PwC ReportingInBrief

Year-end reminders - 31 March 2017

A look at this year’s accounting and financial reporting updates under Ind AS

www.pwc.com

March 2017

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What’s inside?

Financial reporting updates

Ind AS roadmap 4

MCA 6

ICAI 8

SEBI 17

ITFG 19

CBDT 28

RBI 30

IRDA 31

Publications

Ind AS 32

IFRS 34

Key takeaways 35

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What you need to know for this year end under Ind AS

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Welcome to our annual publication of year-end reminders designed to keep you informed about the latest accounting and financial reporting updates under Indian Accounting Standards (Ind AS) and International Financial Reporting Standards (IFRS).

The attempt is to collate the most relevant and important issues, including a listing of key amendments and changes at one place for your easy reference. We have also provided links to our various previously issued publications on related topics.

We hope the information and insights in this publication will keep you updated and help companies while they are getting ready to publish their first annual 31 March 2017 Ind AS financial statements.

This publication includes the following:

Financial reporting updates

Ind AS roadmap

This brings to you MCA’s and RBI’s announcements relating to the roadmap for Ind AS adoption in India.

MCA, SEBI, RBI, CBDT, IRDA

We have included key notifications and circulars issued by these regulatory authorities relating to Ind AS.

ICAI, ITFG

This rounds up all the publications and announcements issued by ICAI related to Ind AS, including deliberations of ITFG on Ind AS issues raised by preparers, users and other stakeholders.

Publications

This lists our various Ind AS publications and updates which we have previously issued,including key updates under IFRS.

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Ind AS roadmap

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Ind AS transition: Press release on roadmap for corporates

In his Budget speech in 2014, the Finance Minister indicated that Ind AS be adopted mandatorily from beginning FY 2016–17 and voluntarily from FY 2015–16.

The Ministry of Corporate Affairs (MCA) issued a press release announcing a roadmap for the implementation of Ind AS. The roadmap provides a phase-wise approach, primarily based on a company’s net worth and listing status. Consistent with the Finance Minister’s speech, the roadmap also allows voluntary adoption of Ind AS.

Click here for the press release >>

http://mca.gov.in/Ministry/pdf/PressRelease_06012015.pdf

Refer also our publication on implementation of Ind AS >>

Ind AS implementation.

Timelines for implementation of Ind AS for corporates

MCA vide notification dated 16 February 2015 issued the Companies (Indian Accounting Standards) Rules, 2015. This notification provides the timelines for adoption of Ind AS.

Ind AS will be applied in a phased manner from 1 April 2016, beginning with companies whose net worth is equal to or exceeding 500 crore INR. Comparative Ind AS information for the year ending 31 March 2016 will also be required. Listed companies and others with a net worth equal to or exceeding 250 crore INR will follow suit starting 1 April 2017.

Any company can voluntarily adopt Ind AS from the financial year 2015–2016. However, the roadmap does not apply to banks, NBFCs and insurance companies.

Click here for the notification >>

http://www.mca.gov.in/Ministry/pdf/Notification_20022015.pdf

Click here for Ind AS standards >>

http://www.mca.gov.in/MinistryV2/Stand.html

Ind AS is applied in a phased manner depending upon a company’s net worth and listing status. If a company is covered in the Ind AS roadmap, its holding, subsidiaries, associates and joint ventures are also required to apply Ind AS

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Ind AS roadmap

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Ind AS roadmap for banks, insurance companies and NBFCs

The MCA issued a press release outlining the roadmap for banks, insurance companies and NBFCs for the implementation of Ind AS.

• Banks (except RRBs) and insurance companies are required to comply with Ind AS beginning from 1 April 2018 onwards with comparatives for the periods ending 31 March 2018 or thereafter.

• NBFCs (listed and unlisted) having a net worth of more than 500 crore INR shall comply with Ind AS beginning from 1 April, 2018.

• Listed NBFCs having a net worth of less than 500 crore INR shall comply with Ind AS beginning from 1 April 2019.

• Unlisted NBFCs having a net worth of more than 250 crore INR but less than 500 crore INR shall also comply with Ind AS beginning from 1 April 2019.

Click here for the press release >>

https://mca.gov.in/Ministry/pdf/Press_Release_18012016.pdf

Ind AS Roadmap for NBFCs

The MCA issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2016. These rules contain the Ind AS roadmap for NBFCs as discussed above. Further, early adoption of Ind AS is not permitted by NBFCs.

Click here for the notification >>

http://mca.gov.in/Ministry/pdf/Notification_30032016_I.pdf

Banks (except RRBs) and insurance companies are required to comply with Ind AS beginning from 1 April 2018 onwards. NBFCs are required to comply with Ind AS in two phases based on their net worth and listing criteria

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MCA

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Ind AS compliant Schedule III

MCA amended the existing Schedule III to insert Division II which provides the guidance and format for preparation of the financial statements of company required to comply with Ind AS.

Click here for the notification >>

http://www.mca.gov.in/Ministry/pdf/Notification_04072016.pdf

Amendment to Schedule II to the Companies Act, 2013

MCA amended para 3(ii) of Schedule II to the Companies Act, 2013. The amended para reads as follows:

“For intangible assets, the relevant Ind AS shall apply. Where a company is not required to comply with Ind AS, it shall comply with relevant accounting standards under Companies (Accounting Standards) Rules, 2006, except in case of intangible assets (Toll Roads) created under ‘Build, Operate and Transfer’, ‘Build, Own, Operate and Transfer’ or any other form of public private partnership route in case of road projects. The notification shall be applicable for accounting period commencing on or after 1 April 2016.”

