign exchange difference on long term monetary
assets and liabilities (Ind AS 21)
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Carve-outs in Ind AS from IFRS
Carve-outs (continuing)
Business Combinations ( Ind AS 103)
-- common control transactions
-- Gain on Bargain Purchase ( carve-out continuing in
Ind AS 28 also)
Statement of cash flows (Ind AS 7)
-- Interest and Dividend
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Carve-outs in Ind AS from IFRS
Options granted in IFRS deleted in Ind AS
Presentation in Financial Statements (Ind AS1)
-- classification of expenses
Nature of expense / functional ---- Nature of expense
-- Profit & Loss a/c and Other Comprehensive Income
Single or separate statement ---- Single
Employee Benefits ( IndAS 19)
-- Discount rates for Defined Benefit liabilities
market yields on Govt. Bonds or high quality corporate bonds
--- Market yields on Govt. Bonds
Investment Property (Ind AS 40)
-- Cost Model or Fair Value Model --- Cost Model
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Carve-outs in Ind AS from IFRS
Options granted in IFRS deleted in Ind AS (contd.)
Government Grants ( Ind AS 20)
--- Non-monetary Grants
Fair value or Nominal Value --- Fair Value
--- Govt, Grants releted to Assets
credited to Asset a/c or treated as deferred income
---- treated as deferred income
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Carve-outs in Ind AS from IFRS
Major Carve-outs proposed to be removed
(as these have been addressed by IASB)
* Revenue recognition from real estate sale agreement
(IAS 18, IAS11, IFRIC15, Ind AS 115)
* Accounting for Bearer Plants
(IAS 41, IAS16, Ind AS 41, Ind AS 16)
* Gains on Own Credit Deterioration
(IAS 39, Ind AS 39, IFRS 9, Ind AS 109)
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Carve-outs in Ind AS from IFRS (contd.)
Major Carve-outs proposed to be removed
(on reconsideration by the ICAI)
* Accounting for Associates ( Ind AS 28)
* Forex Gains/Losses on Long Term Monetary Items
(para 29 of Ind AS21)
* Comparatives in First Ind AS Financial Statements
(IndAS101)
New Carve-outs proposed
* Current/Non-Current classification in case of breach of loan
covenants – lender’s agreement after the B/S date (IndAs10 )
* Straight lining of inflation based lease rentals in Operating
Leases : ( ind AS 17)
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Income Computation and Disclosure Standards
* Income Computation & Disclosure Standards :
-- notified under Section 145 (2)
-- 10 Standards covered
( based on AS not IndAS )
* Conflict in Concepts under Ind As v/s
Concepts under Income Computation & Disclosure Standards
* Computation of Profits
-- Court judgements in Tax cases
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New IFRS Project on Leases
Leases
(Joint Proposal under consideration)
• According to the World Leasing Yearbook 2010, leasing
activity in 2008 amounted to US$ 640 billion. However, the
assets and liabilities arising from many of those contracts
are not shown in a lessee’s Statement of Financial Position
(Balance sheet)
• In the books of Lessee
‒ New project envisages that a lessee would recognise a liability
to make lease payments and a corresponding right to use
asset upon lease commencement
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New IFRS Project on Leases (Contd.)
Leases (Contd.)
In the books of Lessor
‒ There was a proposal to adopt “the receivable and residual
approach” (i.e. to allocate the carrying value of underlying asset
being leased between the right of use granted to the lessee and
the residual asset. However, at present the consensus is against
this approach in the books of lessor.)
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Thank you
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