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IFRS in India Its Status, Overview of

Concepts and Impact in India

Rakesh Agarwal
Associate Director, PricewaterhouseCoopers
E-mail : rakesh.r.agarwal@in.pwc.com
Mobile : +91 9820273458

January 2011

Contents
Applicability of IFRS in India
Mapping IFRS and CIAS
Broad understanding of IFRS impact on India Inc.
Common Experiences (adjustments) from Indian GAAP to
IFRS (refer annexure 2)
Essential of IFRS conversion approach
Managing change

Phased approach Transition IFRS methodology

Project management framework

Project structure

Centralised approach v/s decentralised approach

Detailed Training program

Key challenges - mitigation steps / management


calls

Preparation of IFRS Financial Statements


Carve Outs in CIAS from IFRS
Impact Indian Experience
Annexures
1 : Accounting concepts relatively new in India
2 : Common adjustments from Indian GAAP to IFRS
3 : Select IFRS tools & publications

Transitioning to IFRS
IFRS across the world

Top 10 Global Capital Markets

Rakesh Agarwal

US

Converging to IFRS

Japan

Converging to IFRS

UK

IFRS

France

IFRS

Canada

Converging to IFRS

Germany

IFRS

Hong Kong

IFRS

Spain

IFRS

Switzerland

IFRS or US GAAP

Australia

IFRS

Slide 3

IASC Constitution The Current International Financial


Reporting Structure

Slide 4

The Preface and The Framework


Preface to IFRS
1. Objectives
A single set of high quality, enforceable global accounting standards
Work with various national standard Setters for convergence
2. Scope and Authority of IFRS
Designed for profit oriented enterprises
General purpose financial statements
Bold and plain type, have equal authority
3. Due Process
4. English Language
Framework for Preparation and Presentation of Financial Statements
1. Objectives of Financial Statements; includes cash flows
2. Underlying assumption
3. Qualitative characteristics of financial statements
Rakesh Agarwal

4. Elements of financial statements, recognition and measurement

Slide 5

The different levels of IFRS


STANDARDS

International Financial Reporting


Standards (IFRS) and
International Accounting
Standards (IAS)

International Financial Reporting


Interpretations Committee (IFRIC)
And Standing Interpretation
committee (SIC)
www.iasb.org

Exposure Drafts and


Draft Interpretation

Slide 6

www.cfodirect.
com

Rakesh Agarwal

Almost 3,000
pages and
increasing !!!

Type
IFRS
IAS

Number
9 (9)
41 (27)

IFRIC

19 (16)

SIC

33 (7)

Exposure drafts
and
Interpretation

Around 15

IFRS in India Its Status, Overview of Concepts and Impact in India

Applicability of IFRS in India


Opening balance sheet as at April 1* using IFRS-converged accounting standards

2011
NSE - Nifty 50 companies,

2012
All insurance companies

2013

2014

BSE - Sensex 30
companies,

Companies listed or not,


having a net worth between
Rs.500 crores and Rs.1000
crores [Note 1]

Listed companies having a


net worth of less than
Rs.500 crores [Note 1]

Companies whose shares


or other securities listed
outside India;

All scheduled commercial


banks

Companies listed or not,


having a net worth in
excess of Rs. 1,000 crores
[Note 1]

Urban co-operative banks


having net worth between
Rs. 200 to Rs. 300 crores

Urban co-operative banks


having a net worth in excess
of Rs. 300 crores

NBFCs (all other Listed)


NBFCs (other Unlisted)
having net worth between
Rs. 500 to Rs. 1000 crores

NBFCs - Nifty 50 or Sensex


30
NBFCs listed or not, having a
net worth > Rs.1,000 crores

Note 1: Companies not covered in the above chart will apply existing Indian accounting standards OR voluntarily opt to
apply the IFRS-converged accounting standards.

Slide 7

IFRS in India Its Status, Overview of Concepts and Impact in India

Mapping IFRS and CIAS (Converged Indian Accounting Standards)


Corresponding to standards issued by
IASB
Std. No.

Name of the standard


IAS/IFRS

IFRIC

SIC

Whether
significant
differences
between CIAS and
IFRS

CIAS 01

Presentation of financial statements

IAS 1

No

CIAS 02
CIAS 03
CIAS 04

IAS 2
IAS 7
IAS 10

No
No
No

CIAS 07

Inventories
Statement of Cash Flows
Events after the Reporting Period
Accounting Policies, Changes in Accounting Estimates and
Errors
Construction Contracts

CIAS 09

Revenue

IAS 18

CIAS 10

Property, Plant and Equipment

IAS 16

CIAS 11

IAS 21

No

IAS 20

No

CIAS 14

The effects of changes in Foreign Exchange Rates


Accounting for Government Grants and Disclosure of
Government Assistance
Business Combinations

IFRS 3

No

CIAS 15

Employee Benefits

IAS 19

CIAS 16

Borrowing Costs

IAS 23

No

CIAS 17

Operating Segments

No

CIAS 18

Related Party Disclosure

IFRS 8
IAS 24

CIAS 19

Leases

IAS 17

CIAS 20

Earnings Per Share

IAS 33

No

CIAS 21

Consolidated and Separate Financial Statements

IAS 27

No

CIAS 22

Income Taxes

IAS 12

No

CIAS 05

CIAS 12

IFRIC 17

IAS 8
IAS 11

No
IFRIC 12
IFRIC 13, 15,
18
IFRIC 1

No
No
No

IFRIC 14

No

No
IFRIC 4

SIC 15, 27

No

Slide 8

IFRS in India Its Status, Overview of Concepts and Impact in India

Mapping IFRS and CIAS (Converged Indian Accounting Standards)


Corresponding to standards issued by
IASB
Std. No.

Name of the Standard


IAS/IFRS

CIAS 23

Investments in Associates

IFRIC

SIC

Whether
significant
differences
between CIAS and
IFRS

IAS 28

No

IFRS 5

No

CIAS 25

Non-Current Assets Held-For-Sale and Discontinued


Operations
Interim Financial Reporting

CIAS 26

Intangible Assets

IAS 38

SIC 32

No

CIAS 27
CIAS 28

Interest in Joint Ventures


Impairment of Assets

IAS 31
IAS 36

SIC 13

No
No

CIAS 29

Provisions, Contingent Liabilities and Contingent Assets

IAS 37

IFRIC 5,6

No

CIAS 30

Financial Instruments: Recognition and Measurement

IAS 39

IFRIC 9,16,19

No

CIAS 31

Financial Instruments: Presentation

IAS 32

IFRIC 2

No

CIAS 32

Financial Instruments: Disclosures

IFRS 7

No

CIAS 33

Share-based payment

IFRS 2

No

CIAS 34

Financial Reporting in Hyperinflationary economies

IAS 29

CIAS 35

Exploration for and Evaluation of Mineral Resources

IFRS 6

No

CIAS 36

Accounting and Reporting by Retirement Benefit Plans

IAS 26

No

CIAS 37
CIAS 38
CIAS 39

Investment Property
Agriculture
Insurance Contracts

IAS 40
IAS 41
IFRS 4

No
No
No

CIAS 40

Financial Instruments

IFRS 9

No

CIAS 41

First time adoption of Indian Accounting Standards

IFRS 1

No

CIAS 24

IAS 34

IFRIC 10

IFRIC 7

No

No

Slide 9

Broad understanding of
IFRS impact on India
Inc.

