Contents What is IGAAP What is IFRS IFRS application in India - - PowerPoint PPT Presentation
CNK & Associates LLP Overview of IND AS Schedule III of Companies Act, 2013 Major Differences in Existing AS and Ind AS. CA. Pareen Shah Partner CNK & Associates LLP Chartered Accountants Contents What is IGAAP What
Overview of IND AS
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1973 International Accounting Standards Committee (IASC) 2000 2001 onwards International Accounting Standards Board (IASB) Future International Accounting Standards (IAS) International Financial Reporting Standards (IFRS) IFRS series Standards IAS SIC Interpretations IFRS IFRIC Interpretations
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IFRS-IAS issued to date (45 standards, 28 interpretations)
Conceptual Framework 17 IFRS 28 IAS 20 IFRIC 8 SIC
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to follow IFRS from 2006 for CFS
doing a reconciliation with US GAAP
single set of standards – likely date 2018/2019
pressure
applicability
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Historical Cost is not relevant
Time Value of Money
Substance over Form
Balance Sheet is the focus rather than the statement of profit and loss
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IAS / IFRS Corresponding Ind AS IAS 1 Ind AS 1 IAS 2 Ind AS 2 IFRS 1 Ind AS 101 IFRS 2 Ind AS 102
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Particulars Phase I Phase II Voluntarily Year of Adoption 2016-17 2017-18 2015-16
thereafter Comparative year 2015-16 2016-17 2014-15
thereafter Opening BS 1st April, 2015 1st April, 2016 Covered Companies a) Listed All companies with net worth equal to
500 cr All listed companies, and those in the process
getting listed Any company could voluntarily adopt Ind AS b) Unlisted Companies having a net worth of Rs. 250 cr
c) Group Applicable to holding, subsidiaries, joint ventures, or associates of companies covered under (a) and (b) above
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2016-17 2017-18 April March March April Opening balance sheet 1 April 2016 Comparative for 31 March 2017 Financial Statements for the year ended 31 March 2018
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Current Requirements Banking & Insurance Companies * NBFC’s - Phase I NBFC’s - Phase II Year
Adoption FY 2018 – 19 FY 2018 – 19 FY 2019 – 20 Comparative Year FY 2017 – 18 FY 2017 – 18 FY 2018 – 19
* Deferred till FY 2021-22
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the Indian Accounting Standards (Ind AS)…’
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Companies Act
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Also, applicable for Consolidated Financial Statement.
disclosures on face of the Balance Sheet & Profit and Loss Account.
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Revenue or Rs. 10 lacs
with Ind AS
instead of Indirect Method.
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Equivalents, etc. under “ Financial Assets.”
Sheet.
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1. Compliance with the Companies Act , AS to have precedence over the requirements of the Schedule III. 2. Notes to accounts to contain information :
those statements and
statements. 3. Each item be cross referenced to related information in the notes to accounts. 4. The corresponding amounts for the immediately preceding year to be shown for all items in financial statements including notes except for first financial statements. ( Not too many or too short)
AS 6: Depreciation Accounting AS 10: Accounting for Fixed Assets AS 10 (Revised): Accounting for Property, Plant & Equipments Ind AS 16 : Property, Plant and Equipment
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Act 2013)
applied
classified as PPE
year end
AS 26: Intangible Assets Ind AS 38: Intangible Assets
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Indian GAAP Ind AS AS 26 Ind AS 38 Measurement: Measured only at cost. Measured either at cost or revalued amounts. Useful Life: Useful life may not be indefinite. There is a presumption that useful life of the intangible assets will not exceed 10 years from the date when asset was available for use. Schedule II requires AS 26 to be followed Useful life to be estimated (may be finite
Goodwill: Goodwill arising on amalgamation in the nature of purchase is amortised over a period not exceeding 5 years (AS 14) Goodwill is not amortised subject to annual impairment test or when there is an indication for impairment.