Click here for the notification >>

http://www.mca.gov.in/Ministry/pdf/Noti_18112016.pdf

The amendment was intended to remove any inconsistency between Ind AS 38 Intangible assets and Schedule II. Ind AS 38 does not permit revenue-based amortisation for intangible assets, except under limited circumstances.

The impact of this amendment is that companies adopting Ind AS cannot follow revenue-based amortisation for toll road intangible assets except under the limited circumstances permissible under Ind AS 38.

However, an entity may opt to amortise the intangible assets arising from service concession arrangements in respect of toll roads recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS reporting period as per previous GAAP policy (para D7AA of Ind AS 38 and para D22 of Ind AS 101 First-time adoption of Ind AS).

Companies cannot follow a revenue-based amortisation for toll road intangible assets except under limited circumstances

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MCA

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Ind AS Amendment Rules, 2016

MCA issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2016. These rules notified Ind AS 11 Construction Contracts, and Ind AS 18 Revenue, and omitted Ind AS 115 Revenue from Contracts with Customers, also making certain other amendments to other Ind ASs. The amendments come into force on the date of publication in the Official Gazette i.e. 30 March 2016.

Click here for the notification >>

http://mca.gov.in/Ministry/pdf/Notification_30032016_I.pdf

Refer also our publication on Ind AS Amendment Rules, 2016 >>

https://www.pwc.in/assets/pdfs/services/ifrs/companies-ind-as-amendment-rules-2016.pdf

Ind AS Amendment Rules, 2017

MCA recently issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2017, amending Ind AS 102 Share-based Payment, and Ind AS 7 Statement of Cash Flows. The amendments are consequent to amendments in corresponding IFRS as issued by IASB. These amendments shall come into force from 1 April 2017.

Click here for the amendment >>

http://www.mca.gov.in/Ministry/pdf/CompaniesIndianAccountingStandards_21032017.pdf

Refer also our publication PwC ReportingInBrief: Companies (Indian Accounting Standards)(Amendment) Rules, 2017 >>

http://www.pwc.in/assets/pdfs/publications/2017/pwc-reportinginbrief-ind-as-amendments-2017.pdf

The Amendment Rules, 2017, shall be applicable from annual periods beginning on or after 1 April 2017. Accordingly, these amendments are not applicable to Phase I entities preparing their first Ind AS financial statements for the year ended 31 March 2017. However, such entities would need to provide relevant disclosures under para 30 and 31 of Ind AS 8 Accounting Policies, changes in accounting estimates and errors in their first Ind AS financial statements for the year ended 31 March 2017.

As per above guidance, when an entity has not applied a new Ind AS that has been issued but is not yet effective, the entity shall disclose: (a) this fact; and (b) known or reasonably estimable information relevant to assessing the possible impact that application of the new Ind AS will have on the entity’s financial statements in the period of initial application.

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ICAI

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Guidance Note on Accounting for Real Estate Transactions(Ind AS Compliant Companies)

ICAI has issued a guidance note on accounting for real estate transactions for entities to whom Ind AS is applicable. The objective of this guidance note is to recommend the accounting treatment to be followed by entities dealing in ‘real estate’ as sellers or developers. This guidance note covers all forms of transactions in real estate.

Click here for the guidance note >>

http://resource.cdn.icai.org/42173asb31843.pdf

Refer also our publication PwC Ind AS Alert: Guidance note on accounting for real estate transactions >>

https://www.pwc.in/assets/pdfs/services/ifrs/ind-as-alert-2-gn-on-accounting-for-real-estate-transactions.pdf

FAQ issued by ASB

The Accounting Standards Board (ASB) of ICAI has issued a clarification on deemed cost of property, plant and equipment (PPE) under Ind AS 101.

Click here for the FAQ >>

http://resource.cdn.icai.org/42543asb32315.pdf

Deemed cost at the date of transition to Ind AS becomes the cost for the purpose of subsequent depreciation

Ind AS 101 provides an option to use previous GAAP carrying value for all of its PPE on the date of transition as deemed cost. Deemed cost is the amount used as a surrogate for the cost or depreciated cost.

For the purpose of subsequent depreciation, deemed cost as at the date of transition to Ind AS becomes the cost. The cost and any accumulated depreciation and provision for impairment under previous GAAP have no relevance. Accordingly, provision for impairment provided before the date of transition as per previous GAAP cannot be reversed in later years.

However, information regarding gross block of assets, accumulated depreciation and provision for impairment under previous GAAP can be disclosed by way of a note forming part of the financial statements.

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ICAI

March 2017

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ICAI publication provides a summary of Ind AS, major carve-outs and major differences between Ind AS and existing accounting standards

ICAI publication on Ind AS overview

This publication contains an overview of various aspects related to Ind AS such as the roadmap for the applicability of Ind AS, carve-outs from IFRS/IAS, changes in financial reporting under Ind AS compared to financial reporting under the existing accounting standards, and a summary of all the Ind AS. It also captures all the recent amendments to Ind AS notified by MCA in March 2016.

Click here for the publication >>

http://resource.cdn.icai.org/43399indas33174.pdf

Guidance Note on Combined and Carve-Out Financial Statements

ICAI has issued a guidance note which provides the meaning of combined/carve-out financial statements, indicative situations in which these may be required to be prepared, procedures for preparation of the same and required disclosures.

