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Decoding the differencesComparison of Ind AS with IFRS
A summary of thesignificant differencesbetween Ind AS and IFRS - impact andimplications of changeson financial reporting.
February 2011
www.pwc.com/india
Comparison of Ind AS with IFRS 2
ContentsIntroduction 3
India’sConvergencewithIFRS–Recentdevelopments 3
Whythispublication? 3
IndASvis-a-visIFRS–Anoverview 4
IndASandIFRS–Acomparison 6
IndAS101First-timeAdoptionofIndianAccountingStandards 6
IndAS103BusinessCombinations 9
IndAS1PresentationofFinancialStatements 10
IndAS7StatementofCashFlows 11
IndAS11ConstructioncontractsandIndAS18Revenue 12
IndAS19EmployeeBenefits 13
IndAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance 14
IndAS21TheEffectsofChangesinForeignExchangeRates 14
IndAS32FinancialInstruments:Presentation 15
IndAS24RelatedPartyDisclosures 16
IndAS27ConsolidatedandSeparateFinancialStatements 17
IndAS28InvestmentsinAssociates 18
IndAS33EarningsperShare 18
IndAS39FinancialInstruments:RecognitionandMeasurement 19
IndAS40InvestmentProperty 19
Otherdifferences 20
ChallengesAhead 22
AppendixA-ListofIndAS 23
AppendixB-DifferencesbetweennearfinalandfinalIndAS 25
AppendixC-IASB’songoingprojects 27
Wecanteamup 28
Comparison of Ind AS with IFRS 3
India’s Convergence with IFRS – Recent developments
IndianAccountingStandards(IndAS)beingnotifiedbytheMCA
OnFebruary25,2011,theMinistryofCorporateAffairs(‘MCA’)hasissuedapressreleasestatingthat35‘IndAS’arebeingnotifiedandplacedontheMCAwebsite.Withthis,theresultsofIndia’scurrenteffortsofconvergencetoInternationalFinancialReportingStandards(‘IFRS’)areknownandthefinalnewstandardsareavailableforreference,althoughtheireffectivedateistobenotifiedbytheMCAatalaterdate,aftervariousissues(includingtaxrelatedissues)areresolvedwithinvariousdepartmentsofthegovernment.Correspondingchangestocorporatelawsareanticipatedsoontoenablethestandardstocomeintoeffect.
ThefinalIndASarelistedinAppendixAandavailableathttp://www.mca.gov.in/Ministry/accounting_standards.html.
ThedifferencesbetweenthefinalIndASandthenearfinalIndASissuedbytheInstituteofCharteredAccountantsofIndia(‘ICAI’)onJanuary14,2011aresummarisedintheAppendixB.
ExposureDraftontherevisedFrameworkforthePreparationandPresentationofFinancialStatements
OnJanuary18,2011,theAccountingStandardsBoard(‘ASB’)oftheICAIissuedtheExposureDraftontheFrameworkforthePreparationandPresentationofFinancialStatementsunderIndAS(similartoIFRSFramework),whichwasopenforcommentstillJanuary28,2011.Theexposuredraftisavailableathttp://220.227.161.86/21510ed180111a.pdf.
Why this publication?
IfyouarealreadyusingIFRSasissuedbytheInternationalAccountingStandardsBoard(‘IASB’)orstartedtheconversionprocessusingIFRS,thenthispublicationwillbeusefulinhelpingtoidentifythekeyareaswheredifferencesexistbetweenIndASandIFRS.ItisimportanttounderstandthatcompliancewithIndASisunlikelytoresultincompliancewithIFRStherebycompaniesmaynotnecessarilyachievedualcompliancegiventhenumberandnatureofdifferences.Accordingly,whenIndianentitiesfiletheirIndASfinancialstatementswithregulatoryauthorities,theymayneedtomakesuitableadjustmentstocomplywithIFRSsoastomakeanunreservedstatementofcompliancewithIFRSasissuedbytheIASB.Nevertheless,ifacompany’sgoalistominimisedifferencesfromIFRS,andisthereforewillingtoforegosomeoftherelaxationsconferredbyIndASrelativetoIFRS,thecarefulselectionofpoliciesandoptionsmayenablecompaniesexceptcertainsectorslikerealestate,toeliminatemanydifferences.
ThispublicationsummarisesthesignificantdifferencesbetweenIndASandIFRSasatthedateofpublication,andprovidesanindicationofwhichGAAPdifferencesareavoidableifthepreparersowishes.However,IFRSisamovingtargetwithanumberofIASB’songoingprojects(listedinAppendixC),whichoncefinalisedcouldbringfurtherchangesinIndASor,alternatively,widenthegapbetweenthetwosetsofstandards.CompaniesareencouragedtokeeptrackofchangesinIFRSandassesstheirimplicationsontheirfinancialstatements.
PricewaterhouseCoopersiscommittedtotakeeverypossiblesteptoassistyouwithyourconversiontoIndASorIFRS,includingkeepingyouupdatedregardingthelatestdevelopmentsinIndASorIFRS.TolearnaboutcurrentdevelopmentsandhowwecanhelpyouinIndASorIFRSconversion,visitourwebsiteathttp://www.pwc.com/in/en/services/IFRS/IFRS-intro.jhtml orspeaktoyourlocalPwCcontact.
Introduction
Ind AS vis-a-vis IFRS – An overviewThere are differences between IFRS and Ind AS. Some of these differences stem from the number of standards itself, while other stem from changes made while developing the Ind AS. Currently, IFRS consists of 38 standards and 26 interpretations, while the MCA has placed only 35 Ind AS (inclusive of 24
interpretations) on its website (see Appendix A for the list of final Ind AS). A high level categorisation of differences is provided below along with the list of IFRS pronouncements not currently included under Ind AS:
A. Unavoidable differences between Ind AS and IFRS B. Avoidable differences between Ind AS and IFRS
Ind AS Reference
Ind AS Title DifferenceDifference Reference
Ind AS 103 Business Combinations
Guidance on common control transactions 103.1
Accounting for the gain on a bargain purchase
103.2
Ind AS 11 Construction Contracts IFRIC 15 ‘Agreement for the construction of real estate’ scoped out of Ind AS 18 Revenue
11.1
Ind AS 18 Revenue
Ind AS 19 Employee Benefits
Recognition of actuarial gains and losses – other long term employee benefits
19.1.2
Elimination of the requirement to use a high quality corporate bond rate to discount employee benefit obligations
19.2
Ind AS 32Financial Instruments: Presentation
Exception to the definition of a financial liability
32.1
Ind AS Reference
Ind AS Title DifferenceDifference Reference
Ind AS 101First-time Adoption of Indian Accounting Standards
Transition date and comparative requirements 101.1
Reconciliation requirements to explain transition from previous GAAP
101.2
Transitional relief from retrospective application of Ind AS 16 PP&E, Ind AS 40 Investment properties and Ind AS 38 intangible assets
101.3Transitional relief from retrospective application of effective interest method or impairment requirements for financial instruments carried at amortised cost
Exemption regarding translation of long-term monetary assets and liabilities denominated in a foreign currency
Ind AS 21The Effects of Changes in Foreign Exchange Rates
Option to recognise exchange differences arising on translation of long term monetary items in equity
21.1
Ind AS 24 Related Party Disclosures Overriding nature of statute for related party disclosures 24.1
Ind AS 28 Investments in Associates Different accounting periods and policies of associates 28.1
Ind AS 39Financial Instruments: Recognition and Measurement
Change in the fair value of a financial liability due to the entity’s own credit risk
39.1
Comparison of Ind AS with IFRS 5
C. Textual differences that will not prevent convergence Ind AS issued but to be modified and/or notified later
IFRS pronouncements not issued or early adopted under Ind AS
IndASReference
IndASTitle DifferenceDifferenceReference
IndAS101 First-timeAdoptionofIndianAccountingStandards
DefinitionofpreviousGAAP
101.4
IndAS1 PresentationofFinancialStatements
SinglestatementofProfitandloss 1.1
Classificationofexpenserecognisedinprofitorloss 1.3
IndAS7 StatementofCashFlows ClassificationofinterestanddividendinCashflowstatement 7.1
IndAS19 EmployeeBenefits Recognitionofactuarialgainsandlosses–postemploymentdefinedbenefitplan 19.1.1
IndAS20 AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance
Eliminationofoptiontomeasurenon-monetarygovernmentgrantsatnominalvalue
20.1
Eliminationofoptiontopresentgrantsasdeductioninarrivingatthecarryingamountofasset
20.2
IndAS24 RelatedPartyDisclosures Changeindefinitionofclosefamilymembers 24.2
Additionalguidanceforaggregationoftransactions 24.3
IndAS27 Consolidatedfinancialstatements
Formatofconsolidatedfinancialstatements 27.1
IndAS33 EarningsperShare CompulsorydisclosureofEPSinstandalonefinancialstatements 33.1
AdjustmentstotheEPScalculation 33.2
IndAS40 InvestmentProperty Eliminationofoptiontorecogniseinvestmentpropertiesatfairvalue 40.1
IndASReference
IndASTitle Remarks
IndAS104* InsuranceContracts Thisstandardshallcomeintoeffectforinsurancecompaniesfromthedatetobeseparatelyannounced.
