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CHAPTER 5:

OBJECTIVE WISE ANALYSIS AND COMPARISON


For achieving various objectives of research, researcher has compared all the numeric and theoretical data to conclude the difference and find
out the major differences between IFRS reporting and GAAP reporting.
To overrule the problems arising in regulatory framework in India new Indian AS have been framed to sort out the problems identified
between rules and regulations applicable in existing GAAP, various laws and IFRS. In India, newly framed Indian AS will become effective
for reporting practices.
For this, first of all researcher has compared the rules and regulations which are applicable in India, Existing GAAP, IFRS and Indian AS
(Newly Framed). Researcher has tried to make detailed comparison of rules and regulation applicable in above three reporting standards.

5.1 COMPARISON AMONG INDIAN GAAP, IFRS AND INDIAN AS1


Table 4: Detailed Comparison amongst Indian GAAP, IFRS and Indian AS

Basis
Presentation of
financial statements

Components of
financial statements

INDIAN GAAP
IFRS
INDIAN AS(NEW)
AS 1- disclosures of accounting
IAS 1 Presentation of
Indian AS 1 Presentation of
policies
financial statements
financial statements
AS 5- net profit or loss for the
period, prior period items and
change in accounting policies
As per the requirement relating to Under IFRS financial statement Under IFRS financial statement
financial statements presentation comprises
comprises
setup by various regulatory bodies
(a) Statement of financial
(a) Statement of financial
such as schedule VI of companies act
position
position(Notes including
1956, schedule III of Banking
(b) Statement
of
summary of accounting
regulation act(for banks), IRDA(for
comprehensive
income
policies and explanatory
insurance
companies),
SEBI
(displaying profit and
notes)
guidelines (for mutual funds) :
loss)
(b) Statement
of

Chapter 5: Objective wise analysis and comparison

components of financial statements


(c) Statement of cash flow
are
(d) Statement of changes in
(a) Balance sheet
equity
(b) Statement of Profit & loss
(e) Notes including summary
(c) Cash flow statement
of accounting policies and
(d) Explanatory
notes
with
explanatory notes
significant accounting policies Comparative figures for one year
Comparative figures for one year are are also to be presented.
also to be presented.
All entities are required to present
their stand alone financial statements.
But companies having subsidiaries
are required to submit their
consolidated financial statements.

Presentation
of Schedule VI of companies Act 1956
financial statements- have provided formats of P&L A/C
Formats
and Balance sheet.
Formats can be modified if any
changes are required.

Only illustrative formats for


formats for presentation of
financial statements have been
given.

Presentation
of Items, the knowledge of which might Omission or misstatements are
financial statements- influence the decisions of the user of material if individually or
definition of material the financial statements.
collectively they could affect the
economic decisions that users
takes on the basis of financial
statements.
Fair presentation of Fair presentation requires compliance Fair presentation needs faithful
financial statements
with regulatory framework applicable representation of the effects of the
and AS framework. Departure from transactions, other events and
framework
and
regulatory conditions in accordance with the
174

comprehensive income
(displaying profit and
loss)
(c) Statement of cash flow
(d) Statement of changes in
equity
Comparative figures for one year
are also to be presented.
Indian as do not mandate which
entities are required to prepare
consolidated financial statements
as the required to prepare
consolidated
financial
as
required to present consolidated
or separate financial statements
is regulated by governing
statutes in India.
AS 1 does not include any
illustrative format of financial
statement though Ind AS 27 does
set out the form in which
consolidated financial statement
are to be presented.
-Same as IFRS-

-Same as IFRS-

Chapter 5: Objective wise analysis and comparison

requirements are strictly prohibited.

No guidance in existing standards.


As per Schedule VI financial liabilities
which have to be paid within 12
months without any unconditional
right, after the reporting date will be
classified as current liabilities.
Classification
of No guidance in existing standards.
financial
liabilities As per Schedule VI financial liabilities
upon
breach
of which have to be paid within 12
months without any unconditional right
covenants
to defer settlement of the liability, after
the reporting date will be classified as
current liabilities.

Classification
of
financial
liabilities
under
refinancing
arrangements

Presentation
of
income
statement/statement
of
comprehensive
income

As per Schedule VI analysis of expense


should be on the basis of nature. Any
item of income and expenditure which
is higher of 1% of revenue from
operations or Rs. 1 lakh needs to e
disclosed.

definition of and recognition


criteria.
In extremely rare circumstances
in which management thinks that
compliance with requirements of
a standards or interpretation is
misleading, it may depart from
the set standards.
Reasons for departure and
financial impact are to be
disclosed.
Current even if refinance or
reschedule payments on a long
term basis are completed after the
reporting period and before the
financial
statements
are
authorized to issue.
Non-current, if lender has agreed
before reporting date to provide a
grace period of minimum 12
months after the reporting period
within which the breach can be
rectified the lender cant demand
immediate payment.
Analysis of expenses is presented
using a classification based on
either the nature of expenses or
their function whichever provides
more reliable and relevant
information if presented by
function, specific nature wise
disclosures are to be provided in
the notes. Where items are
175

-Same as IFRS-

-Same as IFRS-

present an analysis of expenses


recognized in profit or loss using
a classification based only on the
nature of expense.

Chapter 5: Objective wise analysis and comparison

material their nature and amount


are separately disclosed.

Profits or loss available for minority


interest is disclosed as deduction from
the profit or loss for the period as an
item of income or expense(as per AS
21)

Presentation
of
income
statement/statement
of
comprehensive
income

Statement of profit and loss in Indian


GAAP is equivalent to separate income
statement under IFRS.
Items such as revaluation surplus or
deficit
are
treated as
other
comprehensive income under IFRS/
Ind AS are recognized directly in
equity under Indian GAAP.

Profit or loss of minority interest


and equity holders of the parent
company are disclosed in the
statement of
comprehensive
incomes allocation of profit and
loss and total comprehensive
incomes for the period.

Includes all items of income and


expenses
including
(a)
components of profit and loss and
(b) other comprehensive income
such as revaluation reserve.
Items are presented either:(a) In a single statement of
comprehensive
income
with a sub total; or
(b) In a separate income
statement
displaying
components of profit or
loss and a separate
statement
of
comprehensive
income
starting with profit or loss
and
displaying
components
of other
comprehensive income.
176

-Same as IFRS-

Present all items of income and


expenditure
including
components
of
other
comprehensive income in a
period in a single statement of
profit and loss.

Chapter 5: Objective wise analysis and comparison

Statement of changes Not required.


A statement of change in equity is
Movements in share capital, retained required to be presented showing:
in equity
earnings and other reserves are to be
(a) Total
comprehensive
mentioned in notes to accounts.
income for the period
(b) Effects of retrospective
application
on
each
component of equity;
(c) A reconciliation between
opening
and
closing
balances
separately
disclosing changes arising
from (i) profit or loss, (ii)
items
of
other
comprehensive
income,(iii) transactions
with owners in their
capacity
as
owners,
showing
separately
contributions
by
an
distributions to owners
and changes in controlling
interest in subsidiaries that
do not results in a loss of
control.
Disclose separately in statement of Presentation of any item as
Extraordinary items
profit and loss and to be included in the extraordinary is prohibited.
determination of net profit or loss for
the period.
These items should be disclosed
distinct from the ordinary activities and
are determined by nature of the event
or transactions.
AS 1 does not requires disclosures of Requires disclosures of critical
Critical judgment
177

Is to be presented as a part of
balance
sheet
containing
information similar to IFRS.

Presentation of any item as


extraordinary is prohibited.

-Same as IFRS-

Chapter 5: Objective wise analysis and comparison

Estimation
uncertainty

judgment made by management in


summary of accounting policies.
Under AS 1 no such requirement
though other standards may require
certain disclosures may require certain
disclosure of the same.

Capital

AS 1 does not need any disclosures.

INVENTORIESPRIMARY
Scope

AS 2- Valuation of Inventories
No scope exemption for any
inventories held by commodity traders.
AS 2 totally excludes from its scope
producer inventories of livestock
agriculture and forest products, and
mineral oils, ores and gases to the
extent that they are measured at net
releasable value on the basis of wellsettled practices of that industry.
WIP of service providers in ordinary
course has been scoped out of AS 2.

judgments made by management


for applying accounting policies.
Requires disclosure of key
sources of estimation uncertainty
at the end of the reporting period,
which has a significant risk of
causing a material adjustment to
carrying amounts of assets and
liabilities within next financial
year.
Nature of uncertainty and
carrying amounts of assets and
liabilities at the end of the
reporting period are required to
be disclosed.
Requires
disclosures
of
information
relating
to
management of capital and
compliance
with
capital
requirements.
IAS 2- Inventories
IAS 2 does not apply to
inventories held by commodity
brokers who measure their
inventories at fair value less cost
to sell. Producers of agriculture
and forest products, agriculture
and forest produce after harvest
and minerals and mineral
products to the extent that they
are measured at net realizable
value on the basis of well-settled
178

-Same as IFRS-

-Same as IFRS-

Ind AS 2- Inventories

-Same as IFRS-

Chapter 5: Objective wise analysis and comparison

settlement Payment for purchase of inventories on


deferred settlement terms are not
explicitly dealt with in the AS 2.
Payment on deferred basis for
inventory will be treated as cost of
inventory unless contract specifies
otherwise.
Reversal of write No specific guidelines in AS 2 for
reversal of write down of inventories.
down of inventory
Reversal may be permitted as AS 5
requires this to be disclosed as a
separate line in the statement in profit
and loss A/C.
Deferred
terms

Classification
inventories

Cash
statements

practices of that industry.


Change in fair value less costs to
sell/changes in net realizable value
is recognized in profit and loss in
the period of change.
Purchase price of inventory for
normal credit terms
(-)
amount paid for deferred
settlement terms
= interest expense

-Same as IFRS-

Write down is reversed if


Similar to IFRS
circumstances that previously
caused inventories to be written
down below cost no longer exist
or there is a clear evidence of an
increase in net realizable value
because of changes in economic
conditions.
Amount of reversal=original
write down
of Needs to be classified(as per schedule No specific requirements.
Similar to IFRS
VI):
Classification
should
be
Raw material
appropriate to entity.
Work in progress
Finished goods
Stock in trade(acquired for
trading)
Stores and spares
Loose tools
others
flow AS 3- Cash flow statements
IAS 7- Statements of cash flows Ind AS 7 -Statements of cash
flows
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Chapter 5: Objective wise analysis and comparison

Cash flows from extra Cash flows from extraordinary items


are to be classified as operating,
ordinary items
financing and investing activities.
Interest and dividend For financial entities:
Interests paid/received are to be
received as financing activities.
Dividend paid to be classified as
financing activities.
For other entities:
Interest/dividends received are to be
classified as investing activities.
Interest/dividend paid is to be
classified as financing activities.
Acquisition
and No specific guidance
disposal of properties

Changes in ownership
interest

Investing activities

Accounting policies,
changes
in
accounting estimates
and errors change

Cash flow statements do not


reflect any items as extraordinary.

Similar to IFRS

May
be
classified
as
operating/investing/financing
activities in a manner consistent
from time to time.

Similar to Indian GAAP

Entity might regularly sell items


Similar to IFRS
of property, plant and equipment
that they have previously held for
rental
to
others.
Cash
payment/received in respect of
acquisition and disposal of such
assets are to be classified as
operating activities.
No specific guidance
Changes in ownership interest in
Similar to IFRS
a subsidiary without loss of
control are to be classified as
financing activities.
No specific guidance
Only expenditures resulting in
Similar to IFRS
recognized assets in the statement
of financial position should be
classified as investing activities.
AS 5- net profit or loss for the IAS 8 Accounting policies, Ind AS 8 Accounting policies,
period, prior period items and changes in accounting estimates
changes in Accounting
changes in accounting policies
and errors
Estimates and Errors
180

Chapter 5: Objective wise analysis and comparison

in
accounting
policies
Accounting policies,
changes
in
Accounting Estimates
and Errors changes
in accounting policies

Errors

Changes in accounting policies should


be made only if it is required by law
for compliance with an AS or for
appropriate presentation of the
financial statements on a prospective
basis,(unless transitional provisions
requires otherwise) together with the
disclosure of the impact of the same, if
material, if any change has no effect
for the current period but will affect
financial position in the later periods,
the same should be appropriately
disclosed.
Prior period errors are to be included in
determination of profit or loss of the
period in which the errors is discovered
and are separately disclosed in
statement of profit and loss in a manner
that impact on current profit or loss can
be perceived.

New
accounting No requirements to disclose
pronouncements

Absence of standards No specific guidance

Requires retrospective application


of changes in accounting policies
by adjusting the opening balance
of each affected component of
equity for the earliest prior period
presented
and
the
other
comparative amounts for each
period presented as if the new
accounting policy had always
been applied, unless transitional
provision of an AS requires
otherwise.

Similar to IFRS

Prior period errors which are


Similar to IFRS
material
are
corrected
retrospectively by restating the
comparative amounts for prior
periods presented in which errors
is occurred or if errors occurred
before earliest period presented,
by restating the opening statement
of financial position.
New pronouncements that have
Similar to IFRS
been issued but not yet effective
as at the end of reporting period,
assessment of the possible impact
of
new
accounting
pronouncements on the financial
statements on initial application is
disclosed
Permits
considering
recent In the absence of Ind AS that
181

Chapter 5: Objective wise analysis and comparison

or interpretation that
specifically applies to
a transaction

pronouncements
by
other
standards setting bodes that use
similar conceptual framework of
IFRS to the extent these do not
conflict with IFRS.

specifically
applies
to
a
transaction, other events or
condition, the management while
developing accounting policy ,
should first consider the most
recent pronouncements of the
IASB and in absence thereof
standards set by other standards
setting bodies that use similar
conceptual
framework
of
developing AS.
Events
occurring AS 4 contingencies and events IAS 10 events after the Ind AS 10 events after the
after the reporting occurring after the balance sheet reporting period
reporting period
periodprimary date
literature
As per schedule VI disclosures of Declared
Dividends
dividends
to
be
Similar as IFRS
proposed dividends in the notes to recognized in the period when it
accounts. However AS 4 overrides the is declared.
requirements
of
Schedule
VI,
dividends declared or proposed after
balance sheet date but before approval
of financial statements will have to be
recorded as a liability.
AS 7: construction contracts
Construction
IAS 11: Construction Contracts Ind AS 11: construction
contracts primary Guidance note(Issued by ICAI) on IFRIC 12: Service concession contracts
recognition of revenue by Real estate Arrangements
literature
Ind AS 11: appendix A
developers
IFRIC 15: Agreements for the service
concession
construction of the real estate
Arrangements: Disclosures
SIC 29: Service concession (Implementation
of
Arrangements: Disclosures
Notification of Appendix A &
B has been deferred for further
time)
Service
concession No specific guidelines, ICAI have Prescribes accounting by private Similar to IFRS
182

Chapter 5: Objective wise analysis and comparison

Arrangements: Scope

issued an exposure draft of guidance


not on Accounting for service
concession arrangements, which is
similar to IFRIC 12.

Service
concession No specific guidelines
Arrangements:
Recognition

sector operators involved in


provision of public sector
infrastructure assets and service.
Under
service
concession
arrangements,
the
grantor
specifies the services to be
provided to the public, controls
the infrastructure and the price to
be charged to the public by the
operator.
Depending o the terms and
condition of the arrangements:
(a) a financial asset is
recognized if an operator
has an unconditional right
to receive cash or other
financial assets from the
grantor over the life of the
arrangement; or
(b) an intangible asset is
recognized where operator
receives cash directly
from the public and where
cash flows of future vary
depending on the usage of
the infrastructure; or
(c) Both financial asset and
intangible
asset
are
recognized where the
operators
return
is
provided partly by a
financial asset and partly
by an intangible asset.
183

Similar to IFRS

Chapter 5: Objective wise analysis and comparison

Agreement for the Guidance note on recognition of


Construction of real revenue by real estate developers gives
guidance on application of revenue
estate
recognition principles in AS 9 to real
estate sales.
In case the seller is obliged to perform
any substantial acts after the transfer of
significant risks and rewards of
ownership,
revenue
should
be
recognized by applying the %age of
completion method as per AS 7.

This agreement comes within the


scope of IAS 11 only when the
buyer is able to specify the major
structural elements of the design
of the real estate before
construction
begins
and/or
specifies major structural changes
once construction is in progress.
If buyer does not have that
ability, IAS 18 applies.
Where IAS 11 applies, revenue is
recognized on a %age of
completion
basis
provided
reliable estimates of construction
progress and future costs can be
made.
IAS 18 applies; it may be a case
of agreement to provide services
or goods.
In IAS 11 %age of completion
method is to be adopted while in
IAS 18 revenue recognition
depends on transfer of significant
risk and reward of ownership.
Income
taxes
- AS 22: accounting for taxes on IAS 12: Income Taxes
income
primary literature
SIC 21: income taxes recovery
of revalued non depreciable
assets
SIC 25: Income Taxes
changes in the Tax status of an
entity or its shareholders

184

Agreements for the construction


of real estate are within the scope
of Ind AS 11. Hence revenue
from
such
contracts
is
recognized using the %age of
completion method.

