Comparison of Indian GAAP with IFRS

INVENTORIES - ACQUIRED ON DEFERRED SETTLEMENT TERMS

IFRS Indian GAAP

IAS 2 specifically requires that when the inventories are acquired on deferred settlement basis than the difference between the purchase price of inventories for normal credit terms and the amount paid for deferred settlement terms is recognised as interest expense.

There is no express requirement under AS 2 specifying treatment of inventories acquired on deferred settlement terms

INVENTORIES - COST FORMULAE

IFRS Indian GAAP

IAS 2 permits specific identification, FIFO and weighted average as acceptable methods of determining cost. However IAS 2 does not require the same for the choice of the formula to be used; rather it requires that same cost formula should be used for all inventories having a similar nature and use as entity.

AS 2 provides that the cost of inventories of items other than those which are not ordinarily interchangeable and goods or services produced and segregated for specific projects should be assigned by using the first-in, first-out (FIFO), or weighted average cost formula. It is specifically required by AS 2 that the formula used should reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition

INVENTORIES - BIOLOGICAL ASSETS

IFRS Indian GAAP

A biological asset should be measured on initial recognition and at each balance sheet date at its fair value less estimated point-of-sale costs.

All changes in fair value should be recognised in the income statement in the period in which they arise.

There is no specific guidance in AS 2 on Biological Assets

INVENTORIES - INVENTORIES OF SERVICE PROVIDERS

IFRS Indian GAAP

IAS 2 provides that to the extent the service providers have inventories, these should be measured at the costs of production. These costs consist primarily of the labour and other costs of personnel directly engaged in providing the service, including supervisory personnel, and attributable over-heads. Labour and other costs relating to sales and general administrative personnel are not included but are recognised as expenses in the period in which they are incurred. The cost of inventories of a service provider should not include profit margins or non-attributable overheads that are often factored into prices charged by service providers.

Not covered by AS 2

INVENTORIES - EXCLUSION FROM COST OF INVENTROIES

IFRS Indian GAAP

IAS 2 excludes only "Selling Costs" and not "Distribution Costs" from cost of inventories.

AS 2 specifically excludes "selling “ as well as “distribution costs" from the cost of Inventories and provides that it is appropriate to recognise them as expenses in the period in which they are incurred.

INVENTORIES - RECOGNITION AS AN EXPENSE

IFRS Indian GAAP

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised.

The amount of any write-down of inventories to net realisable value and all losses of inventories should be recognised as an expense in the period the write-down or loss occurs.

The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, should be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs .

AS 2 does not deal with the issues relating to recognition of inventories as an expense including the write down of inventories to net realisable value and any reversal of such write down

INVENTORIES - DISCLOSURE REQUIREMENTS

IFRS Indian GAAP(a) The accounting policies adopted in measuring inventories, including the cost formula used;

(b) The total carrying amount of inventories and the carrying amount in classifications appropriate to the entity;

(c) The carrying amount of inventories carried at fair value less costs to sell;

(d) The amount of inventories recognised as an expense during the period;

(e) The amount of any write-down of inventories recognised as an expense in the period ;

(f) The amount of any reversal of any write-down that is recognised as a reduction in the amount of inventories recognised as expense in the period ;

(g)The circumstances or events that led to the reversal of a write-down of inventories ; and

(h)The carrying amount of inventories pledged as security for liabilities. .

(a)The accounting policies adopted in measuring inventories, including the cost formula used; and

(b)The total carrying amount of inventories and its classification appropriate to the enterprise.

IAS 8 :CHANGES IN ACCOUNTING POLICIES – WHEN PERMISSIBLE

IFRS Indian GAAP

can change its accounting policy only if the change

(a) Is required by an IFRS; or

(b) Results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flows.

Permitted in the following three cases:

a)If the adoption of a different accounting policy is required by statute; or

b)For compliance with an accounting standard; or

c)If it is considered that the change would result in a more appropriate presentation of the financial statements of the enterprise.

APPLYING CHAGES IN ACCOUNTING POLICIES

IFRS Indian GAAP

Account for a change in accounting policy resulting from the initial application of a Standard or an Interpretation in accordance with the specific transitional provisions.