IndAS106* ExplorationforandEvaluationofMineralResources
Thisstandardwillbeappliedwithmodificationfromadatetobenotifiedlateron.
IndAS18 Revenue Forrateregulatedentities,thisstandardshallstandmodified,whereandtoextenttherecognitionandmeasurementofrevenueofsuchentitiesisaffectedbyrecognitionandmeasurementofregulatoryassets/liabilitiesaspertheGuidanceNoteonthesubjectbeingissuedbytheICAI.
AppendixCofIndAS17**
DeterminingwhetheranArrangementcontainsaLease
Notificationofthisappendix(IFRIC4equivalent)hasbeendeferred.Theeffectivedateforitsimplementationwillbeannouncedseparately.
AppendixAofIndAS11**
ServiceConcessionArrangements Notificationoftheseappendices(IFRIC12andSIC12equivalents)
hasbeendeferred.Theeffectivedatesforimplementationoftheseappendiceswillbeannouncedseparately.AppendixBof
IndAS11**ServiceConcessionArrangements:Disclosures
IFRSReference
IFRSTitle Possibleconsiderations
IFRS9 FinancialInstrumentsIFRS9is,itself,evolvingandcertaincomponents(suchashedgeaccountingandimpairment)arestillbeingdeveloped
IAS26AccountingandReportingbyRetirementBenefitPlans
Notrelevantforcompanies
IAS41* AgricultureMajorconcernovertheuseoffairvalueinagriculturesectorinIndia.
IFRIC2Member’sshareinCooperativeEntitiesandsimilarinstruments
Notrelevantforcompanies
IFRIC15Agreementforconstructionofrealestate
Concernoverrelevanceofresultsreportedbyrealestatecompaniesifsalesarerecognizedona‘completion’basis
*In the potential delay in notification of these standards, companies may formulate accounting policies for relevant transactions that are consistent with the principles in other standards or otherwise in accordance with the Ind AS 8 hierarchy.
**Companies may early adopt these appendices under Ind AS 8 hierarchy when selecting accounting policies. Once selected, accounting policies should be applied consistently.
Ind AS and IFRS – A comparisonInd AS 101 First-time Adoption of Indian Accounting Standards
Difference 101.1 GAAP difference? Avoidable?
Transition date and comparative requirements Yes Yes*
IFRS 1 defines the transition date as the beginning of the earliest period for which an entity presents full comparative information under IFRS. Ind AS 101 provides that the date of transition is the beginning of the current period. In addition, it provides an option to present comparative financial statements in accordance with Ind AS only on a memorandum basis, in which case the beginning of comparative period would be considered to be the deemed date of transition only for memorandum period. Under both scenarios of Ind AS, companies are required to present their prior year financial information that was prepared using the existing Indian GAAP. This comparative information must be reclassified to follow the disclosure form and content of Ind AS.
PwC observation
If the company decides to present comparative information in accordance with Ind AS, it would have two transition dates (one for the comparative period for memorandum reporting and another for the primary reporting period) and an additional obligation to present reclassified numbers as per existing Indian GAAP. The fact that the transitional date is a year later under Ind AS even for those companies that provide Ind AS comparatives on a memorandum basis – it may create unavoidable differences in the year of transition compared with a first-time adopter of IFRS as issued by IASB. However, assuming the Ind AS implementation date is 1st April, 20x1, if an entity chooses to comply with IFRS from the subsequent year (i.e. 31st March 20x3), it would also have a transition date of 1st April 20x1 and differences may be avoided prospectively.
Such presentation challenges may discourage companies from providing comparative information under Ind AS. For example, there could be three different balance sheets under Ind AS, i.e. as at 31st March 20x1 (existing Indian GAAP), 31st March 20x1 (Ind AS comparative period), and 1st April 20x1 (opening balance sheet for first Ind AS statutory financials). The required reconciliations between the two different transition dates may also pose a challenge to those companies that elect to present Ind AS comparatives.
* Potentially avoidable from the second year of compliance with Ind AS
Comparison of Ind AS with IFRS 7
Difference 101.2 GAAP difference? Avoidable?
Reconciliation requirements to explain transition from previous GAAP (Refer 101.4 for definition of previous GAAP ) Yes Yes
IFRS 1 requires reconciliations for opening equity, total comprehensive income, the cash flow statement (if any) and closing equity for the comparative period to explain transition from previous GAAP. Ind AS 101 provides an option to provide comparative period financial statements on a memorandum basis and consequently reconciliation that are similar to IFRS. Entities that do not provide comparatives per Ind AS on a memorandum basis need not provide a reconciliation for total comprehensive income, the cash flow statement or closing equity in the first year of transition, but are expected to disclose significant differences pertaining to total comprehensive income (or if did not report such a total, Profit or loss).
PwC observation
Ind AS has significantly fewer disclosure requirements than IFRS, for companies that do not provide comparatives. Companies would have to weigh out the cost-benefit aspects of the few disclosures per Ind AS, as stakeholders may wish to know more and potentially get as much as reconciliation information normally provided under IFRS.
Difference 101.3 GAAP difference? Avoidable?
Inclusion/modification of existing exemptions to make them relevant for India Yes Yes
• Transitional relief from retrospective application of Ind AS 16 Property, Plant and Equipment, Ind AS 40 Investment properties and Ind AS 38 intangible assetsInd AS 101 provides an option to use previous GAAP carrying values at the date of transition to Ind AS for all its property, plant and equipment. The carrying amount for these assets on transition become their deemed cost after adjusting for decommissioning liabilities as per Para D21 and D21A of Ind AS 101. A similar option can also be applied for investment properties and intangible assets.
• Transitional relief from retrospective application of effective interest method or impairment requirements for financial instruments carried at amortised costIf it is impracticable to apply retrospectively the effective interest method or the impairment requirements of Ind AS 39 for financial instruments carried at amortised cost, Ind AS 101 requires that the fair value of the financial instruments at the date of transition to Ind AS be used as the new amortised cost of that financial instrument at the date of transition to Ind AS.