Ind AS 12- Income taxes


Ind AS 12- Appendix A
income Taxes recovery of
Revalued Non Depreciable
Assets
Ind AS 12 Appendix B
income taxes changes in the
tax status of an entity or its
shareholders

Chapter 5: Objective wise analysis and comparison

Deferred
taxes

Recognition
deferred tax
and liabilities

income Deferred tax arises in respect of


recognition of items of profit or loss
for the purpose of financial reporting
and for income tax purpose.
taxes
are
generally
of Deferred
assets recognized for all timing differences.

Recognition of taxes
on items recognized
in
other
comprehensive
income or directly in
equity

No specific guidance in AS 22,


however ICAI made an announcement
requiring any expense charged directly
to reserves and surplus and or
securities premium account to be net of
tax benefits expected to arise from the
admissibility of such expenses for
taxation purposes. Any amount
transferred to reserves and surplus
should be net of tax effect.

recognition of deferred Deferred tax assets for unused tax


tax assets
losses and unabsorbed depreciation is
recognized only to the extent that there
is virtual certainty supported by

It is computed for temporary


difference between the carrying
amount of an asset or liability in
the statement of financial position
and its tax base.
Deferred tax are recognized for
all temporary difference between
accounting and tax base of assets
and liabilities except to the extent
which arise from (a) initial
recognition of goodwill (in case
of deferred tax liability) or (b)
asset or liability in a transaction
which (i) is not a business
combination; and (ii) at the time
of the transaction, affects neither
the accounting nor the tax profit.
Current tax and deferred tax is
recognized outside profit or loss
if the tax relates to items that are
recognized in the same or a
different period, outside profit or
loss. Therefore, the tax on items
recognized in other items
recognized
in
other
comprehensive income or directly
in equity, is also recorded in other
comprehensive income or in
equity, as applicable.
Deferred tax assets is recognized
for carry forward unused tax
credits to the extent that it is
probable that future taxable profit
185

Similar to IFRS

Similar to IFRS

Similar to IFRS

Similar to IFRS

Chapter 5: Objective wise analysis and comparison

realistic evidence that sufficient future


taxable income will be available
against which such deferred tax assets
can be realized. Deferred tax assets for
all other unused credits is recognized
only to the extent that there is a
reasonable certainty that sufficient
future taxable income will be available
against which such deferred tax assets
can be realized.
6DEPRICIATION
Property , plant and AS
ACCOUNTING
equipment
AS 10 - ACCOUNTING FOR
FIXED ASSETS

Scope

No exemption from AS 10 for property


under development for future use as
property held for investment.

Replacement costs

Only expenditure that increases the


future benefits from the existing assets
beyond
previous
standards
of
performance is capitalized.

Revaluation

No specific requirements on frequency


of revaluation.

Depreciation

Fixed assets are not required to be

will be available against which


the unused tax losses and tax
credits can be utilized.

IAS 16- Property, plant and


equipment
IFRIC 1 changes in existing
decommissioning, Restoration
and Similar Liabilities

IND AS 16- Property, plant


and equipment
IND AS 16 Appendix AChanges
in
existing
decommissioning, restoration
and similar liabilities
Property under development for Similar to IFRS
future use as property held for
investment is excluded from the
scope of IAS 16 and covered by
IAS 40, investment property.
Replacement cost is to be Similar to IFRS
capitalized if replacement meets
the recognition criteria. Carrying
amount of items replaced is
derecognized.
Revaluations are required to be Similar to IFRS
made with sufficient regularity to
ensure that the carrying amount
does not differ materially from that
which would be determined using
fair value at the end of the
reporting period.
Property plant and equipments are Similar to IFRS
186

Chapter 5: Objective wise analysis and comparison

Compensation
impairments

factorized and depreciated separately,


although AS 10 states that such an
approach may improve the accounting
for an item of fixed assets. Schedule
XIV to the companies Act specifies the
minimum depreciation rates are to be
used for depreciation for different
categories of assets.
for No specific requirements. In practice,
compensation is offset against the cost
of assets.

Transfer
from Transfer may be through profit and loss
account.
revaluation reserve
Residual value

Estimates of residual value are not


required to be updated at year end

to be factorized and are to be


depreciated
separately.
No
requirements of minimum statutory
depreciation under IFRS.

Compensation from third party for


impairment or loss is included in
profit and loss accounts when it
becomes receivable.
Transfer from revaluation reserve
to retained earnings are made
directly and not through profit or
loss.
Estimates of residual values are
required to be updated at least once
at year end.
Requires annual assessment of
useful life and depreciation
method.
It will be treated as change in
accounting estimates and applied
prospectively.

Similar to IFRS

Similar to IFRS

Similar to IFRS

Reassessment
of Not required
Similar to IFRS
useful
life
and
depreciation method
Change in method of Requires retrospective re-computation
Similar to IFRS
of depreciation and any excess or
depreciation
deficit is required to be adjusted in the
period in which such change is
affected. Such a change is treated as a
change in accounting policy and its
effect is quantified and disclosed.
Entities might routinely sells items Similar to IFRS
Routine sale of assets No guidance
of property, plant and equipment
previously held for
that they have previously held for
rental purpose
rental to others, proceeds received
from the sale of such assets should
187

Chapter 5: Objective wise analysis and comparison

LEASESPRIMARY
LITERATURE

AS 19 - LEASES

be recognized as revenue in
accordance with IAS 18.
IAS 17 LEASES
IFRIC 4 DETERMINING
WHEATHER
AN
ARRANGEMENT CONTAINS
A LEASE
SIC 15 OPERATING LEASE
INCENTIVES
SIC 27 EVALUATING THE
SUBSTANCE
OF
TRANSACTIONS INVOLVING
THE LEGAL FORM OF
LEASE

Interest in leasehold Will be classified as fixed assets


land

Recognized as operating and


financial lease as per the
classification criteria. An important
consideration in such determination
is that land has an indefinite
economic life. A property interest
in an operating lease may be
classified as investment property in
which case it should be accounted
for as a finance lease and the fair
value model should be applied for
the asset recognized.
Initial
direct
costs
are
either
recognized
For finance leases other than those
Initial direct costs of
lesser for assets under immediately in the statement of profit involving manufacturer lessors,
and loss or allocated against the initial direct cost are included in
a finance lease
finance income over the lease term.
the measurement of the finance
188

IND AS 17 LEASES
IND AS 17 APPENDIX AOPERATING
LEASE

INCENTIVES
IND AS 17 APPENDIX BDETERMINING WHEATHER
AN
ARRANGEMENT
CONTAINS A LEASE
IND AS 17 APPENDIX CDETERMINING WHEATHER
AN
ARRANGEMENT
CONTAINS A LEASE
(Notification of appendix C has
been deferred. The effective date
for its implementation will be
announced separately)
Same as IFRS except a property
interest in an operating lease
cannot be accounted for as
investment property as the fair
value model is not permissible by
Ind AS 40.

Similar to IFRS

Chapter 5: Objective wise analysis and comparison

lease receivable and reduce the


Initial lease costs incurred by amount of income over the lease
manufacturer lessors are recognized as term.
expense at the commencement of lease.
Initial lease costs incurred by
manufacturer or dealer lessors are
recognized as expenses when
selling profit is recognized, which
is normally at the beginning of the
lease term.

For finance leases other than those


involving manufacturer or dealer
lessors, initial direct cost are
included in the measurement of the
finance lease receivable and reduce
Initial costs incurred by manufacturer the amount of income recognized
or dealer lessors are recognized as over the lease term.
expenses at the commencement of
Initial
cost
incurred
by
lease.
manufacturer or dealer lessors are
recognized as expense when selling
profit is recognized as an expense
over the lease term on the same
basis as lease term on the same
basis as lease income.
Leases- initial direct Initial direct cost incurred by lessors Added to the carrying amount of
costs of lessors for are either deferred and allocated to leased asset and recognized as an
assets
under a income over the lease term in expense over the lease term on the
proportion to income over the lease same basis as lease income.
operating lease
term in proportion to the recognition of

Leases- initial direct


costs of lessors for
assets
under a
finance lease

Initial direct cost are either recognized


immediately in the statement of profit
and loss or allocated against the
finance income over the lease term.

189

Similar to IFRS

Same as IFRS

Chapter 5: Objective wise analysis and comparison

lease income, or are recognized as an


expense in the statement of profit and
loss in the period in which they are
incurred.
Determining whether No specific guidance, payments under
an
arrangement such arrangements are recognized in
accordance with the nature of expenses
contains a lease
incurred.

Lease incentives(such No specific guidance


as rent period)

Evaluating
the No specific guidance
substance
of
transactions involving
the legal form of
lease
Leases - initial direct
costs of lessors for
assets under a finance
lease

Initial direct costs are either


recognized immediately in the
statement of profit and loss or
allocated against the finance income
over the lease term.

Arrangements that do not take the


legal form of a lease but fulfillment
of which is dependent on the use of
specific assets and which convey
the rights to use the assets are
accounted for as lease.
Lease incentives are recognized by
both the lessor and the lessee as a
reduction of rental income and
expense, respectively, over the
lease term.
If a series of transaction involves
the legal form of a lease and the
economic effect can only be
understood with reference to the
series as a whole, then the series is
accounted for as a single
transaction.
For finance leases other than
those involving manufacturer or
dealer lessors, initial direct costs
are included in the measurement
of the finance lease receivable
and reduce the amount of income
recognized over the lease term.

Initial lease costs incurred by


manufacturer or dealer lessors are
recognized as expense at the inception Initial lease costs incurred by
of the lease.
manufacturer or dealer lessors are
recognized as expense when
selling profit is recognized, which
190

Similar to IFRS. However,


guidance will be notified at a later
date and the effective date for its
implementation will be announced
separately.
Same as IFRS

Same as IFRS

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

Leases - initial direct


costs of lessors for
assets under operating
leases

Initial direct costs incurred by lessors


are either deferred and al located to
income over the lease term in
proportion to the recognition of lease
income, or are recognized as an
expense in the statement of profit and
loss in the period in which they are
.
incurred.
Determining whether No specific guidance. Payments
an
arrangement under such
arrangements
are
contains a lease
recognized in accordance with the
nature of expense incurred.

is normally at the commencement


of the lease term.
Initial direct costs incurred by Similar to IFRS
lessors are added to the carrying
amount of the leased asset and
recognized as an expense over the
lease term on the same basis as
lease income.

Arrangements that do not take the


legal form of a lease but
fulfillment of which is dependent
on the use of specific assets and
which convey the rights to use the
assets are accounted for as lease.
Lease incentives
No specific guidance.
Lease incentives (such as rentfree period) are recognized by
both the lessor and the lessee as a
reduction of rental income and
expense, respectively, over the
lease term.
IAS 18 Revenue
Revenue primary AS 9- Revenue recognition
Guidance Note on accounting for
SIC 31 Revenue Barter
literature
transactions
involving
advertising services
IFRIC 13 Customer loyalty
programmes
IFRIC 18 Transfers of assets
from customers
Revenue Definition Revenue is the gross inflow of cash, Revenue is the gross inflow of
receivables or other consideration economic benefits during the
arising in the course of the ordinary period arising in the course of the
191

Similar to IFRS

Similar to IFRS

Ind AS 18 Revenue
Ind AS 18 appendix A, B, C

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

activities from sale of goods, from the


rendering of services, and from the use
by others of enterprise resources
yielding interest, royalties
and
dividends.

ordinary activities of an entity


when those inflows result in
increases in equity, other than
increases relating to contributions
from equity participants.

As per Schedule VI, in the case of


a company other than a finance
company, revenue from operations
should disclose separately in the notes
to accounts the following:
sale of products
sale of services
other operating revenues
Less:
Excise duty

Amounts collected on behalf of


third parties such as sales and
service taxes and value added taxes
are excluded from revenues.

However, as per AS 9 (the provisions


of which will prevail over those of
Schedule VI), revenue needs to be
presented on the face of the statement
of profit and loss as under:
Turnover (Gross) XX
Less: Excise duty XX
Turnover (Net)

XX

In the case of a finance company,


revenue from operations should include
revenue from:
interest; and
other financial services
192

Chapter 5: Objective wise analysis and comparison

Revenue - principal No specific guidance is given on Guidance on whether an entity is Similar to IFRS
versus agent
determining whether an agency acting as a principal or as an
relationship exists.
agent is included in the
illustrative
examples
accompanying (but not forming
part of) IAS 18. T he guidance
lists down features that indicate
that an entity is acting as a
principal.
Revenue
- Revenue is recognized at the nominal Fair value of revenue from sale of Similar to IFRS.
measurement
amount of consideration receivable.
goods and services when the
inflow of cash and cash
On AS 30 becoming effective, there equivalents
is
deferred
is
will be no difference between AS 9 determined by discounting all
and IAS 18.
future receipts using an imputed
rate of interest. The difference
between the fair value and the
nominal amount of consideration
is recognized as interest income
using the effective interest
method.
Revenue - exchange
No specific guidance.
The
accounting
treatment Similar to IFRS.
transactions
depends on whether the exchange
transaction involves goods and
services of similar nature and
value (for example, exchange of
commodities like oil or milk).
Exchanges of similar assets:
Carrying amount of the asset
received
= Carrying amount of the asset
surrendered + cash or cash
193

Chapter 5: Objective wise analysis and comparison

equivalent transferred

No gains or losses are


recognized

Revenues - financial Financial service fee is recognized as


service fees
revenue depending on whether the
service has been provided once for
all or is on a continuing basis.
Loan origination and arrangement
fees are recognized as revenues when
the loan has been originated.
On AS 30 becoming effective, there
will be no difference between AS 9
and IAS 18.
Revenue - interest

Interest is recognized on a time


proportion basis taking into account
the amount outstanding and the rate

Exchanges of dissimilar assets:


Carrying amount of the asset
received
= Fair value of the asset received
+/- cash or cash equivalent
transferred
Gain or loss to be recognized
= Fair value of the asset received
+/cash
or
cash
equivalent
transferred
- carrying amount of the asset
surrendered
Fees that are an integral part of Similar to IFRS
the effective interest rate of a
financial instrument, for example,
loan origination and arrangement
fees are deferred and recognized
as an adjustment to the effective
interest rate. However, when the
financial instrument is measured
at fair value with changes in fair
value recognized in profit or loss,
the fees are recognized as revenue
when the instrument is initially
recognized.
Interest income is recognized Similar to IFRS.
using the effective interest
method.
194

Chapter 5: Objective wise analysis and comparison

applicable.
On AS 30 becoming effective, there
will be no difference between AS 9
and IAS 18.
Revenue - dividend Dividend income declared out of
recognition in the post-acquisition profits should be
separate
financial recognized in the statement of profit
statements
and loss. Dividends declared out of
pre-acquisition profits will go to
reduce the cost of the investment.

Entire dividend income should be Similar to IFRS


recognized in the profit or loss
irrespective of whether it is
declared out of pre-acquisition or
post-acquisition profits, though it
may, in some situations be
necessary to test the investment
for impairment.

Revenue - services Completed service contract method


rendered
or proportionate completion method
permitted.
Revenues from installation fees and
production
commission
are
recognized when installation and
production is completed, unless the
installation is incidental to sale.
Barter
transactions No specific guidance in AS 9.
involving
However, the Guidance Note on
advertising services
Accounting for Dot-com Companies
provides guidance for advertising
barter transactions which is similar to
IFRS.

Requires
recognition
using Similar to IFRS.
percentage of completion method.
Revenues from installation fees
and production commission are
recognized with reference to
stages of completion, unless the
installation is incidental to sale.
Fair value of services provided is Similar to IFRS.
measured with reference to nonbarter similar transactions that
occur frequently, represent a
substantial number of the
transactions,
consideration
involves cash or other securities
that has a reliable measure of fair
value and do not involve
transaction with the same
195

Chapter 5: Objective wise analysis and comparison

Customer
Programs.