If no transitional provisions in IFRS, apply the change retrospectively.

When a change in accounting policy is applied retrospectively, adjust the opening balance of each affected component of equity for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if the new accounting policy had always been applied.

Changes can be both retrospective or prospective.

Material effect to be disclosed.

A change in accounting policy consequent upon the adoption of an Accounting Standard should be accounted for in accordance with the specific transitional provisions, if any, contained in that Accounting Standard.

PRIOR PERIOD ERRORS - MEANING

IFRS Indian GAAP

Defined as omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) Was available when financial statements for those periods were authorized for issue; and

(b)Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.

Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.

AS 5 does not define the term “Prior period errors”. Instead, it defines “prior period items” as income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods.

ERRORS – ACCOUNTING TREATMENT

IFRS Indian GAAP

Needs to be corrected retrospectively Prior period errors are included in determination of profit or loss of the period in which the error is discovered and are separately disclosed in the statement of profit and loss in a manner that the impact on current profit or loss can be perceived. AS 5 does not require restatement of comparatives.

IMPRACTIBLE – MEANING

IFRS Indian GAAPIAS 8 defines the term “Impracticable”. It provides that applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.

For a particular prior period, it is impracticable to apply a change in an accounting policy retrospectively or to make a retrospective re-statement to correct an error if:

(a)The effects of the retrospective application or retrospective restatement are not determinable;

(b)it requires assumptions about what management’s intent would have been in that period; or

©it requires significant estimates of amounts, and it is impossible to distinguish objectively information about those estimates that:

(i)Provide evidence of circumstances that existed on the date(s) as at which those amounts are to be recognised, measured or disclosed; &

(ii)Would have been available when the financial statements for that prior period were authorised for issue from other information

Not defined

IMPACT OF NEW ACCOUNTING PRONOUNCEMENT

IFRS Indian GAAP

Disclose an impending change in accounting policy when an entity has yet to implement a new Standard or Interpretation that has been issued but not yet come into effect.

Also disclose known or reasonably estimable information relevant to assessing the possible impact that application of the new Standard or Interpretation will have on the entity's financial statements in the period of initial application.

There is no such specific requirement under AS 5.

ABSENCE OF STANDARD INTERPRETATION

IFRS Indian GAAP

In the absence of an IFRS that specifically applies to a transaction, other event or condition, IAS 8 permits considering recent pronoun-cements by other standard-setting bodies that have a conceptual framework similar to IFRS to the extent these pronouncements do not conflict with IFRS.

There is no such guidance in AS 5.

EVENT AFTER THE REPORTING DATE – DIVIDENDS

IFRS Indian GAAP

Proposed dividend is treated as a non-adjusting event and the liability for dividends declared to holders of equity instruments are recognised in the period when declared

As per the Indian law governing companies, pro-vision for proposed dividend is required to be made. Hence, AS 4 requires that dividends be recognised as an appropriation from profits and recorded as a liability on the balance sheet date, if proposed or declared subsequent to the reporting period but before approval of the financial statements.

DISCLOSURE OF NON-ADJUSTING EVENTS

IFRS Indian GAAP

As per IAS 10, non-adjusting events, which are material, are required to be disclosed in the financial statements.

As per AS 4, such disclosures are required to be made in the report of the approving authority and not in the financial statements.

EVENT AFTER THE REPORTING DATE – DATE OF AUTHORISATION

IFRS Indian GAAP

IAS 10 requires an entity to disclose the date when the financial statements were authorized for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity is required to disclose the fact thereof.

There is no such specific requirement in AS 4.

EMPLOYEE BENEFITS – DISCOUNT RATE

IFRS Indian GAAP

Determined by reference to market yields at the end of the reporting period on high quality corporate bonds.

In countries where there is no deep market in such bonds, the market yields (at the end of the reporting period) on government bonds is used.

The currency and term of the corporate bonds or government bonds needs to be consistent with the currency and estimated term of the post-employment benefit obligations.