• Exemption regarding retranslation of long-term monetary assets and liabilities denominated in a foreign currencyInd AS 101 allows an entity to exercise the option in paragraph 29A of Ind AS 21 (to recognise unrealised gains and losses on any long-term monetary assets or liabilities in equity) either retrospectively or prospectively.
PwC observation
• Transitional relief from retrospective application of effective interest method or impairment requirements for financial instruments carried at amortised costThe standard uses the term ‘impracticable’ to claim the exemption from the retrospective application. However, ‘impracticable’ is a high threshold, and hence it is unlikely that a GAAP difference will arise.
If an entity elects to make use of any of the above exemptions, the resultant financial statements will not comply with IFRS.
Comparison of Ind AS with IFRS 8
Difference101.4 GAAPdifference? Avoidable?
Definition of previous GAAP No --
IFRS1definespreviousGAAPasthebasisofaccountingthatafirst-timeadopterusedimmediatelybeforeadoptingIFRS.IndAS101requirescompaniestoconsiderexistingnotifiedIndianaccountingstandardsaspreviousGAAPwhentheytransitiontoIndAS.
(Also refer consequential amendment 1 and minor difference 1 & 2 in ‘Other differences’ section)
Comparison of Ind AS with IFRS 9
Difference103.1 GAAPdifference? Avoidable?
Guidance on common control transactions Yes No
IFRS3excludesfromitsscopebusinesscombinationsofentitiesundercommoncontrol.IndAS103givesdetailedguidanceforcommoncontroltransactions,andrequiresthatbusinesscombinationsinvolvingentitiesorbusinessesundercommoncontrolshouldbeaccountedforusingthepoolingofinterestsmethod.Theexcessoftheconsiderationgivenovertheamountofsharecapitalisrecordedasgoodwill,whereasshortfallistreatedascapitalreserve.Italsorequiresthatfinancialinformationinrespectofpriorperiodshouldberestatedasifthebusinesscombinationhasoccurredatthebeginningoftheearliestperiodpresentedinthefinancialstatements,irrespectiveoftheactualdateofcombination.
PwC observation
SinceIFRS3excludescommoncontroltransactions,entitiestypicallyelectastheiraccountingpolicyeithertheapplicationofthepoolingofinterestsmethod(i.e.predecessoraccounting),orthefairvaluemethodrequiredforallotherbusinesscombinationswithinthescopeofIFRS3.UnlikeIndAS,nonewgoodwillariseswhileusingthepoolingofinterestmethodunderIFRS.Theexcessorshortconsiderationgivenoveraggregatebookvalueoftheassetsandliabilitiesoftheacquiredentityisincludedinretainedearningsorinaseparatereserve.
IndAS103BusinessCombinations
Difference103.2 GAAPdifference? Avoidable?
Accounting for the gain on a bargain purchase Yes No
IFRS3requiresanygainarisingfromabargainpurchase(i.e.wherethecostofacquiringabusinessislessthanthefairvalueoftheidentifiableassetsandliabilitiesacquired)exceptarisingincommoncontroltransactionstoberecognisedinprofitorloss.IndAS103requiresthisgaintoberecognisedinothercomprehensiveincomeandaccumulatedinequityasacapitalreserve,unlessthereisnoclearevidencefortheunderlyingreasonforclassificationofthebusinesscombinationasabargainpurchase,inwhichcaseitshouldberecogniseddirectlyinequityasacapitalreserve.
AsimilarrequirementalsoappliestoassociatesaccountingforinaccordancewithIndAS28.
Comparison of Ind AS with IFRS 10
Difference1.1 GAAPdifference? Avoidable?
Single statement of Profit and loss No --
IAS1,PresentationofFinancialStatements,providesanoptioneithertofollowthesinglestatementapproachortofollowthetwostatementapproachtothepreparationoftheStatementofComprehensiveIncome.Thesinglestatementapproachrequiresallitemsofincomeandexpensetoberecognisedinthestatementofcomprehensiveincome,whilethetwostatementsapproachrequirestwostatementstobeprepared,onedisplayingcomponentsofprofitorloss(separateincomestatement)andtheotherbeginningwithprofitorlossanddisplayingcomponentsofothercomprehensiveincome.IndAS1allowsonlythesinglestatementapproach,andrequiresthistobetitledthe‘StatementofProfitandLoss’.CorrespondingamendmentshavebeenmadetootherIndAS.
PwC observation
TherequirementperIndASisinlinewithanIASBexposuredraftonfinancialstatementpresentationissuedinMay2010,whichrequiredthesinglestatementapproach.SincethesinglestatementapproachisanacceptableoptionunderIFRS,itwillnotprecludeconvergencewithIFRS.
Difference1.2 GAAPdifference? Avoidable?
Statement of changes in equity to be shown as a part of the balance sheet Not known --
IAS1requiresthepreparationofaStatementofChangesinEquityasaseparatestatement.IndAS1requiresthestatementofchangesinequitytobeshownasapartofthebalancesheet.
PwC observation
InIndia,theformatoffinancialstatementsofcompaniesisgovernedbytheScheduleVItoCompaniesAct.TheMCAhasrecentlyissuedRevisedScheduleVIwhichprescribestheformatoffinancialstatementsunderexistingaccountingstandardsandnotunderIndAS.SinceScheduleVIinlinewithIndAShasnotbeenissuedyet,henceatthispointoftimeit’snotknownwhethertheabovedifferencewouldresultinaGAAPdifference.
IndAS1PresentationofFinancialStatements
Difference1.3 GAAPdifference? Avoidable?
Classification of expense recognised in profit or loss No --
IAS1requiresanentitytopresentananalysisofexpensesrecognisedinprofitorlossusingaclassificationbasedoneithertheirnatureortheirfunctionwithintheentity.IndAS1requiresexpensestobeclassifiedbynature.
(Also refer consequential amendment 2 and minor differences 3 in ‘Other differences’ section)
Comparison of Ind AS with IFRS 11
IndAS7StatementofCashFlows
Difference7.1 GAAPdifference? Avoidable?
Classification of interest and dividend in cash flow statement No --
IAS7givesanoptiontoclassifydividendspaidasanitemofoperatingactivity.Further,incaseofotherthanfinancialentities,IAS7givesanoptiontoclassifyinterestpaidandinterestanddividendsreceivedasoperatingorfinancingcashflows.However,IndAS7doesnotprovidesuchoptionsandrequiresasfollows:
ForFinancialentities
Items Classification in cash flow statement
Interestanddividendsreceived OperatingActivities
Interestpaid OperatingActivities
Dividendspaid FinancingActivities
Forotherentities
Items Classification in cash flow statement
Interestanddividendsreceived InvestingActivities
Interestpaid FinancingActivities
Dividendspaid FinancingActivities
Comparison of Ind AS with IFRS 12
IndAS11ConstructioncontractsandIndAS18Revenue
Difference11.1 GAAPdifference? Avoidable?
IFRIC 15 ‘Agreement for the construction of real estate’ scoped out of IAS 18 Revenue Yes No
IAS18Revenueappliestoagreementsfortheconstructionofrealestate,unlessthebuyerisabletospecifythemajorstructuralelementsofthedesignofrealestatebeforeconstructionbegins,and/orspecifymajorstructuralchangesonceconstructionisinprogress.Formanyrealestatedevelopers,applicationofIAS18requiresrevenue(andprofit)fromsaletoberecognisedoncompletionoftheconstructionandhand-overofcontrolofthepropertytothebuyer.
IndAS,however,bringsrevenuetransactionsofrealestatedevelopersintothescopeofIndAS11.Accordingly,revenue(andprofit)isrecognised,usingapercentageofcompletionmethod,overtheconstructionperiod.
