Ind AS December 2014 Presented by Shrenik Baid [email protected] +91-22-6669-1312...

Ind AS

December 2014

Presented byShrenik Baid [email protected]+91-22-6669-1312 +91-98-2011-6904

Price Waterhouse & Co.


Agenda

1. Ind AS in India

2. Ind AS 101-First-time Adoption of Ind-AS

3. Adoption of Ind-AS

Slide 2December 2014


Ind AS in India

1• Where are we?

• Adoption timelines

• Fundamental areas in which Indian GAAP and Ind-AS differ


Where are we?

Roadmap - ICAI - 24 March, 14

Only for consolidated financial statements

*Mandatory adoption date for specified companies as per roadmap finalized by ICAI Council as on 24 March, 2014 and submitted to MCA for it’s consideration.

Roadmap for banks, NBFCs and Insurance Companies will be decided in consultation with RBI and IRDA.

# Net worth = Share Capital + Reserves – Revaluation as at 31 March, 2014 audited standalone financial statements

2016-17*2015-16

Comparative period

a) Equity/ debt securities are listed or in process of listingon any stock exchange in India or outside Indiab) Net worth# >= Rs. 500 crore c) Holding, subsidiary, joint venture or associate of companies covered under above

Transition date April 1, 2015



Equity P&L Equity

Adoption timelines

31/12/2014

31/3/2015Transition

DateOpening

balance sheet

31/3/2016Adoption

Date

31/3/2017Reporting

DateClosing balance sheet

First Ind-AS Reporting period

Ind-AS Ind-AS Ind-AS

EGAAP* EGAAP* EGAAP*

*EGAAP = Existing GAAPHerein, the dates have been assumed and are for illustrative purpose only




Fundamental areas in which Indian GAAP and Ind-AS differ

IndianGAAP Ind-AS

• Full compliance, qualification not accepted

• More guidance• Focus on substance over form• Focus on risks and rewards• Present value and fair value

concepts• Estimates• Restatement of previously issued

financial statements• Detailed disclosures



Ind AS 101-First-time Adoption of Ind-AS

22.1 Introduction and Overview

2.2 Exceptions and Exemptions

2.3. Disclosures



Introduction and Overview

2.1Slide 8

December 2014



Objective• Is transparent for users and comparable over all periods

presented;• Provides a suitable starting point for accounting under Indian

Accounting Standards (Ind-ASs); and• Can be generated at a cost that does not exceed the

benefits to users.

Application

• To the first Ind AS financial statements ; and

• Each interim financial report under Ind-AS in the first period.

Ind AS 101 is different from transition adjustments in each standard and also it is different from change in accounting

policies. Ind AS 101 is for first time adoption of Ind AS only




Ind AS 101 requires• Identify the period for adoption of Ind AS.• Prepare an opening balance sheet at the date of transition to

Ind AS.• Select accounting policies that comply with Ind AS, and apply

those policies for all periods presented in the first Ind AS financial statements.

• Consider whether to apply any of the optional exemptions from retrospective application.

• Apply the mandatory exceptions.• Provide disclosures to explain the transition to Ind AS from

Previous GAAP.

The first Ind AS financial statements are:The first financial statements to contain “an explicit and unreserved statement of compliance with Ind ASs”

Slide 10

December 2014


Exceptions and Exemptions

2.2Slide 11

December 2014

PwC

Ind AS 101 - Mandatory exceptions summary

Non-controlling interests

Government loans

Derecognition of financial

assets and financial liabilities

Classification and

measurement of financial

assets

Impairment of financial

assets

Embedded derivatives

Hedge accounting

Estimates



PwC

Ind AS 101 - Mandatory exceptions summary

Estimates

Estimate required by

previous GAAP?Evidence of error?

Calculation consistent with Ind AS?

Make estimate reflecting conditions

at relevant date

Use previousestimate and adjust

to reflect Ind AS

Use previous estimate

Yes

Yes Yes No

No

No



PwC

Ind AS 101 - Optional Exemptions summary

Business combinatio

ns

PPE,Investment Properties, Intangibles

Cumulative translation differences

Leases Leases

Compound Financial

Instruments

Assets and liabilities of subsidiaries, associates and joint ventures

Investments in

subsidiaries, associates and joint ventures

FV measurement of Financial

Instruments on initial

recognition

Designation of financial assets andFinancial Liabilities

Insurance contracts

Compound Instrument

s

Investments in

subsidiaries, associates and joint control entities

Share-based

payments

FV measurement of financial assets

or financial liabilities at

initial recognition

Designation of previously recognised financial

instrumentsDesignation of contracts to buy or sell

a non-financial

item

Insurance contracts

Service concessions arrangement

s

Revenue

Severe hyperinflatio

n

Joint arrangeme

nt

Stripping cost

Non-current assets held for sale and discontinued operations

Extinguishing financial liabilities

with equity instruments

Decommissi--oning

liabilities



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Business Combinations

Ind AS 103 need not be applied to combinations before date of transition• BUT, if one combination is restated, after a particular date of

choice, all subsequent combinations need to be restated

When the exemption is used

• No change in classification

• Post combination carrying amount deemed cost for assets and liabilities measured at cost

• Assets and liabilities measured at fair value restated at date of transition – adjust retained earnings



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Assets and liabilities not recognised at the time of a business combination under previous GAAP are:• Recognized as if subsidiary adopted Ind ASs at the same date

Subsidiaries not consolidated under previous GAAP are:• Consolidated as if subsidiary adopted Ind ASs at the same date• Goodwill is the difference between cost of investment and net

assets recognised at date of transition



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Goodwill is recognised at the carrying amount under previous GAAP and adjusted for • Intangibles that are not recognised under Ind AS• Intangibles that must be recognised under Ind AS• Contingent consideration not recognised; and• Tested for impairment

Goodwill deducted from equity remains in equity



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Property, Plant and Equipment

For property, plant and equipment, an entity can choose to measure the value using:

• Carrying value as per previous GAAP (para D7AA of Ind AS 101).• Cost in accordance with Ind AS.