IFRS in India Its Status, Overview of Concepts and Impact in India

Potential Impact of IFRS on consolidated financial statements of


ABC Limited for the Y.E. March 31, 2010
Areas
A

Select Components of Financial Statements

Consolidation
(SIC 12, DT on outside basis)

Business Combinations
(common control transactions, Fair value vs. Book value, Merger Scope
exemption presumed)

Property, Plant and Equipment

(See sample list of applicable GAAP differences)

Impact
Net worth

Net Income

Disclosures

Efforts

Medium High

Medium - High

Low

Medium

Nil - Low

Low

Nil

Low

Medium - High

Medium - High

Low

High

Share based payments


e.g. Fair value accounting vs. Book value.

Nil-Low

Low-Medium

Nil

High

Financial Instruments
e.g. Forward contracts, IFRS 7 disclosure

Low-Medium

Medium

High

High

Employee Benefits
e.g. Policy of actuarial gains and losses. VRS.

Low

Low

Low

Low

Revenue Recognition
IFRIC 13, Multiple Elements, etc.

Low

Low

Low

Medium

Rakesh Agarwal

Slide 11

IFRS in India Its Status, Overview of Concepts and Impact in India

Potential Impact of IFRS on consolidated financial statements of


ABC Limited for the Y.E. March 31, 2010
Areas
A

Select Components of Financial Statements

Taxes on Income
(B/S Approach, IFRS Adjustments, Defferred Tax on Outside basis etc.)

Foreign Currency Transactions


(Functional Currency determination of foreign branches, Cost plus contracts)

10

First Time Adoption


(Selecting exemptions and exceptions, 1) FV of Fixed Assets, 2) Business
Combinations and Mergers, 3) Actuarial Gains and Losses)

11

Restructuring and Discontinued Operations

12

Impact
Net worth

Net Income

Disclosures

Efforts

Medium High

Medium High

Medium

Medium

Low

Low

Low

Medium

Medium High

Medium - High

High

High

Low-Medium

Low-Medium

Low

Low

EPS
(Impact of IFRS adjustments, Dilution option in subsidiary, if any.)

Nil

Nil

Low

Low

13

Operating Segment
(MIS data vs. Audited Segmental information)

Nil

Nil

High

Low

14

Presentation of Financial Statements


(Making policy choices of format and benchmarking, Fixed deposits)

Nil

Nil

High

High

15

New Businesses/Transactions/ Others


(New Acquisitions, Dividend)

Future

Future

Future

Future

Rakesh Agarwal

Slide 12

IFRS in India Its Status, Overview of Concepts and Impact in India

Potential Impact of IFRS on consolidated financial statements of


ABC Limited for the Y.E. March 31, 2010
Impact

Other Notes

Property, Plant and Equipment ( PP & E)

Net worth

P&L

Disclosures

Effort

Work Stream

Significant areas

IFRS 1 - Deemed Fair Value, Event Driven Organisation

High

High

Low

High

Policy Decision

Revaluation Model

High

High

Medium

High

Policy Decision

Fair Value at time of Business Combinations

Low

Low

Low

Low

Policy Decision

Exchange of Assets

Low

Low

Low

Low

Identifying +
Valuation

Nil Low

Nil - Low

Low

Low

Valuation +
Data capturing

Differences in Indian Accounting Standards for earlier periods

Asset Retirement Obligation

Capitalisation of Borrowing Costs

Low

Low

Low

Low

Data Capturing

Indirect expenditure during trial run

Low

Low

Low

Low

Data Capturing

IFRIC - 4; Capital leasing arrangement within Service


Contracts

Low-High

Low-High

Low

High

Renewal of
Contracts

Leased Assets acquired before April 1, 2000

Nil

Nil

Nil

Low

N.A.

10

Capitalization of Exchange Fluctuation

Low

Low

Nil

High

Data capturing

Rakesh Agarwal

Slide 13

IFRS in India Its Status, Overview of Concepts and Impact in India

Potential Impact of IFRS on consolidated financial statements of


ABC Limited for the Y.E. March 31, 2010
Impact

Other Notes

Property, Plant and Equipment ( PP & E)


Net worth

P&L

Disclosures

Effort

Work Stream

Other matters resulting in differences in capitalization

11

Assets Supplied on Deferred Credit

Low

Low

Low

Medium

Data capturing

12

Less than Rs.5000 assets

Low

Low

Low

Low

Data capturing

Year on Year Impact - Recomputed since capitalization date for each asset

13

Component Approach for Capitalization of Fixed Assets

Low

Low

Low

High

Data capturing

14

Depreciation Rates (Useful Life)

Low

Low

Low

Low

Management
Assessment

15

Residual Value - Revisited at each reporting date

Low

Low

Low

High

Do

16

Residual Life - Revisited at each reporting date

Low

Low

Low

High

Do

17

Recoup of Depreciation on Revalued Assets

Nil-Low

Nil-Low

Low

Low

Data capturing

18

Profit or loss on Sale of Assets

None

Low

Low

High

Data capturing

Rakesh Agarwal

Slide 14

IFRS in India Its Status, Overview of Concepts and Impact in India

Common Experiences (adjustments) from Indian GAAP to IFRS

Consolidation

Additional entities to be consolidated

Functional currency

Deferred tax on consolidation

Fair value measurement in jointly


control entities

Transitional provision

Property plant and equipment

Change in residual value

Capitalisation of exchange losses

Investments

Change in the fair value of traded


investments

Change in the fair value of


investments classified as available
for sale

Interest income shall be recognised


using effective interest rate method
for investments classified as Held till
maturity

Loans and advances - Interest free loans


shall be fair valued.

Amortisation of goodwill and other


intangible assets
Rakesh Agarwal

Slide 15

IFRS in India Its Status, Overview of Concepts and Impact in India

Common Experiences (adjustments) from Indian GAAP to IFRS

Share Capital

Redeemable preference shares to be


classified as financial liability
Cost incurred for issuance of
additional equity

Debentures - Premium on redemption


Current liabilities

Other

ESOP Scheme from Parent

Correction of errors

Change in accounting policy

Deferred taxes

Recognition of deferred taxes on


GAAP adjustments.