PwC Observation
UnderexistingIndianGAAP,companiesrecogniserevenuefromagreementsfortheconstructionofrealestatebasedonapercentageofcompletionmethod.TheamendmentstoIAS11andIAS18inarrivingattheIndASequivalentstandardsallowrealestatedeveloperstocontinuetousetheirexistingaccountingpolicy.ThisisasignificantdeparturefromIFRSandwillpreventfinancialstatementsissuedbyrealestatedevelopersunderIndASfrombeingcomparablewiththeirinternationalcounterparts.
Inaddition,thechangetothescopeofIndAS11couldbeconstruedasbringingallagreementsofrealestatedevelopmentintothescopeofIndAS11,notmerelythoserelatingtoconstructionofrealestate.Ifthefinalstandardcontinuestousethepresentwording,andintheabsenceofadefinitionofa‘realestatedeveloper’,thiscouldresultinunintendedconsequences.
TheIASBhasrecentlyissuedanexposuredraft,Revenue,whichproposestoreplaceIAS11ConstructionContracts,IAS18Revenue,IFRIC13CustomerLoyaltyProgrammes,IFRIC15AgreementsfortheConstructionofRealEstate,IFRIC18TransfersofAssetsfromCustomers,andSIC31BarterTransactionsInvolvingAdvertisingServices.Itproposesanewrevenuerecognitionmodelthatcouldfundamentallyalterthewayentitiesrecogniserevenue.
Refertoour‘PracticalguidetoIFRS-Revenuerecognitionfullspeedahead’(availableonourwebsitewww.pwc.com/in/en/services/IFRS/Publication-IFRS)formoredetails.
IndAS19EmployeeBenefits
Difference19.1 GAAPdifference? Avoidable?
19.1.1 Recognition of actuarial gains and losses – post employment defined benefit plan No --
IAS19givesthreeoptionstorecogniseactuarialgainsandlossesforpostemploymentdefinedbenefitplansnamely:1. recogniseinothercomprehensiveincome;2. recogniseimmediatelyintheincomestatement;3. amortisetoprofitorlossusinga‘corridorapproach’.
IndAS19doesnotincorporatethesecondandthirdoptions,therebyrequiringactuarialgainsandlossestoberecognisedinothercomprehensiveincome(OCI).TheactuarialgainsandlossesthathavebeenrecordedinOCIshallberecognisedimmediatelyinretainedearningsandshallnotbereclassifiedtoprofitorlossinasubsequentperiod.
19.1.2 Recognition of actuarial gains and losses – other long term employee benefits Yes No
AsperIAS19,actuarialgainsandlossesforotherlongtermdefinedbenefitsarerecognisedinprofitorloss,whileasperIndAS19thesearetoberecognisedinOCI.TheactuarialgainsandlossesthathavebeenrecordedinOCIshallberecognisedimmediatelyinretainedearningsandshallnotbereclassifiedtoprofitorlossinasubsequentperiod.
Difference19.2 GAAPdifference? Avoidable?
Elimination of the requirement to use a high quality corporate bond rate to discount employee benefit obligations Yes No
IndAS19requirespostemploymentbenefitobligationstobediscountedusingthemarketyieldongovernmentbonds.ThisrequirementiscontrarytoIAS19,whichrequiresgovernmentbondyieldstobeusedonlywherethereisnodeepmarketforhighqualitycorporatebonds.
PwC observation Yes No
IndAShasremovedtheuseofadiscountratebasedonhighqualitycorporatebondsonthebasisthatthereisnodeepmarketforsuchbondsinIndia.Whilethiswillnotimpactsolelydomesticcompanies,whereIAS19wouldalsorequiretheyieldongovernmentbondstobeused,itwillgiverisetoadifferenceforcompaniesthathavedefinedbenefitschemeswherepaymentwillbemadeinaforeigncurrency(e.g.overseassubsidiariesofIndiancompanies),forwhichthereisadeepmarketofhighqualitycorporatebonds,suchasintheUKorUS.
Difference19.3(NotpartoftheStandard) GAAPdifference? Avoidable?
Frequency of Actuarial valuation No --
TheappendixtoIndAS19(unlikeIAS19)statesthatdetailedactuarialvaluationofdefinedbenefitobligationsmaybemadeatintervalsnotexceedingthreeyears.
PwC observation
TheappendixtoIndAS19indicatesthattheremayhaveoriginallybeenanintentiontorequirethedetailedactuarialvaluationofdefinedbenefitobligationsatleasteverythreeyears.However,nosuchamendmentisinthemaintextofthestandard.Thisdiscrepancyshouldbeclarifiedbythestandardsetters.
Comparison of Ind AS with IFRS 14
IndAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance
IndAS21TheEffectsofChangesinForeignExchangeRates
Difference20.1 GAAPdifference? Avoidable?
Elimination of option to measure non-monetary government grants at nominal value No --
IAS20givesanoptiontomeasurenon-monetarygovernmentgrantseitherattheirfairvalueoratnominalvalue.IndAS20requiresmeasurementofsuchgrantsonlyattheirfairvalue.ConsequentialamendmentshavebeenmadetoIndAS38IntangibleAssets.
Difference21.1 GAAPdifference? Avoidable?
Option to recognise exchange differences arising on translation of long term monetary items in equity Yes Yes
IndAS21providescompanieswithanoptiontorecogniseunrealisedexchangedifferencesarisingontranslationoflong-termmonetaryitems(assetsandliabilities)denominatedinaforeigncurrencydirectlyinequity,andaccumulatedasaseparatecomponenttherein.Suchaccumulatedexchangedifferencesmustbetransferredtoprofitorlossovertheperiodofmaturity‘inanappropriatemanner’.Theoption,ifapplied,istobeexercisedwhentheexchangedifferenceisinitiallyrecognised.Onceexercised,itisirrevocableandappliedforalllongtermmonetaryitems.
Thisoptionisnotavailableforthelong-termmonetaryitemswhichareclassifiedasatfairvaluethroughprofitorlossinaccordancewithIndAS39,eitherbecausetheyareheldfortradingorbecauseoftheirdesignationasatfairvaluethroughprofitorloss.Monetaryitemsareconsideredtobelong-termifithasamaturityperiodoftwelvemonthsormorefromthedateoftheinitialrecognition.
IAS21requiresallgainsandlossesarisingonretranslationofmonetaryassetsandliabilitiesdenominatedinaforeigncurrencytoberecognisedinprofitorloss(unlessitisdesignatedasahedginginstrumentinacashflowornetinvestmenthedge).
Difference20.2 GAAPdifference? Avoidable?
Elimination of option to present grants as deduction in arriving at the carrying amount of asset No --
IAS20givesanoptiontopresentthegrantsrelatedtoassetseitherbysettingupthegrantasdeferredincomeorbydeductingthegrantinarrivingatthecarryingamountoftheasset.IndAS20requirespresentationofsuchgrantsinthebalancesheetasdeferredincome.
Comparison of near final Ind AS with IFRS 15
IndAS32FinancialInstruments:Presentation
Difference32.1 GAAPdifference? Avoidable?
Exception to the definition of financial liability Yes No
IndAS32introducesanexceptiontotheIFRSdefinitionofa‘financialliability’.IndASclassifiesaconversionoptionembeddedinaconvertiblebonddenominatedinaforeigncurrencyasanequityinstrumentifitentitlestheholdertoacquireafixednumberofentity’sownequityinstrumentsforafixedamountofcash,andtheexercisepriceisfixedinanycurrency.IAS32requirestheexercisepricetobefixedintheentity’sfunctionalcurrency.
