IND- AS “A Step towards
IFRS Convergence In India”
Contents
1
3 Regulatory Update
2 IND-AS comparison with IFRS
IFRS in India : Background and overview
2
IFRS - now a truly global standard
• IFRS is adopted in more than 100 countries
• The IFRS movement started in India in the year 2001
• ICAI presented Position paper in the year 2007 and issued concept paper
in 2009
• Due to the announcement in government policy as to adopt IFRS from
1April 2007, all regulatory procedures were fastened to implement IFRS in
India
•By 2011,more than 150 countries would have adopted IFRS including
India, China, Brazil and Korea
•IFRS includes
IAS: International Accounting standards
SIC: Standard of interpretation committee
IFRS: International financial reporting standards
IFRIC: International Financial reporting Interpretation committee
IFRS convergence in India – Announcement by the Ministry of
Corporate Affairs (MCA)
Convergence with IFRS in a phased manner starting April 1, 2011
Criteria for companies covered in each phase defined
Two separate sets of Accounting Standards under Section 211(3C) of the
Companies Act, 1956 – IFRS converged standards (Ind-AS) and existing
accounting standards
Companies not covered will follow existing accounting standards; but may
voluntarily converge
Carve – out’s (First-time transition / Ongoing accounting policies)
IFRS convergence in India – phased approach
NIFTY 50
SENSEX 30
Companies whose shares or other securities listed on stock exchanges outside India
Companies (listed or unlisted) with net worth in excess of INR.1,000 crores
Companies (listed or unlisted) with net worth in excess of INR. 500 crores but less thanINR.1,000 crores
Listed companies with net worth less than INR. 500 crores
Separate convergence plan for banks (April 1, 2013), NBFC (April 1, 2013 or
April 1, 2014) and insurance companies (April 1, 2012)
Phase 1 – Transition date April 1, 2011
Phase 2 – Transition date April 1, 2013
Phase 3 – Transition date April 1, 2014
MCA clarifications on IFRS adoption (1/3)
A company may, however, voluntarily choose to report comparative period figures (i.e. for the
year ending March 31, 2011 in case of Phase 1 entities) as per the converged accounting
standards by inserting an additional column in the financial statements. The opening balance
sheet (and therefore transition adjustments) for companies in such a case shall be as at April 1,
2010.
Presentation of comparatives
Option to present comparatives voluntarily (2010 –2011)
Option to choose the IFRS vs. Indian converged accounting standards
Opening balance sheet shall be prepared as at April 1, 2011 (i.e. Phase 1 entities) and the
financial statements for the year ending March 31, 2012 shall be in accordance with the
converged accounting standards; but comparative period figures (i.e. for the year ending
March 31, 2011) shall those reported as per the non-converged accounting standards.
Companies shall need to follow the converged accounting standards and not IFRS as issued by
IASB.
The date for the determination of applicability criteria of the converged standards would be
March 31, 2011 for banks and NBFCs and March 31, 2009 for other companies (other than
insurance companies)
Date for determination of eligibility
MCA clarifications on IFRS adoption
Once a company follows the converged accounting standards it shall continue preparing
financial statements in accordance with the converged accounting standards. It shall not
revert to the non-converged accounting standards even though the applicability criteria no
longer apply to it.
Voluntary adoption for Phase 2 and 3 companies
Matters subsequent to adoption
What is included in the ‘Net worth’?
Phase 2 and 3 companies will have an option to early adopt the converged accounting
standards commencing on or after April 1, 2011.
All other companies can also early adopt IFRS
Share capital + reserves – revaluation reserve – debit balance in P&L account
Net worth shall be determined based on the standalone audited balance sheet – for
companies as on March 31, 2009 and for financial institutions (banks and NBFCs) on March
31, 2011.
Summary of comparison Ind AS vis-à-vis IFRS
S R
No. Indian Accounting Standard Key IFRS differences
1. Ind AS 1 - Presentation of Financial Statements a
2. Ind AS 2 - Inventories r
3. Ind AS 7 - Statement of Cash Flows a
4. Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and
Errors
r
5. Ind AS 10 - Events after the Reporting Period r
6. Ind AS 11 - Construction Contracts a
7. Ind AS 12 - Income Taxes r
8. Ind AS 16 - Property, Plant and Equipment r
9. Ind AS 17 – Leases a
10. Ind AS 18 – Revenue a
11. Ind AS 19 - Employee Benefits a
12. Ind AS 20 - Accounting for Government Grants and Disclosure of
Government Assistance
a
Summary of comparison Ind AS vis-à-vis IFRS contd.
S R
No. Indian Accounting Standard Key IFRS differences
13. Ind AS 21 - The Effects of Changes in Foreign Exchange Rates a
14. Ind AS 23 - Borrowing Costs a
15. Ind AS 24 - Related Party Disclosures a
16. Ind AS 27 - Consolidated and Separate Financial Statements a
17. Ind AS 28 - Investments in Associates a
18. Ind AS 29 - Financial Reporting in Hyperinflationary Economies a
19. Ind AS 31 - Interests in Joint Ventures a
20. Ind AS 32 - Financial Instruments: Presentation a
21. Ind AS 33 – Earnings per Share a
22. Ind AS 34 – Interim Financial Reporting a
23. Ind AS 36 - Impairment of Assets a
24. Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets r
25. Ind AS 38 - Intangible Assets a
26. Ind AS 39 - Financial Instruments: Recognition and Measurement a
Summary of comparison Ind AS vis-à-vis IFRS contd.S R
No. Indian Accounting Standard Key IFRS differences
27. Ind AS 40 - Investment Property a
28. Ind AS 101 - First-time Adoption of Indian Accounting Standards a
29. Ind AS 102 - Share-based Payment r
30. Ind AS 103 - Business Combinations a
31. Ind AS 104 - Insurance Contracts r
32. Ind AS 105 - Non-current Assets Held for Sale and Discontinued Operations r
33. Ind AS 106 – Exploration for and Evaluation of Mineral Resources r
34. Ind AS 107 – Financial Instruments: Disclosures r
35. Ind AS 108 - Operating Segments r
11
Ind AS 1 Presentation of Financial Statements
S R
No. Ind AS requirement IFRS requirement
1. Ind AS 1 allows only the single statement
approach. So entities can not follow two
statements approach
With regard to preparation of Statement of profit
and loss, IAS 1 provides an option either to follow
the single statement approach or to follow the two
statement approach.