Recognition of deferred taxes on


items directly debited to reserves

Proposed dividend

Gratuity

Consolidation

Leave

Probability v/s Virtually certain

Termination benefits

Accounting for forward cover

Rakesh Agarwal

Slide 16

Essentials of IFRS
Conversion Approach

IFRS in India Its Status, Overview of Concepts and Impact in India

Essentials of IFRS Conversion Approach

Rakesh Agarwal

Slide 18

IFRS in India Its Status, Overview of Concepts and Impact in India

Essentials of IFRS Conversion Approach


Phased approach - TransitionIFRS methodology

Indian

Rakesh Agarwal

Slide 19

IFRS in India Its Status, Overview of Concepts and Impact in India

Essentials of IFRS Conversion Approach


Phased approach - TransitionIFRS methodology

Indian

Objectives

Phase 1

Phase 2

Assess impact of IFRS on F/S

Establish proper governance and project management

Assess how IFRS is currently


impacting the organization
Assess the financial reporting,
business process and systems impact
Deploy Measurement and Disclosure
Checklist
Develop informed business case and
strategy

Outputs

Rakesh Agarwal

High-level assessment of IFRS impact


to F/S including financial reporting,
business process and systems impact
Options for next steps including
strategy with timeline
IFRS Workshop

Phase 3
EvaluationSM

Complete Component
- Establish IFRS policies and determine adjustments
- Assess impact at business unit level
- Evaluate parent company policies and decisions
Develop IFRS shell F/S
Design, build and test IFRS reporting process (dual
reporting period)
Prepare initial IFRS financial statements and recon
(dual reporting period)

Operationalized Project Management Office (PMO)


Documented IFRS policies
IFRS adjustments
Data gaps inventory
Shell annual and quarterly IFRS F/S
IFRS reporting process and system
IFRS financial results for dual reporting period

Develop roadmap to embed IFRS as


primary reporting language
Embed IFRS into financial reporting
processes and systems (corporate and
business units)
Embed IFRS into other financial and
operational processes and systems
Assess whether relevant contractual
agreements and financial covenants reflect
a different basis of accounting
Go live and close project

Prioritized project plan


Data and business requirements
System and configuration requirements
SOX and procedural documentation
Global Chart of Accounts (COA)
Pre- and post-implementation testing
documentation

Slide 20

IFRS in India Its Status, Overview of Concepts and Impact in India

Project Management Framework


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

Auditor
TRC

Technical Review
Committee

Issue
Originators

INVITEES

Expert
Work Streams

Technical
Champions

Needs

WS1
o Loans
o Investments
o Consolidatio
n

Rakesh Agarwal

WS2
o Financial
Reporting
o Employee
benefits

WS3
o Income
Recognition
o Deferred
Taxes

WS4
o Derivatives
o IFRS 1
o Cash Flows

Technical support material


Roles & Responsibilities
Timelines
Nodal offices

Slide 21

IFRS in India Its Status, Overview of Concepts and Impact in India

Project Management Framework

Rakesh Agarwal

Slide 22

IFRS in India Its Status, Overview of Concepts and Impact in India

Project structure

We propose to create a TRC and Working Groups

Rakesh Agarwal

Slide 23

IFRS in India Its Status, Overview of Concepts and Impact in India

Project structure
Advisory
services

Advisors IFRS implementation services

Centralised vs Decentralised Approach


Levels in IFRS implementation Service
assistance
Provided

Centralised

Additional
Location 1-0

Total

A. Base Scenario (Advisory services)


Training
Yes
Implementation workshop
Yes
IFRS financial sketch for ABC
Yes
Limited (in word file)
Rs 1x
N.A.
Rs 1x
IFRS issue log for ABC Limited
Yes
Ongoing IFRS issue resolution
Yes
and memos
B. Additional services (Blend of advisory services and reasonable involvement in actual conversion)
Excel template (Broad level)
Yes
prepared by management
Rs 2x X 1 = 2x
Assisting management in project
Yes
Rs 1x
Rs 2x X 0.5 = 0.5x
Rs 3.9x
plan
Rs 2x X 0.2 = 0.4x
Guidance by Advisor during
Yes
execution by management
Actual implementation - Full
fledge conversion from ledger or
No
N.A.
N.A.
N.A.
trail balance
Total
Rs 2x
Rs 2.9x
Rs 4.9x

Rakesh Agarwal

Slide 24

IFRS in India Its Status, Overview of Concepts and Impact in India

Detailed Training Program


Model 4 Days IFRS Workshop (Extracts overview of Financials)

Advisors IFRS implementation services

Sr. No. Topics

Train
ing
Level

Durati
on

Proficiency - Break up

A to D

Time Hrs

Concep
ts Basics

Concep
ts
Advanc
ed

Illustra
tion

Multipl
e
Option
s

Comp
any
Specif
ic
(Broad
ly)

GAAP
Differen
ces

Q&A

Extend
ed
Discus
sion

Overview of IFRS (Including


presentation of Financial
Statements)

1.50

Revenue recognition

1.50

Other
Rema
rks, if
any

Conclus
ion

Implementation Workshop

Overview of IFRS

Revenue recognition

Work-stream to evaluate

Draft Accounting policies

- Listing of accounting policies

Draft JV Adjustments

- Structure of Financial statements

Update Issues Log

- Reclassification of Indian GAAP Financials to IFRS

Rakesh Agarwal

Slide 25

IFRS in India Its Status, Overview of Concepts and Impact in India

Key challenges - mitigation steps / management calls


Key Challenges

Mitigation steps / management calls

Volatility due to fair valuation

SEC study states only 25% are total assets are fair
valued out of which for over 90% of the assets
reference price is readily available.

Change in IT systems

Most IT packages are capable to respond to dual


reporting.

Change in MIS systems

The impact with respect to IFRS 8 is manageable

Taxes

Some implication on MAT.

Managing market, investors and analysts

Early communication Europe experience

Regulatory uncertainty

Worst case scenario, additional cost for early doing


Management to take decision based on corporate
philosophy

Rakesh Agarwal

Slide 26

Preparation of
IFRS financial
statement

Rakesh Agarwal

IFRS in India Its Status, Overview of Concepts and Impact in India

IFRS Desk Top for Discussion

Advisors IFRS implementation services

ABC Limited - Consolidated financial statements


IFRS Desktop for the year ended March 31, 2010
Sr. No.
Nature of adjustments
Impact
Accuracy
Rs. Crs.
(L/M/H)
Net Worth
Amount as per Indian GAAP
558.09
A
Adjustments - Indian GAAP to IFRS
1
Fixed assets, intangibles and lease
M-H
Gestimate
(25.00)
accounting
2
Derivatives
M
Gestimate
(70.00)
3

Rs. Crs.
PAT
116.81
(25.00)
(70.00)

Notes
Audited financial statements
Computation needed
Around 5% of the net asset
base
Actual loss as per the audited
financial statements