PwC observation on Ind AS 21 & Ind AS 32
TheseprovisionsmayhelptopreventincomestatementvolatilityforIndianentitiesresultingfromIFRSaccountingfor(a)translationsoflongtermmonetaryitemsfromforeigncurrencytofunctionalcurrency(i.e.IAS21)and(b)equityconversionoptionsembeddedinaforeigncurrencyconvertiblebonddenominatedinforeigncurrencytoacquireafixednumberofentity’sownequityinstrumentsforafixedamountinaforeigncurrency(i.e.IAS32).
Asuitableexamplethatcontainsboththeabovementionedfeaturesi.e.ForeignCurrencyConvertibleBond(FCCB)isexplainedoverhere.IndiancompaniesoftenissuelongtermFCCBs,denominatedinacurrencydifferentfromthefunctionalcurrencyoftheissuingentitytoraiseforeignfundsatcompetitiverates. TheseFCCBscontainaplainvanillaequityconversionoption,forwhichthenumberofsharestobeissuedonconversionaswellastheunderlyingconsideration(redemptionamountofthebond)arefixedinaforeigncurrency.
IFRSprescribessplitaccountingfortheseFCCBs(i.e.liabilityandconversionfeature),wherethethedebthostisliabilitycomponentinitiallyrecordedatfairvalueandsubsequentlymeasuredatamortisedcostwithforeignexchangetranslationdifferencebeingrecognisedinprofitandlossaccount;whiletheconversionfeatureistreatedasderivativeliability(as‘fixed-for-fixed’conditionnotsatisfiedduetotheexchangeratevariation)andsubsequentlyre-measuredthroughprofitandlossaccount.
However,IndAS21providesanirrevocableoptiontorecogniseexchangedifferencesonthetranslationofsuchlongtermmonetaryitemsfromforeigncurrencytofunctionalcurrencyinequityandforthesetobetransferredtotheprofitorlossoverthematurityofsuchinstrumentsinanappropriatemanner(subjecttocertainconditions.)UnderIndAS32,anexceptiontothedefinitionoffinancialliabilitypermitsthatsuchconversionoptionwillberecognisedasanequityinstrumentratherthanasaderivativeliabilityasspecifiedunderIFRS. These are significant GAAP differences relative to IFRS.
Comparison of Ind AS with IFRS 16
IndAS24RelatedPartyDisclosures
Difference24.1 GAAPdifference? Avoidable?
Overriding nature of statute for related party disclosures Yes Yes
InIndAS24eliminatestheneedtoproviderelatedpartydisclosuresthatareconsideredtoconflictwiththeconfidentialityrequirementsofstatute,aregulatororsimilarcompetentauthority,onthebasisthataccountingstandardscannotoverridelegal/regulatoryrequirements(Para4Aand4BofIndAS24).IAS24hasnoequivalentrequirement.
PwC observation
Para4Aand4Bareopenforinterpretationandcouldleadtonon-disclosureofinformation,whichmaynotbetheintentionofthestandard.Further,itisunclearwhatconstitutesa‘similarcompetentauthority’.
Difference24.2 GAAPdifference? Avoidable?
Change in definition of close family members Unlikely --
IAS24defines,‘closemembersofthefamily’ofanindividualasthosefamilymemberswhomaybeexpectedtoinfluence,orbeinfluencedby,thatindividualintheirdealingswiththeentity.Theymayinclude:1. theindividual’sdomesticpartnerandchildren;2. childrenoftheindividual’sdomesticpartner;and3. dependantsoftheindividualortheindividual’sdomesticpartner.
However,IndAS24defines‘closemembersofthefamily’ofapersonasthepersonsspecifiedwithinmeaningof‘relative’undertheCompaniesAct1956andthatperson’sdomesticpartner,childrenofthatperson’sdomesticpartneranddependantsofthatperson’sdomesticpartner.
Difference24.3 GAAPdifference? Avoidable?
Additional guidance for aggregation of transactions No --
IndAS24providesadditionalclarificatoryguidanceregardingtheaggregationoftransactionsfordisclosure.Thisguidancestatesthataggregation‘shouldnotbedonesoastoobscuretheimportanceofsignificanttransactions’,forexample:• Purchasesorsalesofgoodsshouldnotbeaggregatedwithpurchasesorsalesoffixedassets;• Amaterialrelatedpartytransactionwithanindividualpartyshouldnotbeclubbedinanaggregateddisclosure.
Comparison of Ind AS with IFRS 22
Difference27.1 GAAPdifference? Avoidable?
Format of consolidated financial statements (Refer difference 1.2 also)
Unlikely --
IndAS27prescribesspecificformatforpresentationofconsolidatedfinancialstatementsorasneartheretoascircumstancesadmit,whereparentisacompany.Itsetsouttheminimumrequirementsfordisclosureonthefaceof• ‘ConsolidatedBalanceSheet’attheendoftheperiodanda‘ConsolidatedStatementofChangesinEquity’forthe
periodasapartofthe‘ConsolidatedBalanceSheet’,• ‘ConsolidatedStatementofProfitandLoss’fortheperiod,and• Notestoaccounts.
However,IAS27doesnotprescribeanyspecificformatforpresentationofconsolidatedfinancialstatements.
IndAS27ConsolidatedandSeparateFinancialStatements
Comparison of Ind AS with IFRS 18
Difference28.1 GAAPdifference? Avoidable?
Different accounting periods and policies of associates Yes Yes
Wherethefinancialstatementsofanassociateusedinapplyingequitymethodarepreparedasofadatedifferentfromthatoftheinvestor,IAS28requiresthatthisdifferenceshouldnotbemorethanthreemonths.IAS28alsorequiresthattheaccountingpoliciesofanassociateshouldbealignedwiththoseofthereportingentity.IndAS28providesexceptionstotheserequirementsiftheyare‘impracticable’.
PwC observation
IndAS28explainsthatthesechangeshavebeenmadebecausetheinvestordoesnotcontroltheassociate,andhenceitmaynotbeabletoobtaintheinformationnecessarytocomplywiththerequirementsofIAS28.Nevertheless,ifthecompanyisunabletoinfluenceitsassociatesufficientlyinordertoobtaintherelevantfinancialstatementsorinformation,thiscouldbringintoquestionwhetherithassignificantinfluenceoveritsinvestment,andhencewhetheritsclassificationasanassociateisappropriate.However,'impracticable'isahighthreshold,andhenceitisunlikelythataGAAPdifferencewillarise.
Difference33.1 GAAPdifference? Avoidable?
Compulsory disclosure of EPS No --
IAS33providesthatwhenanentitypresentsbothconsolidatedfinancialstatementsandseparatefinancialstatements,itmaygiveEPSrelatedinformationinconsolidatedfinancialstatementsonly,whereas,theIndAS33requiresEPSrelatedinformationtobedisclosedbothinconsolidatedfinancialstatementsandseparatefinancialstatements.
Difference33.2 GAAPdifference? Avoidable?
Adjustments to the EPS calculation No --
IndAS33providesthatwhereanyitemofincomeandexpensewhichisotherwiserequiredtoberecognisedinprofitorlossinaccordancewithIndAS,isdebitedorcreditedtosecuritiespremiumaccount/otherreservesinaccordancewithlegalrequirements,theamountinrespectofthereofshallbedeductedfromprofitorlossfromcontinuingoperationsforthepurposeofcalculatingbasicanddilutedearningspershare.
PwC observation
ThisamendmenteliminatesaGAAPdifferenceinreportedEPSincircumstanceswhereaGAAPdifferencealreadyexistsinreportedprofitorlossduetotherequirementsofIndianlawe.g.shareissueexpenseneedtobewrittenoffagainstsecuritiespremiumratherthantoberecognisedinprofitandlossaccount.
