Certificate Course on IFRS of ICAI April-May 2011 Ahmedabad

Overview on GAAP Differences between Ind-AS and IFRS

Presented by: Anand Banka

Talati & Talati, Chartered Accountants

Partner

Overview on GAAP Differences between Ind-AS and IFRS

Ind-AS Title of Ind AS Corresponding IFRS IFRS Ind AS 1 Ind AS 2 Ind AS 7 Ind AS 8 Ind AS 10 Ind AS 11 Ind AS 12 Ind AS 16 Ind AS 17 Ind AS 18 Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Estimates and Errors Events after the Reporting Period Construction Contracts Income Taxes Property, Plant and Equipment Leases Revenue Accounting Policies, Changes in IAS 1 IAS 2 IAS 7 IAS 8 IAS 10 IAS 11 IAS 12 IAS 16 IAS 17 IAS 18 IFRIC 17 IFRIC 15 SIC 21, 25 IFRIC 1 IFRIC 4 and SIC 15, 27 IFRIC 12,13,18 and SIC 29, 31 Ind AS 19 Ind AS 20 Ind AS 21 Ind AS 23 Ind AS 24 Ind AS 27 Ind AS 28 Ind AS 29 Ind AS 31 Ind AS 32 Ind AS 33 Ind AS 34 Ind AS 36 Ind AS 37 Ind AS 38 Ind AS 39 Ind AS 40 Employee Benefits Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates Borrowing Costs Related Party Disclosures Consolidated and Separate Financial Statements Investments in Associates Hyperinflationary Economies Interests in Joint Ventures Financial Instruments: Presentation Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Financial Instruments: Recognition and Measurement Investment Property IAS 38 IAS 39 IAS 40 SIC 32 IFRIC 9, 16, 19 No significant difference Refer page 6 Refer page 6 Financial Reporting in IAS 28 IAS 29 IAS 31 IAS 32 IAS 33 IAS 34 IAS 36 IAS 37 IFRIC 7 SIC 13 IFRIC 10 IFRIC 5, 6 Refer page 5 No significant difference Refer page 5 Refer page 6 Refer page 6 No significant difference No significant difference No significant difference Accounting for Government Grants and IAS 19 IAS 20 IAS 21 IAS 23 IAS 24 IAS 27 IFRIC 14 SIC 10 SIC 12 Refer page 4 Refer page 4 Refer page 4 No significant difference Refer page 5 Refer page 5 IAS/ IFRIC/ SIC Refer page 3 No significant difference Refer page 3 No significant difference No significant difference Refer page 3 No significant difference No significant difference Refer page 4 Refer page 4 Comparisons

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Overview on GAAP Differences between Ind-AS and IFRS

Ind-AS Title of Ind AS Corresponding IFRS IFRS Ind AS 101 Ind AS 102 Ind AS 103 Ind AS 104 Ind AS 105 Ind AS 106 Ind AS 107 Ind AS 108 No Ind-AS No Ind-AS No Ind-AS First Time Adoption of Indian Accounting Standards Share-based Payments Business Combinations Insurance Contracts Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Resources Financial Instruments: Disclosures Operating Segments Retirement Benefit Plans Agriculture Financial Instruments Accounting and Reporting by IFRS 6 IFRS 7 IFRS 8 IAS 26 IAS 41 IFRS 9 No significant difference No significant difference No significant difference IFRS 1 IFRS 2 IFRS 3 IFRS 4 IFRS 5 IAS/ IFRIC/ SIC Refer page 7 No significant difference Refer page 7 No significant difference No significant difference Comparisons

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Overview on GAAP Differences between Ind-AS and IFRS

Areas Presentation of Financial Statements

Terminology 1. 2.

Ind-AS Ind-AS 1
Balance sheet Statement of Profit and Loss 1. 2.