Click here for the guidance note >>

http://resource.cdn.icai.org/43441asb33184b.pdf

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ICAI

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DDT is in substance, of the nature of withholding tax and should be presented in a manner consistent with the underlying transactions

FAQ issued by ASB

ASB of ICAI issued FAQ on Dividend Distribution Tax (DDT). The purpose of the FAQ is to illustrate and assist in clarifying the requirements regarding the accounting treatment of DDT.

Click here for the FAQ >>

http://resource.cdn.icai.org/43791asb33473a.pdf

• DDT in India is in substance, of the nature of a withholding tax. Its presentation should be consistent with the transactions that created the tax consequences.

• DDT should be charged to profit or loss, if the dividend itself is charged to profit or loss. If dividend is recognised in equity, the DDT should also be consistently recognised in equity.

• For compound instruments, the portion of DDT related to dividend/interest to the debt component should be recognised in profit or loss and that related to equity component should be recognised in equity.

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ICAI

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Sales which are ‘infrequent in number’ or ‘insignificant in value’ do not violate the held to collect model. Judgement needs to be applied while determining what constitutes ‘infrequent’ or ‘insignificant’ on a case-to-case basis

FAQ issued by ASB

ASB of ICAI has also issued another FAQ elaborating the terms ‘infrequent number of sales’ or ‘insignificant in value’ used in Ind AS 109 Financial Instruments.

Click here for the FAQ >>

http://resource.cdn.icai.org/43792asb33473b.pdf

• Financial assets are classified based on the entity’s business model to manage the assets under Ind AS 109. Financial assets which are held to collect cash flows are classified as amortised cost and those which are held to collect cash flows and for sale are measured at fair value through other comprehensive income.

• Sales which are ‘infrequent in number’ or ‘insignificant in value’ do not violate the held to collect model. However, these terms are not defined in standard.

• The clarification below has been issued with regard to the interpretation of these terms.

- Judgement should be applied while determining what constitutes ‘infrequent’ or ‘insignificant’ on a case-to-case basis. A general rule of thumb in terms of indicative percentages cannot be applied considering the differing characteristics of financial assets.

- Management may decide, while determining the business model, the circumstances under which sale of assets before maturity may not be considered inconsistent with the held to collect model e.g. rebalancing of portfolio resulting from changes in credit rating, regulatory reasons.

- The term insignificant is not defined in Ind AS, but can be interpreted as ‘less than material’ or ‘almost negligible’.

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ICAI

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The guidance note on reports in Company Prospectuses includes key reporting considerations while preparing financial statements under Ind AS to be included in offer documents

Guidance Note on Accounting for Oil and Gas producing Activities (Ind AS)

ICAI has issued a Guidance Note on Accounting for Oil and Gas Producing Activities (Ind AS) for entities whose financial statements have been prepared and presented in accordance with Ind AS. The objective is to establish sound accounting principles related to acquisition, exploration, development and production activities.

The guidance note comes into effect in respect of accounting periods commencing on or after 1 April 2017. Early application is encouraged.

Click here for the guidance note >>

http://resource.cdn.icai.org/44181research33961.pdf

Updated publications of the Ind AS Implementation Committee of the ICAI

The Ind AS (IFRS) Implementation Committee of the ICAI has revised its earlier issued educational materials on Ind AS 1 Presentation of Financial Statements; Ind AS 2 Inventories; Ind AS 7 Statement of Cash Flows, Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. Additionally, there also exists educational materials on Ind AS 101 First-time adoption of Ind AS, Ind AS 10 Events after the Reporting Period previously issued in 2015, Ind AS 18 Revenue and Ind AS 108 Operating Segments previously issued in 2013.

Click here for the publications >>

http://www.icai.org/post.html?post_id=8181

Guidance Note on Reports in Company Prospectuses (revised 2016)

The Auditing and Assurance Standards Board (AASB) has issued this revised Guidance Note on Reports in Company Prospectuses which supersedes the earlier guidance note issued in 2006. The guidance note also includes key reporting considerations while preparing financial statements under Ind AS to be included in offer documents.

Click here for the guidance note >>

http://resource.cdn.icai.org/44092aasb-gnrcp-rev2016.pdf

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ICAI

March 2017

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Implementation Guide on Auditor’s Reports under Indian Accounting Standards for Transition Phase

AASB of ICAI brought out the Implementation Guide on Auditor’s Reports under Indian Accounting Standards for Transition Phase. This provides appropriate guidance on auditor’s reporting responsibilities on financial statements prepared under Ind AS, especially in context ofthe transition phase.

Click here for the publication >>

http://resource.cdn.icai.org/43184aasb32904.pdf

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ICAI

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Exposure drafts

Exposure Draft of the Ind AS compliant Schedule III to the Companies Act, 2013, for Non-Banking Financial Companies

ASB of ICAI has issued an exposure draft of Ind AS compliant Schedule III to the Companies Act, 2013, applicable to NBFCs for public comments.

Click here for the exposure draft >>

http://resource.cdn.icai.org/44656icaiasb34464.pdf

Exposure Draft on Recognition of Deferred Tax Assets (DTA) forUnrealised Losses

This exposure draft contains proposed amendments to Ind AS 12 Income taxes, to clarify the recognition of deferred tax assets (DTAs) for unrealised losses.

Click here for the exposure draft >>

http://resource.cdn.icai.org/44435asb34333.pdf

The proposed amendments clarify the existing guidance under Ind AS 12 and are not expected to change the underlying principles for recognition of DTA

The exposure draft introduces the following additional requirements with respect to recognition of DTAs:

• While assessing whether future taxable profits will be available to utilise a deductible temporary difference, entities should also consider whether any tax law restricts any source of taxable profits against which it may make deductions on the reversal of the deductible temporary difference/utilisation of losses.

