KEY DIFFERENCES- AS VS. IND AS
1
AGENDA
• Operating segments
• Related party transactions
• Provisions, Contingent Liabilities and Contingent Assets
• Revenue
• Construction contracts
IND-AS 108
OPERATING SEGMENTS
AS 17 VS. IND AS 108
Identification of Segments
AS 17
• AS 17 requires identification of two sets of segments—
• one based on related products and services,
• the other on geographical areas based on the risks and returns approach.
• One set is regarded as primary segments and the other as secondary segments.
• Because of ambiguity, many entities claim that they have only ‘one’ segment.
Ind AS 108
• Ind AS 108 segment identification is based on ‘management approach’ .
• Operating segments are identified based on the internal reports regularly reviewed
by the entity’s chief operating decision maker.
• Will result in incomparable information for similar companies.
• Generally popular with management as more aligned with internal reporting.
AS 17 VS. IND AS 108Restatement
Indian GAAP
• If new segment is identified, corresponding data for comparative purpose is also
required.
Ind-AS
• If any entity changes the structure of its internal organization that causes the
composition of reportable segment to change, corresponding information for
earlier periods, including interim periods will be restated.
IND-AS 24
RELATED PARTY DISCLOSURES
AS 18 VS. IND AS 24
Related parties
• Ind AS 24 Definition of related parties is entirely different compared to AS 18.
• There may be several new related parties as per Ind AS 24 due to the new
definition.
AS 18 VS. IND AS 24Definition of close members of the family
Indian GAAP
AS 18, covers ‘Relatives’ who may be expected to influence, or be influenced by,
that individual in his/her dealings with the reporting enterprise.
Ind-AS
Ind AS 24, covers Close members of the family of KMP.
AS 18 VS. IND AS 24
Key Management Personnel/ post employment benefit plans
Ind-AS 24
• covers KMP of the entity as well those of its parent as related parent
• Ind AS 24 includes any director whether executive or otherwise
• Post employment benefit plans are treated as related parties
IND-AS 37
PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
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AS 29 VS. IND AS 37Discounting of provisions
Indian GAAP
AS 29- prohibits discounting the amounts of provision
Ind AS 37
Ind AS 37- provisions to be at present value if time value of money is material
The increase in liability is treated as borrowing cost.
AS 29 VS. IND AS 37Recognition of Provisions
Indian GAAP
As per AS 29 provisions are recognized based on legal obligation.
Ind-AS 37Provisions are recognized based on Constructive Obligation
IND-AS 18 & 11
REVENUE AND CONSTRUCTION CONTRACTS
BACKGROUND
• MCA issued IFRS converged standards (Ind AS)
• included Ind AS 115 (equivalent of IFRS 115) Revenue from contracts with
customer
• IFRS 15 is Joint project of FASB and IASB
• Representation from stakeholders as to impact of this and time required
• IASB confirmed deferral of IFRS 15
• After deferral, MCA also deferred Ind AS 115
• Post deferment, MCA notified
• Ind AS 11 Ind AS 18
AS 9/ AS 7 VS. IND AS 18/11
Measurement of revenue
Indian GAAP
recognized at the contractual amount of consideration
Ind-AS
measured at the fair value of the consideration
AS 9 VS. IND AS 18
Customer Loyalty programmes (CLP)
Indian GAAP
• Technical guide on retail sector
• Recognize ‘Deferment Model’ and ‘Provision Model’
• Per guide, deferment model is preferred
Ind-AS
• As per IND AS 18, award credits to the customers are treated as different
component of sales transaction.
• Fair value of the award credits/ points is estimated separately at the time of
sales transactions and recorded separately.
AS 9 VS. IND AS 18
Multiple element arrangements
Indian GAAP
• ICAI issued technical guide on Accounting issues in retail sector
• Deferment model is preferred model
Ind-AS
• Requires separation of different components and book revenue when
revenue recognition criteria is met
AS 9 VS. IND AS 18
Discounts, rebates and schemes
Indian GAAP
Cash discount and certain schemes are reported as expenditure in financial
statements.
Ind-AS
Under IND AS 18, rebates, discounts, schemes cost will be reduced from revenue
when sales is recognized.
AS 9 VS. IND AS 18
Recognition of revenue from interest
Indian GAAP
AS 9 requires the recognition from interest on time proportion basis as per
contractual terms
Ind-AS
• IND AS 18 requires interest to be recognised using the effective interest method
as set out in Ind AS 109.
AS 9 VS. IND AS 18
Revenue from rendering of services
Indian GAAP
As per AS 9 revenue is recognised using either by completed services or
proportionate completion method.
Ind-AS
As per IND AS 18 revenue is recognised in the period in which services would be
rendered, generally under percentage completion method.
AS 9 VS. IND AS 18
Revenue from Barter transactions
Ind-AS
• IND AS 18 specifically deals with the exchange of goods and services of similar
and dissimilar nature.
• For dissimilar goods and services, accounting will generally be on the fair value
of goods and services received.
• For similar goods and services, no revenues and costs are to be separately
recognized
AS 9 VS. IND AS 18
Disclosure of excise duty
Indian GAAP
• As per AS 9 , excise duty is reduced from the gross revenue and reported on
net basis.
Ind-AS
• As per IND AS 18, only gross inflows of economic benefits received by the
Company on it’s own account.
• However, excise duty collected is duty on manufacture and is considered as
revenue and
• excise duty payment as expenditure.
AS 9 VS. IND AS 18
Transfer of assets from customers
Indian GAAP
• No specific guidance to acquire such assets.
• Varied practices.
Ind-AS
• Customer contribution that meet definition of asset, would be recognized as an
asset.
• On initial recognition, the cost of asset is measured at fair value.
• Revenue will be recognized when related performance obligations are
satisfied.
AS 9 VS. IND AS 18
Revenue from agreement of real estate development
Indian GAAP
Current guidance note requires POCM for recognizing revenue on transactions and
activities that have same economic substance as Construction Contracts.
Ind-AS
• Revenue would be recognized as per Guidance Note issued by ICAI.
• Guidance note allows percentage of completion with specific threshold/
guidelines.
• Will remain as Major carve out from IFRS till Ind AS 115 is notified.
AS 7 VS. IND AS 11
Service concession ArrangementsIndian GAAP
• In 2008 and 2014, ICAI issued one exposure draft on this but final version was never
issued or notified.
• Varied practices with some enterprises reporting infrastructure as PPE.
Ind-AS
• Ind-AS 11 provides specific guidance for Public to Private arrangements in which
• The public sector entity controls/ regulates the services provided and prices
• Public entity controls any significant residual interest in the infrastructure.
• Operator would not recognize Infrastructure as PPE.
• It would recognize either a Financial Asset or an Intangible Asset or both.
JUST TO RECAP...
It is clear the consequences are far wider than financial reporting issues and extend to various significant business and regulatory matters including :
Entities will also need to communicate the impact of IND-AS convergence to their investors to ensure they understand the shift from Indian GAAP to IND-AS.
CFS
Thank you