IndAS28InvestmentsinAssociates
IndAS33EarningsperShare
Comparison of Ind AS with IFRS 19
Difference39.1 GAAPdifference? Avoidable?
Change in the fair value of a financial liability due to the entity’s own credit risk Yes Yes
IndAS39hasamendedthesubsequentmeasurementoffinancialliabilitiesdesignatedatfairvaluethroughprofitorlosssoastoignorechangesinthefairvalueconsequenttochangesintheentity’sowncreditrisk.Accordingly,suchliabilitiesarenotrecognisedatfairvalue,butusinga‘frozencreditspread’methodology.IAS39requiresallchangesinfairvaluesinsuchliabilitiestoberecognisedinprofitorloss.
PwC observation
Thisprovisionisintroducedtopreventtherecognitionofunrealisedgainsorlossesresultingfromthechangesinfairvalueoffinancialliabilitiesconsequenttochangesintheentity’sowncreditrisk.TheIASBhasalsointroducedmeasuresinIFRS9FinancialInstrumentstopreventvolatilityinprofitorlossfromchangesintheentitiesowncreditrisk.However,thesemeasuresdiffersignificantlyfromthoseinIndAS39,asIFRS9continuestorequiresuchfinancialliabilitiestoberecognisedatfairvalue,butwithchangesduetoowncreditbeingrecognisedinothercomprehensiveincome(i.e.outsideprofitorloss).
TheFairValueThroughProfitorLossdesignationisitselfoptionalunderIndAS,andhencetheGAAPdifferencetechnicallycouldbeavoidedbynotusingthismeasurementcategory.
IndAS39FinancialInstruments:RecognitionandMeasurement
IndAS40InvestmentPropertyDifference40.1 GAAPdifference? Avoidable?
Elimination of option to recognise investment properties at fair value No --
IAS40permitsinvestmentpropertytobemeasuredusingeitherthecostmodelorthefairvaluemodelafterinitialrecognition.IndAS40requirestheuseofthecostmodel.Accordingly,followingprovisionsof‘IAS17Leases’havebeenremovedunderIndAS17:
• Paragraph18ofIAS17dealingwithmeasurementofthelandandbuildingselementswhenthelessee’sinterestinbothlandandbuildingsisclassifiedasaninvestmentpropertyinaccordancewithIAS40InvestmentPropertyandthefairvaluemodelisadopted.
• Paragraph19ofIAS17dealingwithpropertyinterestheldunderanoperatingLeaseasaninvestmentproperty,ifthedefinitionofinvestmentpropertyisotherwisemetandthefairvaluemodelisapplied.
Comparison of Ind AS with IFRS 20
Otherdifferences
ApplicabilityofIndAS
ApplicabilityorexemptionstoIndASaregovernedbytheCompaniesAct,1956andtherulesmadethereunder.Accordingly,thefollowingchangeshavebeenmade:
1. ApplicabilityorexemptionofIndAS33EarningsperShareandIndAS108Operatingsegmentshasbeenchangedtobe based on‘Companies(AccountingStandards)Rules__’ratherthanbasedonlistingcriteriagiveninIFRS.
2. ThescopeofIndAS28InvestmentsinAssociatesandIndAS31InterestsinJointVentureshavebeenmodifiedsoastoexcludemutualfunds,unittrustsandsimilarentities(includinginsurancelinkedinvestmentfunds)astheCompaniesAct,1956isnotapplicabletothem.
3. TheexemptionfrompreparingconsolidatedfinancialstatementsunderPara10ofIAS27hasbeenremovedinIndAS27.SimilaramendmentshavebeenmadetoIndAS28InvestmentsinAssociatesandIndAS31InterestsinJointVentures.
‘Companies(AccountingStandards)Rules__’tomakeIndASeffectiveareyettobenotified.
Consequentialamendments
1. IFRS1requiresspecificdisclosuresiftheentityprovidesnon-IFRScomparativeinformationandhistoricalsummaries.SincecomparativesareoptionalunderIndAS,thesedisclosurerequirementshavebeenremovedfromIndAS101.
2. IAS1containsImplementationGuidance.IndAS1doesnotincludethesamebecausevariousenactmentshaveprescribedformats,e.g.,ScheduleVItotheCompaniesAct,1956.
3. IndAS12IncomeTaxeshasbeenmodifiedconsequenttothechangeinaccountingtreatmentofgainsonbargainpurchases,theadoptionofasinglestatementapproachinIndAS1,andgovernmentgrantpresentation.
4. AdditionalguidanceisincludedinIndAS23BorrowingCostsonexchangedifferencesarisingfromforeigncurrencyborrowingsthataretobetreatedasanadjustmenttointerestcosts.
5. Withregardtotheacquisitionofanintangibleassetbywayofagovernmentgrant,IAS38,IntangibleAssets,providestheoptiontoanentitytorecognizebothassetandgrantinitiallyatfairvalueoratanominalamountplusanyexpenditurethatisdirectlyattributabletopreparingtheassetforitsintendeduse.IndAS38allowsonlyfairvalueforrecognisingtheintangibleassetandgrantinaccordancewithIndAS20.
Comparison of Ind AS with IFRS 21
Otherdifferences(Contd.)
Minordifferences
1. DeletionofIFRS1exemptionsnotrelevantforIndia• SinceIndAS19doesnotallowthecorridorapproachtobeusedtodeferactuarialgainsandlosses,thecorresponding
IFRS1exemptionforsettingactuarialgainorlosstozeroundercorridorapproachhasbeenremovedfromIndAS.• TheoptioninIFRS1tocapitaliseborrowingcostsonaprospectivebasishasbeenremovedfromIndAS,onthebasis
thatexistingIndianGAAPalreadyrequiresanentitytocapitaliseborrowingcosts.
2. TransitionalprovisionsfortheaccountingforinsurancecontractsandserviceconcessionarrangementshavebeenincorporatedinIndAS101soastorequireprospectiveapplicationonorafterdateoftransitiontoIndAS.Earlierapplicationisencouraged.
3. Normally,anentityconsistentlypreparesfinancialstatementsforaone-yearperiod.However,forpracticalreasons,someentitiesprefertoreport,for52-weekperiod.IAS1allowsthispracticebutIndAS1doesnot.
4. Whenthereisachangeinfunctionalcurrencyofeitherthereportingcurrencyorasignificantforeignoperation,IAS21requiresdisclosureofthatfactandthereasonforthechangeinfunctionalcurrency.IndAS21requiresanadditionaldisclosureofthedateofchangeinfunctionalcurrency.
5. AdditionaldisclosuresregardingthedurationofhyperinflationaryexistingintheeconomyhasbeenaddedtoIndAS29FinancialReportinginHyperinflationaryEconomies.
Generaldifferences
1. Differentterminologiesareused,asusedinexistinglawse.g.term‘BalanceSheet’isusedinsteadof‘Statementoffinancialposition’and‘Statementofprofitandloss’isusedinsteadof‘Statementofcomprehensiveincome’.Words‘approvedforissue’havebeenusedinsteadof‘authorisedforissue’inthecontextoffinancialstatementsconsideredforthepurposeofeventsafterthereportingperiod.
2. ProvisionsrelatingtoTransitionincludedinindividualIAShavebeendeletedfromIndASsincealltransitionalprovisionsrelatedtoIndASwhereeverconsideredappropriatehavebeenincludedinIndAS101.
3. IFRICs(exceptIFRIC2&15)andSICsareincludedasappendicesintheIndAS.ThusthereferencestoIFRICsandSICshavebeenreplacedwithreferencestoAppendices.