• When there are insufficient future taxable profits, entities shall also compare the deductible temporary differences with future taxable profit that excludes tax deductions resulting from the reversal of those deductible temporary differences.

• Estimates of probable future taxable profits may include the recovery of some of an entity’s assets for more than their carrying amount, if there is sufficient evidence that it is probable that the entity will achieve this.

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ICAI

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Exposure Draft on Transfers of Investment Property, Amendments to Ind AS 40, Investment Property

The ICAI has issued an exposure draft on transfers of investment property. The proposed amendment intends to clarify that to transfer a property to, or from, investment properties there must be a change in use. To conclude if there is a change in the use of a property, there should be an assessment of whether the property meets or ceases to meet the definition of investment property as per Ind AS 40 Investment Property. This change must be supported by evidence. A change in intention, in isolation, is not enough to support a transfer. Comments can be submitted by 28 April 2017.

Click here for the exposure draft >>

http://resource.cdn.icai.org/44998asb34952a.pdf

Exposure Draft of Appendix B of Ind AS 21, Foreign Currency Transactions and Advance Consideration

The exposure draft clarifies that the date of the transaction determines the exchange rate to be used on initial recognition of the related asset, expense or income. Ind AS 21 The Effects of Changes in Foreign Exchange Rates defines the ‘date of the transaction’ as the date when the transaction first qualifies for recognition. The proposed amendment clarifies that the date of transaction is the date on which the advance consideration is paid or received (resulting in recognition of a prepayment or deferred income) and is not the transaction date when the asset, expense or income is initially recognised. Comments can be submitted by 28 April 2017.

Click here for the exposure draft >>

http://resource.cdn.icai.org/44999asb34952b.pdf

Date of the transaction, for the purpose of determining the exchange rate to use on initial recognition of the related item, should be the date on which an entity initially recognises the non-monetary asset or liability arising from the advance consideration

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ICAI

March 2017

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Exposure Draft of Annual Improvements to Ind AS Standards 2014-2016 Cycle

The exposure draft proposes to clarify that the disclosures requirement of Ind AS 112 Disclosure of Interests in Other Entities are applicable to interest in entities classified as held for sale except for summarised financial information (para B17 of Ind AS 112). Previously, it was unclear whether all other Ind AS 112 requirements were applicable for these interests.

Ind AS 28 Investments in Associates and Joint Ventures allows venture capital organisations, mutual funds, unit trusts and similar entities to elect measuring their investments in associates or joint ventures at fair value through profit or loss (FVTPL). The proposed amendment clarifies that this election should be made separately for each associate or joint venture at initial recognition. Comments can be submitted by 28 April 2017.

Click here for the exposure draft >>

http://resource.cdn.icai.org/45000asb34952c.pdf

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SEBI

March 2017

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SEBI clarification regarding applicability of Ind AS to disclosures in offer documents under SEBI ICDR regulations

The SEBI has issued a clarification regarding applicability of Ind AS to disclosures in offer documents under ICDR regulations.

Click her for the circular >>

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1459418165606.pdf

SEBI circular for revised format for financial results and Ind AS implementation

The SEBI vide circular dated 5 July 2016 issued the revised format for financial results to be submitted by listed entities complying with Ind AS.

Click here for the circular dated 5 July 2016 >>

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1467712561526.pdf

Click here for the original SEBI circular dated 30 November 2015 >>

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1448885855487.pdf

Refer also our publication PwC ReportingInBrief: FAQs on the SEBI circular on the revised format for financial results and implementation of Ind AS >>

https://www.pwc.in/assets/pdfs/publications/2016/pwc-reportinginbrief-sebi-faqs.pdf

For periods ending on or after 31 March 2017, the formats for the balance sheet and statement of profit and loss to be submitted by listed entities with the stock exchanges shall be as per Schedule III to the Companies Act, 2013

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SEBI

March 2017

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Revised Formats for Financial Results and Implementation of Ind AS by Listed Entities which have listed their debt securities and/or non-cumulative redeemable preference shares

SEBI has issued a circular dated 10 August 2016 to facilitate smooth Ind AS transition of companies which have listed their debt securities and/or non-cumulative redeemable preference shares. The circular gives various relaxations during the first year of Ind AS implementation relating to timelines, format and presentation of comparatives, audit/limited review of comparative figures and format for financial results to be published in newspapers, etc.

Click here for the circular >>

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1470830193897.pdf

Clarification by SEBI regarding revenue recognition and excise duty

In order to have a uniform approach with respect to disclosure of ‘revenue from operations’, SEBI has issued the following clarification:

“Income from Operations, as mentioned in the formats for publishing financial results prescribed in the circular dated 30 November 2015, may be disclosed inclusive of excise duty, instead of net of excise duty.”

Click here for the circular >>

https://nseindia.com/content/equities/NSE_Circular_20092016.pdf

Revenue should be inclusive of excise duty

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ITFG

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Constitution of the Ind AS Transition Facilitation Group (ITFG) by ASB

Pursuant to the issuance of the roadmap for Ind AS implementation by MCA vide notification dated 16 February 2015, Ind ASs are applicable to Phase I companies from 1 April 2016 on a mandatory basis. Considering the need to address various issues raised by preparers, users and other stakeholders on an urgent basis, ITFG has been formed by ASB of ICAI.