• Fair value at the date of transition as deemed cost.

• A revaluation carried out at a previous date (like a IPO) less accumulated depreciation till the date of transition as deemed cost, subject to certain conditions.

This exemption can also be applied to intangible assets that meet the

criteria for revaluation in Ind AS 38 and to investment properties where

the cost method in Ind AS 40 is applied. The exemption may not be used

for any other assets or for liabilities.

If a company elects option under para D7AA, then its Ind AS financial statement will not qualify to be compliant with IFRS.



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Other key exemptionsExemption Impact

Cumulative translation differences

The cumulative translation reserve may be reset to zero.

Leases A company may elect to assess whether an arrangement contains a lease at the date of transition, rather than at the inception of the arrangement.

Share-based paymenttransactions

A company may choose (but is not required) to apply Ind AS 102 to any equity instruments that were granted before date oftransition to Ind ASs.In addition, a company may choose (but is not required) to apply Ind AS 102 to a liability relating to a cash-settled share-based payment that was settled prior to the date of transition to Ind AS.

Compound financialinstruments

A compound financial instrument does not need to be bifurcated if the liability component is not outstanding at the transition date. Slide 19

December 2014Price Waterhouse & Co.

PwC


Other key exemptionsExemption Impact

Assets and liabilities of subsidiaries, associates and joint ventures

A subsidiary that adopts Ind AS later than its parent can elect to apply Ind AS 101 or to use the carrying amounts of its assets and liabilities included in the consolidated financial statements, subject to eliminating any consolidation adjustments.If a parent adopts Ind AS later than its subsidiary, the parent, in its consolidated financial statements, must measure the assets and liabilities of the subsidiary at the same carrying amounts as in the Ind AS financial statements of the subsidiary, adjusting for normal consolidation entries.

Investments insubsidiaries, jointlycontrolled entities and Associates

In their separate financial statements, first-time adopters can measure their investment in subsidiaries, jointly controlled entities and associates at either:• Cost, determined in accordance with Ind AS 27;• fair value at the Ind AS transition date, or• Deemed cost, defined as previous GAAP carrying

amount at the Ind AS transition date. Slide 20

December 2014Price Waterhouse & Co.


Disclosures

2.3Slide 21

December 2014

PwC

Ind AS 101 - Disclosures

Comparative information

• An entity is mandatorily required to provide comparative financial statements for atleast one period. Entity can provide comparative financial statements for more than one period.

• Opening balance sheet (related disclosures in notes) as at transition date to be presented.

• Comparative financial statement to be presented in accordance with Ind AS.

Non Ind AS comparative information and historical summaries

• Allows entities to disclose non-Ind AS information in the Ind AS financial statement.

• Any financial statement information in accordance with previous GAAP shall be labelled as Previous GAAP information and disclose the nature of main adjustments required to make it comply with Ind AS.

Adjustment of GAAP differences on Ind AS transition date

• GAAP differences on Ind AS transition date are adjusted directly in retained earnings (or, if appropriate, another category of equity).




Adoption of Ind-AS

3• Challenges in adopting Ind-AS

• Managing the Change

• Project Management Framework

• Model steps for Ind AS implementation



Challenges in adopting Ind-AS

- Managing and communicating the change

- Data capturing

- Aligning different policies, practices and system across the group having presence in multiple jurisdictions and having different reporting requirements including tax and statutory reporting

- Conforming accounting with changes in business

- Aligning the business practices considering Ind AS accounting requirements

- Training across the organization

- Lack of appropriately skilled resources in the market



Project Framework Establishing an

environment to support the project

Controls and Documentation

Embeddingthe Change

Creating a sustainable reporting environment

Communication and Knowledge Sharing

Technical Accounting Advice

Ensuring the conversion process is controlled and documented

Monitoring the pace and communication of the work

Technical accounting information along with practical application advice

Man

ag

ing

th

e C

han

ge




Steering Committee

Work Streams

TRC

Decision Maker

Issue Originators

Auditor

Expert

WS1

WS2

WS3

WS4

Technical Review Committee

o Loanso Income

recognition

o Financial Reporting

o Employee benefits

o Investmentso Derivativeso Consolidatio

n

o Ind AS 107

o Segmental Reporting

• Technical support material

• Roles & Responsibilities

• Timelines• Nodal offices

INVITEES

Technical Champion

s

Needs

A well thought out project structure on lines below ensures that an entity is able to get appropriate management focus on project and on technical front “get it right the first time” which is very essential for a successful project.

Project Management Framework



Model steps for Ind AS implementationDiagnostic study

• Identification of key GAAP differences between IGAAP & Ind AS and accounting policy options under Ind AS,

• Ind AS 101 – First-time adoption of Ind AS implication,

• Finalise accounting policy under Ind AS and optional exemption under Ind AS 101 to be opted.

Ind AS conversion

• Quantification of GAAP differences,

• Preparation of Ind AS financial statement,

• Ensuring completeness of disclosures,

• Audit of Ind AS financial statement.


Thank You

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, [insert legal name of the PwC firm], its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2014 Pricewaterhouse & Co. All rights reserved. “PwC”, a registered trademark, refers to Price Waterhouse & Co. (a partnership firm in India) or, as the context requires, other member firms of PwC International Limited, each of which is a separate and independent legal entity.

Shrenik Baid [email protected]+91-22-6669-1312 +91-98-2011-6904

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