Loyalty No specific guidance

Transfers of Assets No specific guidance.


from
Customers

counterparty to the barter


transaction.
Award credits are accounted for Similar to IFRS
as
a
separate
identifiable
component of sales transaction,
with the consideration allocated
between the awards credit and the
other components of sale.
When property, plant and Similar to IFRS
equipment transferred from a
customer meets the definition of
an asset under the IASBs
Framework,
from
the
perspective of the recipient, the
recipient must recognize the asset
in its financial statements. (T his
will not be the case, if the
customer continues to control the
transferred asset).
If there are separately identifiable
services received by the customer
in exchange for the transfer, then
the recipient will split the
transaction
into
separate
component as required by IAS 18.
The deemed cost of that asset is
its fair value on the date of the
transfer. T he total fair value will
be al located to separately
identifiable service obligations (if
more than one obligation is
identified) and revenue will be
196

Chapter 5: Objective wise analysis and comparison

Employee Benefits - AS 15 (Revised 2005) Employee


primary literature
Benefits

Employee
definitions

benefits- The distinction between short-term


and other long-term employee
benefits depends on whether they fall
wholly due within 12 months after
the end of the period in which the
employees render the related service.
There is an inconsistency in the
definition of short-term employee
benefits and the current/non-current
classification in Schedule VI. While
the definition of short-term employee
benefits as per AS 15 refers to

recognized from each service


separately in accordance with IAS
18. If there is an obligation to
provide ongoing services, the
period over which revenue I
recognized
is
generally
determined by the terms of the
agreement with the customer.
In the absence of such agreement,
revenue should be recognized
over a period no longer than the
useful life of the transferred asset
used to provide the ongoing
service.
IAS 19 - Employee Benefits
IFRIC 14 - T he Limit on a
Defined
Benefit
Asset,
Minimum
Funding
Requirements
and
their
Interaction
The distinction between shortterm and other long-term
employee benefits depends on
whether they are due to be settled
within 12 months after the end of
the reporting period in which the
employees render the related
service.

197

Ind AS 19 - Employee Benefits


Ind AS 19 - Append ix A - T he
Limit on a Defined Benefit
Asset, Minimum Funding
Requirements
and
their
Interaction
Similar to IFRS

Chapter 5: Objective wise analysis and comparison

benefits which fall due wholly


within 12 months after the end of the
period in which the employees render
the related service, as per Schedule
VI requirements, for classification as
current liabilities, the benefits should
be due to be settled within 12
months after the reporting date.
However, the Exposure Draft of the
Guidance Note to the Revised
Schedule VI to the Companies
Act, 1956 has clarified that while AS
15 governs the
measurement
requirements, Schedule VI governs
the presentation requirements.
Therefore, each company will need to
apply these criteria to its facts and
circumstances
and
decide
an
appropriate classification of its
employee benefit obligations.
Employee benefits - Short-term employee benefits include
short-term
short-term compensated absences
compensated
where the absences are expected to
absences
occur within 12 months after the end
of the period in which the employees
render the related service.

Absences
where
the Similar to IFRS
compensation for the absences is
due to be settled within 12
months after the end of the
reporting period in which the
employees render the related
service.

There is an inconsistency in the


description
of
short-term
compensated absences and the
current/non-current classification in
Schedule VI. While the description of
short-term employee compensated
198

Chapter 5: Objective wise analysis and comparison

absences as per AS 15 refers to


absences that are expected to occur
within 12 months after the end of the
period in which the employees render
the related service, as per Schedule
VI requirements, for classification as
current liabilities, the absences
should be due to be settled within 12
months after the reporting date.
However, the Exposure Draft of the
Guidance Note to the Revised
Schedule VI to the Companies Act,
1956 has clarified that while AS 15
governs
the
measurement
requirements, Schedule VI governs
the
presentation
requirements.
Therefore, to the extent the employee
has an unconditional right to avail the
leave, the same needs to be classified
as current even though a portion of
the same may have to be measured as
other long-term employee benefits as
per AS 15.
Employee benefits - Similar to IFRS, except that detailed
actuarial valuation
actuarial valuation to determine
present value of the benefit obligation
is carried out at least once every three
years and fair value of plan assets are
determined at each balance sheet
date.

Detailed actuarial valuation to Similar to IFRS.


determine the present value of
defined benefit obligation and the
fair value of plan assets is
performed
with
sufficient
regularity so that the amounts
recognized in the financial
statements
do
not
differ
materially from the amounts that
199

Chapter 5: Objective wise analysis and comparison

would have been determined at


the end of the reporting period.
IAS 19 does not specify sufficient
regularity.
Employee benefits All actuarial gains and losses should Actuarial gains and losses for
actuarial gains and be recognized immediately in the defined benefit plans may be:
losses
statement of profit and loss as an recognized immediately in
income or expense.
profit or loss;
recognized immediately in other
comprehensive income; or
deferred upto a maximum with
any excess over 10% of the
greater of the defined benefit
obligation or the fair value of the
plan assets at the end of the
previous reporting period being
recognized over the expected
average remaining working lives
of the participating employees or
other accelerated basis.

All actuarial gains and losses for


post-employment defined benefit
plans and other long-term
employee benefit plans are
recognized immediately in other
comprehensive income.

Actuarial gains and losses for


other
long-term
employee
benefits
are
recognized
immediately in profit or loss.
Employee benefits - Market yields at the balance sheet Market yields at the end of the Similar to Indian GAAP
discount rate
date on government bonds are used as reporting period on high quality
discount rates.
corporate bonds are used as
discount rates. In countries where
there are no deep markets for
such bonds, market yields on
government bonds are used.
Employee benefits - No clarification to distinguish A reduction in the extent to which Similar to IFRS.
200

Chapter 5: Objective wise analysis and comparison

curtailments
and reductions as curtailments or negative future salary increases are linked
negative past service past service cost.
to benefits payable for the past
cost
service will be a case of
curtailment.

T he Limit on a No specific guidance.


Defined
Benefit
Asset,
Minimum
Funding
Requirements
and
their Interaction

Government Grants AS
12
Accounting
- primary literature Government Grants

Government Grants Government


assistance

When a plan amendment reduces


benefits, the effect of the
reduction for future service is a
curtailment whereas the effect of
any reduction for the past service
is a negative e past service cost.
Addresses when refunds or
reductions in future contributions
are regarded as available for
recognition of an asset; how
funding requirements in future
may affect the availability of
reductions in future contributions
and when minimum funding
requirement may give rise to a
liability. It also deals with
prepayments of a minimum
funding requirement.
for IAS 20 - Accounting for
Government
Grants
and
Disclosure
of
Government
Assistance

Similar to IFRS.

Ind AS 20 - Accounting for


Government
Grants
and
Disclosure of Government
Assistance
Ind AS 20 - Append ix A No
SIC 10 - No Specific Relation to Specific Relation to Operating
Operating Activities
Activities
Does not deal with disclosure of Deals with both government Similar to IFRS.
government assistance other than in grants
and
disclosure
of
the form of government grants.
government assistance.
201

Chapter 5: Objective wise analysis and comparison

Government Grants - No specific guidance.


forgivable loans

Government Grants - No specific guidance.


government
loans
with below market
rate of interest

Government Grants - Two broad approaches may be


recognition
followed - the capital approach or the
income approach.
Government grants in the nature of
promoters contribution i.e. they are
given with reference to the total
investment in an undertaking or by
way of contribution towards its total
capital outlay and no repayment are
ordinarily expected are credited
directly to shareholders funds.
Grants related to revenue are
recognized in the statement of profit
and loss on a systematic and rational
basis over the periods necessary to
match them with the related costs.

Forgivable loans are treated as


government grants when there is
a reasonable assurance that the
entity will meet the terms for
forgiveness of the loan.
Benefit of government loans with
below market rate of interest
should be accounted for as
government grant-measured as
the difference between the initial
carrying amount of the loan
determined in accordance with
IAS 39 and the proceeds received.
Government
grants
are
recognized as income to match
them with the related costs for
which they are intended to
compensate on a systematic basis.
Government grants are not
directly credited to shareholders
interests.
Government grants related to
assets are presented in the
statement of financial position
either by setting up the grant as
deferred income or by deducting
the grant in arriving at the
carrying amount of the asset.

Grants relating to non-depreciable


assets are credited to capital reserve.
If such grants require fulfillment of
202

Similar to IFRS.

Similar to IFRS.

Similar to IFRS. However,


grants related to assets, including
non-monetary grants at fair
value, should be presented in the
balance sheet only by setting up
the grant as deferred income.

Chapter 5: Objective wise analysis and comparison

some obligation, such grants should


be credited to income over the period
over which the cost of meeting the
obligation is charged to income.
Grants related to depreciable assets
are either treated as deferred income
and transferred to the statement of
profit and loss in proportion to
depreciation, or deducted from the
cost of the asset.
Government Grants - If the asset is given by the
non-monetary
government at a discounted price, the
government
asset and the grant is accounted at the
grants
discounted purchase price.
Non-monetary grants free of cost are
accounted for at nominal values.
Government Grants - Recognized either by increasing the
repayment of grants carrying amount of the asset or
relating
to
fixed reducing the deferred income or
assets
capital reserve by the amount
repayable. If the carrying amount of
the asset is increased, depreciation on
the revised carrying amount is
provided prospectively over the
residual useful life of the asset.
Classified as an extraordinary item.

T he asset and the grant may be T he asset and the grant should
accounted
at
fair
value. be accounted at fair value.
Alternatively, these can be
recorded at nominal amount.

Recognized either by increasing


the carrying amount of the asset
or reducing the deferred income
by the amount repayable.
Cumulative depreciation that
would have been recognized in
profit or loss to date in the
absence of grant should be
recognized immediately in profit
or loss.

Recognized by reducing the


deferred income balance by the
amount repayable.
Prohibited to be classified as an
extraordinary item.

Prohibited to be classified as an
extraordinary item.
Foreign Exchange - AS 11 - The Effects of Changes in IAS 21 - The Effects of Changes Ind AS 21 - The Effects of
primary literature
Foreign Exchange Rates
in Foreign Exchange Rates
Changes in Foreign Exchange
Rates
Effects of Changes in Foreign currency is a currency other Functional currency is the Similar to IFRS.
203

Chapter 5: Objective wise analysis and comparison

Foreign
Exchange
Rates functional
and
presentation
currency

Effects of Changes in
Foreign
Exchange
Rates exchange
differences

than the reporting currency which is


the currency in which financial
statements are presented. There is no
concept of functional currency.

currency of the primary economic


environment in which the entity
operates. Foreign currency is a
currency other than the functional
currency.
Presentation currency is the
currency in which the financial
statements are presented.
Exchange differences arising on
translation or settlement of
foreign currency monetary items
are recognized in profit or loss in
the period in which they arise.

Similar to IFRS, except that exchange


differences
on
translation
of
monetary foreign currency liabilities
incurred upto the end of the
accounting
period
commencing
before 1 April 2004 onwards
acquisition of fixed assets are Exchange
differences
on
capitalized in the carrying amount of monetary items, that in substance,
these assets.
form part of net investment in a
foreign operation, are recognized
There is a limited period irrevocable in profit or loss in the period in
option for corporate entities to which they arise in the separate
capitalize exchange differences on financial statements and in other
long-term monetary items incurred comprehensive income in the
for acquisition of depreciable capital consolidated financial statements.
assets and to amortise exchange
differences on other long-term
monetary items over the life of such
items but not beyond the stipulated
date. This option is available in
respect of accounting periods
commencing on or after 7 December
2006, and ending on or before 31
March 2012.
204

Exchange differences arising on


translation or settlement of
foreign currency monetary items
are generally recognized in profit
or loss in the period in which
they arise. However, an entity
may exercise an option in respect
of
unrealized
exchange
differences arising on long-term
monetary assets and long-term
monetary liabilities denominated
in a foreign currency to be
recognized directly in equity and
accumulated in a separate
component of equity. The
amount so accumulated should
be transferred to profit or loss
over the period of maturity of
such long-term monetary items
in an appropriate manner.
Exchange
differences
on
monetary items that in substance,
form part of net investment in a
foreign operation are recognized

Chapter 5: Objective wise analysis and comparison

in a manner similar to IFRS.

Effects of Changes in
Foreign
Exchange
Rates translation in
the
consolidated
financial statements

Exchange differences on monetary


items, which in substance, form part
of net investment in a foreign
operation, are recognized in Foreign
Currency Translation Reserve both
in the separate and consolidated
financial statements.
Translation of financial statements to
the reporting currency of the
parent/investee depends on the
classification of that operation as
integral or non-integral.
In the case of an integral operation,
monetary assets are translated at
closing rate. Non-monetary items are
translated at historical rate if they are
valued at cost. Non-monetary items
which are carried at fair value or
other similar valuation are reported
using the exchange rates that existed
when the values were determined.
Income and expense items are
translated at historical/average rate.
Exchange differences are taken to the
statement of profit and loss.

Assets and liabilities should be Similar to IFRS.


translated
from
functional
currency to presentation currency
at the closing rate at the date of
the statement of financial
position; income and expenses at
actual/average rates for the
period; exchange differences are
recognized
in
other
comprehensive
income
and
recycled to profit or loss on
disposal of the operation.
Treatment for disposal depends
on whether control is lost or not.
Thus, if control is lost, the entire
exchange difference recognized
in other comprehensive income
and accumulated in equity is
reclassified from equity to profit
For non-integral operations, closing or loss.
rate method should be followed (i.e.
all assets and liabilities are to be
translated at closing rate while profit
and loss account items are translated
at actual/average rates).
205

Chapter 5: Objective wise analysis and comparison

The resulting exchange difference is


taken to reserve and is recycled to
profit and loss on the disposal of the
non-integral foreign operation.

Effects of Changes in
Foreign
Exchange
Rates scoping for
derivatives

Effects of Changes in
Foreign
Exchange
Rates

forward
contracts

Treatment for disposal does not


depend on whether control is lost or
not. Even if control is lost, only
proportionate amount of the reserve
is recycled to statement of profit and
loss.
AS 11 is applicable to exchange
differences on all forward exchange
contracts including those entered into
to hedge the foreign currency risk of
existing assets and liabilities and is
not applicable to the exchange
difference arising on forward
exchange contracts entered into to
hedge the foreign currency risks of
future transactions in respect of
which firm commitments are made or
which are highly probable forecast
transactions.
Forward contracts not intended for
trading or speculation purposes:
i.
Any premium or discount
arising at the inception of
a
forward
exchange
contract is amortised as
expense or income over
the life of the contract.
ii.
Exchange differences on

Foreign currency derivatives Similar to IFRS.


that are not within the scope of
IAS 39 (e.g. some foreign
currency derivatives that are
embedded in other contracts) are
within the scope of IAS 21. In
addition, IAS 21 applies when an
entity translates amounts relating
to derivatives from its functional
currency to its presentation
currency.

Accounted for as a derivative.

206

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

such a contract are


recognized
in
the
statement of profit and
loss in the reporting
period in which the
exchange rates change.
Exchange difference on a
forward exchange contract
is the difference between
(a) the foreign currency
amount of the contract
translated at the exchange
rate at the reporting date,
or the settlement date
where the transaction is
settled
during
the
reporting period, and
(b) the same foreign
currency
amount
translated at the latter of
the date of inception of
the forward exchange
contract and the last
reporting date.
Forward exchange contract intended
for trading or speculation
purposes:
The premium or discount on the
contract is ignored and at each
balance sheet date, the value of the
contract is marked to its current
market value and the gain or loss on
the contract is recognized.
207

Chapter 5: Objective wise analysis and comparison

On AS 30 becoming effective, AS 11,


to the extent it deals with forward
exchange contracts will stand
withdrawn.
Effects of Changes in Change in reporting currency is not Change in functional currency is
Foreign
Exchange dealt with in AS 11, though reason applied prospectively.
Rates - change in for change is required to be disclosed.
functional currency
Borrowing Costs AS 16 - Borrowing Costs
IAS 23 - Borrowing Costs
primary literature
Borrowing Costs - No such scope exception similar to
Borrowing costs need not be
Scope
IFRS/ Ind AS is available.
capitalized in respect of
i.
qualifying
assets
measured at fair value
(e.g. biological assets)
ii.
Inventories that are
manufactured
or
otherwise produced, in
large quantities on a
repetitive basis (even
if they are otherwise
qualifying assets). T
his is an option.
Borrowing Costs No reference to effective interest rate. Descriptions
of
specific
components
of AS 16 requires amendment on AS 30 components are linked to
borrowing costs
becoming mandatory.
effective interest rate.
Related
Party AS 18 - Related Party Disclosures
IAS 24 - Related Party
DisclosuresDisclosures
Primary literature
Related
Party Parties are considered to be related if A related party is a person or
Disclosuresat any time during the reporting entity that is related to the entity
definition of related period one party has the ability to that is preparing its financial
208

Similar to IFRS.

Ind AS 23 - Borrowing Costs


Similar to IFRS.

Similar to IFRS.

Ind AS 24 - Related Party


Disclosures
Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

party

Related
definition
member
family.

control the other party or exercise


significant influence over the other
party in making financial and/or
operating decisions.