Issues may be submitted via e-mail to asb@icai.in. A summary of the ITFG clarifications is provided below.

Ind AS 101 exemption to continue capitalisation of exchange differences arising on long-term foreign currency monetary items for acquisition of depreciable assets is available for loans taken and recognised before the beginning of the first Ind AS reporting period

Clarifications on technical bulletins

ITFG Bulletin 1 clarifications

1. A company having a net worth between 250–500 crore INR as on 31 March 2014 and therefore falling in phase II but has net worth exceeding 500 crore INR during 2015–16 would need to comply with Ind AS from 1 April 2016 i.e. from the immediately next financial year.

2. Subsidiaries of Phase I company also transition to Ind AS from 1 April 2016. However, the parent-subsidiary relationship for this purpose is evaluated as at 1 April 2016.

3. A company cannot avail the exemption in para D13AA (option to continue to follow the previous GAAP accounting policy for capitalising exchange differences arising on long-term foreign currency monetary item as per para 46A of AS 11 The Effects of Changes in Foreign Exchange Rates.) for loans taken and recognised after the beginning of the first Ind AS reporting period.

4. When there is a change in functional currency from INR to another functional currency (e.g. USD), a company cannot avail the exemption in para D13AA for loans denominated in that currency (e.g. USD), since such loans will no longer be treated as a foreign currency monetary item.

5. An entity should do the assessment of functional currency retrospectively as per para 10 of Ind AS 101.

Click here for ITFG Bulletin 1 >>> resource.cdn.icai.org/41254asb31060.pdf

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ITFG

A company shall recompute the amortised cost of debentures issued and adjust the same against securities premium, since the premium on such debenture was written off against securities premium under the previous GAAP

ITFG Bulletin 2 clarifications

1. When the exemption in para D13AA is availed, the company has to continue applying the accounting policy followed for such long-term foreign currency monetary item under the previous GAAP. Accordingly, the company shall amortise the exchange differences accumulated in FCMITDA at the date of transition to Ind AS through profit or loss and not through other comprehensive income.

2. A company which is a subsidiary of a foreign company shall determine net worth for the purpose of determining Ind AS applicability based on its won financial statements, and shall not take into consideration the net worth of the foreign parent.

3. The date of transition to Ind AS for a Phase I company will continue to be 1 April 2015, irrespective of the fact that it has transitioned to IFRS (as issued by IASB) at an earlier date.

4. Insurance spares classified as inventory under the previous GAAP should be capitalised as part of PPE and depreciated over their useful life if it meets the definition of PPE as per Ind AS 16 Property, plant and equipment.

5. Capitalisation of expenditure incurred on constructing roads on land not owned by the company depends on the facts and circumstances of the case. Capitalisation is permitted if the recognition criteria in Ind AS 16 are met.

6. A company shall compute the amortised cost of a foreign currency loan retrospectively in accordance with Ind AS 109. In such a case, if the company has elected to apply the exemption in para D13AA, it shall revise the balance in FCMITDA account based on the revised carrying amount of the loan at amortised cost retrospectively.

7. A company shall adjust the amortised cost of debentures retrospectively and apply the effective interest rate so computed. This adjustment on transition date should be adjusted against securities premium, since the premium on issue of such debentures was written off by utilising securities premium account under the previous GAAP.

Click here for ITFG Bulletin 2 >>> http://resource.cdn.icai.org/42170asb31830.pdf

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ITFG

Even when a company avails deemed cost exemption for PPE, it shall recognise capital spares as part of PPE, even though they were classified as inventory under previous GAAP

ITFG Bulletin 3 clarifications

1. Companies voluntarily adopting Ind AS for financial year 2015–16 may use the Schedule III (Ind AS) format in the absence of specific guidance.

2. An exempted core investment company meets the definition of a NBFC, and is required to follow the roadmap for NBFCs.

3. A company needs to assess functional currency at the entity level, considering the economic environment in which the entity operates, and not at the level of a business or a division.

4. If a parent company voluntarily or mandatorily adopts Ind AS then its holding, subsidiary, joint venture or associate company (whether through direct or indirect association) shall comply with Ind AS from the financial year in which the parent company starts complying with Ind AS.

5. Assessment of significant influence for determining Ind AS applicability for an associate should be based on Ind AS 28 and not as per previous GAAP.

6. A listed company falling in phase II of the Ind AS roadmap, but becoming an associate of a phase I company before 31 March 2017 should adopt Ind AS from 1 April 2016.

7. A company falling in phase II of the Ind AS roadmap, but becoming a holding company of a phase I company before 31 March 2017 should adopt Ind AS from 1 April 2016.

8. A listed company falling in phase II of the Ind AS roadmap, and therefore having a mandatory adoption date of 1 April 2017, but gets delisted before the mandatory adoption date of 1 April 2017, need not to comply with Ind AS.

9. Even when a company avails the deemed cost exemption for PPE, it shall make necessary adjustments to PPE for recognition of capital spares which were classified as inventory under the previous GAAP (assuming it meets the definition of PPE under Ind AS 16 on transition).

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ITFG

ITFG Bulletin 3 clarifications

10. Hedge accounting under Ind AS 109 will not be applicable for foreign currency swap against loans for which an entity avails the option in para D13AA of Ind AS 101.

11. A company can avail the deemed cost exemption for capital work-in-progress as at thedate of transition.

12. A company can carry its investment in subsidiary at cost as per Ind AS 27 Separate Financial Statements by considering the fair value as deemed cost on the date of transition.