2. Ind AS 1 requires the statement of changes in
equity to be shown as a part of the balance
sheet.
IAS 1 requires preparation of a Statement of
changes in equity as a separate statement.
3. Ind AS 1 requires only nature-wise classification
of expenses.
Paragraph 99 of IAS 1 requires an entity to present
an analysis of expenses recognised in profit or
loss using a classification based on either their
nature or their function within the entity.
4. Ind AS 1 does not include implementation
guidance because various enactments have
prescribed formats, e.g., Schedule VI to the
Companies Act, 1956.
IAS 1 contains implémentation guidance.
12
Ind AS 2 Inventories
S R
No. Ind AS requirement IFRS requirement
1. Paragraph 38 of IAS 2 dealing with recognition
of inventories as an expense based on function-
wise classification, has been deleted keeping in
view the fact that
option provided in IAS 1 to present an analysis
of expenses recognised in profit or loss using a
classification based on their function within the
equity has been
removed and Ind AS 1 requires only nature -
wise classification of expenses.
IAS 2 allows recognition of inventories as an
expense based on function-wise classification.
13
Ind AS 7 Statement of Cash Flows
S R
No. Ind AS requirement IFRS requirement
1. Ind AS 7 does not provide
such an option and requires these item to be
classified as item of financing activity and
investing activity, respectively.
In case of other than financial entities, IAS 7
gives an option to classify the interest paid and
interest and dividends received as item of
operating cash flows.
2. Ind AS 7 requires it to be classified as a part of
financing activity only.
IAS 7 gives an option to classify the dividend
paid as an item of operating activity.
14
Ind AS 11 Construction Contracts
S R
No. Ind AS requirement IFRS requirement
1. This has been dealt with under Ind AS 11, since
it has been kept out of the scope tof Ind AS 18,
Revenue.
IAS 11 does not deal with accounting for
construction contracts in respect of real estate
developers.
1515
IND AS 17 – Leases
S R
No.
Ind AS requirement
IFRS Requirement
1. Relevant paragraphs of IAS 17 dealing with
measurement of the land and buildings
elements when the lessee’s interest in both land
and buildings is classified as an investment
property in accordance with Ind AS 40
Investment Property if the fair value model is
adopted and paragraph 19 of IAS 17 dealing
with property interest held under an operating
Lease as an investment property, if the
definition of investment property is otherwise
met and fair value model is applied, have been
deleted, since Ind AS 40, Investment Property,
prohibits the use of fair value model.
Both cost and fair value option are prescribed
for investment property under Ind AS 40, for
which corresponding guidance is given under
IAS 17.
1616
IND AS 18 – Revenue
S R
No. IND AS Requirement IFRS Requirement
1. IFRIC 15 has not been included in Ind AS 18 to
scope out agreements in relation to construction
of real estate and to include the same in Ind AS
11, Construction Contracts.
The same requirement forms part of IFRIC 15
based on principles of IAS 18.
Ind-AS as compared to IFRS
The first category of carve-out's include:
Mandatory deviations from IFRS
Percentage of completion basis – Real estate
Recognition of biological/plantation assets at cost
Recognition of 'embedded' foreign currency conversion options in
convertible bonds, as 'equity’
Recognition of 'bargain purchase gains' as 'capital reserves’
Use of government securities yields for determining actuarial liabilities
.
Ind-AS as compared to IFRS
The second category of carve-out's include:
Voluntary deviations from IFRS
Choice to defer exchange differences on long-term foreign currency assets
and liabilities
Choice to follow non-uniform accounting policies/periods for associates
Choice to consider Indian GAAP carrying values as 'deemed cost' for fixed
assets acquired prior to April 1, 2007
The third category of carve-out's include:
Elimination of options
Single statement presentation of income statement
Classification of expenses in the profit and loss account by their nature
Classification of interest and dividend as financing/investing cash flows
No choice to carry investment property at fair value
Recognition of actuarial gains and losses directly in reserves
Requirement to present consolidated financial statements by intermediate
holding companies
Re computation of borrowing costs capitalizable
Regulatory updates (1/3)
Representations for deferral of April 1, 2011 timeline:
Delay in issuance of the final standards and final regulatory
amendments
Need for preparatory time (12 months – 24 months) after issuance
Expected changes in IFRS
Lack of clarity on taxation
U.S. and Japan have more extended timelines
Regulatory updates (2/3)
Ministry of Corporate Affairs (MCA) comment process:
300 companies invited to comment
Approximately 30 companies responded
Deferral unlikely
Transition year (2011-12) – quarterly reporting under Indian GAAP?
Some additional carve-outs possible
Regulatory updates
Converged Indian accounting standards (Ind AS) yet to be issued in final form –
expected in February 2011
Several proposed ‘carve-outs’ (deviations) from IFRS issued internationally
Fixed assets
Concessional government loans
Embedded leases
Amendments to the Companies Act
Separate records for tax purposes - Position paper by Institute of Chartered
Accountants of India (ICAI); Committee formed by Ministry of Finance
Thank You