Partyof close
of
the

Related
Party
Disclosures post
employment benefit

statements (reporting entity) and


includes:
A person or close member of
that persons family if that person
has control, joint control,
significant influence over the
reporting entity or is a member of
key management personnel of the
reporting entity or of a parent of
the reporting entity; or
Entities that are member of the
same group (parent, subsidiaries,
joint ventures, associates, and
post-employment benefit plans).
No definition of close member of the Close members of the family of a
family. Instead the term relative person are those family members
has been defined.
who may be expected to
influence, or be influenced by,
that person in their dealings with
the entity and include:
i.
that persons children
and
spouse
or
domestic partner;
ii.
children
of
that
persons spouse or
domestic partner; and
iii.
Dependants of that
person or that persons
spouse or domestic
partner.
Post employment benefit plans are Related party includes post
not included as related parties.
employment benefit plans for the
benefit of employees of the
209

Close members of the family of a


person are the persons specified
within meaning of relative
under the Companies Act 1956
and that persons domestic
partner, children of that persons
domestic partner and dependants
of that persons domestic partner.

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

plans

Related
Disclosures
exemptions

Party
-

Related
Party
Disclosures -items to
be disclosed.

Related
Party
Disclosures key
management
personnel

reporting entity or any entity that


is a related party of the reporting
entity.
Disclosure requirements do not apply Some
minimum
disclosures Disclosures which conflict with
if providing such disclosures would should be made by government- confidentiality requirements of
conflict with an enterprises duties of related entities.
statute/regulations
are
not
confidentiality
as
specifically
required to be made.
required in terms of a statute or by
any regulator or similar competent
authority.
Also, no disclosure is required in the
financial statements of a statecontrolled enterprise as regards
related party relationships with other
state-controlled
enterprises
and
transactions with such enterprises.
If an entity has related party If an entity has related party Similar to IFRS.
transactions during the period transactions during the period
covered by the financial statements, covered
by
the
financial
the enterprise should disclose the statements, the amount of such
volume of transactions either as an transactions and the amount of
amount or as an appropriate outstanding balances including
proportion
and
amounts
or commitments
need
to
be
appropriate
proportions
of disclosed.
outstanding items.
Compensation of key management
Compensation
of
key Similar to IFRS.
personnel is disclosed in total as an management
personnel
is
aggregate
of
all
items
of disclosed in total and separately
compensation except when a separate for
disclosure is necessary for the
a. short-term
employee
understanding of the effects of related
benefits;
party transactions on the financial
b. post-employment benefits;
statements.
c. other long-term benefits;
210

Chapter 5: Objective wise analysis and comparison

Accounting
and There is no equivalent standard.
Reporting
By
Retirement Benefit
Plan
primary
literature
Accounting
and There is no equivalent standard.
Reporting by
Retirement
Benefit
Plan

Consolidated
AS 21 - Consolidated Financial
Financial
Statements
Statements

primary literature

d. termination benefits; and


e. share- based payments.
IAS 26 - Accounting and There
is
reporting
by
Retirement standard.
Benefit Plan

no

equivalent

Sets
out
the
reporting There is no equivalent standard.
requirements
by defined contribution and
benefit plans, including a
statement of net assets available
for benefits and disclosure of the
actuarial present value of
promised benefits.
Specifies the need for actuarial
valuation of the defined benefits
and the use of fair values for plan
investments.
IAS 27 (2008) - Consolidated Ind AS 27 - Consolidated and
and
Separate Financial Statements
Separate Financial Statements
Ind AS 27 - Append ix A
SIC 12 - Consolidation - Special Consolidation

Special
Purpose Entities
Purpose Entities

Ind AS 27 - Append ix C Form


of
Consolidated
Financial
Statements
Consolidated and Separate
Financial Statements Indian GAAP does not specify A parent is required to prepare Ind AS does not mandate
scope in which they entities that are required to present consolidated financial statements presentation of consolidated
211

Chapter 5: Objective wise analysis and comparison

consolidate
their consolidated financial statements. T
investments
in he accounting standard is required to
subsidiaries
in be followed if consolidated financial
accordance with IAS statements are presented.
27.
The Securities and Exchange Board
A subsidiary is an of India requires entities listed and to
entity
that
is be listed to present consolidated
controlled by another financial statements.
entity (known as the
parent).

A parent need not prepare


consolidated financial statements
only if all the following
conditions are met:
the entity is itself a wholly
owned subsidiary or a
partially owned subsidiary
and its other owners have
not objected to the entity
not
presenting
consolidated
financial
statements;
the entitys debt or equity
instruments are not traded
in a public market;
the entity is not in a
process of filing its
financial statements for
the purposes of issuing
any class of instruments in
a public market; and
The ultimate or any
intermediate parent of the
entity
produces
consolidated
financial
statements available for
public use that comply
with IFRSs.
Consolidated
and Control is:
Control is the power to govern the
Separate
Financial
a. the ownership, directly or financial and operating policies of
Statements
indirectly
through an entity so as to obtain benefits
definition of control
subsidiary(ies), of more than from its activities.
one-half of the voting power
212

financial
statements
as
requirements
to
present
consolidated or separate financial
statements is regulated by
governing statutes in India.

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

of an enterprise; or
b. Control of the composition of
the board of directors in the
case of a company or of the
composition
of
the
corresponding
governing
body in case of any other
enterprise so as to obtain
economic benefits from its
activities.

Consolidated
and
Separate
Financial
Statements dual
control

Consolidated
and
Separate
Financial

Therefore a mere ownership of more


than 50% of equity shares is
sufficient to constitute control under
Indian GAAP, whereas this is not
necessarily so under IFRS.
In a rare situation, when an enterprise
is controlled by two enterprises one
which controls by virtue of
ownership
of majority of the voting power and
the other which controls, by virtue of
an agreement or otherwise, the
composition of the board of
dir11ectors, the first mentioned
enterprise will be considered as
subsidiary of both the controlling
enterprises and therefore, both the
enterprises will need to consolidate
the financial statements of that
enterprise.
Potential voting rights are not
considered in assessing control.

Only one entity can have control


Similar to IFRS.
( as distinct from joint control)
over another entity. Therefore,
when two or more entities each
hold significant voting rights,
certain factors are reassessed to
determine which party has
control.

The existence and effect of Similar to IFRS.


potential voting rights that are
213

Chapter 5: Objective wise analysis and comparison

Statements potential
voting rights

Consolidated
and
Separate
Financial
Statements

exclusion
of
subsidiaries,
associates and joint
ventures
Consolidated
and
Separate
Financial
Statements - uniform
accounting policies

Consolidated
and
Separate
Financial
Statements - reporting
dates
Consolidated
and
Separate
Financial
Statements - noncontrolling interest

Excluded from consolidation, equity


accounting
or
proportionate
consolidation if the subsidiary was
acquired with intent to dispose of
within 12 months or if it operates
under severe long-term restrictions
which significantly impair its ability
to transfer funds to the paren.
If not practicable to use uniform
accounting policies in the preparation
of consolidated financial statements,
that fact should be disclosed together
with the proportions of the items in
the consolidated financial statements
to which different accounting policies
have been applied.
The difference between the reporting
date of the subsidiary and that of the
parent shall be no more than six
months.
Minority interests are presented in the
consolidated balance sheet separately
from liabilities and the equity of the
parents shareholders.

currently
exercisable
or
convertible, including potential
voting rights held by another
entity, are considered when
assessing control.
If on acquisition a subsidiary Similar to IFRS.
meets the criteria to be classified
as held for sale in accordance
with IFRS 5, it is included in the
consolidation but is accounted for
under that standard.

Consolidated financial statements Similar to IFRS.


should be prepared using uniform
accounting policies. No exception
is provided.

The difference between the Similar to IFRS.


reporting date of the subsidiary
and that of the parent shall be no
more than three months.
Non-controlling interests are Similar to IFRS.
presented in the consolidated
statement of financial position
within equity, separately from the
equity of the owners of the
parent.
Consolidated
and Excess of loss applicable to minority Total comprehensive income/net Similar to IFRS.
Separate
Financial over the minority interest in the income or loss, if separate
214

Chapter 5: Objective wise analysis and comparison

Statements
- equity of the subsidiary and any
allocation of losses to further losses applicable to minority
non-controlling
are adjusted against majority interest
interests
except to the extent that the minority
has a binding obligation to, and is
able to, make good the losses.
Consolidated
and No specific guidance.
Separate
Financial
Statements - disposals

Consolidated
and
Separate
Financial
Statements
Accounting
for
investments
in
subsidiaries
in
separate
financial
statements of the
parent
Consolidated
and
Separate
Financial
Statements special
purpose
entities

Accounted at cost less impairment


loss. The limited revision to AS 21,
on becoming effective, eliminates
this difference between AS 21 and
IAS 27.

There is no specific guidance on


SPEs. However, Schedule VI requires
disclosure of controlled special
purpose entities though this term has

statements are presented, is


allocated to the owners of the
parent and the non-controlling
interests even though this results
in the non-controlling interests
having a deficit balance.
Partial disposal of an investment Similar to IFRS.
in a subsidiary where control is
retained is accounted for as an
equity transaction, and gain or
loss is not recognized.
Partial disposal of an investment
in a subsidiary resulting in loss of
control triggers re measurement
of the residual holding to fair
value. Any difference between
the fair value and the carrying
value is recognized as gain or loss
in profit or loss.
Accounted either at cost (less Similar to IFRS.
impairment loss) or as available
for sale with changes in fair value
recognized
in
other
comprehensive income.
If measured at cost (less
impairment), on classification as
held for sale, IFRS 5 will apply.
SPEs, for example employee Similar to IFRS.
share
option
plans,
are
consolidated where the substance
of the relationship between the
215

Chapter 5: Objective wise analysis and comparison

(SPEs)

Investments
in
Associates - primary
literature
Investments
in
Associates
significant influence

Investments
in
Associates - potential
voting rights

not been defined either in AS 21 or in


Schedule VI. T he Exposure Draft of
the Guidance Note to the Revised
schedule VI to the Companies Act,
1956, however, clarifies that these
should essentially be subsidiaries as
per AS 21.
AS 23 - Accounting for Investments
in Associates in Consolidated
Financial Statements
Significant influence is the power to
participate in the financial and/or
operating policy decisions of the
investee but not control over those
policies.
Potential voting rights are not
considered in assessing significant
influence.

Investments
in Currently there is no exemption for
Associates - scope
investments made by venture capital
organizations, mutual funds, unit
trusts and similar entities from
applying the equity method.
The limited revision to AS 23, on
becoming effective, eliminates this
difference between AS 23 and IAS
28.

parties indicates control.

IAS 28 Associates

Investments

in Ind AS 28 - Investments in
Associates

Significant influence is the power


to participate in the financial and
operating policy decisions of the
investee but is not control or joint
control over those policies.
The existence and effect of
potential voting rights that are
currently
exercisable
or
convertible, including potential
voting rights held by another
entity, are considered when
assessing significant influence.
Investments by venture capital
organizations, mutual funds, unit
trusts and similar entities
including
investment-linked
insurance funds are exempted
from applying equity method, if
an election is made to measure
such investments at FVTPL under
IAS 39. If this election is made,
certain disclosure requirements
have to be complied with.
216

Similar to IFRS.

Similar to IFRS.

Investments by venture capital


organizations are exempted from
applying equity method, if an
election is made to measure such
investments at FVTPL under Ind
AS 39.

Chapter 5: Objective wise analysis and comparison

Investments
in Loss in excess of the carrying amount Losses recognized under the
Associates - share of of investment is not recognized.
equity method in excess of the
losses
investors investment in ordinary
shares are applied to other
components of the investors
interest such as long-term loans.
Investment
in No specific guidance.
On disposal resulting in loss of
Associates - disposals
significant
influence,
the
remaining
investment
is
remeasured at fair value, with
gain or loss recognized in profit
or loss.
Investments
in Capital reserve arising on the Any excess of the investors share
Associates
acquisition of an associate by an of net fair value of the associates
capital investor should be included in the identifiable assets and liabilities
reserve/negative
carrying amount of investment in the over the cost of investments is
goodwill
associate but should be disclosed included as income in the
separately.
determination of the investors
share of associates profit or loss.

Similar to IFRS.

Similar to IFRS.

Any excess of the investors


share of the net fair value of the
associates identifiable assets and
liabilities over the cost of the
investment is recognized directly
in equity as capital reserve in the
period in which the investment is
acquired.
Uniform accounting policies Uniform accounting policies
should be followed while should be followed for like
applying the equity method. No transactions and events in similar
exception is provided.
circumstances unless it is
impracticable to do so.

Investments
in If not practicable to use uniform
Associates - uniform accounting polices while applying the
accounting policies
equity method, that fact should be
disclosed together with a brief
description of the differences
between the accounting policies.
Investments
in The maximum difference between the The difference between the
Associates
- reporting date of the associate and reporting date of the associate and
reporting date
that of the parent is not specified.
that of the parent shall be no more
than three months.
Investments
in At cost less impairment loss.
Associates - separate

The difference between the


reporting date of the associate
and that of the parent shall be no
more than three months unless it
is impracticable to do so.
Either at cost or at fair value as Similar as IFRS
available for sale with changes in
217

Chapter 5: Objective wise analysis and comparison

financial statements The limited revision to AS 23, on fair value recognized in other
of the investor
becoming effective, eliminates this comprehensive income.
difference between AS 23 and IAS
28.
If measured at cost (less
impairment), on classification as
held for sale, IFRS 5 will apply.
Reporting
in There is no equivalent standard.
IAS 29 - Financial Reporting in
Hyperinflationary
Hyperinflationary Economies
Economies primary
literature
IFRIC 7 - Applying the
Restatement Approach under
IAS 29
Financial Reporting There is no equivalent standard.
in Hyperinflationary
Economieshyperinflationary
Financial Reporting There is no equivalent standard.
in Hyperinflationary
Economies basic
principle

Financial Reporting There is no equivalent standard.


in Hyperinflationary
Economies
restatements

Ind AS 29 - Financial
Reporting in hyperinflationary
Economies

Ind AS 29 - Append ix A
Applying the Restatement
Approach under Ind AS 29
Generally an economy is Similar to IFRS.
hyperinflationary
when
the
cumulative inflation rate over 3
years is approaching or exceeds
100%.
Financial statements should be Similar to IFRS.
stated in terms of the measuring
unit current at the end of the
reporting period. Comparative
figures for prior period(s) should
be restated into the same current
measuring unit.
Restatements are made by Similar to IFRS.
applying a general price index.
Items such as monetary items that
are already stated at the
measuring unit at the end of the
reporting period are not restated.
Other items are restated based on
the change in the general price
218

Chapter 5: Objective wise analysis and comparison

index between the date those


items were acquired or incurred
and the end of the reporting
period.

Financial Reporting There is no equivalent standard.


in Hyperinflationary
Economies - basic
principle

Financial Reporting There is no equivalent standard.


in Hyperinflationary
Economies
restatements

A gain or loss on the net


monetary position is included in
net income. It should be disclosed
separately.
Financial statements should be Similar to IFRS.
stated in terms of the measuring
unit current at the end of the
reporting period. Comparative
figures for prior period(s) should
be restated into the same current
measuring unit.
Restatements are made by Similar to IFRS.
applying a general price index.
Items such as monetary items that
are already stated at the
measuring unit at the end of the
reporting period are not restated.
Other items are restated based on
the change in the general price
index between the date those
items were acquired or incurred
and the end of the reporting
period.
A gain or loss on the net
monetary position is included in
net income. It should be disclosed
219

Chapter 5: Objective wise analysis and comparison

Applying
the
Restatement
Approach under IAS
29
Interests in Joint
Ventures - primary
literature

Interests
Ventures
control

in
-

separately.
There is no equivalent standard.
When the economy of an entitys Similar to IFRS.
functional currency becomes
hyperinflationary, IAS 29 is
applied as if the economy was
always hyperinflationary.
AS 27 - Financial Reporting of IAS 31 - Interests in Joint Ind AS 31 - Append ix A Interests in Joint Ventures
Ventures
Jointly Controlled Entities Non-Monetary Contributions
SIC 13 - Jointly Controlled by Venturers
Entities
Non-Monetary
Contributions by Venturers

Joint Joint control is the contractually


joint agreed sharing of control over an
economic activity.

IAS 31 - Interests in Joint


Ventures
Joint control is the contractually Similar to IFRS.
agreed sharing of control over an
economic activity, and exists only
when the strategic financial and
operating decisions relating to the
activity
require
unanimous
consent of the venturers.

However, where an enterprise by a


contractual arrangement establishes
joint control over an entity which is a
subsidiary of that enterprise within
the meaning of AS 21, the entity is
consolidated under AS 21 by the said
enterprise, and is not treated as a joint
venture.
Interests in Joint Currently, there is no exemption as in IAS 31 is not applicable for
Ventures - scope
IFRS.
investments made by venture
capital organizations, mutual
The limited revision to AS 27, on funds, unit trusts and similar
becoming effective, eliminates this entities including investmentdifference between AS 27 and IAS linked insurance funds that upon
220

Ind AS 31 is not applicable for


investments made by venture
capital organizations that upon
initial recognition are classified
as at FVTPL under Ind AS 39.