Dummy

50.00

Functional currency of subsidiaries, JVs and


branches
Dividends (net impact zero)

Actual

5
6

Debt vs equity classification


Deferred taxes on above

M
L

Dummy
Estimate

(5.00)
(17.00)

B
7

IFRS 1 (1 exemption out of 15 more relevant)


Business combinations

Dummy

- To be concluded

C
8

Transactions with Parent/Group


Group transactions and tax thereon

Dummy

- To be concluded

Total of all adjustments


Amount as per IFRS

Rakesh Agarwal

(67.00)
491.09

50.00
- Dividend for 2008-09 and
2007-08 is the same
(5.00)
(17.00)

(67.00)
49.81

Slide 28

IFRS in India Its Status, Overview of Concepts and Impact in India

Preparation of IFRS financial statement

Template financial

Issue log
ABC Limited

Advisors IFRS implementation services

Issues Log

Sr

Type of Issue

Issue

Property, plant and equipment


1
Measurement
Component Approach

IAS 16

The cost of major overhaul occurring at regular


intervals to be capitalized.

Subsequent costs should be capitalized, that


is recognized as an asset, only if they meet
the recognition criteria that:
a) It is probable that future economic benefits
associated with the item will flow to the entity;
and
b) The cost of the item can be measured
reliably
Deferred term basis
If the Company has acquired a PPE on
deferred term basis and terms are beyond
normal credit terms, PPE will be recognized
on cash price equivalent, i.e. discounted
amount.
Environmental obligation and Asset Costs of dismantling and removing the item or
retirement obligation
restoring the site on which it is located be
recorded when an obligation exists. A liability
for the present value of the costs of
dismantling, removal or restoration as a result
of a legal or constructive obligation is
recognized and the corresponding cost
included as part of the related PPE.
Expenditure during construction
Indirect expenses during construction period
period
which are not required to bring the asset in
the condition for its intended use are
expensed off as incurred.
Change in method of depreciation Change in method of depreciation is
considered as change in accounting estimate
and thereby accounted for prospectively.

Measurement

Major overhaul expenses

Measurement

Subsequent expenditure

Measurement

Recognition

Measurement

Measurement

Technical
Reference

The Company is required to depreciate each


significant component of an item of PPE
separately, if they have significantly different
useful life.

Requirements under IFRS

Requirements under Indian


GAAP

Priority
(H, M, L)

Enquiries / Discussion with


management during the workshop

There is no specific requirement.

IAS 16

The cost of major overhaul


occurring at regular intervals is
charged to Profit and loss A/c

Subsequent expenditure incurred for every


seven years in rayon plant (spinning
machine) needs to capitalised

IAS 16

Subsequent maintenance
expenditure will be capitalized as
part of PPE, if they increase the life
of the plant or increase capacity or
has a benefit for more than a year.

No such cases were reported

PPE is recorded on purchase price.

IAS 16

IAS 16

No provision has been made for


environment and asset retirement
obligation.

No, any purchases are done on deferred


term basis

IAS 16

Indian GAAP allows pre-operative


expenses to be generally
capitalized as part of PPE.

No such cases were reported

IAS 16

Change in depreciation method is


considered as change in
accounting policy, the impact of
change in depreciation method is
determined retrospectively;
computing depreciation under the
new method.

The Company has not changed its method


of depreciation in past.

Similar to IFRS

To assess whether working capital loan has


been included in the general borrowing for
the purpose of calculation of WACC.

Recognition

Borrowing Cost

IAS 23R

Similar to IFRS

To assess whether difference in exchange


fluctuation of foreign currency borrowing
cost has been capitalized.

10

Classification

Leasehold land

The borrowing cost shall be capitalized for


exchange differences on the amount of
principal of the foreign currency borrowings to
the extent of difference between interest on
local currency borrowings and interest on
foreign currency borrowings.
The land is normally classified as an
operating lease unless title passes to the
lessee at the end of the lease term.
Accordingly leasehold land is classified as
operating lease and disclosed as prepaid
assets.

Leasehold land is classified as a


part of fixed assets

To assess whether the title would pass to


the company at the end of the lease term.

IAS 17

Cost of leasehold land is amortised over the


lease period.

IAS 16

No specific requirement.

Whether the current SLM reflects the useful


life of the assets?
There are some PPE which are still in use
but they are fully depreciated viz. cement
plant, paper plant etc.
To assess further any such case where the
life of the PPE has been fully depreciated

Statement of financial position

<--- If this cell is red - there is problem in this sheet


<--- If this cell is red - there is problem in this sheet

Note

AS PER IFRS

PPE

INVESTMENT
PROPERTY

HELD TO
MATURITY

AVAILABLE FOR
SALE FINANCIAL
ASSET

NON CURRENT ASSETS


OTHER
DEFERRED TAX TRADE & OTHER
FINANCIAL
ASSETS
RECEIVABLES
ASSETS

SOURCES OF FUNDS

Share Capital
Reserves and Surplus

93.04
1,402.48

Loan Funds
Secured Loans
Unsecured Loans

1,714.98
43.31
290.08

Fixed Assets (Net Block Incl. CWIP)

2,810.83
46.54

Current Assets, Loans and Advances


Inventories
Sundry Debtors
Cash and Bank Balances
Other Current Assets
Loans and Advances

670.57
150.89
66.54
33.78
672.24

Less: Current Liabilities and Provisions


Liabilities
Provisions

681.02
327.74

Miscellaneous Expenditure

101.26
3,543.89

2,810.83
46.54
670.57
150.89
66.54
33.78
672.24
681.02
327.74
101.26
3,543.89

ASSETS
Noncurrent assets
Property, Plant and equipment
Intangible Assets
Available for sale financial asset
Deferred income tax assets
Derivative financial instruments
Trade and other receivables
Current assets
Inventories
Trade and other receivables, net of allowance for doubtful debts
Derivative financial instruments
Investments in bank deposits
Cash and cash equivalents

93.04
1,402.48
1,714.98
43.31
290.08
3,543.89

Assets held for sale and discontinued operations


Total assets
EQUITY
Capital and reserves attributable to equity holders of the
Company
Ordinary shares
Share premium
Retained earnings
Other component of equity
Total equity

APPLICATION OF FUNDS

Investments

IAS 23R

Rakesh Agarwal

AS PER Indian
GAAP

3,543.89

General borrowings shall include working


capital loan amount

Residual value, residual life and method of


depreciation of the asset is required to be
assessed at each balance sheet.

PARTICULARS

Deferred tax liability (Net)

Borrowing Cost

Periodic Review

As discuss the amount is not material

Recognition

Measurement

Financial Statements
Template for IFRS conversion for year ended March 31, 2009
Rs. In Crore
Rs. in Crores

To assess whether any significant


component of an item of PPE having
significantly different useful life.