AS 28: Impairment of Assets Ind AS 36: Impairment of Assets
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Indian GAAP Ind AS AS 28 Ind AS 36 Reversal of impairment loss for goodwill: Can be reversed only if the impairment was caused by a specific event of an exceptional nature which is not expected to recur and other subsequent external events have occurred which have reversed the effect of that event. Reversal of impairment of goodwill in a subsequent period or in a subsequent interim period is prohibited
AS 24 : Discontinuing Operations AS 10 : Accounting for Fixed Assets Ind AS 105 : Non-current Assets Held For Sale and Discontinued Operations
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Indian GAAP Ind AS AS 24, AS 10 Ind AS 105 Recognition, Measurement & Presentation: No Standard currently applicable, but AS 10 deals with asset disposal. Such assets are recorded at lower of their net book value and net realisable value and shown separately in the FS. Any expected loss is recognised in the PL Recognition to be done when asset is available for immediate sale and the sale is highly probable. Depreciation ceases from the date of recognition. Measured at lower of its carrying value and fair value less cost to sell. Such assets to be presented separately in BS Classification:
detailed formal plan and its announcement. When it has either been disposed or is classified as held for sale.
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Indian GAAP Ind AS AS 24 Ind AS 105 Period of disposal for non-current assets held for sale: Indian GAAP does not specify any time-frame for sale of discontinuing
sale. The disposals should be completed within a year, with limited exceptions. Disclosure in financial statements: Items of fixed assets retired from active use and held for disposal are shown separately in the financial statements. Non current assets classified as held for sale are shown separately in the financial statements.
AS 13 (revised): Accounting for Investments Ind AS 40: Investment Property
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Indian GAAP Ind AS AS 13 Ind AS 40 Definition and Scope: AS 13 defines Investment Property (IP) as an investment in land or building that are not intended to be occupied substantially for use by, or in the
IP is land or building or both held (whether by an owner or by a lessee under a finance lease) to earn rentals
Measurement: Classified as long term investments and measured at cost less impairment. As per Schedule III to the Companies Act, 2013, they are classified as non current investments. IP is measured at cost. Fair valuation model is not permitted. Detailed disclosures pertaining to fair value to be given. Transaction costs are to be included in the initial measurement.
AS 2: Valuation of Inventories Ind AS 2: Inventories
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Indian GAAP Ind AS
AS 2 Ind AS 2 Deferred settlement terms: The cost of inventories will generally be its purchase price, unless stated
Difference between the purchase price of inventories for normal credit terms and amount paid for deferred settlement terms is recognised as an interest expense.
AS 22 : Accounting for taxes on Income Ind AS 12 : Income taxes
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Indian GAAP Ind AS AS 22 Ind AS 12 Deferred income taxes: Deferred taxes are computed for timing differences in respect of recognition of items of profit or loss or financial reporting and income tax reporting. (Income Statement Approach) Deferred taxes are computed for temporary differences between carrying amount of an asset or liability in the balance sheet and its tax base. (Balance Sheet Approach) Recognition of Deferred Tax Assets (DTA) on unused tax losses etc.: Recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realised. DTA is recognised to the extent that it is probable that future taxable profit will be available against which the DTA can be utilised.
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Indian GAAP Ind AS AS 22 Ind AS 12 Recognition of asset on MAT credit carry forward: It is considered as prepaid tax and recognised as an asset (not as deferred tax) to the extent there is convincing evidence that MAT credit will be used in future years to reduce the regular tax liability It is recognised as a Deferred Tax Asset if it is probable that MAT credit can be used in future years to reduce the regular tax liability. Significant disclosure requirements: Not required Additional disclosures like rate reconciliation, tax holidays and their expiry, and unrecognised deferred tax liability on undistributed earnings of subsidiaries, branches, associates and joint ventures are required
AS 19 : Leases Ind AS 17 : Leases
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Indian GAAP Ind AS AS 19 Ind AS 17 Interest in leasehold land: Leasehold land is accounted for as fixed assets, not covered by AS 19 To be recognised as Operating or Finance Lease as per definition and classification criteria. Operating lease rentals – Recognition: Lease payments under an operating lease should be recognised as an expense in the statement of PL on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit. There is a carve-out as per which it is recognised as per lease agreement terms including for the escalation of Operating Lease rentals that are in line with the expected general inflation. Otherwise, on a straight line basis over the lease term.