4. IFRSincludesaBasisforConclusions(‘BC’)asanappendix,whichsummarisestheIASB’sconsiderationsinreachingtheconclusionofeachstandard;thesedonotformpartofIndAS.
Comparison of Ind AS with IFRS 22
IndiaismovingaheadonthepathofIFRSconvergence,andwiththeIndASbeingnotifiedbytheMCA,itbringsforthafewquestionsaboutthenextstepsintheprocessofconvergence.
Key Questions to be answered
TheconvergencetoIFRSbyIndiaisaverysignificantstepintherightdirectionandthepathtakenhasbeenchallenginggiventheneedtoconsiderthenumerousaspectsinplay.WiththewelcomemovebytheMCAofissuingIndAS,thereareothervitalstepsthatareanticipatedwithsomeanxietygiventhetimeathand,andinclude:
• WhenwouldtheseIndASbenotifiedintheofficialgazette?
• WhenwouldthedateofimplementationofIndASbeannouncedbytheGovernment?
• Howandbywhenwillconsequentialamendmentstoexistinglegislation(e.g.theCompaniesAct,IncometaxAct,SEBIguidelines,etc),bemade?
• WhenwillSEBIrequiretheuseofIndASforquarterlyreporting?
• HowwouldIndASsynchronizewith,andwhatwouldtheimpactbeof,newchangesonthehorizon,suchasDTC,GST,etc?
• WillIndAScontinuetoevolvealongsidechangestoIFRS?
Is convergence achieved?
IndiahasadoptedasteptowardsconvergencewithIFRS,butwithcertain‘carve-outs’(and‘carve-ins’)toeaseadoptionandtemperIFRStobemoreacceptableinthelocalmarketplace.Thefundamentalquestionremains:howwillIndiaparticipate(ifnotinfluence)inthefuturedevelopmentofIFRS?WilltheinclusionofsignificantdifferencesbetweenIndASandIFRSmuteIndia’svoicerelativetofullyconvergedterritories?
Further,withIFRSitselfchangingintheneartomediumterm(seeAppendixCforIASB’songoingprojects),whenandhowwouldallthesebeincorporatedintothepathIndiaistaking?Finally,andperhapsmostimportantly,willthebenefitsof‘almostconverging’outweighthepainbeingenduredbythoseadoptingIndAS?
Are Companies prepared for this change?
ThoughthefinalIndAShavebeenissuedbytheMCAbutthereisnoclarityonthedateofimplementationofIndAS.Recently,therehasbeenmediacoverageofvariousstakeholdersquestioningthetimingoftheconvergenceplansinIndia,giventhenumerousmovingpartsintheIndiancontextandIFRSbeingamovingplatform.
Challenges Ahead
ThesearethefinalIndASbeingnotifiedbytheMCA.ThedateofimplementationoftheseIndASisexpectedtobeannouncedbytheMCAatalaterdate.FollowingIFRSarenotissuedunderIndAS–FinancialInstruments(IFRS9),AccountingandReportingbyRetirementBenefitPlans(IndAS26)andAgriculture(IndAS41).
Appendix A - List of Ind AS
IndAS IndASNameCorrespondingIFRS
ExistingASIAS/IFRS IFRIC SIC
IndAS101 First-timeAdoptionofIndianAccountingStandards IFRS1 - - -
IndAS102 SharebasedPayment IFRS2 - - -
IndAS103 BusinessCombinations IFRS3 - - AS14
IndAS104 InsuranceContracts IFRS4 - - -
IndAS105 Non-CurrentAssetsHeldforSaleandDiscontinuedOperations IFRS5 - - AS24
IndAS106 ExplorationforandEvaluationofMineralResources IFRS6 - - -
IndAS107 FinancialInstruments:Disclosures IFRS7 - - AS32
IndAS108 OperatingSegments IFRS8 - - AS17
IndAS1 PresentationofFinancialStatements IAS1 - - AS1
IndAS2 Inventories IAS2 - - AS2
IndAS7 StatementofCashFlows IAS7 - - AS3
IndAS8 AccountingPolicies,ChangesinAccountingEstimatesandErrors IAS8 - - AS5
IndAS10 EventsaftertheReportingPeriod IAS10 IFRIC17 - AS4
IndAS11 ConstructionContracts IAS11 IFRIC12 SIC29 AS7
IndAS12 IncomeTaxes IAS12 - SIC21,25 AS22
IndAS16 Property,PlantandEquipment IAS16 IFRIC1 - AS6,10
IndAS17 Leases IAS17 IFRIC4 SIC15,27 AS19
IndAS18 Revenue IAS18 IFRIC13,15*,18 SIC31 AS9
*IFRIC 15 has not been issued under Ind AS. Source: www.mca.gov.in
Comparison of Ind AS with IFRS 24
Notes:
1. Theterm‘InternationalFinancialReportingStandards’(‘IFRS’)comprisesof:• InternationalFinancialReportingStandards(IFRS)• InternationalAccountingStandards(IAS)• InterpretationsfromtheInternationalFinancialReportingInterpretationsCommittee(IFRIC)• InterpretationsfromStandingInterpretationsCommittee(SIC)
2. ExistingASreferstoexistingAccountingStandardsnotifiedunderCompanies(AccountingStandards)Rules,2006.
IndASReference
IndASNameCorrespondingIFRS ExistingAS
ReferenceIAS/IFRS IFRIC SIC
IndAS19 EmployeeBenefits IAS19 IFRIC14 - AS15
IndAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance
IAS20 - SIC10 AS12
IndAS21 TheEffectsofChangesinForeignExchangeRates IAS21 - - AS11
IndAS23 BorrowingCosts IAS23 - - AS16
IndAS24 RelatedPartyDisclosures IAS24 - - AS18
IndAS27 ConsolidatedandSeparateFinancialStatements IAS27 - SIC12 AS21
IndAS28 InvestmentsinAssociates IAS28 - - AS23
IndAS29 FinancialReportinginHyperinflationaryEconomies IAS29 IFRIC7 - -
IndAS31 InterestsinJointVentures IAS31 - SIC13 AS27
IndAS32 FinancialInstruments:Presentation IAS32 IFRIC2* - AS31
IndAS33 EarningsperShare IAS33 - - AS20
IndAS34 InterimFinancialReporting IAS34 IFRIC10 - AS25
IndAS36 ImpairmentofAssets IAS36 - - AS28
IndAS37 Provisions,ContingentLiabilitiesandContingentAssets IAS37 IFRIC5,6 - AS29
IndAS38 IntangibleAssets IAS38 - SIC32 AS26
IndAS39 FinancialInstruments:RecognitionandMeasurement IAS39IFRIC9,16,19
- AS13,30
IndAS40 InvestmentProperty IAS40 - - -
*IFRIC 2 has not been issued under Ind AS. Source: www.mca.gov.in
Comparison of Ind AS with IFRS 25
Deferral of certain standards and interpretations
• IndAS106ExplorationforandEvaluationofMineralResources(i.e.IFRS6equivalent)Thisstandardwillbeappliedwithmodificationfromadatetobenotifiedlater.Inthepotentialdelayinnotificationofthisstandard,companieswillneedtoformulateaccountingpoliciesforrelevanttransactionsthatareconsistentwiththeprinciplesinotherstandardsorotherwiseinaccordancewiththeIndAS8hierarchy.Itwouldbeproblematicforcompaniestoapplyotherstandards(IndAS16Property,plantandequipment;IndAS38Intangibleassets;andIndAS36Impairmentofassets),asIndAS106providesrelieffromcertainrequirementsofthesestandards.
• Notificationoffollowingappendiceshasbeendeferred.Theeffectivedateofimplementationwillbeannouncedseparately.