11

ABC Limited

Sketch financial

2,810.83
6.56

39.28

LIABILITIES
Noncurrent liabilities
Borrowings
Retirement benefit obligations
Other noncurrent liabilities
Deferred income tax liabilities

0.70

Current liabilities
Trade and other payables
Current income tax liabilities
Other current liabilities
Retirement benefit obligations
Borrowings
Provisions for other liabilities and charges
Derivative financial instruments

3.21
2,814.04

6.56

39.28

0.70

As on March
31, 2009

6
7
9
21
10
11

12
11
10
14
15

16
16
17
18

20
22
21

19

22
20
23
10

Liabilities of disposal group classified as held-for-sale


Total liabilities
Total equity & liabilities
The accompanying notes form an integral part of these financial statements.

Slide 29

IFRS in India Its Status, Overview of Concepts and Impact in India

Carve Outs in CIAS from IFRS


IFRS

Converged Indian Accounting Standard

ED AS 1(R) Presentation of Financials Statements


Required that the components of profit or loss and
statement of other comprehensive income shall be
presented in a two statement.

Required that the components of profit or loss and


statement of other comprehensive income shall be
presented in a single statement of profit or loss.

ED AS 3(R) Statement of Cash Flows


Provide an option to other than financial entities to
classify the interest paid and interest and dividends
received as an item of operating cash flows also.

Have to classify the interest paid and interest and


dividends received as an item of financing and investing
cash flows activity.

Provide an option to classify the dividend paid as an


item of operating cash flows also.

Have to classify the dividend paid as an item of


financing activity.

ED AS 15(R) Employee Benefits


Permits various options for treatment of actuarial gains
and losses

Requires immediate recognition of actuarial gain and


loss in profit or loss

Does not provide guidance about the interval for


actuarial valuation of defined benefit obligation

Provide guidance about the actuarial valuation of


defined benefit obligation may be made at interval not
exceeding three years

Rate of government bond can be used as a discount


rate only where there is no deep market of high quality
corporate bonds.

Rate of government bond shall be used to discount post


employment benefits obligation.

Slide 30

IFRS in India Its Status, Overview of Concepts and Impact in India

Carve Outs in CIAS from IFRS, Contd.


IFRS

Converged Indian Accounting Standard

ED AS 18(R) Related Party Disclosures


Does not have such disclosure.

Disclosures which conflict with confidentiality


requirements of statute/regulations are not required to
be made since Accounting Standards can not override
legal/regulatory requirements.

Does not specifically include such members.

Definition of the close members of the family of a


person ,father, mother, brother and sister are included.

Does not have such disclosure.

Provides for additional disclosure requirements with


respect to related parties, if required by any statute.

Does not have such guidance.

Provides additional clarificatory guidance regarding


aggregation of transactions for disclosure

ED AS 20(R) Earning per share


When an entity presents both consolidated financial
statements and separate financial statements, it may
give EPS related information in consolidated financial
statements only

Required to disclose EPS related information in both


consolidated financial statements and separate financial
statements.

Terminology Difference
Statement of financial position

Balance Sheet

Statement of comprehensive income

Statement of profit and loss

ED AS 41(R) First time adoption of Indian accounting standard


Detail covered in the IFRS 1presentation
Slide 31

IFRS in India Its Status, Overview of Concepts and Impact in India

Carve Outs in CIAS from IFRS, Contd.


Comparison between CIAS and
IFRS issued by IASB
Publication

Source: PwC Publication Moving Towards Future........


Indian GAAP.
Exposure Draft issued by ICAI

Slide
Slide 32
32

IFRS in India Its Status, Overview of Concepts and Impact in India

Impact Indian Experience


Transitional experience by India Inc. - Common IFRS Adjustments
No. of
IFRS adj.

Statistics

No. of
IFRS adj.

Infosys Technologies Limited

Wipro Limited

High adjustment
(>20% impact on net-worth / net income)

Tata Motors Limited

10

Dabur India Limited

Medium adjustment
(5% - 20% impact on net-worth / net
income)

Rolta India Limited

10

Low adjustment
(1% - 5% impact on net-worth / net
income)

30

Total

36

Name of the entities

Noida Toll Bridge Co Ltd

Total

36

Nature of adjustment identified by India Inc. in their Financial Statement (Publicly


available)
High impact adjustments

Foreign Exchange Gain or loss of


FCCB liability long term foreign
currency monetary items

Medium impact adjustments

Deferred tax

Gain on repurchase of FCCB

Imputed Interest on FCCB

Low impact adjustments

Reversal of Amortised Goodwill


and intangibles

Share Based Payment

Difference in revenue recognition


norms
Slide 33

Annexure 1: Concepts relatively


new in Indian GAAP

Presentation of financial statement


Consolidation
Business combination
Leases
Functional currency
Deferred taxes
Employee benefits (including
ESOP)
Financial instruments
First time adoption of IFRS
Rakesh Agarwal

Slide 34

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Presentation of financial statement
Free form presentation
A complete set of financial statements
comprises:
(a) a statement of financial position as at the end of
the period;
(b) a statement of comprehensive income for the
period;
(c) a statement of changes in equity for the period;
(d) a statement of cash flows for the period;
(e) notes, comprising a summary of significant
accounting policies and other explanatory
information; and

An entity may use titles for the statements


other than those prescribed in IAS 1R,
however the titles used shall not be
misleading.

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Consolidation - Special Purpose Entities SIC 12
Activities
Activities of the SPE are being
conducted on behalf of the entity
according to its own specific
business needs

Benefits

Rights to obtain
the majority of
the benefits of
the SPE and
therefore the
risks incident to
the activities of
the SPE;

CIRCUMSTANCES
INDICATING THAT AN ENTITY
CONTROLS AN SPE
AN SPE SHOULD BE
TREATED AS A SUBSIDIARY

Majority of the
residual or
ownership risks
related to the
SPE or its assets
retained by the
controlling entity

Risks

Decision-making powers to obtain


the majority of the benefits of the
activities of the SPE are controlled
by the enterprise directly or
through an autopilot mechanism
Rakesh Agarwal

Decision -making

Slide 36

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Consolidation
Key GAAP differences
Uniform accounting policy
More entities are required to be consolidated under IFRS

Rakesh Agarwal

Slide 37

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Consolidation
Our experience
Companies need to develop group accounting manual and reporting packages for
preparation of consolidated financial statement with uniform accounting policy and
IFRS compliant figures
Ensuring uniform accounting policy for all the consolidating entity is difficult
Determination of functional currency is complex under certain situation

Rakesh Agarwal

Slide 38

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Business combination
Asset or business acquisition?
What is a business?
IFRS 3 (R) defines it as:
an integrated set of activities and assets conducted and managed for
providing.return to investor or economic benefit to stakeholders.generally consists
of inputs and processes applied to those inputs , and resulting in outputs that are, or
will be used to generate revenues.
If goodwill is present in a transferred set of activities and assets, the transferred set
shall be presumed to be a business.