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Indian GAAP Ind AS AS 19 Ind AS 17 Operating leases – incentives: No specific guidance Lease incentives (e.g. rent free period) for Operating Leases are recognised by lessor / lessee as a reduction of rental income / expense respectively, over the lease term.
AS 12 : Accounting for Government Grants Ind AS 20 : Accounting for Government Grants and disclosure of Government Assistance
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Indian GAAP Ind AS AS 12 Ind AS 20 Recognition: Capital Approach
Income Approach Government Grants are recognized as income to match them with related costs. Grants related to assets, including non monetary grants at fair value should be presented in the balance sheet only by setting up the grant as deferred income. Grants in the nature of promoter's contribution: Grants to be recognized directly in Capital Reserve. Grants will be recognised as income over the periods necessary to match them with the related costs which they intend to compensate, on a systematic basis.
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Indian GAAP Ind AS AS 12 Ind AS 20 Repayment of Government Grants relating to Fixed Assets: Recognised either by increasing the carrying amount of the asset or reducing the deferred income or capital reserve. If the carrying amount is increased, depreciation on the same is provided prospectively. Can be classified as an extra ordinary item. Recognised by reducing the deferral income balance by the amount payable. Prohibited to be classified as an extra
Non monetary government grants: Non monetary grants free of costs are accounted for at nominal values. The asset and grant to be accounted for at fair value.
AS 5 : Net Profit or Loss for the period, Prior Period Items and Changes in Accounting policies Ind AS 8 : Accounting Policies, Changes in Accounting Estimates and Errors
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Indian GAAP Ind AS AS 5 Ind AS 8 Changes in Accounting policies: To be made only if it is required by statute, for compliance with AS or for a more appropriate presentation of FS on prospective basis (except depreciation where it was retrospective) Impact on FS to be disclosed. Retrospective application for changes in accounting policies is required. A BS is required for earliest affected period. New Accounting pronouncements: No disclosures in this regard. Non application of new accounting pronouncements that have been issued but are not effective as at the end of reporting period needs to be disclosed with possible impact on FS.
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Indian GAAP Ind AS AS 5 Ind AS 8 Errors: They are incomes or expenses which arise in the current period as a result of errors or omissions in the preparation of FSs. Prior Period items are included in determination of net profit or loss for the period in which the error is discovered. It is disclosed separately in FS such that its impact on current profit or loss can be perceived. Broader definition – includes errors arising from the failure to use, or misuse of reliable information that:
were approved,
(can be of current or previous years errors also) Material prior period errors are corrected retrospectively by restating the comparative amounts for prior periods in which error occurred. If the error occurred before the earliest period presented, it is done by restating opening balance sheet.
AS 4 : Contingencies and Events occurring after the Balance Sheet date Ind AS 10 : Events after the Reporting Period
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Indian GAAP Ind AS Revised AS 4 Ind AS 10 Adjusting Event: No specific guidance When there is a breach of a long term loan arrangement on or before the end of the reporting period with the effect that liability becomes payable on demand on the reporting date, the agreement by lender before the approval of FSs for not to demand payment due to the breach, will be considered as an adjusting event. Dividend: Dividend proposed or declared after balance sheet date but before approval of FS is a non adjusting event Dividend proposed or declared after reporting period does not meet the criteria of present
the Notes in FS.
AS 11 : The effects of changes in foreign exchange rates Ind AS 21 : The effects of changes in foreign exchange rates
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Indian GAAP Ind AS
AS 11 Ind AS 21
Recognition of exchange differences: Exchange differences arising
translation
monetary items are recognized as income or expense in the period in which they arise. Companies can also elect to capitalize exchange differences on long term foreign currency monetary items to fixed assets (to the extent they relate to the acquisition of such fixed assets) or elect to account for such exchange differences in the ‘Foreign Currency Monetary Item Translation Difference Account’ which is subsequently amortized through PL. To be charged to Statement of PL in all cases However, option to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP (i.e. Para 46 / 46A of AS 11). Once exercised, such a policy decision shall be irrevocable.