Discount rate to be used for determining defined benefit obligation is by reference to market yields at the balance sheet date on government bonds of a currency and term consistent with the currency and term of the post-employment benefit obligations

EMPLOYEE BENEFITS – ACTUARIAL GAINS AND LOSSES

IFRS Indian GAAPActuarial gains and losses may be :

Recognised immediately in profit or loss;or

Recognised immediately in other comprehensive income; or

Deferred the excess being recognised over the expected average remaining working lives of the employees participating in that plan.

Excess is the actuarial gains and losses when the net cumulative unrecognised actuarial gains and losses at the end of the previous reporting period exceeded the greater of:

(a)10% of the present value of the defined benefit obligation at that date (before deducting plan assets); and

(b)10% of the fair value of any plan assets at that date.

Limits to be calculated and applied separately for each defined benefit plan.

Actuarial gains and losses should be recognised imme-diately in the statement of profit and loss as an income or expense.

EMPLOYEE BENEFITS – TERMINATION BENEFITS

IFRS Indian GAAP

1.Termination benefits are recognized as a liability and an expense when, and only when, the entity is demonstrably commit-ted to either :

(a)Terminate the employment of an emp-loyee or group of employees before the normal retirement date; or

(b)Provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.

2.Where termination benefits fall due more than 12 months after the reporting period, they needs to be discounted.

Termination benefits are accounted when employees accept VRS scheme. Termination benefits are expensed off immediately in the profit and loss account or are considered as deferred revenue expenditure. The transitional provisions of AS 15 provides an option to write off the expense over the

pay back period ;or

the period from the date expense on termination benefits is incurred to 1-4-2010

whichever is shorter

BORROWING COST – MEANING OF SUBSTANTIAL PERIOD

IFRS Indian GAAP

IAS 23 defines a “qualifying asset” an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. However, it does not provide any guidance on as to what is a substantial period of time.

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Ordinarily, a period of 12 months is considered as substantial period of time unless a shorter or longer period can be justified on the basis of facts and circums-tances of the case.

BORROWING COST – DISCLOSURE OF CAPITALIZATION RATE

IFRS Indian GAAP

IAS 23 requires an entity to disclose the capitalisation rate used to determine the amount of borrowing costs

There is no such requirement under AS 16.

RELATED PARTY DISCLOSURES – DEFINITIONS

IFRS Indian GAAPA party is related to an entity if :

(a)directly, or indirectly through one or more intermediaries, the party:

(i)Controls, is controlled by, or is under common control with, the entity (includes parents, subsidiaries and fellow subsidiaries);

(ii)Has an interest in the entity that gives it significant influence over the entity; or

(iii)Has joint control over the entity;

(b)The party is an associate (as defined in IAS 28 ) of the entity;

(c)The party is a joint venture in which the entity is a venturer ( IAS 31);

(d)The party is a member of the key management personnel of the entity or its parent;

(e)The party is a close member of the family of any individual referred to in (a) or (d);

(f)The party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

(g)The party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity

AS 18 covers following types of related party relation- ships :

(a) Enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the reporting enterprise (this includes holding companies, subsidiaries and fellow subsidiaries);

(b) Associates and joint ventures of the reporting enterprise and the investing party or venturer in respect of which the reporting enterprise is an associate or a joint venture;

(c) Individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual;

(d) Key management personnel and relatives of such personnel; and

(e) Enterprises over which any person described in (c) or (d) is able to exercise significant influence.

Thus, unlike IAS 24, Post employment benefit plans are not included as related parties under AS 18.

RELATED PARTY DISCLOSURES – STATUS OF NON EXECUTIVE DIRECTOR

IFRS Indian GAAP

IAS 24 provides for including non-executive director in key management personnel.

According to AS 18, as notified by the Government, a non-executive director of a company should not be considered as a key management person by virtue of is merely his being a director unless he has the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise.

RELATED PARTY DISCLOSURES – MEANING OF RELATIVE

IFRS Indian GAAP

IAS 24 uses the concept of 'close members of the family of an individual' who are "those family members who may be expected to influe-nce, or be influenced by, that individual in their dealings with the entity. They may include :

(a) The individual's domestic partner and children;

(b) Children of the indivi-dual's domestic partner; and

(c) Dependants of the indivi-dual or the individual's domestic partner."