Chapter 5: Objective wise analysis and comparison

31.

Interests in Joint
Ventures - separate
financial statement of
The venturer

Interests in Joint
Ventures - alternative
accounting methods

initial recognition are classified as


at FVTPL under IAS 39. If this
election
is
made,
certain
disclosure requirements have to
be complied with.
At cost less impairment loss.
Either at cost or at fair value as Similar to IFRS.
available for sale investment with
The limited revision to AS 27, on changes in fair value recognized
becoming effective, eliminates this as a component of comprehensive
difference between AS 27 and IAS income.
31.
If measured at cost (less
impairment), on classification as
held for sale, IFRS 5 will apply.
Interests in jointly controlled entities Investments in jointly controlled Similar to IFRS.
to be accounted using proportionate entities can be proportionately
consolidation only. Equity method consolidated or equity accounted
accounting is not permitted.
by the venturer.

Interests in Joint At cost less impairment if Even if consolidated financial


Ventures
- consolidated financial statements are statements are not prepared (e.g.
consolidated financial not prepared.
because the venturer has no
statements
subsidiaries)
proportionate
consolidation/equity accounting is
used for jointly controlled
entities.
Financial
AS 31 - Financial Instruments:
IAS 32 - Financial Instruments
Instruments:
Presentation
:
Presentation
Presentation
primary literature
Financial
Financial instruments are classified Financial
instruments
are
Instruments:
based on legal form redeemable classified as a liability or equity
Presentation
- preference shares will be classified as according to the contractual
221

Ind AS does not mandate


presentation of consolidated
financial
statements
as
requirements
to
present
consolidated or separate financial
statements is regulated by
governing statutes in India.
Ind AS 32 - Financial
Instruments : Presentation

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

classification of
financial liabilities

Financial
Instruments:
Presentation
treasury shares
Financial
Instruments:
Presentation
offsetting

Financial
Instruments:
Presentation
classification
convertible debts

Financial

equity.

of

arrangement, (and not its legal


form), and the definition of
Preference dividends are always financial liabilities and equity
recognized similar to equity dividend instruments.
and are never treated as interest
expense.
Dividends
on
financial
instruments classified as financial
liability is recognized as an
interest expense in the statement
of comprehensive income/income
statement
(if
presented
separately).
Acquiring own shares is permitted If an entity reacquires its own
only in limited circumstances. Shares shares (treasury shares), these are
repurchased should be cancelled shown as a deduction from
immediately and cannot be held as equity.
treasury shares.
There are no offset rules. However, in A financial asset and financial
practice the rules under IFRS are liability can only be offset if the
applied.
entity has a legally enforceable
right to set off the recognized
amounts and intends to either
settle on a net basis, or to realise
the asset and settle the liability
simultaneously.
Currently, the entire instrument is Split the instrument into liability
classified as debt based on its legal and equity component/conversion
form and any interest expense is option as an embedded derivative
recognized based on the coupon rate. depending on the contractual
Premium on redemption of the debt is terms of the financial instrument
recognized in securities premium to at issuance.
the extent available.
Currently there is no specific Conversion option to acquire
222

Similar to IFRS.

Similar to IFRS.

Similar to IFRS.

Similar to IFRS except for


conversion option embedded in a
foreign currency convertible
bond under certain situations.

Conversion option to acquire

Chapter 5: Objective wise analysis and comparison

Instruments:
guidance.
Presentation

conversion
option
embedded in foreign
currency convertible
bonds

fixed number of equity shares for


fixed amount of cash in any
currency (Entitys functional
currency or foreign currency) is
treated as equity and accordingly
is not required to be remeasured
at fair value at every reporting
date.

Financial
Instruments:
Presentation

puttable instruments
etc.

Similar to IFRS.

Financial
Instruments:
Presentation
classification of rights
issue

fixed number of equity shares for


fixed amount of cash in entitys
functional currency only is treated
as equity. Thus, a conversion
option embedded in foreign
currency convertible bonds is
treated as embedded derivative,
and accordingly fair valued
through profit or loss at every
reporting period end.
Currently there is no specific Puttable
instruments
and
guidance.
instruments that impose an
obligation to deliver pro rata
share of net assets only on
liquidation should be classified as
equity if some conditions are met.
This
also
triggers
some
disclosures to be made as
required by IAS 1.
Currently there is no specific Rights, options or warrants to
guidance.
acquire a fixed number of an
entitys own equity instruments
for a fixed amount of any
currency are equity instruments,
if the entity offers such options
etc. pro rata to all of its existing
owners of the same class of its
non-derivative
equity
instruments.
AS 20 - Earnings Per Share
IAS 33 - Earnings Per Share

Earnings Per Share


primary literature
Earnings Per Share AS 20 requires disclosure of basic When an entity presents both
disclosure in separate and diluted EPS information both in separate
and
consolidated
223

Similar to IFRS.

Ind AS 33 - Earnings Per


Share
EPS is required to be presented
in both, consolidated as well as

Chapter 5: Objective wise analysis and comparison

financial statements

Earnings Per Share disclosure

Earnings Per Share extraordinary items

Earnings Per Share Mandatorily


convertible
instrument

Earnings Per Share


shares issuable after a
passage of time

the separate and consolidated financial statements, EPS is


financial statements of the parent.
required to be presented only in
the
consolidated
financial
statements. An entity may
disclose EPS in its separate
financial statements voluntarily.
Certain
additional
disclosures IAS 33 requires additional
required under IFRS not mandatory.
disclosures for EPS from
continuing and discontinued
operations. Disclosure is also
required
for
instruments
(including contingently issuable
shares) that could potentially
dilute basic earnings per share in
the future, but were not included
in the calculation of diluted
earnings per share because they
are anti-dilutive for the periods
presented.
EPS with and without extraordinary Since IAS 1 prohibits the
items is to be presented.
disclosure
of
items
as
extraordinary,
no
separate
consideration is given to such
items while calculating EPS.
No specific requirement as in IFRS.
Ordinary shares to be issued upon
conversion of a mandatorily
convertible
instrument
are
included in the calculation of
basic EPS from the date the
contract is entered into.
No specific guidance.
Ordinary shares that are issuable
solely after a passage of time are
not treated as contingently
224

separate financial statements.

Similar to IFRS.

Similar to IFRS.

Similar to IFRS.

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

issuable shares because passage


of time is a certainty.
Earnings Per Share - No guidance on contingently Outstanding ordinary shares that Similar to IFRS.
Contingently
returnable shares
are contingently returnable are
returnable shares
not treated as outstanding and are
ignored in the calculation of basic
EPS until the shares are no longer
subject to recall.
Interim
Financial AS 25 - Interim Financial IAS 34 - Interim Financial Ind AS 34 - Interim Financial
Reporting - primary Reporting
Reporting
Reporting
literature
IFRIC 10 - Interim Reporting Ind AS 34 - Append ix A and Impairment
Interim Financial Reporting
and Impairment
Interim
Financial A statute governing an enterprise or a No specific guidance when a Similar to IFRS.
Reporting - statute regulator may require an enterprise to statute requires an enterprise to
requiring
an prepare
and
present
certain prepare and present certain
enterprise to prepare information at an interim date which information at an interim date in a
and present certain may be different in form and/or specific format.
information at an content as required by AS 25 for e.g.
interim date
Clause 41 of the Listing Agreement
requires companies to publish
quarterly financial information in a
specific format. In such a case, the
recognition
and
measurement
principles as laid down in AS 25 are
applied in
respect
of such
information,
unless
otherwise
specified in the statute or by the
regulator.
Interim Reporting and There
is
no
corresponding Where an entity has recognized Similar to IFRS.
Impairment
pronouncement to IFRIC 10. an impairment loss in an interim
However, AS 28 does permit the period in respect of goodwill or
225

Chapter 5: Objective wise analysis and comparison

reversal of goodwill in certain


circumstances. T his would be
equally applicable to the interim
financial statements. Reversal of
impairment of investments is
permitted in AS 13 and hence the
same is equally applicable for interim
financial statements. However, on AS
30 becoming effective, reversal of
impairment
loss
on
equity
instruments classified as available for
sale or financial instruments carried
at cost is prohibited in the annual
financial statements. There is no
guidance for such reversals in the
context
of
interim
financial
statements.
Impairment
of AS 28 - Impairment of Assets
Assets - primary AS 26 - Intangible Assets
literature
Impairment of Assets AS 28 requires goodwill to be tested
- goodwill
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.

an investment in either an equity


instrument classified as available
for sale or a financial asset carried
at cost, that impairment loss is not
reversed in subsequent interim
financial statements or in annual
financial statements.

IAS 36 - Impairment of Assets

Ind AS 36 - Impairment of
Assets

Allocated to cash generating units Similar to IFRS.


that are expected to benefit from
the synergies of
business
combination.
Allocated to the lowest level at
which goodwill is internally
monitored by management which
should not be larger than an
operating
segment
before
aggregation of segments as
defined in IFRS 8.
Impairment of Assets Goodwill and other intangibles are Goodwill, intangible assets not Similar to IFRS.
annual impairment tested for impairment only when yet available for use and
226

Chapter 5: Objective wise analysis and comparison

test for goodwill and there is an indication that they may indefinite life intangible assets are
intangibles
be impaired.
required to be tested for
impairment at least on an annual
AS 26, Intangible Assets requires basis or earlier if there is an
intangible assets that are not available impairment indication.
for use and intangible assets that are
amortized over a period exceeding
ten years to be assessed for
impairment at least at each financial
year end even if there is no indication
that the asset +is impaired.
Impairment of Assets Impairment loss for goodwill is Impairment loss recognized for

reversal
of reversed if the impairment loss was goodwill is prohibited from
impairment loss for caused by a specific external event of reversal in a subsequent period.
goodwill
an exceptional nature that is not
expected to recur and subsequent Goodwill impaired in an interim
external events have occurred that period is not subsequently
reverse the effect of that event.
reversed in subsequent interim or
annual financial statements.
Provisions,
AS 29 - Provisions, Contingent IAS 37 - Provisions, Contingent
Contingent Assets Liabilities and Contingent Assets
Liabilities
and
Contingent
and
Contingent
Assets
Liabilities - primary
literature
IFRIC 5 - Rights to Interests
arising from Decommissioning,
Restoration and Environmental
Funds
IFRIC 6 - Liabilities arising
from Participating in a Specific
Market - Waste Electrical and
Electronic Equipment

227

Similar to IFRS.

Ind AS 37 - Provisions,
Contingent Liabilities and
Contingent Assets
Ind AS 37 - Append ix A Rights to Interests arising from
Decommissioning, Restoration
and Environmental Funds
Ind AS 37 - Append ix B Liabilities
arising
from
Participating in a Specific
Market - Waste Electrical and
Electronic

Chapter 5: Objective wise analysis and comparison

Provisions,
Contingent
Liabilities
and
Contingent
Assets - recognition
of
provisions
Provisions,
Contingent Liabilities
and
Contingent
Assets - discounting

Provisions are not recognized based


on constructive obligations though
some provisions may be needed in
respect of obligations arising from
normal practice, custom and a desire
to maintain good business relations or
to act in an equitable manner.
Discounting of liabilities is not
permitted and provisions are carried
at their full values.

Rights to Interests No specific guidance.


arising
from
Decommissioning,
Restoration
and
Environmental Funds

Liabilities
arising No specific guidance.
from Participating in
a Specific Market
Waste Electrical and
Electronic Equipment

A provision is recognized only


when a past event has created a
legal or constructive obligation,
an outflow of resources is
probable, and the amount of the
obligation can be estimated
reliably.
When the effect of time value of
money is material, the amount of
provision is the present value of
the expenditure expected to be
required to settle the obligation. T
he discount rate is a pre-tax rate
that reflects the current market
assessment of the time value of
money and risks specific to the
liability.
Deals with the accounting in the
financial statements of the
contributor for interests in
decommissioning, restoration and
environmental
rehabilitation
funds established to fund some or
all
of
the
costs
of
decommissioning assets or to
undertake
environmental
rehabilitation.
Provides guidance on the
accounting for liabilities for waste
management costs and requires
recognition of an obligation to
contribute to the costs of
disposing of waste equipment
228

Similar to IFRS.

Similar to IFRS.

Similar to IFRS.

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

based on the entitys share of


market in the measurement
period.

Provisions,
Contingent Liabilities
and
Contingent
Assets - contingent
assets
Provisions,
Contingent Liabilities
and
Contingent
Assets - restructuring
cost

Contingent assets are not disclosed in


the financial statements. They are
usually disclosed as part of the report
of the approving authority (e.g. Board
of Directors report).
Requires recognition based on
general recognition criteria for
provisions i.e. when the entity has a
present obligation as a result of past
event and the liability is considered
probable and can be reliably
estimated.

Intangible Assets AS 26 - Intangible Assets


Primary literature

Intangible Assets - Measured only at cost.


measurement

The liability for such obligation


arises when an entity participates
in the market during the
measurement period.
Contingent assets are disclosed in Similar to IFRS.
the financial statements when an
inflow of economic benefits is
probable.
IAS 37 requires provisions on the Similar to IFRS.
basis of constructive obligations.
A constructive obligation to
restructure arises only when an
entity has a detailed formal plan
for the restructuring and has
raised a valid expectation in those
affected that it will carry out the
restructuring by starting to
implement
that
plan
or
announcing its main features to
those affected by it.
IAS 38 - Intangible Assets
Ind AS 38 - Intangible Assets
SIC 32 - Intangible Assets - Ind AS 38 - Append ix A Web Site Costs
Intangible Assets - Web Site
Costs
Intangible assets can be measured Similar to IFRS.
at either cost or revalued
amounts.
229

Chapter 5: Objective wise analysis and comparison

Intangible Assets - The useful life may not be indefinite.


useful life
There is a rebuttable presumption that
the useful life of an intangible asset
will not exceed ten years from the
date when the asset is available for
use.
Intangible Assets - Goodwill arising on amalgamation in
goodwill
the nature of purchase is amortized
over five years (as per AS 14).
Goodwill arising on consolidation is
not amortised but is tested for
impairment.
Intangible Assets Payment for the delivery of goods or
prepayments
for services made in advance of the
advertising
and delivery of goods or the rendering of
promotional activities services
are
considered
as
prepayment assets.

Useful life may be finite or Similar to IFRS.


indefinite.

Not amortised but subject to


annual impairment test or more
frequently whenever there is an
impairment indication.

Recognition of a prepayment Similar to IFRS.


asset
for
advertising
or
promotional expenditure would
be permitted only up to the point
at which the entity has the right to
access the goods or upto the
receipt of services.

Mail order catalogues specifically


Identified as a form of advertising
and promotional activity to be
expensed.
Financial
AS
13
Accounting
for IAS 39 - Financial Instruments: Ind AS 39 - Financial
Instruments:
Investments.
Recognition and Measurement
Instruments: Recognition and
Recognition
and AS 11 - The Effects of Changes in
Measurement
Measurement
Foreign Exchange Rates.
IFRIC 9 - Reassessment of Ind AS 39 - Append ix C primary literature
Embedded Derivatives
Reassessment of Embedded
AS 30 - Financial Instruments:
Derivatives
Recognition and Measurement
IFRIC 16 - Hedges of a Net Ind AS 39 - Append ix D 230

Chapter 5: Objective wise analysis and comparison

Financial
Instruments:
Recognition
and
Measurement
general recognition
principle

Financial
Instruments:
Recognition
and
Measurement
investments,
and
loans and receivables

Investment in a Foreign
The differences discussed below are Operation
based on AS 13.
IFRIC 19 - Extinguishing
Financial
Liabilities
with
Equity Instrument
Note : IFRS 9 will come into
effect from 1-4-2015
T here is no definition of financial All financial assets and financial
instrument. Currently, derivatives are liabilities are recognized in the
not required to be recognized in the statement of financial position
balance sheet except for certain when these meet the definition
forward exchange contracts within and recognition criteria of a
the scope of AS 11, and for entities financial instrument.
not following AS 30, losses in respect
of all outstanding derivative contracts A financial instrument is a
not covered by AS 11 (see the contract that gives rise to a
caption
Financial
Instruments: financial asset in one entity and a
Recognition and Measurement - financial liability or equity in
derivatives and hedge accounting).
another entity.
Per AS 13, investments are classified Financial
instruments
are
as long-term or current. A current classified as fair value through
investment is an investment that is by profit or loss
its nature readily realisable and is (FVTPL), held to maturity, loans
intended to be held for not more than and receivables or available for
one year from the date on which such sale.
investment is made. A long term A
financial
instrument
is
investment is an investment other classified as FVTPL if it is held
than a current investment.
for trading or has been designated
Accordingly, the assessment of as at FVTPL upon initial
whether an investment is long-term recognition.
A
financial
has to be made on the date the instrument is classified as held for
investment is made.
trading if these are acquired or
Long-term investments are carried at incurred principally for the
231

Hedges of a Net Investment in


a Foreign Operation
Ind AS 39 - Append ix E Extinguishing
Financial
Liabilities
with
Equity
Instruments
Similar to IFRS.

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

cost less provision for diminution in


value, which is other than temporary.
Current investments are carried at
lower of cost and fair value.
As per Schedule VI, investments are
required to be classified as current
and non-current, such classification
being made on the balance sheet date.
However,
this
leads
to
an
inconsistency in the classification of
investments as current under AS 13
and Schedule VI. T he Exposure
Draft of the Guidance Note to the
Revised Schedule VI to the
Companies Act, 1956 has clarified
that AS 13 does not lay down
presentation norms, though it requires
disclosures to be made for current
and
long
term
investments.
Accordingly, presentation of all
investments in the balance sheet
should be made as per the
requirements of Schedule VI i.e. as
current or non-current. Therefore, the
portion of long-term investment as
per AS 13 that is expected to be
realised within 12 months from the
balance sheet date needs to be shown
as Current Investment under
Revised Schedule VI. Alternatively,
the same can also be shown under
long term Investments as Current
portion of long term investments.

purpose of selling or repurchase


in the near future, is part of a
portfolio that is managed together
and for which there is evidence of
recent actual pattern of short-term
profit taking or is a derivative
(that is not designated as an
effective hedging instrument). A
financial instrument can be
designated as at FVTPL only if it
eliminates or reduces accounting
mismatch or a group of financial
assets, financial liabilities or both
is managed and its performance
evaluated on a fair value basis in
accordance with a documented
risk management strategy and
information about the group is
provided on that basis to key
management personnel.
Held-to-maturity investments are
non-derivative financial assets
with fixed or determinable
payments and fixed maturity that
an entity has positive intent and
ability to hold to maturity. Held
to maturity investments are
measured at amortized cost using
the effective interest method.
Loans and receivables have fixed
or determinable payments that are
232

Chapter 5: Objective wise analysis and comparison

Loans and receivables are measured not quoted in an active market.


at cost less valuation allowance.
Loans and receivables are
measured at amortized cost using
the effective interest method.
Available-for-sale
investments
are those that do not qualify or
are not classified as at FVTPL,
held-to-maturity investments or
loans and receivables. Gain or
loss in changes in fair value of
available-for-sale investments are
recognized
in
other
comprehensive income.
No specific guidance.
In determining the fair value of
the financial liabilities designated
at
FVTPL
upon
initial
recognition, any change in fair
value due to changes in the
entitys own credit risk are
considered.

Financial
Instruments:
Recognition
and
Measurement
changes in fair value
of financial liabilities
due to changes in
credit risk
Financial
No specific rules for reclassification Non-derivative financial assets
Instruments:
of investments
can be reclassified out of FVTPL
Recognition
and
or available for sale categories
Measurement
only in certain circumstances
reclassifications
except
for
non-derivative
financial assets that have been
designated at FVTPL. This
triggers some disclosures to be
made as required by IFRS 7.
Financial
An enterprise should assess the Impairment is recognized if, and
Instruments:
provision for doubtful debts at each only if, there is objective
Recognition
and period end which, in practice, is evidence of impairment as a
233

In determining the fair value of


the
financial
liabilities
designated at FVTPL upon initial
recognition, any change in fair
value due to changes in the
entitys own credit risk are
ignored.
Similar to IFRS.

Similar to IFRS.

Chapter 5: Objective wise analysis and comparison

Measurement
impairment
financial assets

- based
of as:

Financial instruments:
Recognition
and
Measurement
derivatives
and
embedded derivatives

on relevant information such result of one or more events that


occurred
after
the
initial
past experience,
recognition of the asset
actual financial position and
(Referred to as loss event), and
cash flows of the debtors.
the loss event(s) has an impact on
the estimated cash flows that can
Different methods are used for be reliably estimated.
making provisions for bad debts, Impairment losses recognized in
including:
profit or loss for equity classified
the ageing analysis,
as available for sale cannot be
An individual assessment of reversed through profit or loss.
recoverability.
Impairment
losses recognized in profit or
loss for equity investments are
reversed through profit or loss
(as per AS 13). On AS 30
becoming mandatory, the
position will be similar to
IFRS.
For banks and financial service
entities, the Reserve Bank of India
has laid down specific provisioning
norms based on the age of the
outstanding.
Currently there is no equivalent Measured
at
fair
value. Similar to IFRS.
standard on derivatives except for Prepayment options, the exercise
certain forward exchange contracts price of which compensates the
within the scope of AS 11, and for lender for the loss of interest by
entities not following AS 30, an reducing the economic loss from
ICAI announcement for losses in reinvestment risk should be
respect of all outstanding derivative considered closely related to the
contracts not covered by AS 11 (see host debt contract.
the caption Financial Instruments:
234

Chapter 5: Objective wise analysis and comparison

Recognition and Measurement derivatives and hedge accounting).


The principles in AS 30 may be
followed for other derivatives.
Financial
Currently there is no equivalent
Instruments:
standard on hedge accounting except
Recognition
and in the case of forward exchange
Measurement
- contracts within the scope of AS 11
derivatives and hedge and an announcement dated 29
accounting
March 2008 made by the ICAI
requiring entities not following AS
30 to provide for losses in respect of
all outstanding derivative contracts
not covered by AS 11 by marking
them to market at the balance sheet
date.
The said announcement is applicable
to financial statements for the period
ending 31 March 2008 or thereafter.
For other cases of hedge accounting,
the principles in AS 30 may be
followed.

Hedge accounting (recognizing Similar to IFRS.


the offsetting effects of fair value
changes of both the hedging
instrument and the hedged item in
the same periods profit or loss) is
permitted
in
certain
circumstances, provided that the
hedging relationship is clearly
defined, measurable, and actually
effective.
IAS 39 provides for three types of
hedges:
fair value hedge: if an
entity hedges a change in
fair value of a recognized
asset or liability or
unrecognized
firm
commitment, the change
in fair values of both the
hedging instrument and
the hedged item are
recognized in profit or
loss when they occur;
cash flow hedge: if an
entity hedges changes in
the future cash flows
relating to a recognized
asset or liability or a
highly probable forecast
235

Chapter 5: Objective wise analysis and comparison

transaction,
then
the
change in fair value of the
hedging instrument is
recognized
in
other
comprehensive
income
until such time as those
future cash flows affect
profit or loss. T he
ineffective portion of the
gain or loss on the
hedging instrument is
recognized in profit or
loss in the period of such
change; and
Hedge of a net investment
in a foreign entity: treated
similar to cash flow
hedge.
A hedge of foreign currency risk
in a firm commitment may be
accounted for as a fair value
hedge or as a cash flow hedge.

Financial
Instruments:
Recognition
and
Measurement
eligible hedged items

At present, except for forward


exchange contracts within the scope
of AS 11, there is no separate
standard on hedge accounting.
However, the principles laid down in

(Also see the caption Hedges of


a Net Investment in a Foreign
Operation).
Inflation may only be hedged Similar to IFRS.
when changes in inflation are a
contractually- specified portion of
cash flows of a recognized
financial
instrument
and
identifiable.
236

Chapter 5: Objective wise analysis and comparison

Financial
Instruments:
Recognition
and
Measurement
derecognition
of
financial assets and
securitization

Financial
Instruments:
Recognition
and
Measurement
derecognition
of
financial liabilities
Financial
Instruments:
Recognition

and

AS 30 dealing with hedge accounting


may be followed.
An entity may designate an
option as a hedge of changes in
the cash flows or fair value of a
hedged item above or below a
specified price or other variable
(a one-sided risk). In such cases,
the hedged risk does not include
time value of the purchased
option.
The Guidance Note on Accounting Derecognition of financial assets Similar to IFRS.
for Securitization (withdrawn from is based on whether substantially
the
date
AS
30
became all risks and rewards inherent in
recommendatory i.e. 1 April 2009) the assets have been transferred to
required
derecognition
of
a the transferee. If risks and
securitized asset based on loss of rewards have neither been
control.
substantially transferred
nor
retained, an assessment is made
whether control has been retained
by the transferor in which case
the assets continue to be
recognized to the extent of
continuing involvement.
There is no specific guidance on Financial
liabilities
are Similar to IFRS.
derecognition of financial liabilities derecognized only when the
but in practice principle under IFRS obligation specified in the
is applied. However, unclaimed contract
is
discharged
or
liabilities are written back after a cancelled or has expired.
specified period based on historical
analysis.
Financial guarantee contracts are Financial guarantee contracts Similar to IFRS.
disclosed as contingent liabilities and (issued) are initially measured at
recognized only when the payment fair value
237

Chapter 5: Objective wise analysis and comparison

Measurement
- under the contract becomes probable and subsequently at the higher of
financial
guarantee and is measured as the best estimate
fair value at initial
contracts
of the amount to be settled.
recognition
less
cumulative amortization
in accordance with IAS 18
and
the amount determined in
accordance with IAS 37.
Reassessment
of No specific guidance.
When certain non-derivative Similar to IFRS.
Embedded
financial
instruments
are
Derivatives
transferred out of FVTPL
categories as permitted by IAS
39, the embedded derivatives
have to reassess and, if necessary,
separately accounted for in the
financial statements.
Hedges of a Net No specific guidance.
A parent may designate as a Similar to IFRS.
Investment
in
a
hedged risk only the foreign
Foreign Operation
exchange differences arising from
a difference between its own
functional currency and that of its
foreign operation.
The hedging instrument for the
hedge of a net investment in a
foreign operation may be held by
any entity or entities within the
group. On derecognition of a
foreign operation, IAS 39 must be
applied to determine the amount
that needs to be reclassified to
profit or loss from the foreign
currency translation reserve in
respect of the hedging instrument,
238

Chapter 5: Objective wise analysis and comparison

Extinguishing
No specific guidance.
Financial Liabilities
with
Equity
Instruments

while IAS 21 must be applied in


respect of the hedged item.
If a debtor issues equity Similar to IFRS.
instruments to a creditor to
extinguish all or part of a
financial liability, those equity
instruments are consideration
paid. T his is accounted for as an
extinguishment of the financial
liability, and accordingly the
debtor should derecognise the
financial liability fully or partly.
The debtor should measure the
equity instruments issued to the
creditor at fair value, unless fair
value is not reliably determinable,
in which case the equity
instruments issued are measured
at the fair value of the liability
extinguished.

The debtor recognises in profit or


loss the difference between the
carrying amount of the financial
liability (or part) extinguished and
the fair value of the equity
instruments issued.
Investment Property There is no equivalent standard on At present, covered by AS 13 - IAS 40 - Investment Property
- primary literature investment property.
Accounting for Investments.
Ind AS 40 - Investment
Property
Investment Property - Classified as long-term investments Investment properties can be Investment
properties
are
measurement
and measured at cost less impairment. measured using the cost or the measured using the cost model
239

Chapter 5: Objective wise analysis and comparison

fair value model, with changes in only.


As per Schedule VI, they are fair value recognized in profit or
classified as non-current investments. loss.
Agriculture
There is no equivalent standard.
IAS 41 - Agriculture There is There
is
no
equivalent
primary literature
no equivalent standard.
standard. However the ICAI
has issued an Exposure Draft
of the same.
Agriculture
- There is no equivalent standard.
Measured at fair value less costs There is no equivalent standard.
measurement
to sell.
First Time Adoption There is no equivalent standard IFRS 1 - First Time Adoption of Ind AS 101 - First Time

Primary under Indian GAAP. A first time International


Financial Adoption
of
Indian
Literature
preparer will have to comply with Reporting Standards
Accounting Standards
the measurement and disclosure
requirements of all the Indian
standards that are applicable to the
enterprise.
First Time Adoption - Not applicable.
Entities are required to present at Entities have to mandatorily
date of transition
least one year comparatives. T he transition as of the beginning
date of transition is the beginning date of financial year on or after
of the earliest period for which an 1 April 2011 and are not required
entity presents full comparative to
present
comparative
information under IFRS in its first information; however, entities
IFRS financial statements.
have an option to present
memorandum
comparative
information based on deemed
transition date as of the
beginning date of immediately
preceding financial year.
First Time Adoption Not applicable.
There is no requirement to Irrespective of the option elected

additional
present additional comparatives for presentation of memorandum
comparatives as per
under previous GAAP (See Ind AS comparatives, the first
previous GAAP
Exhibit 1).
time adopter shall present latest
corresponding previous periods
240

Chapter 5: Objective wise analysis and comparison

First Time Adoption - Not applicable.


choice of previous
GAAP

First Time Adoption - Not applicable.


exemption to consider
previous
GAAP
carrying value of
property, plant and
equipment as deemed
cost
First Time Adoption - Not applicable.
exemption
for
unrealized
foreign
currency
exchange
differences on longterm monetary assets
and liabilities

It is not mandatory for entities to


consider existing Indian GAAP as
the previous GAAP for the
purpose of transition to IFRS and
can use other GAAP financial
statements being presented by
them to transition to IFRS e.g. US
GAAP financial statements may
be used to transition to IFRS.
There is no exemption permitting
previous GAAP carrying value of
property, plant and equipment as
deemed cost under IFRS (except
for certain specific oil and gas
assets, and rate regulated assets).

The
unrealised
exchange
differences arising on long -term
monetary assets and liabilities are
recognized immediately in profit
or loss.

241

financial statements prepared as


per the previous GAAP (existing
Indian GAAP). Such previous
GAAP financial statements
should be reclassified to the
extent
practicable,
when
presenting its first Ind AS
financial statements (See Exhibit
1).
Entities have to consider the
basis of accounting that they
used
immediately
before
adopting Ind ASs for their
reporting requirements in India
as previous GAAP for the
purpose of transition.

Entities have an option to use


previous GAAP carrying values
of property, plant and equipment
as on the date of transition as
deemed cost under Ind AS. A
similar exemption is available
for intangible assets and
investment properties.
Ind AS 21 provides an option to
recognize unrealised exchange
differences arising on translation
of long-term monetary assets and
liabilities either in equity or in
profit or loss. If recognized in
equity,
the
amount
so

Chapter 5: Objective wise analysis and comparison

accumulated
should
be
transferred to profit or loss over
the period of maturity of such
long-term monetary items in an
appropriate
manner.
The
aforesaid option is irrevocable
and, if elected, should be applied
for all long-term monetary items.

First Time Adoption - Not applicable.


exemption
from
retrospective
application
of
effective
interest
method
and
impairment
requirements

There is no exemption from


retrospective
application
of
effective interest method or the
impairment requirements for
financial instruments.

First Time Adoption - Not applicable.


non-current
assets
held for sale
and
discontinued
operations

No exemption in respect of noncurrent assets held for sale and


discontinued operations.

242

The
aforesaid
option
of
accumulating the exchange gains
or loss in equity may be
exercised prospectively and such
unrealised exchange differences
on said items may be deemed to
be zero on the date of transition.
If it is impracticable to
retrospectively
apply
the
effective interest method or the
impairment requirements for
financial instruments, the fair
value of the financial asset at the
date of transition shall be the
new amortized cost of that
financial asset at the date of
transition.
Ind AS 101 provides transitional
relief while applying Ind AS 105
- Non-current Assets Held for
Sale
and
Discontinued
Operations. Under Ind AS 101,
an entity may use the transitional
date circumstances to measure

Chapter 5: Objective wise analysis and comparison

First Time Adoption Not applicable.


- reconciliations

IFRS requires reconciliations for


opening
equity,
total
comprehensive income, cash flow
statement and closing equity for
the comparative period to explain
the transition to IFRS from
previous GAAP (See Exhibit 1).

Share-based
There is no equivalent standard.
Payment - primary However, the ICAI has issued a
literature
Guidance Note on Accounting for
Employee Share-based Payments.
This guidance note deals only with
employee share-based payments.
The SEBI has also issued the
Securities and Exchange Board of
India (Employee Stock Option
Scheme and Employee Stock
Purchase Scheme) Guidelines,
1999.
Share-based Payment Both the guidance note and the SEBI

IFRS 2 - Share-based Payment


(covers share-based payments
both for employees and nonemployees and transactions
involving receipt of goods and
services)

such assets or operations at the


lower of carrying value and fair
value less cost to sell.
Ind AS 101 provides an option to
provide a comparative period
financial
statement
on
memorandum
basis.
Accordingly, entities that do not
provide comparatives need not
provide reconciliation for total
comprehensive income, cash
flow statement and closing
equity in the first year of
transition but are expected to
disclose significant differences
pertaining to total comprehensive
income. Entities that provide
comparatives would have to
provide reconciliations which are
similar to IFRS (See Exhibit 1).
Ind AS 102 - Share-based
Payment

For equity settled share-based Similar to IFRS.


243

Chapter 5: Objective wise analysis and comparison

- measurement

guidelines permit the use of either the


intrinsic value method or the fair
value method for determining the
costs of benefits arising from
employee share-based compensation
plans.
The
guidance
note
recommends the use of the fair value
method.

transactions with non-employees,


goods and services received and
the corresponding increase in
equity is measured at the fair
value of the goods and services
received. If the fair value of the
goods and services cannot be
estimated reliably, then the value
is measured with reference to the
fair value of the equity
instruments granted. In case of
equity settled transactions with
employees and others providing
similar services, fair value of the
equity instrument should be used.

Under the intrinsic value method, the


cost is the difference between the
market price of the underlying share
on the grant date and the exercise
price of the option. The fair value
method is based on the fair value of
the option at the date of grant. T he
fair value is estimated using an Different valuation
option-pricing model (for example, may be applied.
the Black-Scholes or a binomial
model) that takes into account as of
the grant date the exercise price and
expected life of the option, the
current price in the market of the
underlying stock and its expected
volatility, expected dividends on the
stock, and the risk-free interest rate
for the expected term of the option.
Where an enterprise uses the intrinsic
value method, it should also disclose
the impact on the net results and EPS
- both basic and diluted for the
accounting period, had the fair value
method been used.
244

techniques

Chapter 5: Objective wise analysis and comparison

Share-based Payment The Guidance Note on Accounting


- group entities
for Employee Share-based Payments
applies to transfers of shares or stock
options of the parent of an entity or
shares or stock options of another
entity in the same group to the
employees of the entity.
Business
AS 14 - Accounting for
Combinations Amalgamations
primary literature
Business
Amalgamations in the nature of
Combinations the purchase are accounted for by
pooling of interests recording the identifiable assets and
and purchase method liabilities of the the person wose
asstes are going to be acquired either
at the fair values or at book values.

IFRS 2 provides guidance on Similar to IFRS.


accounting
for
share-based
payment transactions among
group entities.

IFRS 3 (2008) - Business


Combinations

All business combinations, other


than those between entities under
common control, are accounted
using the purchase method. An
acquirer is identified for all
business combinations, which is
the entity that obtains control of
Amalgamations in the nature of the other combining entity.
merger are accounted under the
pooling of interests method. Under Pooling of interests method to
the pooling of interests method, the record business combinations
assets, liabilities and reserves of the within the scope of IFRS 3 is
transferor company are recorded by prohibited.
the transferee company at their
existing carrying amounts (after
making the adjustments required for
conflicting accounting policies).
Identifiable assets and liabilities of
subsidiaries acquired by purchase of
shares which are not amalgamations
are recorded in the consolidated
financial statements at the carrying
245

Ind AS 103
Combinations

Business

Common control transactions are


included in the scope; and
additional guidance is provided.
The additional guidance provides
that
business
combination
transactions between entities
under common control should be
accounted for using the pooling
of interests method.

Chapter 5: Objective wise analysis and comparison

amounts stated in the acquired


subsidiarys financial statements on
the date of acquisition.
Business
At the time of acquisition, minority
Combinations - non- interests in the net assets consist of
controlling interest
the amount of equity attributable to
minorities at the date on which
investment in the the person wose
asstes are going to be acquired is
made.
This is determined on the basis of
information contained in the financial
statements of the the person wose
asstes are going to be acquired as on
the date of investment.
Business
At the time of acquisition, minority
Combinations - non- interests in the net assets consist of
controlling interest
the amount of equity attributable to
minorities at the date on which
investment in the person whose assets
are going to be acquired is made.
This is determined on the basis of
information contained in the financial
statements of the the person wose
asstes are going to be acquired as on
the date of investment.
Business
Any excess of the amount of the
Combinations
consideration over the value of the
goodwill
net assets of the transferor company
measurement
acquired by the transferee company is
recognized
in
the
transferee
companys financial statements as
goodwill arising on amalgamation.

At the date of acquisition, an Similar to IFRS.


entity may elect to measure, on a
transaction by transaction basis,
the non-controlling interest at (a)
fair value or (b) the noncontrolling
interests
proportionate share of the fair
value of the identifiable net assets
of the the person wose asstes are
going to be acquired.

At the date of acquisition, an Similar to IFRS.


entity may elect to measure, on a
transaction by transaction basis,
the non-controlling interest at (a)
fair value or (b) the non
controlling
interests
proportionate share of the fair
value of the identifiable net assets
of the the person wose asstes are
going to be acquired.
Measured
between:

as

the

difference Similar to IFRS. However, any


gain

the aggregate of (a) the on


bargain
purchase
is
acquisition-date fair value recognized
of
the
consideration
transferred;
(b)
the in other comprehensive income
246

Chapter 5: Objective wise analysis and comparison

amount of any noncontrolling interest and (c)


in a business combination
achieved in stages, the
acquisition- date fair value
of
the
acquirers
previously held equity
interest in the the person
wose asstes are going to
be acquired; and

If the amount of the consideration is


lower than the value of the net assets
acquired, the difference is recognized
as capital reserve, a component of
shareholders equity.

and
accumulated in equity as capital
reserve if there is a clear
evidence of
the underlying
classification

reason

for

of the business combination as a


the net of the acquisitiondate fair values of the bargain purchase; otherwise, the
identifiable
assets
acquired and the liabilities resulting gain is recognized d
assumed.
irectly in

Business
Combinations
business
combinations
achieved in stages

Dealt with in AS 21. If two or more


- investments are made over a period
of time, the equity of the subsidiary at
the date of investment is generally
determined on a step-by-step basis;
however, if small investments are
made over a period of time and then
an investment is made that results in
control, the date of the latest
investment, as a practicable measure,
may be considered as the date of
investment.

If the above difference is equity as capital reserve.


negative, the resulting gain is
recognized as a bargain purchase
in profit or loss.
For
business
combinations Similar to IFRS.
achieved
in stages, if the acquirer increases
an existing equity interest so as to
achieve control of the the person
wose asstes are going to be
acquired, the
previously-held equity interest is
remeasured at acquisition-date
fair
value and any resulting gain or
loss is
247

Chapter 5: Objective wise analysis and comparison

Business
Combinations
Subsequent
measurement
goodwill

Business
Combinations
Contingent
consideration

Goodwill arising on amalgamation in


- the nature of purchase is amortised
over a period not exceeding five
of years.
There is no specific guidance on
goodwill arising on acquisition of
subsidiary. In practice such goodwill
is not amortised but tested for
impairment.
Where the scheme of amalgamation
- provides for an adjustment to the
consideration contingent on one or
more future events, the amount of the
additional payment should be
included in the consideration if
payment is probable and a reasonable
estimate of the amount can be made.
In all other cases, the adjustment
should be recognized as soon as the
amount is determinable.

recognized in profit or loss.


Goodwill is not amortised but Similar to IFRS.
tested for impairment on an
annual basis or more frequently if
events
or
changes
in
circumstances
indicate
impairment.

Consideration for the acquisition Similar to IFRS.


includes the acquisition-date fair
value of contingent consideration.
The obligation to pay contingent
consideration should be classified
as a liability or as equity, as
appropriate. The right to return of
previously
transferred
consideration should be classified
as an asset, if specified conditions
are met. Changes in contingent
consideration which are within
the measurement period are
recognized as adjustments against
original accounting for the
acquisition (and so may impact
goodwill).
Contingent
consideration
classified as equity is not
subsequently remeasured and its
subsequent
settlement
is
accounted
within
equity.
248

Chapter 5: Objective wise analysis and comparison

Business
No specific guidance.
Combinations
acquisition
related
costs

Business
No specific guidance.
Combinations

initial accounting for


a
business
combination
determined
provisionally

Contingent
consideration
classified as an asset or a liability
that is a financial instrument
within the scope of IAS 39 should
be measured at fair value, with
any resulting gain or loss
recognized in profit or loss or in
other comprehensive income, as
appropriate. If it is not within the
scope of IAS 39, it should be
accounted for in accordance with
IAS 37 or other IFRSs as
appropriate.
Acquisition related costs such as Similar to IFRS.
finders fee, due diligence costs,
etc.
are accounted for as expenses in
the
period in which the costs are
incurred
and the services are received.
If the initial accounting for a Similar to IFRS.
business combination can be
determined only provisionally by
the end of the first reporting
period, the combination is
accounted for using provisional
values.
Adjustments
to
provisional values relating to new
information about facts and
circumstances that existed at the
acquisition date are permitted
within one year of the acquisition
249

Chapter 5: Objective wise analysis and comparison

Insurance Contracts
- primary literature

Insurance Contracts general

Non-current Assets
Held for Sale and
Discontinued

date. Such adjustments are made


retrospectively as if those
adjustments had been made at the
acquisition date. No adjustments
can be made after one year except
to correct an error in accordance
with IAS 8.
No equivalent standard.
IFRS 4 - Insurance Contracts
Ind AS 104 Insurance
Contracts
(This Ind AS will come into
effect for insurance companies
from the date to be separately
announced)
No equivalent standard.
Applicable to insurance and Similar to IFRS.
reinsurance contracts and to
discretionary
participation
features in insurance contracts.
The insurer is required at the end
of each reporting period to make
a liability adequacy test to assess
whether its recognized insurance
liabilities are adequate. If test
shows carrying amount of its
liabilities are inadequate, the
deficiency is recognized in profit
or loss.
Reinsurance assets are tested for
impairment. Insurance liabilities
may not be offset against related
reinsurance assets.
AS 24 - Discontinuing Operations
IFRS 5 - Non-current Assets Ind AS 105 - Non-current
Held for Sale and Discontinued Assets Held for Sale and
AS 10 - Accounting for Fixed Operations
Discontinued Operations
250

Chapter 5: Objective wise analysis and comparison

Operations
primary
literature

- Assets

Non-current Assets
Held for Sale and
Discontinued
Operations
recognition
and
measurement

Non-current Assets
Held for Sale and
Discontinued
Operations - non-cash
assets
held
for
distribution to owners

Non-current Assets
Held for Sale and
Discontinued
Operations-

IFRIC 17 - Distributions of Ind AS 10 - Append ix A Non-cash Assets to Owners


Distributions of Non-cash
Assets to Owners
There is no standard dealing with
non-current assets held for sale
though AS 10 deals with assets held
for disposal. Items of fixed assets that
have been retired from active use and
are held for disposal are stated at the
lower of their net book value and net
realisable value and are shown
separately in the financial statements.
Any expected loss is recognized
immediately in the statement of profit
and loss.

Non-current assets to be disposed Similar to IFRS.


of are classified as held for sale
when the asset is available for
immediate sale and the sale is
highly probable.

Depreciation ceases on the date


when the assets are classified as
held for sale.
Non-current assets classified as
held for sale are measured at the
lower of its carrying value and
fair value less costs to sell.
AS 24 have no specific guidance Non-cash assets are to be Similar to IFRS.
related to non-cash assets held for classified as held for distribution
distribution to owners.
to owners when the transaction is
highly probable, taking into
account
probability
of
shareholders
approval,
if
required in the jurisdiction.

An operation is classified as
discontinuing at the earlier of (a)
binding sale agreement for sale of the
operation and (b) on approval by the

Such assets are measured at the


lower of carrying amount and fair
value less costs to distribute.
An operation is classified as Similar to IFRS.
discontinued when it has either
been disposed of or is classified
as held for sale.
251

Chapter 5: Objective wise analysis and comparison

classification

board of directors of a detailed formal


plan and announcement of the plan.

5.2 CONCLUSION
In the above table of differences it is clearly evident that there are a lot of changes in Existing Indian GAAP. As IFRS are made on the basis
of international environment so it was necessary to make them feasible and adoptable in Indian scenario because are accounting is affected by
various regulatory requirements. So from the above table it is clearly evident that India is not accepting these standards as it is. In India,
Ministry of corporate Affairs (MCA) and ICAI have developed NEW INDIAN AS for convergence. New standards are the Combo of IFRS
and our regulatory requirements. It is clearly evident from above discussion that we Indian AS are mostly same as IFRS and changes as per
regulatory requirements have been implemented as and when required.

Sources/ References:
1. Deloitte, Indian GAAP, IFRS and Indian AS : A comparison

252

Chapter 5: Objective wise analysis and comparison

5.3 COMPARISON OF PROFITABILITY MEASURES AS PER IFRS &


INDIAN GAAP AND THERE RECONCILIATION:
In the given section researcher has compared profitability measures taken from annual reports of
companies which is prepared on the basis of Indian GAAP and IFRS. Some companies have not
mentioned there IFRS reporting in Annual reports. There IFRS reporting has been taken from
Form 20 F filed with Securities exchange commission (SEC). Researcher has also used AS 11 to
convert foreign currencies which is used in financial reporting as per IFRS in SEC filing i.e. in
Form 20-F. researcher has also reconciled the profitability measures to find out difference due to
convergence with IFRS. Comparison and reconciliation is performed on the basis of two years
data collected from secondary sources such as annual reports and Form 20-F.
For making comparison between profitability as per Indian GAAP and IFRS come profitability
ratios have been taken into consideration. 4 profitability measures have been taken into
consideration for comparison. Following are the 4 profitability ratios which have been taken into
consideration:
a. Net Profit ratio
b. Return on capital employed
c. Return on shareholders fund
d. Basic Earnings Per Share (EPS)
Following tables shows the comparison and reconciliation of profitability indicators in
2011-12:

5.3.1 Net Profits Ratios*: This ratio is the very first indicator ratio which is necessary to
check direct impact on total profitability of a company. Net Profit ratio is relation between Net
Profit after taxes and Net sales of a company.

253

Chapter 5: Objective wise analysis and comparison

Net Profit Ratios


(2010-11)
Table 5: Net Profit Ratios 2010-11

Company's name

Indian GAAP (2010-11) (In %)

Reconciliation

IFRS (2010-11) (In %)

Dr. Reddy's Lab Ltd.

13.8

-0.98

14.78

Bharti Airtel Ltd.

9.92

9.92

Infosys

24.85

0.04

24.81

Tata Motors

3.48

-2.61

6.09

Siemens

7.29

-1.34

8.63

Sterlite

24.3

-0.25

24.55

WIPRO

17.05

-0.12

17.17

TCS

16.67

-6.05

22.72

*Net Profit Ratio = Net profit/Net Sales * 100

30
25
20
15
10

Indian GAAP(2010-11)(In %)

IFRS(2010-11)(In %)

Figure 2- Net Profit 2010-11

254

Chapter 5: Objective wise analysis and comparison

Net Profit Ratios


(2011-12)
Table 6: Net Profit Ratios 2011-12

Company's name

Indian GAAP (2011-12) (In %)

Reconciliation

IFRS (2011-12) (In %)

Dr. Reddy's Lab Ltd.

13.79

-0.95

14.74

Bharti Airtel Ltd.

5.96

5.96

Infosys

24.7

0.05

24.65

Tata Motors

2.65

-3.21

5.86

Siemens

8.16

1.06

7.1

Sterlite

21.3

-1.42

22.72

WIPRO

15.07

0.02

15.05

TCS

11.72

-2.66

14.38

*Net Profit Ratio = Net profit/Net Sales * 100


30
25
20
15
10

Indian GAAP (2011-12)(In %)

IFRS (2011-12)(In %)

Figure 3- Net Profit Ratio (2011-12)

255

Chapter 5: Objective wise analysis and comparison

5.3.2 Return on Capital Employed*: This ratio is an indicator which shows that
company is giving how much return on capital employed. This ratio is relation between Profit
before taxes and capital employed.

Return on Capital Employed*


(2010-11)
Table 7: Return on Capital Employed 2010-11

Company's name

Indian GAAP (2010-11) (In %)

Reconciliation

IFRS (2010-11) (In %)

Dr. Reddy's Lab Ltd.

24.88

-1.36

26.24

Bharti Airtel Ltd.

7.01

7.01

Infosys

35.66

2.63

33.03

Tata Motors

22.74

4.81

17.93

Siemens

33.8

17.97

15.83

Sterlite

43.33

3.18

40.15

WIPRO

22.4

-0.88

23.28

TCS

13.92

-2.91

16.83

*Return on Capital Employed = PBT/Capital Employed * 100


50
45
40
35
30
25
20
15
10
5
0

Indian GAAP (2010-11) (In


%)
IFRS (2010-11) (In %)

Figure 4- Return on Capital Employed (2010-11)

256

Chapter 5: Objective wise analysis and comparison

Return on Capital Employed*


(2011-12)
Table 8: Return on Capital Employed 2011-12

Company's name

Indian GAAP (2011-12) (In %)

Reconciliation

IFRS (2011-12) (In %)

Dr. Reddy's Lab Ltd.

26.8

2.51

24.29

Bharti Airtel Ltd.

6.03

6.03

Infosys

36.88

0.36

36.52

Tata Motors

11.91

-3.09

15

Siemens

18.77

-0.82

19.59

Sterlite

45.02

43.02

WIPRO

23.45

1.54

21.91

TCS

14.23

0.34

13.89

*Return on Capital Employed = PBT/Capital Employed * 100


50
45
40
35
30
25
20
15
10
5
0

Indian GAAP (2011-12) (In


%)
IFRS (2011-12) (In %)

Figure 5- Return on Capital Employed (2011-12)

257

Chapter 5: Objective wise analysis and comparison

5.3.3 Return on Shareholders Funds*: This ratio shows that how much return is
ultimately received by shareholders who are the ultimate owners of the company. This ratio is a
relation between Profit after taxes and shareholders fund.

Return on Shareholders Funds


(2010-11)
Table 9: Return on Shareholders Fund

Company's name

Indian GAAP (2010-11) (In %)

Reconciliation

IFRS (2010-11) (In %)

Dr. Reddy's Lab Ltd.

24.77

5.55

19.22

Bharti Airtel Ltd.

11.43

11.43

Infosys

26.14

1.65

24.49

Tata Motors

9.05

-25.86

34.91

Siemens

22.74

3.08

19.66

Sterlite

37

3.38

33.62

WIPRO

23

0.82

22.18

TCS

12.17

-4.58

16.75

*Shareholders Funds = PAT/Shareholders Funds*100


40
35
30
25
20
15
10
5
0

Indian GAAP (2010-11) (In


%)
IFRS (2010-11) (In %)

Figure 6- Return on shareholders Fund

258

Chapter 5: Objective wise analysis and comparison

5.3.4 Return on Shareholders Funds


(2011-12)
Table 10: Return on Shareholders Funds (2011-12)

Company's name

Indian GAAP (2011-12) (In %)

Reconciliation IFRS (2011-12) (In %)

Dr. Reddy's Lab Ltd.

26.07

1.24

24.83

Bharti Airtel Ltd.

7.98

7.98

Infosys

26.59

0.5

26.09

Tata Motors

8.66

-6.01

14.67

Siemens

44.77

9.63

35.14

Sterlite

35.2

0.16

35.04

WIPRO

20.74

1.18

19.56

TCS

10.48

-2.81

13.29

*Shareholders Funds = PAT/Shareholders Funds*100


50
45
40
35
30
25
20
15
10
5
0

Indian GAAP (2011-12) (In


%)
IFRS (2011-12) (In %)

Figure 7- Return on Shareholders" fund

259

Chapter 5: Objective wise analysis and comparison

5.3.5 Earnings per Share Basic (EPS)*: This ratio indicates that how much is the
companys earnings which can be allocated on each share.

Earnings per Share Basic (EPS)


(2010-11)
Table 11: Earnings Per Share 2010-11

Companys name

Indian GAAP (2010-11) (In %)

Reconciliation

IFRS (2010-11) (In %)

Dr. Reddy's Lab Ltd.

59.06

-6.22

65.28

Bharti Airtel Ltd.

15.93

15.93

Infosys

119.66

0.21

119.45

Tata Motors

31.05

6.45

24.6

Sterlite

46.27

2.562

43.708

WIPRO

21.72

-0.02

21.74

TCS

15

0.45

14.55

140
120

100
80
60
40

Indian GAAP (2010-11) (In


%)

20

IFRS (2010-11) (In %)

Figure 8- EPS (2010-11)

260

Chapter 5: Objective wise analysis and comparison

Earnings per Share Basic (EPS)


(2011-12)
Company's name

Indian GAAP (2011-12) (In %)

Reconciliation

IFRS (2011-12) (In %)

Dr. Reddy's Lab Ltd.

84.16

7.4

76.76

Bharti Airtel Ltd.

11.22

11.22

Infosys

145.83

0.28

145.55

Tata Motors

9.75

4.66

5.09

Siemens

42.58

6.18

36.4

Sterlite

53.07

-4.42

57.49

WIPRO

22.83

0.14

22.69

TCS

14.36

2.76

11.6

*Calculated value EPS is taken from annual reports and Form 20-F.
160
140
120
100
80
60
40
20
0

Indian GAAP (2011-12) (In


%)
IFRS (2011-12) (In %)

Figure 9- EPS (2011-12)

261

Chapter 5: Objective wise analysis and comparison

5.4 Analysis:
In both financial years i.e. in 2010-11 & 2011-12 no significant difference have been found in
profitability of companies as per statistical tools used by researcher. Although differences in
actual figures of profits are material and it can affect the decision of any decision maker.
After collecting data relating to profitability of 8 Companies researcher has calculated
profitability ratios and to test the significance, researcher has applied t-test using SPSS. The
following table shows the t-value at 95% confidence level and table value at 5% level of
significance.
The table is as follows:

Test of Significance Based On t Distribution (2011-12)


Table 13- Showing t value and table value and Correlation (2011-12)

Ratios - 2012

1. Net Profit

Calculated t- value at

Table value on df 7 at

Correlation

95% confidence level

5% level of significance

1.711

2.365

0.981

-0.565

2.365

0.993

-0.31

2.365

0.967

-1.546

2.365

0.997

Ratio
2. Return on
Capital
Employed
3. Return on
shareholders
fund
4. EPS

In every profitability measure Calculated t value < table value of t so null hypothesis have been
accepted and it can be concluded that implementation of IFRS does not bring any significant
difference on the profitability of companies in 2011-12.

Test of Significance Based On t Distribution (2010-11)


262

Chapter 5: Objective wise analysis and comparison


Table 14: Showing t value and table value and Correlation (2011-12)

Ratios -2011

Calculated t value at

Table value on df = 7 at

Correlation

95% confidence level

5% level of significance

1. Net Profit Ratio

1.923

2.365

0.962

2. Return on

-1.254

2.365

0.832

-0.559

2.365

0.338

0.344

2.447(df=6)

0.995

Capital Employed
3. Return on
shareholders fund
4. EPS

In every profitability measure Calculated t value < table value of t so null hypothesis have
been accepted and it can be concluded that implementation of IFRS does not bring any
significant difference on the profitability of companies in Financial year 2010-11.

Conclusion:
On comparing profitability as per IFRS and Indian GAAP in Financial year 2010-11 & 2011-12,
researcher has been reached at following conclusions:
1. On applying statistical tools it was found that there is no significant difference between
Profitability as per IFRS and Indian GAAP and null hypothesis is satisfied.
2. Although statistical tools accepts null hypothesis between profitability as per Indian
GAAP and IFRS but there is still significant difference between various profitability
measures. Although the percentages of difference are very short but in reality amounts
are significantly changed and are material in nature.
3. TATA Motors is the highly affected due to convergence process.

263

Chapter 5: Objective wise analysis and comparison

5.5 ANALYSIS OF PRIMARY DATA:


In this chapter researcher has taken into consideration all the primary data collected from various
resources through Questionnaire and Interviews for analysis and on the basis of that data,
researcher has analysed the some issues which are to be sorted out before convergence process.
And researcher has also given his recommendations for the successful convergence with IFRS in
Indian companies.
Through primary data researcher has tried to find out various issues such as challenges and
problems which will come in front of Indian companies, regulatory bodies, ICAI, accounting
professionals and various users of accounting such as shareholders, investors etc.
After discussing problems, some useful recommendations and suggestion for successful
convergence have been given.
Through Questionnaire researcher has tried to find out some most important issues and
suggestions from Chartered Accountants (CAs). Questionnaire filled by 50 respondents have
been taken into consideration. Questionnaires have been prepared in such manner so that some
important issues, obstacles and problems can be found out.
Detailed Analysis of responses received through questionnaire is as follows:

1. How familiar would you say you are with IFRS?

Not properly familier- 33

Properly Familier- 17

34%
66%
Figure 10: Question 1

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Chapter 5: Objective wise analysis and comparison

2. Has your company used IFRS in preparing financial statement, Group


reporting pack, listing abroad?

Yes-10

No-40
20%

80%
3. Do you think adoption of IFRS would be just a technical accounting
exercise or will change the way business transactions are correctly
conducted?
Accounting change- 10
Change the way business is managed-10
Both-30

20%

20%

60%

4. What do you believe adoption of IFRS will provide in terms of


disclosure, true financial performance and comparability?
More insight-39

12%

Less insight-5

0%

No difference-6

10%
78%

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Dont know

Chapter 5: Objective wise analysis and comparison

5. Should IFRS be made applicable to:


a) All companies-31
b) Only listed companies-19
Public interest entities including listed and large sized
entities

38%
62%

6. Do you believe that adoption of IFRS will facilitate investment decision


for investors?
a) Will facilitate- 41

b) Will not facilitate-09

c) Cant say

18% 0%

82%
7. What is your assessment of the impact of IFRS adoption on reported
profit?
a) Profits will increase-13

b) Profits will decrease-25

24%

26%

50%
266

c) No impact-12

Chapter 5: Objective wise analysis and comparison

8. What is your assessment of impact of IFRS on the share price?


Positive- 25

Negative- 10

No effect

Cant say-25

30%
50%
20%
9. Which of the following do you think is/are critical challenges for
transitions?
Regulatory environment and regulatory clarity-16
Lack of trained and experienced resources- 25
Educating investors and Board of Directors
Significant onetime cost-09

18%

32%

50%
10. What in your assessment is the critical success factor to a smooth
transition?

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Chapter 5: Objective wise analysis and comparison

a) leadership of the project- 7

b) Communication with internal stakeholders and investors


c) Sufficient resources- 5
d) Access to knowledgeable advisors- 34
e) Starting early - 4

8%

14%

0%
10%

68%

11.Do you agree that IFRS convergence exercise would be cumbersome


unless certain regulatory requirements e.g. those under companies act
are amended before date of convergence?
a) Agree-45

b) Do not agree-5

Cant say

10%

90%
12.Should the tax laws/tax reporting be aligned to IFRS reporting?

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Chapter 5: Objective wise analysis and comparison

a) Yes-50

b) No

c) Dont know

0%

100%
13.Has your company summarized its concerns and made representation
to regulatory bodies?
Yes-10

No- still need to summarize-07

on a wait and watch scenario-33

there are no specific concerns-0

0%

20%
14%

66%
14.How confident are you in terms of having trained staff on IFRS?
Confident- have adequate trend work force
Dont have trained work force

Active training in progress

11%

25%
64%

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Chapter 5: Objective wise analysis and comparison

15.Do you think your current Auditor has the essential expertise to help
you in smooth transition to IFRS?
a) Yes-5

b) No

c) Still need to judge-90

5%0%

95%
16.Have you taken expert professional supervision so as to smoothen the
convergence process?
Yes-12

Dont require- our task force is sufficient-5

Still need to do- 33

24%
10%

66%

17.In your opinion, is it essential to train the investors, bankers, other


providers of finance and analysts so as to make the information more
meaningful for them?

a) Yes- 42

b) No- 08

16%
84%
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Chapter 5: Objective wise analysis and comparison

18.In your view, will application of IFRS require changes in internal


control mechanisms and corporate governance policies?

Yes- 26

No- 5

Cant say-19

38%
52%
10%
19.How would you summarize the overall preparedness of your company?
Not started -08
Training and awareness started-32
Project plan and implementation process in place-10
Actual implementation started-0

0% 0%

Implementation completed-0

16%

20%
64%

20.What is the most likely method that you will adopt to assist the
company in smooth transition to IFRS?
a.
b.
c.
d.

Seek input from parent company


Attend seminars and workshops to acquire knowledge
Appoint an external consultant
Use existing auditors

Respondents gave first rank to (b) Attend seminars and workshops to acquire knowledge to
acquire knowledge about IFRS. Second Rank is obtained by (c) appointment of external
consultant is for smooth transition.

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Chapter 5: Objective wise analysis and comparison

21.Have you recognized all accounting differences and disclosures


requirements, and related changes in your company needs to adapt to,
once IFRS is in place?
a) Yes-20

b) In progress-25

c) No-5

10%
40%
50%

5.6 Analysis:
Following is the brief analysis of primary data collected through questionnaire:
1. Almost 2/3rd population is either quite familiar or not worked with IFRS just 1/3rd of the
population is familiar with IFRS in proper way. So in successful convergence with IFRS
the training and knowledge about IFRS will create a big problem if the first person
responsible to make accounts is still not aware with IFRS then how can India converge its
accounts with IFRS? Is the biggest Question.
2. Only 20% respondents companies and concerns have started implementation of IFRS
rest have not started till now. This can be possible because government also delayed the
convergence process due to some reasons such as conflicts under Indian regulatory
compliance and regulations, fair valuation measures etc.
3. Most of the respondents believe that IFRS will change the way of business so it is clear it
will cause some benefits to business or also can cause problems. The benefits are it will
create some international opportunities for business concerns and books will show vary
clear picture of business. Problems in converging accounts with IFRS will be the changes
in accounting process which will require some major training programs and some new
professional which will cost more to companies in initial stage.
4. Most of the respondents think that with the use of IFRS financial statements will become
more comparable and credible and rest thinks consistency of financial statements among
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Chapter 5: Objective wise analysis and comparison

various stakeholders is the benefit. So majority believes that IFRS will facilitate the
features of comparison of financial statements within not only in India but also overseas
also.
5. Majority is agreeing that IFRS should be applicable on all public interest entities. So
public will be capable to know that about exact position of companies in which they have
interest. And this will facilitate the investors to make decision.
6. Majority believes that IFRS will facilitate investments decision. Due to fair value
measurements, if an investors will able to know the exact position about the net worth of
companies then he will take a good and viable decision of investment for growth of his
investments.
7. In initial stages respondents were not able to answer what will be the change in profits
whether it will increase or decrease but on analyzing the companys annual reports of
company it is found that on initial stage when a company started convergence profits are
highly affected but as years passes the profits becomes normal i.e. deviation in profits
becomes less.
8. Share holders are in doubt whether they will get any benefit after convergence or not.
Shareholders are also not sure about their investments.
9. Half respondents believes that lack of trained and experienced resources is the critical
challenge in convergence process because IFRS needs expert knowledge of IFRS which
is lacking in our country as we discussed in question 1 that majority population is not
perfectly aware about IFRS regulations. IFRS are created at international level and our
laws do not takes place in IFRS so the need arose for some other rules which are parallel
with IFRS and regulatory requirements. So ICAI made and sent new Indian AS to
Ministry of corporate Affairs (MCA) and now Ind AS will be applicable at the place of
IFRS.
10. Majority agrees that for convergence availability of knowledgeable advisors is tough in
current scenario so its necessary to start training and certification programs at wide level
to maintain supply of trained knowledgeable advisors.
11. Almost 90% respondent agreed that convergence process will be cumbersome as per
regulatory requirements. Majority believes that convergence is a hectic program which
will cause many problems as per our regulatory requirements because our regulatory
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Chapter 5: Objective wise analysis and comparison

requirements are not parallel with IFRS but ICAI and MCA have framed Ind AS which
will reduce the stress but Ind AS also are in initial phase which will need some changes
in future and major portion of Ind AS are same as IFRS. So the result will come when
India Inc. will accept and give results. 10% could not answer.
12. Our accounting is majorly influenced by the taxation laws i.e. are accounting is also
based on taxation laws such as Income tax Act, Excise laws, Custom Act, Service Tax
etc. and IFRS are not connected with these regulatory requirements so this is the big need
of IFRS that IFRS should be aligned with tax laws. And all the respondents are agreeing
for it.
13. Due to delay by government of India majority of companies are following wait and watch
scenario as government will mandate the reporting with IFRS they start at that point of
time only 20% says that there company have taken initiatives for convergence.
14. Approximately half population says that they still not started active training programs
that are why they think that they do not have trained workforce for convergence process.
And without trained workforce assumption of successful convergence is not correct.
15. Majority respondents says that they need to judge their present auditors as they are aware
about IFRS or not rest says that their auditors are able to audit under IFRS environment.
16. Majority have not started till date even they have not started expert advice for
convergence. 10% have sufficient efficient work force for convergence.
17. Not only professionals but investors, bankers etc also need education about IFRS for their
use as they also needs accounting informations about companies so they should also get
education about IFRS. So majority suggests that education program should also be
provided to investors and bankers etc.
18. Majority says that internal controls will also requires changes in convergence process a
big part says that they cant say because when the need will arise they will change the
internal control.
19. Majority says that their orgainisation have started training process so as to prepare work
force aware for changes.
20. Respondents have given highest rank to attend seminars and workshops to acquire
knowledge about IFRS.

Respondents ranked second to appointment of an external

consultant is good way for smooth transition. Majority of the respondents gave highest
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Chapter 5: Objective wise analysis and comparison

rank for attending workshops and seminars on timely manner they will be able to get
knowledge about IFRS
21. Majority have not started to identify the disclosure requirements and what changes have
to be done so this thing shows the slow mood of corporate about convergence.
From the analysis of primary data it cannot be wrong to say that we are going to converge our
accounts with IFRS with half preparedness and less knowledge thats why the date for transition
is again and again shifting forward and it will be harmful to implement IFRS with less
knowledge.

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