» AppendixCofIndAS17,determiningwhetheranArrangementcontainsaLease(i.e.IFRIC4equivalent)
» AppendixAofIndAS11,‘ServiceConcessionArrangements’(i.e.IFRIC12equivalent)
» AppendixBofIndAS11‘ServiceConcessionArrangements:Disclosures’(i.e.SIC29equivalent)
CompaniesmayearlyadopttheseappendicesunderIndAS8hierarchywhenselectingaccountingpolicies.Onceselected,accountingpoliciesshouldbeappliedconsistently.
Ind AS 18 Revenue
Forrateregulatedentities,IndAS18isexpectedtobemodified,whereandtoextenttherecognitionandmeasurementofrevenueofsuchentitiesisaffectedbyrecognitionandmeasurementofregulatoryassets/liabilities.AGuidanceNoteonthesubjectisalsobeingissuedbytheInstituteofCharteredAccountantsofIndia.
Ind AS 21 Effects of changes in foreign exchanges rates
• Whenthereisachangeinfunctionalcurrencyofeitherthereportingentityorasignificantforeignoperation,IAS21requiresdisclosureofthatfactandthereasonforthechangeinfunctionalcurrency.IndAS21requiresanadditionaldisclosureofthedateofchangeinfunctionalcurrency.
• AppendixB:IllustrativeexamplesonapplicationofPara14,25,33and37(i.e.functionalcurrencyincaseofahyperinflationaryeconomy,impairmentloss,netinvestmentinforeignoperationsdenominatedinthefunctionalcurrencyofthereportingentityandeffectsofchangeinfunctionalcurrency)havebeenincluded.
Appendix B - Differences between near final and final Ind AS
Comparison of Ind AS with IFRS 26
Ind AS 24 Related party disclosures
IndAS24defines‘closemembersofthefamily’ofapersonasthepersonsspecifiedwithinmeaningof‘relative’undertheCompaniesAct1956andthatperson’sdomesticpartner,childrenofthatperson’sdomesticpartneranddependantsofthatperson’sdomesticpartner.InnearfinaldraftitwasdefinedonthesimilarlinesasgiveninIAS24i.e.thosefamilymemberswhomaybeexpectedtoinfluence,orbeinfluencedby,thatindividualintheirdealingswiththeentityincludingbrothers,sisters,fatherandmotherofthatperson.Refer difference 24.2 for more details.
Ind AS 27 Consolidated and Separate Financial Statements
AppendixC‘FormofConsolidatedFinancialStatements’isaddedinthisstandard.Thisappendixsetsouttheminimumrequirementsfordisclosureonthefaceof
» ‘ConsolidatedBalanceSheet’attheendoftheperiodanda‘ConsolidatedStatementofChangesinEquity’fortheperiodasapartofthe‘ConsolidatedBalanceSheet’,
» ‘ConsolidatedStatementofProfitandLoss’fortheperiod,and
» Notestoaccounts.
Refer difference 27.1 and 1.2 for more details.
Ind AS 34 Interim financial reporting
Afootnotehasbeeninsertedwhichstatesthatunauditedfinancialresultsrequiredtobepreparedandpresentedunderclause41oflistingagreementwithstockexchangesisnotan‘InterimFinancialReport’asdefinedinthisstandard.
Ind AS 101 First-time adoption of Indian Accounting Standards
• Para2AhasbeenremovedfromIndAS101wherereliefwasprovidedtoexistingfilersoffinancialstatementsinaccordancewiththeIFRSissuedbytheIASB,whichwouldhavebeenentitledtoadoptthebalancesheetsofiledasattheendoftheimmediatelyprecedingfinancialyearastheopeningIndASbalancesheetaftermakingadjustmentsfordifferencesinIndASandIFRSasonthedateoftransitiontoIndAS.
• ClarificationhasbeenprovidedonapplicationofIndAS101whencomparativeinformationisprovidedfromthedeemeddateoftransition.AfirsttimeadopterforwhomthefirstreportingperiodisfinancialstatementsfortheyearendingMarch31,2012mustapplytheexceptionsandexceptionsasatApril1,2010andApril1,2011;accordinglythebalancesheetasatendofMarch31,2011maynotbeequivalenttotheopeningBalanceSheetasatApril1,2011.
• ParagraphD7Aprovidesanentitywiththeoptiontousethecarryingvalueofallproperty,plantandequipmentasatthedateoftransition(insteadofcarryingvaluesofallsuchassetsonorbeforeApril1,2007asinnearfinalIndAS)inaccordancewithpreviousGAAPasanacceptablestartingpointunderInd-AS.Thisoptioncanalsobeappliedtoinvestmentpropertiesandintangibleassets.
• ParaD19Aprovidestransitionalreliefforretrospectiveapplicationoftheeffectiveinterestmethodandimpairmentrequirementsforfinancialinstrumentscarriedatamortisedcost.Theword‘financialasset’(asgiveninthenearfinaldraft)isreplacedwith‘financialinstrument’inthefinalstandardinorderforthisrelieftobeapplicableforfinancialliabilitiesaswellas‘financialassets’.
Comparison of Ind AS with IFRS 23
Note - This timetable is taken from IASB website (ifrs.org) as on 28 February 2011. It shows the current best estimate of publication dates and is subject to change. Refer http://www.ifrs.org/Current+Projects/IASB+Projects/IASB+Work+Plan.htm for more details.
Other projects
In November 2010 the IASB and FASB (Financial Accounting Standards Board) decided to amend the timetable for projects that are important but less urgent and expect to resume discussing these topics after June 2011:
• Financial Statement Presentation (the replacement of IAS 1 and IAS 7), • Financial instruments with characteristics of equity, • Emissions Trading Schemes, Liabilities (IAS 37 amendments), and • Income Taxes.
Additionally, the IASB is deferring publication of exposure drafts for Investment Companies and Annual improvements (see the timetable above) and the IASB and FASB do not expect to complete the phase A of the conceptual framework reporting entity until the Q2 2011.
Further, IASB will consider research and other projects like rate-regulated activities, intangible assets etc. in its future agenda in 2011.
Recently completed projects
• Deferred tax: recovery of underlying assets• Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters• additions to IFRS 9 Financial Instruments in relation to financial liabilities• Management Commentary• Derecognition – Disclosures• Conceptual Framework Phase A• Improvements to IFRSs
Refer http://www.ifrs.org/Current+Projects/IASB+Projects/IASB+Work+Plan.htm for effective dates.
Appendix C–IASB’s ongoing projects
Estimated publication date
Financial Crisis related projects 2011 Q1 2011 Q2
Financial instruments (IAS 39 replacement)
Impairment
IFRSHedge accounting
Asset and liability offsetting
Consolidation
Replacement of IAS 27 IFRS
Disclosures unconsolidated entities IFRS
Investment companies ED
Fair value measurement IFRS
Memorandum of Understanding (MOU) projects
Financial statement presentation (Presentation of OCI) IFRS
Leases IFRS
Revenue recognition IFRS
Joint ventures IFRS
Post-employment benefits (incl. pensions) IFRS
Other Projects
Insurance contracts IFRS
Annual improvements 2009-2011 ED
ED Exposure Draft
25
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Comparison of near final Ind AS with IFRS 26
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This publication has been developed and compiled by the IFRS Team of PricewaterhouseCoopers, India.
This publication has been prepared for general information on matters of interest only, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this material was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers India, its members, employees and agents shall not be responsible for any loss sustained by any person or entity who relies on this publication.
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NJ 130 February 2011 Comparison of Ind AS with IFRS.indd Designed by PwC Brand & Communicatiom, India
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