13. Entities shall apply the principles of Ind AS 38 for amortisation of toll road intangible assets (which does not permit revenue-based amortisation except under limited circumstances).Further, Ind AS 101 provides an optional exemption to continue the amortisation policy as per previous GAAP for service concession intangible assets recognised before the beginning of the first Ind AS reporting period.

14. When a company chooses to measure PPE by retrospective application of Ind AS 16, then it will be required to re-compute depreciation by assessing the useful life of the assets in accordance with Ind AS 16 which is consistent with Schedule II to the Companies Act, 2013.

Click here for ITFG Bulletin 3 >>> http://resource.cdn.icai.org/42564indas32343.pdf

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A company can avail the deemed cost exemption for capital work-in-progress as at the date of transition

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ITFG

Revenue from operations should include excise duty but exclude service tax collected

ITFG Bulletin 4 clarifications

1. Revenue from sale of goods should be presented gross of excise duty.

2. Since service tax collected represents the amount collected on behalf of a third party i.e. the government, revenue should be presented net of service tax collected.

3. Ind AS will not be applicable for unlisted companies having negative net worth.

4. The transition date to Ind AS shall continue to be the beginning date of the preceding comparative period during the first year of adoption, even if the company decides to give an additional comparative period financial information of one more year.

Click here for ITFG Bulletin 4 >>>http://resource.cdn.icai.org/43101indas32829.pdf

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ITFG

Security deposits repayable on demand shall be classified as current liability

ITFG Bulletin 5 clarifications

1. A holding company falling in phase II of the Ind AS roadmap, but acquires a subsidiaryfalling in phase I shall start complying with Ind AS from FY 1 April 2016.

2. Security deposits repayable on demand should be classified as a current liability, since theentity does not have an unconditional right to defer the settlement of the liability for at least 12 months after the reporting period.

3. A first-time adopter has the option to elect to continue with the previous GAAP carrying value of all of its PPE on transition and use that as deemed cost (para D7AA of Ind AS 101). In such a case, the option of applying previous GAAP carrying values as deemed cost on selective basis to only some items of PPE and using fair value for other items is not available.

4. If an entity elects the option under para D7AA of Ind AS 101 for PPE on transition, no further adjustments shall be made to the carrying value of PPE for transition adjustments arising on the application of other Ind ASs. Accordingly, even if loan processing costs were capitalised as part of PPE under previous GAAP, the adjustments relating to such outstanding loans on transition as per Ind AS 109 shall be recognised in retained earnings.

5. Similar to issue 4 above, if government grants were deducted from the cost of the PPE under previous GAAP, the transition adjustment relating to government grants should be recognised retrospectively as deferred income with corresponding adjustments to retained earnings.

6. Even when an entity elects the option under para D7AA of Ind AS 101 for PPE on transition, it shall recognise spare parts (previously recognised in inventory) as part of PPE, if it meets the definition of PPE under Ind AS 16. However, the above deemed cost exemption cannot be used for spare parts since they were never recognised as PPE under previous GAAP. Accordingly, such spare parts will be measured retrospectively as per Ind AS 16.

7. Judgement is required when determining whether lease escalations are linked to general inflation. When lease escalations are not linked to general inflation, the entire lease payments should be recognised on a straight-line basis since the increase is not a compensation for inflation.

8. A company shall recognise in the statement of profit or loss, its share of profits in an LLP as and when its right to receive the profit share is established.

Click here for ITFG Bulletin 5>>> http://resource.cdn.icai.org/43453asb-itfg-cb5.pdf

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ITFG

If Ind AS applicability criteria are met once based on the specified net worth criteria, a company shall continue to comply with Ind AS even though the net worth criteria is not met subsequently

ITFG Bulletin 6 clarifications

1. If a company meets the net worth criteria once, it shall comply with Ind AS notwithstanding the fact that net worth has subsequently fallen below the specified threshold.

2. Companies registered under Section 8 of the Companies Act, 2013, are not exempted from compliance with Ind AS, if Ind AS applicability criteria are met.

3. If a subsidiary falls under phase II of the corporate roadmap (FY 17–18) and the parent NBFC falls under phase II of NBFC roadmap (FY 19–20), the subsidiary shall prepare Ind AS financial statements for its statutory reporting purposes for FY 17–18 and FY 18–19 and also prepare financial statements as per existing accounting standards for the same periods for the purpose of parent’s consolidated financial statements.

4. Grants in the nature of promoter contribution accounted for as capital reserve under previous GAAP shall be included in net worth for determining Ind AS applicability. However, such analogy should not be applied to other provisions of the Companies Act, 2013.

Click here for ITFG Bulletin 6 >> http://resource.cdn.icai.org/44024indas33794.pdf

PwC

ITFG

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ITFG Bulletin 7 clarifications

1. If a foreign currency loan is partially drawn down before the beginning of the first Ind AS financial reporting period and the remaining amount is drawn down during the first Ind AS reporting period, then Para D13AA option is available only for foreign currency loans drawn and recognised in the financial statements immediately before the beginning of the first Ind AS financial reporting period.

2. Where a company is statutorily required to present its financial statements in INR, which is different from its functional currency, i.e. USD, then it may do so by choosing the INR as presentation currency and prepare and present its financial statements by applying the provisions of paragraphs 38 and 39 of Ind AS 21. Further, the auditor of such company will be required to give audit report on those financial statements prepared in INR.

3. When an entity opts for Para D7AA exemption by considering the previous GAAP carrying value of PPE as its deemed cost at the date of transition, it cannot make any adjustments to the carrying amount of PPE. Accordingly, in such cases, the entity cannot reverse the impact of exchange differences capitalised to PPE under paragraph 46A of AS 11.