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Indian GAAP Ind AS
AS 11 Ind AS 21
Exchange differences - Net investment in non-integral foreign operation: Recognised in ‘Foreign Currency Translation Reserve’ and recognised as income or expense at the time of disposal of operation Separate Financial statements Recognised in PL in the period it arises Consolidated Financial statements Recognised in OCI and reclassified from equity to PL on disposal of the net investment However the company may continue the policy adopted for exchange differences recognised in financial statements for the period ending immediately before the beginning of first Ind AS financial reporting period as per previous GAAP.
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Indian GAAP Ind AS
AS 11 Ind AS 21
Forward exchange contracts (FECs) covered in AS 11: Not intended for trading or speculation
premium
discount is amortised as expense or income over the life of the contract
in the statement of profit and loss in the reporting period in which the rates change. Intended for trading or speculation
marked to its current market value and the gain or loss on the contract is recognised It excludes from its scope FECs, however they are accounted for as a derivative. (covered under Ind AS 109)
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Indian GAAP Ind AS AS 11 Ind AS 21 Translation in the consolidated financial statements: Integral foreign Operation:
which market value was determined
Historical/ Average rate Non- Integral foreign Operation:
There is no classification as integral or non-integral foreign operations. Assets & Liabilities- Translated at closing rate Income & Expenses- Translated at Actual/Average rates
AS 30: Financial Instruments: Recognition and Measurement AS 31: Financial Instruments: Presentation AS 32: Financial Instruments: Disclosures ICAI announcement on Accounting for Derivatives Ind AS 107: Financial Instruments - Disclosures Ind AS 109 : Financial Instruments Ind AS 32: Financial Instruments - Presentation
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A financial instrument (FI) is any contract that gives rise to a financial asset to
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Key definitions:
Financial Asset A financial asset is any asset that is: a) cash; b) an equity instrument of another entity; c) a contractual right: i. to receive cash or another financial asset from another entity; or ii. to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity… Financial Liability A financial liability is any liability that is: A contractual obligation: a) To deliver cash or another financial asset to another entity; or b) To exchange financial assets or financial liabilities with another Entity under conditions that are potentially unfavourable to the Entity
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Key definitions:
Equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
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Indian GAAP Ind AS
AS 11, 30, 31, 32, ICAI announcements, GN on derivatives Ind AS 107, 109, 32 Recognition: Financial assets and liabilities are initially recorded at cost, including transaction cost. All financial instruments are recognised initially at their fair value plus/minus directly attributable transaction costs (except those classified as fair value through profit
expensed as incurred). The initial difference that arises from the fair valuation of such financial assets and liabilities is accounted for to reflect the substance of the underlying transaction.
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Indian GAAP Ind AS AS 11, 30, 31, 32 / ICAI Ind AS 107, 109, 32 Categorisation and subsequent measurement: Investments are classified into:
at lower of cost and fair value
term Investments: measured at cost less diminution,
than temporary Financial assets classified are measured at:
Financial liabilities classified are measured at:
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Illustrative classification into FA, FL, Equity and other assets (OA) and liabilities (OL):
FA FL Equity OA OL Investments Borrowings (incl loans from related parties) Share Capital Fixed Assets (incl Assets held for sale) Provisions Loans and Advances Salary and Wages payable Reserves and Surplus Capital Advances Advance from Customers Trade Receivables Trade Payables Advances to Subsidiary Deferred Tax Liabilities Cash / Bank balances Deposits (including from related parties) Balances with govt authorities (MAT, VAT recoverable) Statutory remittances Interest accrued
Other Payables Inventories Security deposits Unpaid Dividend Prepaid Expenses
No Equivalent Standard in I GAAP Ind AS 113: Fair Value Instruments
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Full Information available If not available, use quoted market prices for similar assets and liabilities If not available, use other valuation techniques (most subjective)
Level 1 Level 2 Level 3
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