In AS 18 the term 'relative' is defined as "the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise"

RELATED PARTY DISCLOSURES – DISCLOSURE OF COMPENTATION OF KAY MANAGEMENT PERSONNEL

IFRS Indian GAAP

IAS 24 requires that compensation of key management personnel is disclosed in total and separately for :

(a) Short-term employee be-nefits;

(b) Post-employment benefits;

(c) Other long-term benefits;

(d) Termination benefits; and

(e) Share-based payments.

Under AS 18, compensation of key management perso-nnel needs to be disclosed in total as an aggregate of all items of compensation except when a separate disclosure is necessary for the understanding of the effects of related party transactions on the financial statements.

IMPAIRMENT LOSS

Impairment loss is excess of (a) over (b)

(a)Carrying amount of

the asset means

The amount at which an asset is recognised in the balance sheet after deducting any accumulated depreciation (amortisation) & accumulated impairment losses thereon.

(b)Recoverable amount

meanshigher of

Fair value less costs to sell

Amount expected from sale of asset (in an arm’s length transaction)Less: Costs of disposal (i.e. incremental costs directly attributable to the disposal of an asset, excluding finance costs and income-tax expense

Value in use

Present value of the future cash flows expected to be derived from an asset or cash-generating unit

Indicators of Impairment-Externalduring the period, an asset’s market value has declined

significantly more than would be expected as a result of the passage of time or normal use.

significant changes with an adverse effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated.

 market interest rates or other market rates of return on investments have increased during the period, and those increases are likely to affect the discount rate used in calculating an asset’s value in use and decrease the asset’s recoverable amount materially.

the carrying amount of the net assets of the entity is more than its market capitalisation.

Indicators of Impairment-Internal  evidence is available of obsolescence or physical damage of

an asset.  significant changes with an adverse effect on the entity have

taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used,e.g. asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, plans to dispose of an asset before the previously expected date, and reassessing the useful life of an asset as finite rather than indefinite.

evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected.

Indicators of Impairment

materiality applies if previous calculations show that an

asset’s recoverable amount is significantly greater than its carrying amount, the entity need not re-estimate the asset’s recoverable amount if no events have occurred that would eliminate that difference.

Similarly, previous analysis may show that an asset’s recoverable amount is not sensitive to one (or more) of the indicatiors

Value in Use

  Steps estimate the future cash inflows and outflows to

be derived from continuing use of the asset and from its ultimate disposal; and

apply appropriate discount rate to those future

cash flows.

Value in Use

  Elements to be considereda)an estimate of the future cash flows the entity

expects to derive from the asset;   b) expectations about possible variations in the

amount or timing of those future cash flows;  c)   the time value of money, represented by the

current market risk-free rate of interest; d)  the price for bearing the uncertainty inherent in

the asset; and  e)other factors, such as illiquidity, that market

participants would reflect in pricing the future cash flows the entity expects to derive from the asset.

Value in Use

  2 approachesTraditional approach Incorporate elements b,c,d & e in discount rate

itselfExpected cash flow approach Incorporate elements b,d & e in cash flows by

computing risk adjusted cash flows

Value in Use

  Traditional approachA proper search for ‘the rate commensurate with

the risk’ requires analysis of at least two items—an asset that exists in the marketplace and has an observed interest rate and the asset being measured.

The appropriate discount rate for the cash flows being measured must be inferred from the observable rate of interest in that other asset.

To draw that inference, the characteristics of the other asset’s cash flows must be similar to those of the asset being measured.

Value in Use

  Traditional approach the measurer must do the following:  (a) identify the set of cash flows that will be discounted;   (b) identify another asset in the marketplace that appears to

have similar cash flow characteristics;    (c) compare the cash flow sets from the two items to ensure

that they are similar (for example, are both sets contractual cash flows, or is one contractual and the other an estimated cash flow?);

   (d) evaluate whether there is an element in one item that is not present in the other,e.g., is one less liquid than the other ; and

(e) evaluate whether both sets of cash flows are likely to behave ,i.e., vary in a similar fashion in changing economic conditions.

Value in Use

  Expected cash flow approachuse all expectations about possible cash flows

instead of the single most likely cash flowCompute expected cash flow by assigning

probabilities

Value in Use

  Expected cash flow approachExamplecash flow $100, 200 or 300 probabilities of 10 %, 60 % and 30 %

respectively. Compute expected cash flows

Value in Use

  Expected cash flow approachThe expected cash flow approach also allows use

of present value techniques when the timing of cash flows is uncertain.

Example cash flow of $1,000 received in one year, two

years or three years with probabilities of 10 %, 60 % and 30 %, respectively.

Estimating future cash flows

cash flow projections on reasonable and supportable assumptions that represent management’s best estimate of the range of economic conditions that will exist over the remaining useful life of the asset.

Greater weight to external evidence. cash flow projections on the most recent financial

budgets/forecasts approved by managementexclude any estimated future cash inflows or outflows

expected to arise from future restructurings or from improving or enhancing the asset’s performance

projections based on budgets/forecasts to cover a maximum period of five years, unless a longer period can be justified.

Estimating future cash flows

estimate cash flow projections beyond the period covered by the most recent budgets/forecasts by extrapolating the projections based on the budgets/forecasts using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.

growth rate not to exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used, unless a higher rate can be justified.

Composition of estimates of future cash flows

projections of cash inflows from the continuing use of the asset;

 projections of cash outflows that are necessarily incurred to generate the cash inflows from continuing use of the asset (including cash outflows to prepare the asset for use) and can be directly attributed, or allocated on a reasonable and consistent basis, to the asset; and

net cash flows, if any, to be received (or paid) for the disposal of the asset at the end of its useful life.

if the discount rate includes the effect of price increases attributable to general inflation, future cash flows are estimated in nominal terms else in real terms

Estimate future cash flows for the asset in its current condition.

Do not include estimated future cash inflows or outflows expected to arise from:

  (a) a future restructuring to which an entity is not yet committed; or

  (b) improving or enhancing the asset’s performance.

Estimates of future cash flows not to include:

cash inflows or outflows from financing activities; or

  income tax receipts or payments.

Discount Rate

interest rates used to discount cash flows should not reflect risks for which the estimated cash flows have been adjusted.

Discount Rate

Guidance (a) entity’s weighted average cost of

capital determined using techniques such as the CAPM ;

  (b) entity’s incremental borrowing rate; and

   (c) other market borrowing rates.

Discount Rate

Adjust rates :  to reflect the way that the market would assess

the specific risks associated with the asset’s estimated cash flows; and

to exclude risks that are not relevant to the asset’s estimated cash flows or for which the

estimated cash flows have been adjusted. Consideration to be given to risks such as

country risk, currency risk and price risk.

Discount Rate

independent of the entity’s capital structure and the way the entity financed the purchase of the asset

pre-tax rate usually a single rate but can be different

rates for different future periods where value in use is sensitive to a difference in risks for different periods or to the term structure of interest rates.

?

A mining entity owns a private railway to support its mining activities. The private railway could be sold only for scrap value and it does not generate cash inflows that are largely independent of the cash inflows from the other assets of the mine.

Identify CGU

?

A bus company provides services under contract with a municipality that requires minimum service on each of five separate routes. Assets devoted to each route and the cash flows from each route can be identified separately. One of the routes operates at a significant loss.

Identify CGU

Internal consumption

If an active market exists for the output produced by an asset or group of assets, that asset or group of assets to be identified as a CGU even if some or all of the output is used internally.

If the cash inflows generated by any asset or cash-generating unit are affected by internal transfer pricing, use management’s best estimate of future price(s) that could be achieved in arm’s length transactions in estimating:

  (a) the future cash inflows used to determine the asset’s or cash-generating unit’s value in use; and

  (b) the future cash outflows used to determine the value in use of any other assets or cash-generating units that are affected by the internal transfer pricing.

IMPAIRMENT OF ASSETS – ASSESSMENT

IFRS Indian GAAP

Assess at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, estimate the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, an entity should also test an intangible asset with an indefinite useful life or an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount.

Goodwill acquired in a business combination is tested for impairment annually

An enterprise should assess at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the enterprise should estimate the recoverable amount of the asset.

Intangible assets, which are not yet available for use, or intangibles that are amortised for greater than 10 years should be tested for impairment annually irrespective of whether there are any indications for impairment.

IMPAIRMENT OF ASSETS – ALLOCATION OF GOODWILL

IFRS Indian GAAP

For the purpose of impairment testing, goodwill acquired in a business combination should, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.

Each unit or group of units to which the goodwill is so allocated should :

(a)Represent the lowest level within the entity at which the goodwill is monitored for internal management purposes; and

(b)Not be larger than an operating segment deter-mined in accordance with IFRS 8 Operating Segments.

If the initial allocation of goodwill acquired in a business combination cannot be completed before the end of the annual period in which the business combination is effected, that initial allocation should be completed before the end of the first annual period beginning after the acquisition date.

Under AS 28,goodwill needs to be tested for impairment using the “bottom-up/top-down” approach under which the goodwill is, in effect, tested for impairment by allocating its carrying amount to each cash-generating unit or smallest group of cash-generating units to which a portion of that carrying amount can be allocated on a reasonable and consistent basis.

IMPAIRMENT OF ASSETS – REVERSAL OF IMPAIRMENT LOSS FOR GOODWILL

IFRS Indian GAAP

Impairment loss recognised for goodwill cannot be reversed in a subsequent period.

Impairment loss for goodwill is reversed if the impairment loss was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events have occurred that reverse the effect of that event.

IMPAIRMENT OF ASSETS – INTERIM FINANCIAL REPORTING AND IMPAIRMENT

IFRS Indian GAAP

As per IFRIC 10, an entity should not reverse an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost.

There is no corresponding pronouncement to IFRIC 10. However, AS 28 does permit the reversal of goodwill in certain circumstances. This would be equally applicable to the interim financial statements as well.

SEGMENT REPORTING – DETERMINATION OF SEGMENTS

IFRS Indian GAAP

Operating segments are identified based on the financial information that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance (The term ‘chief operating decision maker’ identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. Often the chief operating decision maker of an entity is its chief executive officer or chief operating officer but, e.g., it may be a group of executive directors or others.)

AS 17 uses the concept of “Business Segment” and “Geographic Segment”. It requires an enterprise to identify business and geo-graphical segments using a risks and rewards approach, with the enterprise’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments.

SEGMENT REPORTING – MEASUREMENT BASIS

IFRS Indian GAAP

Segment profit or loss should be reported on the same measurement basis as that used by the chief operating decision maker.

Segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole.

SEGMENT REPORTING – RECONCILIATION

IFRS Indian GAAP

An entity should provide reconciliations of all of the following :

(a)The total of the reportable segments’ revenues to the entity’s revenue.

(b)The total of the reportable segments’ measures of profit or loss to the entity’s profit or loss before tax expense (tax income) and discontinued opera-tions. However, if an entity allocates to reportable segments items such as tax expense (tax income), the entity may reconcile the total of the segments’ measures of profit or loss to the entity’s profit or loss after those items.

(c)The total of the reportable segments’ assets to the entity’s assets.

(d)The total of the reportable segments’ liabilities to the entity’s liabilities.

(e)The total of the reportable segments’ amounts for every other material item of information dis-closed to the corresponding amount for the entity.

AS 17 requires an enterprise to present a reconciliation between the information disclosed for reportable segments and the aggregated information in the enterprise financial statements. In presenting the reconciliation, segment revenue should be reconciled to enterprise revenue; segment result should be reconciled to enterprise net profit or loss; segment assets should be reconciled to enterprise assets; and segment liabilities should be reconciled to enterprise liabilities.

SEGMENT REPORTING – ENTITY WIDE DISCLOSURES

IFRS Indian GAAP

Requires disclosure of

(a)External revenues from each product or service;

(b)Revenues from customers in the country of domicile and from foreign countries;

(c)Geographical information on non-current assets located in the country of domicile and foreign countries.

Information on major customers including total revenues from each major customer needs to be disclosed if revenues from each customer is 10% or more of total segment revenues

AS 17 requires disclosures based on the classification of segments as primary or secondary. Disclosure requirements for secondary reporting format are less detailed than those required for primary reporting formats

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