4. Para D13AA option cannot be availed for long-term forward exchange contracts, as these contracts are not within scope of Ind AS 21, and are to be accounted in accordance with Ind AS 109.

5. Classification of lease of land having a lease term of 99 years, at the end of which the lease can be either renewed or land returned back to the lessor, requires exercise of judgement based on evaluation of facts and circumstances in each case.

Para D13AA option cannot be availed for long-term forward exchange contracts

PwC

ITFG

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ITFG Bulletin 7 clarifications

6. If an entity declares dividend on a financial instrument classified as a liability and measured at amortised cost (in accordance with Ind AS 109) after the end of the reporting period, the payment of dividend/interest on such liability accrues at the end of the reporting period.

7. As per Ind AS 12, the recognition of deferred tax is dependent upon the tax consequences that will follow on the basis of the expected manner of recovery or settlement of the asset/liability by the entity. This will require exercise of judgement based on evaluation of facts and circumstances, including consideration of substance to management’s expectation. Basis above, if in respect of freehold land carried at cost, management expects to sell such land on slump sale, then the tax base of such land will be the same as the carrying amount of the land (as indexation benefit is not available in case of slump sale as per Income Tax Act, 1961) and therefore there will not be any temporary difference.

8. If parent company invests in debentures issued by a subsidiary and such debentures meet the definition of equity as per Ind AS 32 Financial Instruments: Presentation from the issuer's perspective (i.e. subsidiary), then such investment can be considered to be part of parent's investment in subsidiary and can be accounted under Ind AS 27 Separate Financial Statements, else it will be accounted under Ind AS 109.

9. Para D22 of Ind AS 101 provides an exemption from retrospective change in accounting policy for amortisation of intangible assets arising from service concession arrangements in respect of toll roads recognised in the financial statements before the beginning of first Ind AS reporting period. Such exemption cannot be availed in case where the intangible asset is in progress, not recognised before start of the first Ind AS reporting period and for which amortisation has not begun.

Click here for ITFG Bulletin 7 >> http://resource.cdn.icai.org/45043indas34980.pdf

Dividends on a liability classified financial instrument accrues at the end of the reporting period

PwC

CBDT

MAT Ind AS Committee provided recommendations to CBDT on MAT related issues faced by Ind AS compliant companies

Ind AS MAT Committee Report

The Central Board of Direct Taxes (CBDT) had constituted a committee to suggest a framework for the computation of book profit for the purposes of levy of Minimum Alternate Tax (MAT) under section 115JB of the Income-tax Act, 1961, for Ind AS compliant companies in the year of adoption and thereafter. The committee discussed in detail the provisions of section 115JB of the Act, Ind AS and relevant sections of the Companies Act, 2013, and submitted a report regarding the framework of computation of book profit.

Click here for the report >>

http://www.incometaxindia.gov.in/news/mat-indas-committee-report-28-04-2016.pdf

MAT Ind AS Committee recommendations on main issues relating tofirst-time adoption

The MAT Ind AS Committee made further recommendations to CBDT on the main issues relating to first-time adoption raised by stakeholders.

Click here for the recommendations >>

http://www.incometaxindia.gov.in/news/report-regarding-framework-for-computation-05-08-2016.pdf

Refer also our publication PwC ReportingInBrief: MAT Ind AS Committee additional recommendations on main issues relating to first-time adoption >>

http://www.pwc.in/publications/2016/pwc-reportinginbrief-mat-ind-as-committee-additional-recommendations.html

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CBDT

Framework for computation of book profit for MAT purposes notified for Ind AS compliant companies

Finance Bill, 2017: MAT provisions for Ind AS compliant companies

The Finance Bill, 2017, was introduced in Lok Sabha on 1 February 2017. Among other matters, it included a proposal to amend section 115JB so as to provide the framework for the computation of book profit for Ind AS compliant companies in the year of adoption and thereafter.

Click here for the bill >>

http://indiabudget.nic.in/ub2017-18/fb/bill.pdf

The memorandum to the Finance Bill gives details on the purpose of the changes (refer pages 26 to 28 for details).

Click here for the memorandum >>

http://indiabudget.nic.in/ub2017-18/memo/memo.pdf

Refer also our publication PwC ReportingInBrief - MAT framework for Ind AS compliant companies >>

http://www.pwc.in/publications/2017/pwc-reportinginbrief.html

Amendment to the Finance Bill, 2017: MAT provisions for Ind AS compliant companies

The amendments to the Finance Bill 2017 introduced in Lok Sabha on 20 March 2017 have changed the definition of ‘transition amount’. The Lok Sabha passed the Finance Bill 2017 on 22 March 2017.

Refer also our publication PwC ReportingInBrief: framework for MAT for Ind AS compliant companies (Amendment to the Finance Bill, 2017) >>

http://www.pwc.in/assets/pdfs/publications/2017/pwc-reportinginbrief-mat-amendment.pdf

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PwC

RBI

RBI has provided a format for banks to submit proforma Ind AS financial statements for the half year ended 30 September 2016, onwards.

RBI report of Working Group on Implementation of Ind AS by Banks

The RBI Working Group issued its report on the implementation of Ind AS by banks on 1 July 2015. The report includes recommendations regarding key areas on accounting for financial instruments by banks after due review of requirements of IFRS 9 Financial Instruments, and RBI instructions and guidelines.