IFRS IAS 1
Statement of Financial Position Statement of Comprehensive Income

Mandatory use of above terminology Statement of profit or loss single statement approach or two statements approach only Allows single statement approach

Option to use different terminologies Option to adopt single statement approach wherein all items of income and expense are recognised in the statement of profit and loss OR two statements approach wherein two statements are prepared, one displaying

components of profit or loss

(separate income statement) and the other beginning with profit or loss comprehensive income Statement of Changes in Equity (SOCIE) Classification of expenses by nature or by function SOCIE forms part of Balance Sheet. No separate statement required Classification of expenses by nature only separate statement Both classifications are allowed, whichever provides information that is reliable and more relevant Implementation guidance containing illustrative financial statement structure and examples Governed by various enactments like Schedule VI Prescribed by the standards and displaying components of other SOCIE must be presented as a

Statement of Cash Flows

Classification of interest and dividends paid and received

Ind-AS 7
Mandatory classification of interest and dividend paid as financing received as investing activity activity and interest and dividend activity

IAS 7
Option to classify these as operating

Construction Contracts
Revenue recognition for developers in case of real estate contracts e.g. sale of flats

Ind-AS 11
Revenue is recognised as per percentage of completion method transactions.

IAS 11
IAS 11 is not applicable to such As per IFRIC 15 Agreement for Construction of Real Estate, IAS 18 Revenue is applicable. Revenue will be recognised as per completed contract method in most cases

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Overview on GAAP Differences between Ind-AS and IFRS

Areas Leases
Classification of property interest held under an operating lease as investment property Not allowed

Ind-AS Ind-AS 17

IFRS IAS 17
Allowed in certain cases and using fair value model accounted for as finance lease

Revenue
IFRIC 15 Agreement for

Ind-AS 18
Not applicable, hence apply Ind-AS 11 Construction Contracts

IAS 18
Revenue
Applicable, hence apply IAS 18

Construction of Real Estate

Employee Benefits
Actuarial gains and losses

Ind-AS 19
All actuarial gains and losses for post-employment defined benefit plans and other long-term recognised in OCI employment benefit plans are

IAS 19
Actuarial gains and losses for postemployment defined benefit plans can be recognised using one of the following three alternatives: 1. 2. 3. in profit or loss in OCI using corridor approach

Actuarial gains and losses for

other long-term employment benefit plans are recognised in profit or loss Discount rate for post-employment defined benefit plans Refer market yields on government bonds Refer market yields on government bonds only if there is no deep bonds market of high quality corporate

Accounting for Government Grants and Disclosure of Government Assistance

Measurement of non-monetary government grants

Ind-AS 20

IAS 20
Provides option to measure either at fair value (deferred income approach) or at nominal value (deducting the grant in arriving at the carrying amount of the asset)

At fair value only i.e. grants need to be presented as deferred income

The Effects of Changes in Foreign Exchange Rates

Recognition and measurement of exchange differences arising on monetary items from foreign translation of certain long-term currency to functional currency

Ind-AS 21

IAS 21
No such option permitted

Option to recognise such exchange differences directly in equity and accumulated exchange differences shall be transferred to profit or loss in appropriate manner

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Overview on GAAP Differences between Ind-AS and IFRS

Areas Related Party Disclosures

Certain disclosures which conflict with confidentiality requirements of statute/ regulations e.g. RBI limits the number of disclosures for banks Definition of close members of the

Ind-AS Ind-AS 24
Such disclosures are not required to be made since Ind-AS does not override law exemptions

IFRS IAS 24
IFRS overrides law. Hence, no such

family of a person

Persons specified within meaning of relative under the Companies Act, 1956 and 1. 2. 3.

Those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include: 1. 2. 3. children, spouse or domestic children of that persons partner

that persons domestic partner children of that persons domestic partner domestic partner

dependants of that persons

spouse or domestic partner that persons spouse or domestic partner

dependants of that person or

Consolidated and Separate Financial Statements

Applicability and Exemptions

Ind-AS 27

IAS 27
IAS 27 is mandatory subject to limited exceptions

Ind-AS 27 is not mandatory and regulated by laws in India

applicability and exemptions are

Investment in Associates
Cases where financial statements of an associate are prepared as of a date different from that of the investor Uniform Accounting Policies

Ind-AS 28
The difference in dates should not be more than 3 months, unless impracticable

IAS 28
The difference in dates should not be more than 3 months

Mandatory use of uniform impracticable

accounting policies, unless Gain on bargain purchase is recognized in capital reserve applicability and exemptions are regulated by laws in India Ind-AS 28 is not mandatory and

Mandatory use of uniform accounting policies

Negative goodwill/ gain on bargain purchase Applicability and Exemptions

Gain on bargain purchase is recognized directly in profit or loss IAS 28 is mandatory subject to limited exceptions

Interests in Joint Ventures

Applicability and Exemptions

Ind-AS 31
applicability and exemptions are regulated by laws in India Ind-AS 31 is not mandatory and

IAS 31
IAS 31 is mandatory subject to limited exceptions

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Overview on GAAP Differences between Ind-AS and IFRS

Areas Financial Instruments: Presentation

Recognition of equity conversion option embedded in a convertible bond denominated in foreign currency Fair value of financial liabilities profit or loss

Ind-AS Ind-AS 32

IFRS IAS 39 IAS 32

Financial Instruments: Recognition & Measurement Ind-AS 39

Such option shall be considered as equity instrument if the exercise price is fixed in any currency and accordingly is not required to fair value at every reporting date Ind-AS 39 ignores changes in fair value consequent to changes in entitys own credit risk

Such option shall be considered as embedded derivative and be fair valued through profit or loss at every reporting date IAS 39 considers changes in fair value consequent to changes in entitys own credit risk

designated as fair value through

Earnings per share (EPS)

Applicability and Exemptions

Ind-AS 33
Applicability and Exemptions are India regulated by governing statutes in

IAS 33
Applicability and Exemptions are given in the standard. Generally applicable to listed entities or entities in the process of listing Requires presentation of EPS in CFS only, if CFS is presented No such guidance

Presentation of EPS in case of (CFS)

Consolidated Financial Statements Additional guidance relating to reserves

Requires presentation of EPS in both Statements Income/ Expense debited/ credited to securities premium/ other reserves (as per applicable Laws) instead of profit or loss (as per standards) must be deducted from profit or loss for calculating EPS

Consolidated and Separate Financial

Investment Property
Subsequent Measurement

Ind-AS 40
Only Cost Model is permitted

IAS 40
Permits use of either Cost Model or Fair Value Model

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Overview on GAAP Differences between Ind-AS and IFRS

Areas First Time Adoption of Ind-AS/ IFRS

Application of the standard

Ind-AS Ind-AS 101

First annual financial statements in which the entity adopts IND-AS

IFRS IFRS 1
Similar but more clear. Examples have been provided for various situations Beginning of earliest period for which an entity presents full comparative information i.e.

Date of Transition

The date on which opening balance sheet is prepared to give effect to cumulative impact of transition
Comparatives Reconciliation for opening equity, total comprehensive income, cash flow statement and closing equity for the comparative period Additional exemption w.r.t. Property, Plant & Equipment, intangible assets and investment properties Financial Instruments: Effective interest method or Impairment requirements

Beginning of current period

beginning of comparative period As per existing IGAAP In addition, as per Ind-AS (optional) mandatory for only those entities that opt for comparatives as per Ind-AS Mandatory for all As per IFRS

Entities may use existing carrying values on the date of transition

No such exemption

If impracticable to retrospectively apply the requirements, calculate the fair value on the date of transition

Mandatory requirement to retrospectively calculate the interest method amortized cost using effective

Business Combinations
Business combination of entities under common control Negative goodwill/ gain on bargain purchase

Ind-AS 103
Allows Pooling of Interests method Gain on bargain purchase is

IFRS 3
Not applicable to such transactions Gain on bargain purchase is

recognized in OCI and accumulated in equity as capital reserve if the of the business combination as a bargain purchase can be clearly underlying reason for classification

recognized directly in profit or loss

evidenced; otherwise, the resulting gain is recognized directly in equity as capital reserve

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Overview on GAAP Differences between Ind-AS and IFRS

Anand Banka Talati & Talati, Chartered Accountants anand.banka@talatiandtalati.com Mob: 9867353743 Partner

AHMEDABAD (HEAD OFFICE) Ambica Chambers Nr. Old High Court, Navrangpura, Ahmedabad 380009 Email: info@talatiandtalati.com Tel: +91 79 27544571/72 Fax: +91 79 27542233

MUMBAI

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