Rakesh Agarwal

Slide 39

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Business combination
Asset or business acquisition?
Is it a
business?
NO

YES

Do we have
control?

NO

Relevant specific
standard e.g. IAS
28, IAS 31

Relevant specific
standard e.g. IAS 16.

YES

IFRS 3R (and
other standards!)

Rakesh Agarwal

Slide 40

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Business combination
Purchase Price Allocation

almost
Fair value everything!
Areas to watch out for!
Consequences of fair valuing

Rakesh Agarwal

Once we have determined


the cost of a business
combination we need to
allocate the cost to the
identifiable assets,
liabilities and contingent
liabilities acquired.

Slide 41

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Business combination
Key GAAP differences
Assets and liabilities are recognised based on fair value
Amortisation of Goodwill is prohibited
Additional Intangible assets to be recognised on business combinations
Date of acquisition - Transfer on control vs high court orders
Business combination are accounted using purchase method only
Contingent liabilities to be recognised to Income statement
Contingent consideration
Reverse acquisitions

Rakesh Agarwal

Slide 42

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Business combination
Our experience
IFRS 1 - Optional exemption for Business combination has been applied by most of
the companies
Valuation experts with IFRS experience are necessary for purchase price allocation
Issues like reverse merger, merger of entities under common control are very
common under Indian scenario

Rakesh Agarwal

Slide 43

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Leases
Application Of IFRIC - 4

IFRIC 4 impact is generally observed where there are Job work arrangements, outsourcing
contracts, power purchase agreements, etc
Rakesh Agarwal

Slide 44

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Functional currency
Functional currency - Primary indicators
The currency that mainly influences
sales prices for goods and services
(generally in which sales prices are
denominated and settled)

The currency of the country whose


competitive forces and regulations
determines the sales price of its
goods and services

Functional Currency

The currency that mainly


influences labour, material and
other costs of providing goods
and services
Rakesh Agarwal

Slide 45

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Deferred taxes
Temporary difference
All of the temporary differences will give rise to deferred tax balances
Exception: Some are specifically exempted from recognition in the standard

Temporary
Differences

Rakesh Agarwal

TAXABLE TEMPORARY DIFFERENCE


give rise to future taxable amounts
DEDUCTIBLE TEMPORARY DIFFERENCE
give rise to future tax deductible amounts

Slide 46

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Deferred taxes
Deferred Tax Asset Recognition
Sufficient DTL available
relating to same tax authority
and same entity
in same period

yes

Recognise DTA

no
Probable sufficient taxable profit
to same tax authority
and same entity
in period of DTA reversal

yes

no
yes
Tax planning opportunities
available to create taxable profits?

No recognition of DTA
no

Rakesh Agarwal

Slide 47

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Deferred taxes
Deferred Tax journal entries
Situation

Where deferred tax is recorded

General rule

Income statement

Adjustment to FV on acquisition

Adjust goodwill

Transaction or event recognised in equity

Equity

Rakesh Agarwal

Slide 48

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Deferred taxes
Key GAAP differences
Balance sheet approach Vs Income statement approach
Deferred tax shall be recognised on following temporary differences
Revaluation of PPE
Foreign currency translation
Consolidation adjustments
Unrealised gains/ losses of subsidiaries, associates or joint venture

Deferred tax assets shall be recognised based on probability criteria

Rakesh Agarwal

Slide 49

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Employee benefits
Key GAAP differences
Option for recognition of actuarial gain or losses to income statement or Other
comprehensive income or corridor approach
Fair value method shall be applied for ESOP accounting

Rakesh Agarwal

Slide 50

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Financial instruments
Classification - Financial assets
Financial Asset

At fair value through


profit or loss

Held for
trading

Rakesh Agarwal

Originated Loans
and receivables

Held to maturity

Available for sale

Designated
at inception

Slide 51

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Financial instruments
Classification Financial Liabilities (Two categories)
1. At fair value through profit or loss

Designated at
inception

Held for trading

Intention of short term profit;


Derivatives unless if hedges

Voluntary designation subject


to Certain conditions;
Irrevocable cannot be moved

2. Other financial liabilities


Rakesh Agarwal

Slide 52

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Financial instruments
Subsequent measurement

Assets/Liabilities at fair value through profit


or loss

At FV through profit
or loss

Loans and receivables


Held to maturity
Available for sale

At amortised cost

At FV through equity

Other liabilities

Rakesh Agarwal

Slide 53

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Financial instruments
Financial assets
At fair value through profit or loss

Held to maturity
Loans and receivables

Available for sale financial assets

Rakesh Agarwal

Initial
measurement

Transaction
costs

Subsequent
measurement

Recognition
of gain / loss

Fair value

Charge to
Income
Statement

Fair value

Income
statement

Capitalise

Amortised cost

Not applicable

Amortised cost

Not applicable

Fair value
Fair value

Fair value

Capitalise

Capitalise

Fair value

Other
comprehensive
income
statement

Slide 54

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


Financial instruments
Our experience
Use of experts required to handle complex areas
Involvement of treasury professionals is crucial
Volatility in Income statement due to accounting of embedded derivative
Documentation for hedge accounting

Rakesh Agarwal

Slide 55

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


First time adoption of IFRS
Optional Exemptions
Business combinations

Compound instruments

Property, plant and equipment,


investment properties, intangibles

Fair value measurement of financial


Instruments on initial recognition

Employee benefits
Cumulative translation differences

Standards
in force at
reporting date

Designation of financial assets and


Financial liabilities
Share-based payments

Transition date for subsidiaries,


associates and joint ventures

Decommissioning liabilities

Leases

Insurance contracts*

Borrowing cost

Service concessions arrangements


Investments in subsidiaries,
associates and joint control entities.

Rakesh Agarwal

Slide 56

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 1: Concepts relatively new in Indian GAAP


First time adoption of IFRS
Mandatory Exceptions
Estimates

Non controlling interest*

Standards
in force at
reporting date

Hedge accounting
*applicable on or after 1st July 2009,
can be early adopted
Rakesh Agarwal

Slide 57

Annexure 2

Common adjustments
from Indian GAAP to
IFRS

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Consolidated Financial Statement
a. Entities to be consolidated ESOP
Q The ESOP trust has XX shares aggregating to USD 50 M
Q The interest on loan given for financing stocks amounted to USD 3 M

Answer
A Dr NW 53,

Rakesh Agarwal

Dr NI 3

Slide 59

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Consolidated Financial Statement
b. Functional Currency
Q The amount are recorded In Indian Rupees. Exchange loss already
booked on transaction from USD to INR is (say)10 USD. Had the
transactions been recorded in USD (being its functional currency) the
gains on transaction would have been 15 USD.

Answer
A Cr NI 25,

Rakesh Agarwal

Cr NW - 25

Slide 60

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Consolidated Financial Statement
c. Deferred Tax on Consolidation
Q Company intends to realize the undistributed profits of the Joint venture by
way of liquidation through cash dividends in foreseeable future. In previous
year company estimated a notional liability of 30 which increased to 35 at
year end.

Answer
A Dr NW 35,

Rakesh Agarwal

Dr NI 5

Slide 61

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Consolidated Financial Statement
d. Fair Value measurement in Jointly Control Entities
Q Company has recorded its investment in JCE at Book value. The net fair
value of all adjustments (excluding goodwill of 100) has the impact of
increase by 50. The depreciation on such increase in FV is 5

Answer
A Dr NW 5,

Rakesh Agarwal

Dr NI 5.

Slide 62

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Consolidated Financial Statement
e. Transitional Provisions
Q The impact of transitional provisions under Indian GAAP is Dr NW 20

Answer
A. Cr NW 20,

Rakesh Agarwal

NI 0

Slide 63

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Property Plant and Equipment
Given,
1. Method adopted SLM
2. Life 10 years
3. Salvage value zero unless stated otherwise

a. Residual Value
Q The residual value taken under Indian GAAP is 5 for an asset, the original
cost of which is 105. At the beginning of the sixth year, the residual value is
re-estimated and the same asset is expected to have 45 at the end of its
life. The depreciation of 10 was provided during the sixth year under Indian
GAAP. What shall be impact under IFRS for the sixth year

Answer
A Cr NW 8,
Rakesh Agarwal

Cr NI 8
Slide 64

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Property Plant and Equipment
Given,
1. Method adopted SLM
2. Life 10 years
3. Salvage value zero unless stated otherwise

b. Exchange gains and losses


Q Exchange loss capitalized 20 as at the beginning of the year

Answer
A Dr NW 18,
Rakesh Agarwal

Dr NI 18
Slide 65

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Intangible Assets
a. Amortisation
Q Amortisation of Brands 10
Q Amortisation of goodwill 15

Answer
A Cr NW 25,

Rakesh Agarwal

Cr NI 25

Slide 66

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Investments
a. Trading Category
Q The fair market value was higher than it books value by 20 and 35 as at
the beginning and as at the end of the year respectively.

Answer
A. Cr NW 35,

Rakesh Agarwal

Cr NI 15

Slide 67

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Investments
b. Available for Sales
Q The fair market value was higher than it books value by 5 and 10 as at the
beginning and as at the end of the year respectively.

Answer
A. Cr NW 10,

Rakesh Agarwal

Cr NI 0

Slide 68

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Investments
c. Held till Maturity
Q Company has fully realized the investment at year end by way of
redemption. The interest in effective yield has been 12 where as per
coupon rate is 11

Answer
A. Cr NW 0,

Rakesh Agarwal

Cr NI 1

Slide 69

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Loans and Advances
a. Present Values
Q Fair value of interest free loan aggregating to 100 was 70 at the beginning
of the year which increased to 80 during the year

Answer
A. Dr NW 20,

Rakesh Agarwal

Dr NI 10

Slide 70

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Share Capital
a. Redeemable Preference Shares
Q The aggregate of redeemable preference shares aggregates to 200

Answer
A. Dr NW 200,

Rakesh Agarwal

Dr NI 0

Slide 71

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Share Capital
b. The Initial Cost on account of issuance of additional Equity Shares
Q The initial cost of equity issued during the year is 20. As the same was not
allowed to be carried forward under Indian GAAP (AS 26, intangible asset),
it was expensed off.

Answer
A. Dr NW 0,

Rakesh Agarwal

Cr NI 20

Slide 72

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Debenture
a. Premium on redemption
Q It is the contention of the company that the redemption of premium
aggregating to 50 shall be debited to share premium at the end of the loan
debenture term i.e. 5 years. This is the second year closing.

Answer
A NW Dr 20,

Rakesh Agarwal

NI Dr 10

Slide 73

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Current Liabilities
a. Dividend - New
Q Proposed dividend at year end is 20

Answer
A Cr NW 20,

Rakesh Agarwal

Dr NI 0

Slide 74

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Current Liabilities
b. Gratuity
Q The actuarial loss during the year is 6. The accumulated actuarial loss at
the beginning of the year is us 0. Presume that these numbers remained
same both under Indian GAAP and IFRS. However, the company has
adopted corridor approach under IFRS

Answer
A Cr NW 0,

Rakesh Agarwal

Cr NI 6

Slide 75

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Current Liabilities
c. Leave
Q The Company provides for leave accruals on basis of its Basic Pay + DA
which constitutes 50 % of the CTC. The leave accruals increased from 20
to 25 during the period. Presume that company follows FIFO method of
leave

Answer
A Dr NW 25,

Rakesh Agarwal

Dr NI 5

Slide 76

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Current Liabilities
d. Termination benefits
Q The expected cost of VRS (not accepted) by employee is 40

Answer
A Dr NW 40,

Rakesh Agarwal

Dr NI 40

Slide 77

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Current Liabilities
e. Accounting of Forward Cover New
Q The company has entered into forward contracts having its gross premium
20 for a period of 6 months. As on the year end 3 months has expired, the
company amortized Rs.10 under Indian GAAP, it also obtained Mark to
Market on the said forward cover for the remaining term of maturity where
the Market Value is Rs.16.

Answer
A Cr NW 6,

Rakesh Agarwal

Cr NI 6

Slide 78

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Revenue
a. Entitlement basis
Q Oil Extracted but another venturer at MV 100. The company shall lift the
extra quantities in subsequent month. Presume impact of depletion and
other operating cost as 20

Answer
A Cr NW 80,

Rakesh Agarwal

Cr NI 80

Slide 79

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Revenue
b. Production Testing Revenue Oil and Gas
Q Production testing revenue taken to income 10. Net margin is 80 %

Answer
A Cr NW 0,

Rakesh Agarwal

Dr NI 8

Slide 80

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Expenses
a. ESOP Scheme from Parent
Q The value of stock options granted and vested during the period by parent
co. to employees of the co is 80

Answer
A Cr NW 0,

Rakesh Agarwal

Dr NI 80

Slide 81

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Expenses
b. Leave As above
Done in current liabilities

Rakesh Agarwal

Slide 82

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Expenses
c. Gratuity Actuarial Gains and Losses
Done in current liabilities

Rakesh Agarwal

Slide 83

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Expenses
d. Correction of Errors
Q Included in Income statement are errors of prior period charged to P& L
aggregating to 8

Answer
A Cr NW 0,

Rakesh Agarwal

Cr NI 8

Slide 84

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Expenses
e. Changes in Accounting Policy
Q The cumulative catch up adjustments for a change in accounting policy
(depreciation) is reduction in depreciation by 16

Answer
A Cr NW 0,

Rakesh Agarwal

Dr NI 16

Slide 85

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Deferred Tax
Given - The tax rate is 30 %

a. GAAP Adjustments from Indian GAAP


Q How do you work out the DT impact of US GAAP ADJUSTMENTS

Answer
A Balance Sheet Approach

Rakesh Agarwal

Slide 86

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Deferred Tax
Given - The tax rate is 30 %

b. Items debited to reserves


Q An item of expenditure amounting to 30 was debited to reserves.

Answer
A Cr NW 9,

Rakesh Agarwal

Cr NI 0

Slide 87

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Deferred Tax
Given - The tax rate is 30 %

c. Consolidation
Q List of inter-company profits getting eliminated on consolidation 20

Answer
A Cr NW 6,

Rakesh Agarwal

Cr NI 6

Slide 88

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Deferred Tax
Given - The tax rate is 30 %

d. Outside Basis
Done in Consolidation

Rakesh Agarwal

Slide 89

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 2: Common adjustments from Indian GAAP to IFRS


Deferred Tax
Given - The tax rate is 30 %

e. Probable v/s Virtually certain


Q The unabsorbed losses c/f from earlier period reduced from 200 to 150.
The was not recognized under Indian GAAP as the Company was not
virtually certain though it was probable

Answer
A Cr NW 45,

Rakesh Agarwal

Dr NI 15

Slide 90

Annexure 3

Select IFRS tools and


publications

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 3: Select IFRS tools and publications


PricewaterhouseCoopers has a range of tools and publications to help companies apply IFRS

Similarities and Differences:


A Comparison of IFRS, US GAAP and Indian GAAP.
This new edition has been completely redesigned to
make it user-friendly and the key features of the new
publication are:
1) Provides insight as to the impact of key differences
between IFRS, US GAAP and Indian GAAP,
2) Provides context of how the conversion to IFRS has
ramifications far beyond the accounting department, and
3) Encourages early consideration of what IFRS means to
your organisation.
This publication is available on www.pwc.com/india

Rakesh Agarwal

Slide 92

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 3: Select IFRS tools and publications


PricewaterhouseCoopers has a range of tools and publications to help companies apply IFRS
A practical guide to share-based payments
Answers the questions we have been asked by entities
and includes practical examples to help management
draw similarities between the requirements in the
standard and their own share-based payment
arrangements. November 2008.

Guide aimed at finance directors, financial controllers


and deal-makers, providing background to the
standard, impact on the financial statements and
controls, and summary differences with US GAAP.

A practical guide to new IFRSs for 2009

IFRS disclosure checklist 2009

40-page guide providing high-level outline of the key


requirements of new IFRSs effective in 2009, in
question and answer format.

Outlines the disclosures required by all IFRSs


published up to October 2009.

A practical guide to capitalisation of borrowing


costs
Guidance in question and answer format addressing the
challenges of applying IAS 23R, including how to treat
specific versus general borrowings, when to start
capitalisation and whether the scope exemptions are
mandatory or optional.

IAS 39 Derecognition of financial assets in


practice
Explains the requirements of IAS 39, providing answers
to frequently asked questions and detailed illustrations
of how to apply the requirements to traditional and
innovative structures.

Rakesh Agarwal

IFRS 3R: Impact on earnings the crucial Q&A for


decision-makers

IFRS pocket guide 2009


Provides a summary of the IFRS recognition and
measurement requirements. Including currencies,
assets, liabilities, equity, income, expenses, business
combinations and interim financial statements.

IFRS news
Monthly newsletter focusing on the business
implications of the IASBs proposals and new
standards. Subscribe by emailing
corporatereporting@uk.pwc.com.

Slide 93

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 3: Select IFRS tools and publications


PricewaterhouseCoopers has a range of tools and publications to help companies apply IFRS
A practical guide to segment reporting

Illustrative consolidated financial statements

Provides an overview of the key requirements of IFRS


8, Operating Segments and some points to consider
as entities prepare for the application of this standard
for the first time. Includes a question and answer
section. Also available: Eight-page flyer on high level
management issues.

Banking, 2009
Insurance, 2009
Investment property, 2009
Private equity, 2009
Investment funds, 2009
Realistic sets of financial statements for existing
IFRS preparers in the above sectors illustrating the
required disclosure and presentation.

Understanding financial instruments


Adopting IFRS A step-by-step illustration of the
transition to IFRS
Illustrates the steps involved in preparing the first IFRS
financial statements. It takes into account the effect on
IFRS 1 of the standards issued up to and including
March 2004.
Financial instruments under IFRS
High-level summary of the revised financial instruments
standards issued in December 2003, updated to reflect
IFRS 7 in September 2006. For existing IFRS preparers
and first-time adopters.

IAS 39 Achieving hedge accounting in practice


Covers in detail the practical issues in achieving hedge
accounting under IAS 39. It provides answers to
frequently asked questions and step-by-step
illustrations of how to apply common hedging
strategies.

Rakesh Agarwal

A guide to IAS 32, IAS 39 and IFRS 7


Comprehensive guidance on all aspects of the
requirements for financial instruments accounting.
Detailed explanations illustrated through worked
examples and extracts from company reports.

SIC-12 and FIN 46R The substance of control


Helps those working with special purpose entities to
identify the differences between US GAAP and IFRS
in this area, including examples of transactions and
structures that may be impacted by the guidance.

Acquisitions Accounting and transparency


under IFRS 3Rd
Assesses the impact of the standard, highlighting the
key issues for management and raising questions for
the Board

Slide 94

IFRS in India Its Status, Overview of Concepts and Impact in India

Annexure 3: Select IFRS tools and publications


PricewaterhouseCoopers has a range of tools and publications to help companies apply IFRS
IFRS manual of accounting 2010
Global guide to IFRS providing comprehensive practical
guidance on how to prepare financial statements in
accordance with IFRS. Includes hundreds of worked
examples and extracts from company reports. The
Manual is a three-volume set comprising:
Manual of accounting IFRS 2010
Manual of accounting Financial instruments 2010
Illustrative IFRS corporate consolidated financial
statements for 2010 year ends

Comperio Your path to knowledge


Online library of financial reporting and assurance literature. Provides the full text of IASB International Auditing Practice Statements and
IPSAS. Also contains PwCs IFRS and corporate publications, and Applying IFRS. For more information, visit www.pwc.com/comperio

Making the change to IFRS


This 12-page brochure provides a high-level overview of the key issues that companies need to consider in making the change to IFRS

IFRS for SMEs Is it relevant for your business?


It outlines why some unlisted SMEs have already made the change to IFRS and illustrates what might be involved in a conversion process.

Rakesh Agarwal

Slide 95

Thank You

Rakesh Agarwal
Associste Director, PricewaterhouseCoopers
E-mail : rakesh.r.agarwal@in.pwc.com
Mobile : +91 9820273458