Click here for the report >>

https://rbidocs.rbi.org.in/rdocs/Content/PDFs/FAS93F78EF58DB84295B9E11E21A91500B8.PDF

Proforma Ind AS financial statements for banks

On 11 February 2016, RBI issued a circular outlining the roadmap for the implementation of Ind AS for scheduled commercial banks (excluding RRBs). RBI also clarified the requirements for proforma Ind AS financial statements which were to be submitted by banks for the half year ended 30 September 2016. Subsequently, RBI issued a circular on 23 June 2016 providing the format of the proforma accounts, including schedules and guidance on significant accounting policies.

Click her for the 11 February 2016 circular >>

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10274&Mode=0

Click here for the 23 June 2016 circular >>

https://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=10456

Applicability of Ind AS to All-India Term Lending and Refinancing Institutions (AIFIs)

RBI issued a notification on the applicability of Ind AS to AIFIS (i.e. EXIM Bank, NABARD, NHB and SIDBI) which requires AIFIs to prepare Ind AS based financial statements for accounting periods beginning from 1 April 2018 onwards, with comparatives for the periods ending 31 March 2018 and thereafter.

Click here for the notification >>

https://m.rbi.org.in//scripts/NotificationUser.aspx?Id=10542&Mode=0

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IRDA

The report details the recommendations of the Implementation Group to IRDA which may be appropriately considered for incorporating the relevant regulations/guidelines by IRDA

Report of the Implementation Group on Ind AS in the insurance sector in India

In order to prepare the insurance industry for Ind AS, IRDA constituted the Implementation Group on 17 November 2015 to examine the implications of implementing Ind AS, address the implementation issues and facilitate the formulation of operational guidelines to converge with Ind AS. The Implementation Group has submitted its report, which is published on IRDA’s website.

Click here for the report >>

https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3040

Exposure Draft of IRDA (Preparation of Financial Statements of Insurers) Regulations, 2017

The Implementation Group submitted its report on 30 December 2016. Based on this report, IRDA proposes to replace the existing IRDA (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002, with IRDA (Preparation of Financial Statements of Insurers) Regulations, 2017, which shall be effective from 1 April 2018.

Click here for the exposure draft >>

https://www.irda.gov.in/admincms/cms/whatsNew_Layout.aspx?page=PageNo3093&flag=1

PwC

Publications

Illustrative Ind AS consolidated financial statements –March 2017

The publication incorporates the requirements of Schedule III (Division II) of the Companies Act, 2013 and Ind AS. This also provides supporting commentary to explain the more challenging accounting areas and highlights the key exemptions and exceptions under Ind AS 101. This publication also includes certain industryspecific disclosures.

https://www.pwc.in/assets/pdfs/services/ifrs/illustrative-ind-as-consolidated-financial-statements-march.pdf

Ind AS presentation and disclosure checklist - March 2017

This publication incorporates the presentation and disclosure requirements of Ind AS, Schedule III (Division II) of the Companies Act, 2013, and the relevant guidance notes issued by ICAI. Additional guidance supporting the disclosure requirements have also been incorporated. This checklist also includes the industry specific disclosures.

http://www.pwc.in/services/ifrs/india-as-publications.html

PwC Reporting Perspectives

Our quarterly newsletter covers the latest developments in financial reporting as well as other regulatory updates.

http://www.pwc.in/services/ifrs/pwc-reporting-perspectives.html

Our PwC Reporting Perspectives (Special edition March 2015) contains an overview of key differences between Ind AS and IFRS, and also between Ind AS and Indian GAAP.

We have summarised some of our Ind AS publications, which you may find useful while preparing for the 31 March 2017 year-end Ind AS financial statements.

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Publications

PwC ReportingInBrief

These newsletters give insights and a broad overview of the latest developments in Ind AS.

http://www.pwc.in/services/ifrs/india-as-publications.html

PwC Ind AS impact analysis

This publication summarises the key areas impacted and issues arising on implementation of Ind AS. The observations are based on review of quarterly financial statements published by 75 companies which are included in Nifty 50 and Nifty Next 50 indices, excluding banks and NBFCs. The analysis is based on results published for quarter ended June 2015 comparing Ind AS vis-à-vis Indian GAAP.

http://www.pwc.in/publications.html

PwC Ind AS Outlook Survey

This report summarises the findings from the survey we had undertaken in January 2016 which aimed to provide insights to companies in gauging the key implications of Ind AS implementation.

http://www.pwc.in/publications.html

PwC Ind AS Pocket Guide 2016

This publication explains the core concepts and principles of Ind AS in a nutshell. It provides a high-level understanding of Ind AS rather than a set of detailed definitive interpretation of the standards.

http://www.pwc.in/publications/2016/ind-as-pocket-guide-2016.html

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IFRS publications

IFRS year-end reminders: March 2017

This publication summarises the key developments in IFRS.

http://www.pwc.com/sk/en/assurance-services/ifrs-spravy/ifrs-year-end-accounting-reminders-march-2017.html

PwC

Key takeaways

Since the announcement of the Ind AS roadmap in February 2015, numerous updates, clarifications and guidance have been issued by various regulators with an attempt to make the Ind AS transition process in India smooth. Accordingly, in this publication, we have attempted to summarise various Ind AS developments and updates till date.

We hope you find this publication informative and of continued interest.

We welcome your feedback at pwc.update@in.pwc.com

For a variety of additional resources offering more in-depth perspectives on the impact and other aspects of Ind AS, please visit our website at www.pwc.in

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This document does not constitute professional advice. The information in this document has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this document represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible.