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Decoding the differencesComparison of Ind AS with IFRS

A summary of thesignificant differencesbetween Ind AS and IFRS - impact andimplications of changeson financial reporting.

February 2011

www.pwc.com/india

Comparison of Ind AS with IFRS 2

ContentsIntroduction 3

India’sConvergencewithIFRS–Recentdevelopments 3

Whythispublication? 3

IndASvis-a-visIFRS–Anoverview 4

IndASandIFRS–Acomparison 6

IndAS101First-timeAdoptionofIndianAccountingStandards 6

IndAS103BusinessCombinations 9

IndAS1PresentationofFinancialStatements 10

IndAS7StatementofCashFlows 11

IndAS11ConstructioncontractsandIndAS18Revenue 12

IndAS19EmployeeBenefits 13

IndAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance 14

IndAS21TheEffectsofChangesinForeignExchangeRates 14

IndAS32FinancialInstruments:Presentation 15

IndAS24RelatedPartyDisclosures 16

IndAS27ConsolidatedandSeparateFinancialStatements 17

IndAS28InvestmentsinAssociates 18

IndAS33EarningsperShare 18

IndAS39FinancialInstruments:RecognitionandMeasurement 19

IndAS40InvestmentProperty 19

Otherdifferences 20

ChallengesAhead 22

AppendixA-ListofIndAS 23

AppendixB-DifferencesbetweennearfinalandfinalIndAS 25

AppendixC-IASB’songoingprojects 27

Wecanteamup 28


India’s Convergence with IFRS – Recent developments

IndianAccountingStandards(IndAS)beingnotifiedbytheMCA

OnFebruary25,2011,theMinistryofCorporateAffairs(‘MCA’)hasissuedapressreleasestatingthat35‘IndAS’arebeingnotifiedandplacedontheMCAwebsite.Withthis,theresultsofIndia’scurrenteffortsofconvergencetoInternationalFinancialReportingStandards(‘IFRS’)areknownandthefinalnewstandardsareavailableforreference,althoughtheireffectivedateistobenotifiedbytheMCAatalaterdate,aftervariousissues(includingtaxrelatedissues)areresolvedwithinvariousdepartmentsofthegovernment.Correspondingchangestocorporatelawsareanticipatedsoontoenablethestandardstocomeintoeffect.

ThefinalIndASarelistedinAppendixAandavailableathttp://www.mca.gov.in/Ministry/accounting_standards.html.

ThedifferencesbetweenthefinalIndASandthenearfinalIndASissuedbytheInstituteofCharteredAccountantsofIndia(‘ICAI’)onJanuary14,2011aresummarisedintheAppendixB.

ExposureDraftontherevisedFrameworkforthePreparationandPresentationofFinancialStatements

OnJanuary18,2011,theAccountingStandardsBoard(‘ASB’)oftheICAIissuedtheExposureDraftontheFrameworkforthePreparationandPresentationofFinancialStatementsunderIndAS(similartoIFRSFramework),whichwasopenforcommentstillJanuary28,2011.Theexposuredraftisavailableathttp://220.227.161.86/21510ed180111a.pdf.

Why this publication?

IfyouarealreadyusingIFRSasissuedbytheInternationalAccountingStandardsBoard(‘IASB’)orstartedtheconversionprocessusingIFRS,thenthispublicationwillbeusefulinhelpingtoidentifythekeyareaswheredifferencesexistbetweenIndASandIFRS.ItisimportanttounderstandthatcompliancewithIndASisunlikelytoresultincompliancewithIFRStherebycompaniesmaynotnecessarilyachievedualcompliancegiventhenumberandnatureofdifferences.Accordingly,whenIndianentitiesfiletheirIndASfinancialstatementswithregulatoryauthorities,theymayneedtomakesuitableadjustmentstocomplywithIFRSsoastomakeanunreservedstatementofcompliancewithIFRSasissuedbytheIASB.Nevertheless,ifacompany’sgoalistominimisedifferencesfromIFRS,andisthereforewillingtoforegosomeoftherelaxationsconferredbyIndASrelativetoIFRS,thecarefulselectionofpoliciesandoptionsmayenablecompaniesexceptcertainsectorslikerealestate,toeliminatemanydifferences.

ThispublicationsummarisesthesignificantdifferencesbetweenIndASandIFRSasatthedateofpublication,andprovidesanindicationofwhichGAAPdifferencesareavoidableifthepreparersowishes.However,IFRSisamovingtargetwithanumberofIASB’songoingprojects(listedinAppendixC),whichoncefinalisedcouldbringfurtherchangesinIndASor,alternatively,widenthegapbetweenthetwosetsofstandards.CompaniesareencouragedtokeeptrackofchangesinIFRSandassesstheirimplicationsontheirfinancialstatements.

PricewaterhouseCoopersiscommittedtotakeeverypossiblesteptoassistyouwithyourconversiontoIndASorIFRS,includingkeepingyouupdatedregardingthelatestdevelopmentsinIndASorIFRS.TolearnaboutcurrentdevelopmentsandhowwecanhelpyouinIndASorIFRSconversion,visitourwebsiteathttp://www.pwc.com/in/en/services/IFRS/IFRS-intro.jhtml orspeaktoyourlocalPwCcontact.

Introduction

Ind AS vis-a-vis IFRS – An overviewThere are differences between IFRS and Ind AS. Some of these differences stem from the number of standards itself, while other stem from changes made while developing the Ind AS. Currently, IFRS consists of 38 standards and 26 interpretations, while the MCA has placed only 35 Ind AS (inclusive of 24

interpretations) on its website (see Appendix A for the list of final Ind AS). A high level categorisation of differences is provided below along with the list of IFRS pronouncements not currently included under Ind AS:

A. Unavoidable differences between Ind AS and IFRS B. Avoidable differences between Ind AS and IFRS

Ind AS Reference

Ind AS Title DifferenceDifference Reference

Ind AS 103 Business Combinations

Guidance on common control transactions 103.1

Accounting for the gain on a bargain purchase

103.2

Ind AS 11 Construction Contracts IFRIC 15 ‘Agreement for the construction of real estate’ scoped out of Ind AS 18 Revenue

11.1

Ind AS 18 Revenue

Ind AS 19 Employee Benefits

Recognition of actuarial gains and losses – other long term employee benefits

19.1.2

Elimination of the requirement to use a high quality corporate bond rate to discount employee benefit obligations

19.2

Ind AS 32Financial Instruments: Presentation

Exception to the definition of a financial liability

32.1

Ind AS Reference

Ind AS Title DifferenceDifference Reference

Ind AS 101First-time Adoption of Indian Accounting Standards

Transition date and comparative requirements 101.1

Reconciliation requirements to explain transition from previous GAAP

101.2

Transitional relief from retrospective application of Ind AS 16 PP&E, Ind AS 40 Investment properties and Ind AS 38 intangible assets

101.3Transitional relief from retrospective application of effective interest method or impairment requirements for financial instruments carried at amortised cost

Exemption regarding translation of long-term monetary assets and liabilities denominated in a foreign currency

Ind AS 21The Effects of Changes in Foreign Exchange Rates

Option to recognise exchange differences arising on translation of long term monetary items in equity

21.1

Ind AS 24 Related Party Disclosures Overriding nature of statute for related party disclosures 24.1

Ind AS 28 Investments in Associates Different accounting periods and policies of associates 28.1

Ind AS 39Financial Instruments: Recognition and Measurement

Change in the fair value of a financial liability due to the entity’s own credit risk

39.1


C. Textual differences that will not prevent convergence Ind AS issued but to be modified and/or notified later

IFRS pronouncements not issued or early adopted under Ind AS

IndASReference

IndASTitle DifferenceDifferenceReference

IndAS101 First-timeAdoptionofIndianAccountingStandards

DefinitionofpreviousGAAP

101.4

IndAS1 PresentationofFinancialStatements

SinglestatementofProfitandloss 1.1

Classificationofexpenserecognisedinprofitorloss 1.3

IndAS7 StatementofCashFlows ClassificationofinterestanddividendinCashflowstatement 7.1

IndAS19 EmployeeBenefits Recognitionofactuarialgainsandlosses–postemploymentdefinedbenefitplan 19.1.1

IndAS20 AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance

Eliminationofoptiontomeasurenon-monetarygovernmentgrantsatnominalvalue

20.1

Eliminationofoptiontopresentgrantsasdeductioninarrivingatthecarryingamountofasset

20.2

IndAS24 RelatedPartyDisclosures Changeindefinitionofclosefamilymembers 24.2

Additionalguidanceforaggregationoftransactions 24.3

IndAS27 Consolidatedfinancialstatements

Formatofconsolidatedfinancialstatements 27.1

IndAS33 EarningsperShare CompulsorydisclosureofEPSinstandalonefinancialstatements 33.1

AdjustmentstotheEPScalculation 33.2

IndAS40 InvestmentProperty Eliminationofoptiontorecogniseinvestmentpropertiesatfairvalue 40.1

IndASReference

IndASTitle Remarks

IndAS104* InsuranceContracts Thisstandardshallcomeintoeffectforinsurancecompaniesfromthedatetobeseparatelyannounced.

IndAS106* ExplorationforandEvaluationofMineralResources

Thisstandardwillbeappliedwithmodificationfromadatetobenotifiedlateron.

IndAS18 Revenue Forrateregulatedentities,thisstandardshallstandmodified,whereandtoextenttherecognitionandmeasurementofrevenueofsuchentitiesisaffectedbyrecognitionandmeasurementofregulatoryassets/liabilitiesaspertheGuidanceNoteonthesubjectbeingissuedbytheICAI.

AppendixCofIndAS17**

DeterminingwhetheranArrangementcontainsaLease

Notificationofthisappendix(IFRIC4equivalent)hasbeendeferred.Theeffectivedateforitsimplementationwillbeannouncedseparately.

AppendixAofIndAS11**

ServiceConcessionArrangements Notificationoftheseappendices(IFRIC12andSIC12equivalents)

hasbeendeferred.Theeffectivedatesforimplementationoftheseappendiceswillbeannouncedseparately.AppendixBof

IndAS11**ServiceConcessionArrangements:Disclosures

IFRSReference

IFRSTitle Possibleconsiderations

IFRS9 FinancialInstrumentsIFRS9is,itself,evolvingandcertaincomponents(suchashedgeaccountingandimpairment)arestillbeingdeveloped

IAS26AccountingandReportingbyRetirementBenefitPlans

Notrelevantforcompanies

IAS41* AgricultureMajorconcernovertheuseoffairvalueinagriculturesectorinIndia.

IFRIC2Member’sshareinCooperativeEntitiesandsimilarinstruments

Notrelevantforcompanies

IFRIC15Agreementforconstructionofrealestate

Concernoverrelevanceofresultsreportedbyrealestatecompaniesifsalesarerecognizedona‘completion’basis

*In the potential delay in notification of these standards, companies may formulate accounting policies for relevant transactions that are consistent with the principles in other standards or otherwise in accordance with the Ind AS 8 hierarchy.

**Companies may early adopt these appendices under Ind AS 8 hierarchy when selecting accounting policies. Once selected, accounting policies should be applied consistently.

Ind AS and IFRS – A comparisonInd AS 101 First-time Adoption of Indian Accounting Standards

Difference 101.1 GAAP difference? Avoidable?

Transition date and comparative requirements Yes Yes*

IFRS 1 defines the transition date as the beginning of the earliest period for which an entity presents full comparative information under IFRS. Ind AS 101 provides that the date of transition is the beginning of the current period. In addition, it provides an option to present comparative financial statements in accordance with Ind AS only on a memorandum basis, in which case the beginning of comparative period would be considered to be the deemed date of transition only for memorandum period. Under both scenarios of Ind AS, companies are required to present their prior year financial information that was prepared using the existing Indian GAAP. This comparative information must be reclassified to follow the disclosure form and content of Ind AS.

PwC observation

If the company decides to present comparative information in accordance with Ind AS, it would have two transition dates (one for the comparative period for memorandum reporting and another for the primary reporting period) and an additional obligation to present reclassified numbers as per existing Indian GAAP. The fact that the transitional date is a year later under Ind AS even for those companies that provide Ind AS comparatives on a memorandum basis – it may create unavoidable differences in the year of transition compared with a first-time adopter of IFRS as issued by IASB. However, assuming the Ind AS implementation date is 1st April, 20x1, if an entity chooses to comply with IFRS from the subsequent year (i.e. 31st March 20x3), it would also have a transition date of 1st April 20x1 and differences may be avoided prospectively.

Such presentation challenges may discourage companies from providing comparative information under Ind AS. For example, there could be three different balance sheets under Ind AS, i.e. as at 31st March 20x1 (existing Indian GAAP), 31st March 20x1 (Ind AS comparative period), and 1st April 20x1 (opening balance sheet for first Ind AS statutory financials). The required reconciliations between the two different transition dates may also pose a challenge to those companies that elect to present Ind AS comparatives.

* Potentially avoidable from the second year of compliance with Ind AS



Reconciliation requirements to explain transition from previous GAAP (Refer 101.4 for definition of previous GAAP ) Yes Yes

IFRS 1 requires reconciliations for opening equity, total comprehensive income, the cash flow statement (if any) and closing equity for the comparative period to explain transition from previous GAAP. Ind AS 101 provides an option to provide comparative period financial statements on a memorandum basis and consequently reconciliation that are similar to IFRS. Entities that do not provide comparatives per Ind AS on a memorandum basis need not provide a reconciliation for total comprehensive income, the cash flow statement or closing equity in the first year of transition, but are expected to disclose significant differences pertaining to total comprehensive income (or if did not report such a total, Profit or loss).

PwC observation

Ind AS has significantly fewer disclosure requirements than IFRS, for companies that do not provide comparatives. Companies would have to weigh out the cost-benefit aspects of the few disclosures per Ind AS, as stakeholders may wish to know more and potentially get as much as reconciliation information normally provided under IFRS.


Inclusion/modification of existing exemptions to make them relevant for India Yes Yes

• Transitional relief from retrospective application of Ind AS 16 Property, Plant and Equipment, Ind AS 40 Investment properties and Ind AS 38 intangible assetsInd AS 101 provides an option to use previous GAAP carrying values at the date of transition to Ind AS for all its property, plant and equipment. The carrying amount for these assets on transition become their deemed cost after adjusting for decommissioning liabilities as per Para D21 and D21A of Ind AS 101. A similar option can also be applied for investment properties and intangible assets.

• Transitional relief from retrospective application of effective interest method or impairment requirements for financial instruments carried at amortised costIf it is impracticable to apply retrospectively the effective interest method or the impairment requirements of Ind AS 39 for financial instruments carried at amortised cost, Ind AS 101 requires that the fair value of the financial instruments at the date of transition to Ind AS be used as the new amortised cost of that financial instrument at the date of transition to Ind AS.

• Exemption regarding retranslation of long-term monetary assets and liabilities denominated in a foreign currencyInd AS 101 allows an entity to exercise the option in paragraph 29A of Ind AS 21 (to recognise unrealised gains and losses on any long-term monetary assets or liabilities in equity) either retrospectively or prospectively.

PwC observation

• Transitional relief from retrospective application of effective interest method or impairment requirements for financial instruments carried at amortised costThe standard uses the term ‘impracticable’ to claim the exemption from the retrospective application. However, ‘impracticable’ is a high threshold, and hence it is unlikely that a GAAP difference will arise.

If an entity elects to make use of any of the above exemptions, the resultant financial statements will not comply with IFRS.


Difference101.4 GAAPdifference? Avoidable?

Definition of previous GAAP No --

IFRS1definespreviousGAAPasthebasisofaccountingthatafirst-timeadopterusedimmediatelybeforeadoptingIFRS.IndAS101requirescompaniestoconsiderexistingnotifiedIndianaccountingstandardsaspreviousGAAPwhentheytransitiontoIndAS.

(Also refer consequential amendment 1 and minor difference 1 & 2 in ‘Other differences’ section)



Guidance on common control transactions Yes No

IFRS3excludesfromitsscopebusinesscombinationsofentitiesundercommoncontrol.IndAS103givesdetailedguidanceforcommoncontroltransactions,andrequiresthatbusinesscombinationsinvolvingentitiesorbusinessesundercommoncontrolshouldbeaccountedforusingthepoolingofinterestsmethod.Theexcessoftheconsiderationgivenovertheamountofsharecapitalisrecordedasgoodwill,whereasshortfallistreatedascapitalreserve.Italsorequiresthatfinancialinformationinrespectofpriorperiodshouldberestatedasifthebusinesscombinationhasoccurredatthebeginningoftheearliestperiodpresentedinthefinancialstatements,irrespectiveoftheactualdateofcombination.

PwC observation

SinceIFRS3excludescommoncontroltransactions,entitiestypicallyelectastheiraccountingpolicyeithertheapplicationofthepoolingofinterestsmethod(i.e.predecessoraccounting),orthefairvaluemethodrequiredforallotherbusinesscombinationswithinthescopeofIFRS3.UnlikeIndAS,nonewgoodwillariseswhileusingthepoolingofinterestmethodunderIFRS.Theexcessorshortconsiderationgivenoveraggregatebookvalueoftheassetsandliabilitiesoftheacquiredentityisincludedinretainedearningsorinaseparatereserve.

IndAS103BusinessCombinations


Accounting for the gain on a bargain purchase Yes No

IFRS3requiresanygainarisingfromabargainpurchase(i.e.wherethecostofacquiringabusinessislessthanthefairvalueoftheidentifiableassetsandliabilitiesacquired)exceptarisingincommoncontroltransactionstoberecognisedinprofitorloss.IndAS103requiresthisgaintoberecognisedinothercomprehensiveincomeandaccumulatedinequityasacapitalreserve,unlessthereisnoclearevidencefortheunderlyingreasonforclassificationofthebusinesscombinationasabargainpurchase,inwhichcaseitshouldberecogniseddirectlyinequityasacapitalreserve.

AsimilarrequirementalsoappliestoassociatesaccountingforinaccordancewithIndAS28.



Single statement of Profit and loss No --

IAS1,PresentationofFinancialStatements,providesanoptioneithertofollowthesinglestatementapproachortofollowthetwostatementapproachtothepreparationoftheStatementofComprehensiveIncome.Thesinglestatementapproachrequiresallitemsofincomeandexpensetoberecognisedinthestatementofcomprehensiveincome,whilethetwostatementsapproachrequirestwostatementstobeprepared,onedisplayingcomponentsofprofitorloss(separateincomestatement)andtheotherbeginningwithprofitorlossanddisplayingcomponentsofothercomprehensiveincome.IndAS1allowsonlythesinglestatementapproach,andrequiresthistobetitledthe‘StatementofProfitandLoss’.CorrespondingamendmentshavebeenmadetootherIndAS.

PwC observation

TherequirementperIndASisinlinewithanIASBexposuredraftonfinancialstatementpresentationissuedinMay2010,whichrequiredthesinglestatementapproach.SincethesinglestatementapproachisanacceptableoptionunderIFRS,itwillnotprecludeconvergencewithIFRS.


Statement of changes in equity to be shown as a part of the balance sheet Not known --

IAS1requiresthepreparationofaStatementofChangesinEquityasaseparatestatement.IndAS1requiresthestatementofchangesinequitytobeshownasapartofthebalancesheet.

PwC observation

InIndia,theformatoffinancialstatementsofcompaniesisgovernedbytheScheduleVItoCompaniesAct.TheMCAhasrecentlyissuedRevisedScheduleVIwhichprescribestheformatoffinancialstatementsunderexistingaccountingstandardsandnotunderIndAS.SinceScheduleVIinlinewithIndAShasnotbeenissuedyet,henceatthispointoftimeit’snotknownwhethertheabovedifferencewouldresultinaGAAPdifference.

IndAS1PresentationofFinancialStatements


Classification of expense recognised in profit or loss No --

IAS1requiresanentitytopresentananalysisofexpensesrecognisedinprofitorlossusingaclassificationbasedoneithertheirnatureortheirfunctionwithintheentity.IndAS1requiresexpensestobeclassifiedbynature.

(Also refer consequential amendment 2 and minor differences 3 in ‘Other differences’ section)


IndAS7StatementofCashFlows


Classification of interest and dividend in cash flow statement No --

IAS7givesanoptiontoclassifydividendspaidasanitemofoperatingactivity.Further,incaseofotherthanfinancialentities,IAS7givesanoptiontoclassifyinterestpaidandinterestanddividendsreceivedasoperatingorfinancingcashflows.However,IndAS7doesnotprovidesuchoptionsandrequiresasfollows:

ForFinancialentities

Items Classification in cash flow statement

Interestanddividendsreceived OperatingActivities

Interestpaid OperatingActivities

Dividendspaid FinancingActivities

Forotherentities

Items Classification in cash flow statement

Interestanddividendsreceived InvestingActivities

Interestpaid FinancingActivities

Dividendspaid FinancingActivities


IndAS11ConstructioncontractsandIndAS18Revenue


IFRIC 15 ‘Agreement for the construction of real estate’ scoped out of IAS 18 Revenue Yes No

IAS18Revenueappliestoagreementsfortheconstructionofrealestate,unlessthebuyerisabletospecifythemajorstructuralelementsofthedesignofrealestatebeforeconstructionbegins,and/orspecifymajorstructuralchangesonceconstructionisinprogress.Formanyrealestatedevelopers,applicationofIAS18requiresrevenue(andprofit)fromsaletoberecognisedoncompletionoftheconstructionandhand-overofcontrolofthepropertytothebuyer.

IndAS,however,bringsrevenuetransactionsofrealestatedevelopersintothescopeofIndAS11.Accordingly,revenue(andprofit)isrecognised,usingapercentageofcompletionmethod,overtheconstructionperiod.

PwC Observation

UnderexistingIndianGAAP,companiesrecogniserevenuefromagreementsfortheconstructionofrealestatebasedonapercentageofcompletionmethod.TheamendmentstoIAS11andIAS18inarrivingattheIndASequivalentstandardsallowrealestatedeveloperstocontinuetousetheirexistingaccountingpolicy.ThisisasignificantdeparturefromIFRSandwillpreventfinancialstatementsissuedbyrealestatedevelopersunderIndASfrombeingcomparablewiththeirinternationalcounterparts.

Inaddition,thechangetothescopeofIndAS11couldbeconstruedasbringingallagreementsofrealestatedevelopmentintothescopeofIndAS11,notmerelythoserelatingtoconstructionofrealestate.Ifthefinalstandardcontinuestousethepresentwording,andintheabsenceofadefinitionofa‘realestatedeveloper’,thiscouldresultinunintendedconsequences.

TheIASBhasrecentlyissuedanexposuredraft,Revenue,whichproposestoreplaceIAS11ConstructionContracts,IAS18Revenue,IFRIC13CustomerLoyaltyProgrammes,IFRIC15AgreementsfortheConstructionofRealEstate,IFRIC18TransfersofAssetsfromCustomers,andSIC31BarterTransactionsInvolvingAdvertisingServices.Itproposesanewrevenuerecognitionmodelthatcouldfundamentallyalterthewayentitiesrecogniserevenue.

Refertoour‘PracticalguidetoIFRS-Revenuerecognitionfullspeedahead’(availableonourwebsitewww.pwc.com/in/en/services/IFRS/Publication-IFRS)formoredetails.

IndAS19EmployeeBenefits


19.1.1 Recognition of actuarial gains and losses – post employment defined benefit plan No --

IAS19givesthreeoptionstorecogniseactuarialgainsandlossesforpostemploymentdefinedbenefitplansnamely:1. recogniseinothercomprehensiveincome;2. recogniseimmediatelyintheincomestatement;3. amortisetoprofitorlossusinga‘corridorapproach’.

IndAS19doesnotincorporatethesecondandthirdoptions,therebyrequiringactuarialgainsandlossestoberecognisedinothercomprehensiveincome(OCI).TheactuarialgainsandlossesthathavebeenrecordedinOCIshallberecognisedimmediatelyinretainedearningsandshallnotbereclassifiedtoprofitorlossinasubsequentperiod.

19.1.2 Recognition of actuarial gains and losses – other long term employee benefits Yes No

AsperIAS19,actuarialgainsandlossesforotherlongtermdefinedbenefitsarerecognisedinprofitorloss,whileasperIndAS19thesearetoberecognisedinOCI.TheactuarialgainsandlossesthathavebeenrecordedinOCIshallberecognisedimmediatelyinretainedearningsandshallnotbereclassifiedtoprofitorlossinasubsequentperiod.


Elimination of the requirement to use a high quality corporate bond rate to discount employee benefit obligations Yes No

IndAS19requirespostemploymentbenefitobligationstobediscountedusingthemarketyieldongovernmentbonds.ThisrequirementiscontrarytoIAS19,whichrequiresgovernmentbondyieldstobeusedonlywherethereisnodeepmarketforhighqualitycorporatebonds.

PwC observation Yes No

IndAShasremovedtheuseofadiscountratebasedonhighqualitycorporatebondsonthebasisthatthereisnodeepmarketforsuchbondsinIndia.Whilethiswillnotimpactsolelydomesticcompanies,whereIAS19wouldalsorequiretheyieldongovernmentbondstobeused,itwillgiverisetoadifferenceforcompaniesthathavedefinedbenefitschemeswherepaymentwillbemadeinaforeigncurrency(e.g.overseassubsidiariesofIndiancompanies),forwhichthereisadeepmarketofhighqualitycorporatebonds,suchasintheUKorUS.

Difference19.3(NotpartoftheStandard) GAAPdifference? Avoidable?

Frequency of Actuarial valuation No --

TheappendixtoIndAS19(unlikeIAS19)statesthatdetailedactuarialvaluationofdefinedbenefitobligationsmaybemadeatintervalsnotexceedingthreeyears.

PwC observation

TheappendixtoIndAS19indicatesthattheremayhaveoriginallybeenanintentiontorequirethedetailedactuarialvaluationofdefinedbenefitobligationsatleasteverythreeyears.However,nosuchamendmentisinthemaintextofthestandard.Thisdiscrepancyshouldbeclarifiedbythestandardsetters.


IndAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance

IndAS21TheEffectsofChangesinForeignExchangeRates


Elimination of option to measure non-monetary government grants at nominal value No --

IAS20givesanoptiontomeasurenon-monetarygovernmentgrantseitherattheirfairvalueoratnominalvalue.IndAS20requiresmeasurementofsuchgrantsonlyattheirfairvalue.ConsequentialamendmentshavebeenmadetoIndAS38IntangibleAssets.


Option to recognise exchange differences arising on translation of long term monetary items in equity Yes Yes

IndAS21providescompanieswithanoptiontorecogniseunrealisedexchangedifferencesarisingontranslationoflong-termmonetaryitems(assetsandliabilities)denominatedinaforeigncurrencydirectlyinequity,andaccumulatedasaseparatecomponenttherein.Suchaccumulatedexchangedifferencesmustbetransferredtoprofitorlossovertheperiodofmaturity‘inanappropriatemanner’.Theoption,ifapplied,istobeexercisedwhentheexchangedifferenceisinitiallyrecognised.Onceexercised,itisirrevocableandappliedforalllongtermmonetaryitems.

Thisoptionisnotavailableforthelong-termmonetaryitemswhichareclassifiedasatfairvaluethroughprofitorlossinaccordancewithIndAS39,eitherbecausetheyareheldfortradingorbecauseoftheirdesignationasatfairvaluethroughprofitorloss.Monetaryitemsareconsideredtobelong-termifithasamaturityperiodoftwelvemonthsormorefromthedateoftheinitialrecognition.

IAS21requiresallgainsandlossesarisingonretranslationofmonetaryassetsandliabilitiesdenominatedinaforeigncurrencytoberecognisedinprofitorloss(unlessitisdesignatedasahedginginstrumentinacashflowornetinvestmenthedge).


Elimination of option to present grants as deduction in arriving at the carrying amount of asset No --

IAS20givesanoptiontopresentthegrantsrelatedtoassetseitherbysettingupthegrantasdeferredincomeorbydeductingthegrantinarrivingatthecarryingamountoftheasset.IndAS20requirespresentationofsuchgrantsinthebalancesheetasdeferredincome.

Comparison of near final Ind AS with IFRS 15

IndAS32FinancialInstruments:Presentation


Exception to the definition of financial liability Yes No

IndAS32introducesanexceptiontotheIFRSdefinitionofa‘financialliability’.IndASclassifiesaconversionoptionembeddedinaconvertiblebonddenominatedinaforeigncurrencyasanequityinstrumentifitentitlestheholdertoacquireafixednumberofentity’sownequityinstrumentsforafixedamountofcash,andtheexercisepriceisfixedinanycurrency.IAS32requirestheexercisepricetobefixedintheentity’sfunctionalcurrency.

PwC observation on Ind AS 21 & Ind AS 32

TheseprovisionsmayhelptopreventincomestatementvolatilityforIndianentitiesresultingfromIFRSaccountingfor(a)translationsoflongtermmonetaryitemsfromforeigncurrencytofunctionalcurrency(i.e.IAS21)and(b)equityconversionoptionsembeddedinaforeigncurrencyconvertiblebonddenominatedinforeigncurrencytoacquireafixednumberofentity’sownequityinstrumentsforafixedamountinaforeigncurrency(i.e.IAS32).

Asuitableexamplethatcontainsboththeabovementionedfeaturesi.e.ForeignCurrencyConvertibleBond(FCCB)isexplainedoverhere.IndiancompaniesoftenissuelongtermFCCBs,denominatedinacurrencydifferentfromthefunctionalcurrencyoftheissuingentitytoraiseforeignfundsatcompetitiverates. TheseFCCBscontainaplainvanillaequityconversionoption,forwhichthenumberofsharestobeissuedonconversionaswellastheunderlyingconsideration(redemptionamountofthebond)arefixedinaforeigncurrency.

IFRSprescribessplitaccountingfortheseFCCBs(i.e.liabilityandconversionfeature),wherethethedebthostisliabilitycomponentinitiallyrecordedatfairvalueandsubsequentlymeasuredatamortisedcostwithforeignexchangetranslationdifferencebeingrecognisedinprofitandlossaccount;whiletheconversionfeatureistreatedasderivativeliability(as‘fixed-for-fixed’conditionnotsatisfiedduetotheexchangeratevariation)andsubsequentlyre-measuredthroughprofitandlossaccount.

However,IndAS21providesanirrevocableoptiontorecogniseexchangedifferencesonthetranslationofsuchlongtermmonetaryitemsfromforeigncurrencytofunctionalcurrencyinequityandforthesetobetransferredtotheprofitorlossoverthematurityofsuchinstrumentsinanappropriatemanner(subjecttocertainconditions.)UnderIndAS32,anexceptiontothedefinitionoffinancialliabilitypermitsthatsuchconversionoptionwillberecognisedasanequityinstrumentratherthanasaderivativeliabilityasspecifiedunderIFRS. These are significant GAAP differences relative to IFRS.


IndAS24RelatedPartyDisclosures


Overriding nature of statute for related party disclosures Yes Yes

InIndAS24eliminatestheneedtoproviderelatedpartydisclosuresthatareconsideredtoconflictwiththeconfidentialityrequirementsofstatute,aregulatororsimilarcompetentauthority,onthebasisthataccountingstandardscannotoverridelegal/regulatoryrequirements(Para4Aand4BofIndAS24).IAS24hasnoequivalentrequirement.

PwC observation

Para4Aand4Bareopenforinterpretationandcouldleadtonon-disclosureofinformation,whichmaynotbetheintentionofthestandard.Further,itisunclearwhatconstitutesa‘similarcompetentauthority’.


Change in definition of close family members Unlikely --

IAS24defines,‘closemembersofthefamily’ofanindividualasthosefamilymemberswhomaybeexpectedtoinfluence,orbeinfluencedby,thatindividualintheirdealingswiththeentity.Theymayinclude:1. theindividual’sdomesticpartnerandchildren;2. childrenoftheindividual’sdomesticpartner;and3. dependantsoftheindividualortheindividual’sdomesticpartner.

However,IndAS24defines‘closemembersofthefamily’ofapersonasthepersonsspecifiedwithinmeaningof‘relative’undertheCompaniesAct1956andthatperson’sdomesticpartner,childrenofthatperson’sdomesticpartneranddependantsofthatperson’sdomesticpartner.


Additional guidance for aggregation of transactions No --

IndAS24providesadditionalclarificatoryguidanceregardingtheaggregationoftransactionsfordisclosure.Thisguidancestatesthataggregation‘shouldnotbedonesoastoobscuretheimportanceofsignificanttransactions’,forexample:• Purchasesorsalesofgoodsshouldnotbeaggregatedwithpurchasesorsalesoffixedassets;• Amaterialrelatedpartytransactionwithanindividualpartyshouldnotbeclubbedinanaggregateddisclosure.



Format of consolidated financial statements (Refer difference 1.2 also)

Unlikely --

IndAS27prescribesspecificformatforpresentationofconsolidatedfinancialstatementsorasneartheretoascircumstancesadmit,whereparentisacompany.Itsetsouttheminimumrequirementsfordisclosureonthefaceof• ‘ConsolidatedBalanceSheet’attheendoftheperiodanda‘ConsolidatedStatementofChangesinEquity’forthe

periodasapartofthe‘ConsolidatedBalanceSheet’,• ‘ConsolidatedStatementofProfitandLoss’fortheperiod,and• Notestoaccounts.

However,IAS27doesnotprescribeanyspecificformatforpresentationofconsolidatedfinancialstatements.

IndAS27ConsolidatedandSeparateFinancialStatements



Different accounting periods and policies of associates Yes Yes

Wherethefinancialstatementsofanassociateusedinapplyingequitymethodarepreparedasofadatedifferentfromthatoftheinvestor,IAS28requiresthatthisdifferenceshouldnotbemorethanthreemonths.IAS28alsorequiresthattheaccountingpoliciesofanassociateshouldbealignedwiththoseofthereportingentity.IndAS28providesexceptionstotheserequirementsiftheyare‘impracticable’.

PwC observation

IndAS28explainsthatthesechangeshavebeenmadebecausetheinvestordoesnotcontroltheassociate,andhenceitmaynotbeabletoobtaintheinformationnecessarytocomplywiththerequirementsofIAS28.Nevertheless,ifthecompanyisunabletoinfluenceitsassociatesufficientlyinordertoobtaintherelevantfinancialstatementsorinformation,thiscouldbringintoquestionwhetherithassignificantinfluenceoveritsinvestment,andhencewhetheritsclassificationasanassociateisappropriate.However,'impracticable'isahighthreshold,andhenceitisunlikelythataGAAPdifferencewillarise.


Compulsory disclosure of EPS No --

IAS33providesthatwhenanentitypresentsbothconsolidatedfinancialstatementsandseparatefinancialstatements,itmaygiveEPSrelatedinformationinconsolidatedfinancialstatementsonly,whereas,theIndAS33requiresEPSrelatedinformationtobedisclosedbothinconsolidatedfinancialstatementsandseparatefinancialstatements.


Adjustments to the EPS calculation No --

IndAS33providesthatwhereanyitemofincomeandexpensewhichisotherwiserequiredtoberecognisedinprofitorlossinaccordancewithIndAS,isdebitedorcreditedtosecuritiespremiumaccount/otherreservesinaccordancewithlegalrequirements,theamountinrespectofthereofshallbedeductedfromprofitorlossfromcontinuingoperationsforthepurposeofcalculatingbasicanddilutedearningspershare.

PwC observation

ThisamendmenteliminatesaGAAPdifferenceinreportedEPSincircumstanceswhereaGAAPdifferencealreadyexistsinreportedprofitorlossduetotherequirementsofIndianlawe.g.shareissueexpenseneedtobewrittenoffagainstsecuritiespremiumratherthantoberecognisedinprofitandlossaccount.

IndAS28InvestmentsinAssociates

IndAS33EarningsperShare



Change in the fair value of a financial liability due to the entity’s own credit risk Yes Yes

IndAS39hasamendedthesubsequentmeasurementoffinancialliabilitiesdesignatedatfairvaluethroughprofitorlosssoastoignorechangesinthefairvalueconsequenttochangesintheentity’sowncreditrisk.Accordingly,suchliabilitiesarenotrecognisedatfairvalue,butusinga‘frozencreditspread’methodology.IAS39requiresallchangesinfairvaluesinsuchliabilitiestoberecognisedinprofitorloss.

PwC observation

Thisprovisionisintroducedtopreventtherecognitionofunrealisedgainsorlossesresultingfromthechangesinfairvalueoffinancialliabilitiesconsequenttochangesintheentity’sowncreditrisk.TheIASBhasalsointroducedmeasuresinIFRS9FinancialInstrumentstopreventvolatilityinprofitorlossfromchangesintheentitiesowncreditrisk.However,thesemeasuresdiffersignificantlyfromthoseinIndAS39,asIFRS9continuestorequiresuchfinancialliabilitiestoberecognisedatfairvalue,butwithchangesduetoowncreditbeingrecognisedinothercomprehensiveincome(i.e.outsideprofitorloss).

TheFairValueThroughProfitorLossdesignationisitselfoptionalunderIndAS,andhencetheGAAPdifferencetechnicallycouldbeavoidedbynotusingthismeasurementcategory.

IndAS39FinancialInstruments:RecognitionandMeasurement

IndAS40InvestmentPropertyDifference40.1 GAAPdifference? Avoidable?

Elimination of option to recognise investment properties at fair value No --

IAS40permitsinvestmentpropertytobemeasuredusingeitherthecostmodelorthefairvaluemodelafterinitialrecognition.IndAS40requirestheuseofthecostmodel.Accordingly,followingprovisionsof‘IAS17Leases’havebeenremovedunderIndAS17:

• Paragraph18ofIAS17dealingwithmeasurementofthelandandbuildingselementswhenthelessee’sinterestinbothlandandbuildingsisclassifiedasaninvestmentpropertyinaccordancewithIAS40InvestmentPropertyandthefairvaluemodelisadopted.

• Paragraph19ofIAS17dealingwithpropertyinterestheldunderanoperatingLeaseasaninvestmentproperty,ifthedefinitionofinvestmentpropertyisotherwisemetandthefairvaluemodelisapplied.


Otherdifferences

ApplicabilityofIndAS

ApplicabilityorexemptionstoIndASaregovernedbytheCompaniesAct,1956andtherulesmadethereunder.Accordingly,thefollowingchangeshavebeenmade:

1. ApplicabilityorexemptionofIndAS33EarningsperShareandIndAS108Operatingsegmentshasbeenchangedtobe based on‘Companies(AccountingStandards)Rules__’ratherthanbasedonlistingcriteriagiveninIFRS.

2. ThescopeofIndAS28InvestmentsinAssociatesandIndAS31InterestsinJointVentureshavebeenmodifiedsoastoexcludemutualfunds,unittrustsandsimilarentities(includinginsurancelinkedinvestmentfunds)astheCompaniesAct,1956isnotapplicabletothem.

3. TheexemptionfrompreparingconsolidatedfinancialstatementsunderPara10ofIAS27hasbeenremovedinIndAS27.SimilaramendmentshavebeenmadetoIndAS28InvestmentsinAssociatesandIndAS31InterestsinJointVentures.

‘Companies(AccountingStandards)Rules__’tomakeIndASeffectiveareyettobenotified.

Consequentialamendments

1. IFRS1requiresspecificdisclosuresiftheentityprovidesnon-IFRScomparativeinformationandhistoricalsummaries.SincecomparativesareoptionalunderIndAS,thesedisclosurerequirementshavebeenremovedfromIndAS101.

2. IAS1containsImplementationGuidance.IndAS1doesnotincludethesamebecausevariousenactmentshaveprescribedformats,e.g.,ScheduleVItotheCompaniesAct,1956.

3. IndAS12IncomeTaxeshasbeenmodifiedconsequenttothechangeinaccountingtreatmentofgainsonbargainpurchases,theadoptionofasinglestatementapproachinIndAS1,andgovernmentgrantpresentation.

4. AdditionalguidanceisincludedinIndAS23BorrowingCostsonexchangedifferencesarisingfromforeigncurrencyborrowingsthataretobetreatedasanadjustmenttointerestcosts.

5. Withregardtotheacquisitionofanintangibleassetbywayofagovernmentgrant,IAS38,IntangibleAssets,providestheoptiontoanentitytorecognizebothassetandgrantinitiallyatfairvalueoratanominalamountplusanyexpenditurethatisdirectlyattributabletopreparingtheassetforitsintendeduse.IndAS38allowsonlyfairvalueforrecognisingtheintangibleassetandgrantinaccordancewithIndAS20.


Otherdifferences(Contd.)

Minordifferences

1. DeletionofIFRS1exemptionsnotrelevantforIndia• SinceIndAS19doesnotallowthecorridorapproachtobeusedtodeferactuarialgainsandlosses,thecorresponding

IFRS1exemptionforsettingactuarialgainorlosstozeroundercorridorapproachhasbeenremovedfromIndAS.• TheoptioninIFRS1tocapitaliseborrowingcostsonaprospectivebasishasbeenremovedfromIndAS,onthebasis

thatexistingIndianGAAPalreadyrequiresanentitytocapitaliseborrowingcosts.

2. TransitionalprovisionsfortheaccountingforinsurancecontractsandserviceconcessionarrangementshavebeenincorporatedinIndAS101soastorequireprospectiveapplicationonorafterdateoftransitiontoIndAS.Earlierapplicationisencouraged.

3. Normally,anentityconsistentlypreparesfinancialstatementsforaone-yearperiod.However,forpracticalreasons,someentitiesprefertoreport,for52-weekperiod.IAS1allowsthispracticebutIndAS1doesnot.

4. Whenthereisachangeinfunctionalcurrencyofeitherthereportingcurrencyorasignificantforeignoperation,IAS21requiresdisclosureofthatfactandthereasonforthechangeinfunctionalcurrency.IndAS21requiresanadditionaldisclosureofthedateofchangeinfunctionalcurrency.

5. AdditionaldisclosuresregardingthedurationofhyperinflationaryexistingintheeconomyhasbeenaddedtoIndAS29FinancialReportinginHyperinflationaryEconomies.

Generaldifferences

1. Differentterminologiesareused,asusedinexistinglawse.g.term‘BalanceSheet’isusedinsteadof‘Statementoffinancialposition’and‘Statementofprofitandloss’isusedinsteadof‘Statementofcomprehensiveincome’.Words‘approvedforissue’havebeenusedinsteadof‘authorisedforissue’inthecontextoffinancialstatementsconsideredforthepurposeofeventsafterthereportingperiod.

2. ProvisionsrelatingtoTransitionincludedinindividualIAShavebeendeletedfromIndASsincealltransitionalprovisionsrelatedtoIndASwhereeverconsideredappropriatehavebeenincludedinIndAS101.

3. IFRICs(exceptIFRIC2&15)andSICsareincludedasappendicesintheIndAS.ThusthereferencestoIFRICsandSICshavebeenreplacedwithreferencestoAppendices.

4. IFRSincludesaBasisforConclusions(‘BC’)asanappendix,whichsummarisestheIASB’sconsiderationsinreachingtheconclusionofeachstandard;thesedonotformpartofIndAS.


IndiaismovingaheadonthepathofIFRSconvergence,andwiththeIndASbeingnotifiedbytheMCA,itbringsforthafewquestionsaboutthenextstepsintheprocessofconvergence.

Key Questions to be answered

TheconvergencetoIFRSbyIndiaisaverysignificantstepintherightdirectionandthepathtakenhasbeenchallenginggiventheneedtoconsiderthenumerousaspectsinplay.WiththewelcomemovebytheMCAofissuingIndAS,thereareothervitalstepsthatareanticipatedwithsomeanxietygiventhetimeathand,andinclude:

• WhenwouldtheseIndASbenotifiedintheofficialgazette?

• WhenwouldthedateofimplementationofIndASbeannouncedbytheGovernment?

• Howandbywhenwillconsequentialamendmentstoexistinglegislation(e.g.theCompaniesAct,IncometaxAct,SEBIguidelines,etc),bemade?

• WhenwillSEBIrequiretheuseofIndASforquarterlyreporting?

• HowwouldIndASsynchronizewith,andwhatwouldtheimpactbeof,newchangesonthehorizon,suchasDTC,GST,etc?

• WillIndAScontinuetoevolvealongsidechangestoIFRS?

Is convergence achieved?

IndiahasadoptedasteptowardsconvergencewithIFRS,butwithcertain‘carve-outs’(and‘carve-ins’)toeaseadoptionandtemperIFRStobemoreacceptableinthelocalmarketplace.Thefundamentalquestionremains:howwillIndiaparticipate(ifnotinfluence)inthefuturedevelopmentofIFRS?WilltheinclusionofsignificantdifferencesbetweenIndASandIFRSmuteIndia’svoicerelativetofullyconvergedterritories?

Further,withIFRSitselfchangingintheneartomediumterm(seeAppendixCforIASB’songoingprojects),whenandhowwouldallthesebeincorporatedintothepathIndiaistaking?Finally,andperhapsmostimportantly,willthebenefitsof‘almostconverging’outweighthepainbeingenduredbythoseadoptingIndAS?

Are Companies prepared for this change?

ThoughthefinalIndAShavebeenissuedbytheMCAbutthereisnoclarityonthedateofimplementationofIndAS.Recently,therehasbeenmediacoverageofvariousstakeholdersquestioningthetimingoftheconvergenceplansinIndia,giventhenumerousmovingpartsintheIndiancontextandIFRSbeingamovingplatform.

Challenges Ahead

ThesearethefinalIndASbeingnotifiedbytheMCA.ThedateofimplementationoftheseIndASisexpectedtobeannouncedbytheMCAatalaterdate.FollowingIFRSarenotissuedunderIndAS–FinancialInstruments(IFRS9),AccountingandReportingbyRetirementBenefitPlans(IndAS26)andAgriculture(IndAS41).

Appendix A - List of Ind AS

IndAS IndASNameCorrespondingIFRS

ExistingASIAS/IFRS IFRIC SIC

IndAS101 First-timeAdoptionofIndianAccountingStandards IFRS1 - - -

IndAS102 SharebasedPayment IFRS2 - - -

IndAS103 BusinessCombinations IFRS3 - - AS14

IndAS104 InsuranceContracts IFRS4 - - -

IndAS105 Non-CurrentAssetsHeldforSaleandDiscontinuedOperations IFRS5 - - AS24

IndAS106 ExplorationforandEvaluationofMineralResources IFRS6 - - -

IndAS107 FinancialInstruments:Disclosures IFRS7 - - AS32

IndAS108 OperatingSegments IFRS8 - - AS17

IndAS1 PresentationofFinancialStatements IAS1 - - AS1

IndAS2 Inventories IAS2 - - AS2

IndAS7 StatementofCashFlows IAS7 - - AS3

IndAS8 AccountingPolicies,ChangesinAccountingEstimatesandErrors IAS8 - - AS5

IndAS10 EventsaftertheReportingPeriod IAS10 IFRIC17 - AS4

IndAS11 ConstructionContracts IAS11 IFRIC12 SIC29 AS7

IndAS12 IncomeTaxes IAS12 - SIC21,25 AS22

IndAS16 Property,PlantandEquipment IAS16 IFRIC1 - AS6,10

IndAS17 Leases IAS17 IFRIC4 SIC15,27 AS19

IndAS18 Revenue IAS18 IFRIC13,15*,18 SIC31 AS9

*IFRIC 15 has not been issued under Ind AS. Source: www.mca.gov.in


Notes:

1. Theterm‘InternationalFinancialReportingStandards’(‘IFRS’)comprisesof:• InternationalFinancialReportingStandards(IFRS)• InternationalAccountingStandards(IAS)• InterpretationsfromtheInternationalFinancialReportingInterpretationsCommittee(IFRIC)• InterpretationsfromStandingInterpretationsCommittee(SIC)

2. ExistingASreferstoexistingAccountingStandardsnotifiedunderCompanies(AccountingStandards)Rules,2006.

IndASReference

IndASNameCorrespondingIFRS ExistingAS

ReferenceIAS/IFRS IFRIC SIC

IndAS19 EmployeeBenefits IAS19 IFRIC14 - AS15

IndAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance

IAS20 - SIC10 AS12

IndAS21 TheEffectsofChangesinForeignExchangeRates IAS21 - - AS11

IndAS23 BorrowingCosts IAS23 - - AS16

IndAS24 RelatedPartyDisclosures IAS24 - - AS18

IndAS27 ConsolidatedandSeparateFinancialStatements IAS27 - SIC12 AS21

IndAS28 InvestmentsinAssociates IAS28 - - AS23

IndAS29 FinancialReportinginHyperinflationaryEconomies IAS29 IFRIC7 - -

IndAS31 InterestsinJointVentures IAS31 - SIC13 AS27

IndAS32 FinancialInstruments:Presentation IAS32 IFRIC2* - AS31

IndAS33 EarningsperShare IAS33 - - AS20

IndAS34 InterimFinancialReporting IAS34 IFRIC10 - AS25

IndAS36 ImpairmentofAssets IAS36 - - AS28

IndAS37 Provisions,ContingentLiabilitiesandContingentAssets IAS37 IFRIC5,6 - AS29

IndAS38 IntangibleAssets IAS38 - SIC32 AS26

IndAS39 FinancialInstruments:RecognitionandMeasurement IAS39IFRIC9,16,19

- AS13,30

IndAS40 InvestmentProperty IAS40 - - -

*IFRIC 2 has not been issued under Ind AS. Source: www.mca.gov.in


Deferral of certain standards and interpretations

• IndAS106ExplorationforandEvaluationofMineralResources(i.e.IFRS6equivalent)Thisstandardwillbeappliedwithmodificationfromadatetobenotifiedlater.Inthepotentialdelayinnotificationofthisstandard,companieswillneedtoformulateaccountingpoliciesforrelevanttransactionsthatareconsistentwiththeprinciplesinotherstandardsorotherwiseinaccordancewiththeIndAS8hierarchy.Itwouldbeproblematicforcompaniestoapplyotherstandards(IndAS16Property,plantandequipment;IndAS38Intangibleassets;andIndAS36Impairmentofassets),asIndAS106providesrelieffromcertainrequirementsofthesestandards.

• Notificationoffollowingappendiceshasbeendeferred.Theeffectivedateofimplementationwillbeannouncedseparately.

» AppendixCofIndAS17,determiningwhetheranArrangementcontainsaLease(i.e.IFRIC4equivalent)

» AppendixAofIndAS11,‘ServiceConcessionArrangements’(i.e.IFRIC12equivalent)

» AppendixBofIndAS11‘ServiceConcessionArrangements:Disclosures’(i.e.SIC29equivalent)

CompaniesmayearlyadopttheseappendicesunderIndAS8hierarchywhenselectingaccountingpolicies.Onceselected,accountingpoliciesshouldbeappliedconsistently.

Ind AS 18 Revenue

Forrateregulatedentities,IndAS18isexpectedtobemodified,whereandtoextenttherecognitionandmeasurementofrevenueofsuchentitiesisaffectedbyrecognitionandmeasurementofregulatoryassets/liabilities.AGuidanceNoteonthesubjectisalsobeingissuedbytheInstituteofCharteredAccountantsofIndia.

Ind AS 21 Effects of changes in foreign exchanges rates

• Whenthereisachangeinfunctionalcurrencyofeitherthereportingentityorasignificantforeignoperation,IAS21requiresdisclosureofthatfactandthereasonforthechangeinfunctionalcurrency.IndAS21requiresanadditionaldisclosureofthedateofchangeinfunctionalcurrency.

• AppendixB:IllustrativeexamplesonapplicationofPara14,25,33and37(i.e.functionalcurrencyincaseofahyperinflationaryeconomy,impairmentloss,netinvestmentinforeignoperationsdenominatedinthefunctionalcurrencyofthereportingentityandeffectsofchangeinfunctionalcurrency)havebeenincluded.

Appendix B - Differences between near final and final Ind AS


Ind AS 24 Related party disclosures

IndAS24defines‘closemembersofthefamily’ofapersonasthepersonsspecifiedwithinmeaningof‘relative’undertheCompaniesAct1956andthatperson’sdomesticpartner,childrenofthatperson’sdomesticpartneranddependantsofthatperson’sdomesticpartner.InnearfinaldraftitwasdefinedonthesimilarlinesasgiveninIAS24i.e.thosefamilymemberswhomaybeexpectedtoinfluence,orbeinfluencedby,thatindividualintheirdealingswiththeentityincludingbrothers,sisters,fatherandmotherofthatperson.Refer difference 24.2 for more details.

Ind AS 27 Consolidated and Separate Financial Statements

AppendixC‘FormofConsolidatedFinancialStatements’isaddedinthisstandard.Thisappendixsetsouttheminimumrequirementsfordisclosureonthefaceof

» ‘ConsolidatedBalanceSheet’attheendoftheperiodanda‘ConsolidatedStatementofChangesinEquity’fortheperiodasapartofthe‘ConsolidatedBalanceSheet’,

» ‘ConsolidatedStatementofProfitandLoss’fortheperiod,and

» Notestoaccounts.

Refer difference 27.1 and 1.2 for more details.

Ind AS 34 Interim financial reporting

Afootnotehasbeeninsertedwhichstatesthatunauditedfinancialresultsrequiredtobepreparedandpresentedunderclause41oflistingagreementwithstockexchangesisnotan‘InterimFinancialReport’asdefinedinthisstandard.

Ind AS 101 First-time adoption of Indian Accounting Standards

• Para2AhasbeenremovedfromIndAS101wherereliefwasprovidedtoexistingfilersoffinancialstatementsinaccordancewiththeIFRSissuedbytheIASB,whichwouldhavebeenentitledtoadoptthebalancesheetsofiledasattheendoftheimmediatelyprecedingfinancialyearastheopeningIndASbalancesheetaftermakingadjustmentsfordifferencesinIndASandIFRSasonthedateoftransitiontoIndAS.

• ClarificationhasbeenprovidedonapplicationofIndAS101whencomparativeinformationisprovidedfromthedeemeddateoftransition.AfirsttimeadopterforwhomthefirstreportingperiodisfinancialstatementsfortheyearendingMarch31,2012mustapplytheexceptionsandexceptionsasatApril1,2010andApril1,2011;accordinglythebalancesheetasatendofMarch31,2011maynotbeequivalenttotheopeningBalanceSheetasatApril1,2011.

• ParagraphD7Aprovidesanentitywiththeoptiontousethecarryingvalueofallproperty,plantandequipmentasatthedateoftransition(insteadofcarryingvaluesofallsuchassetsonorbeforeApril1,2007asinnearfinalIndAS)inaccordancewithpreviousGAAPasanacceptablestartingpointunderInd-AS.Thisoptioncanalsobeappliedtoinvestmentpropertiesandintangibleassets.

• ParaD19Aprovidestransitionalreliefforretrospectiveapplicationoftheeffectiveinterestmethodandimpairmentrequirementsforfinancialinstrumentscarriedatamortisedcost.Theword‘financialasset’(asgiveninthenearfinaldraft)isreplacedwith‘financialinstrument’inthefinalstandardinorderforthisrelieftobeapplicableforfinancialliabilitiesaswellas‘financialassets’.


Note - This timetable is taken from IASB website (ifrs.org) as on 28 February 2011. It shows the current best estimate of publication dates and is subject to change. Refer http://www.ifrs.org/Current+Projects/IASB+Projects/IASB+Work+Plan.htm for more details.

Other projects

In November 2010 the IASB and FASB (Financial Accounting Standards Board) decided to amend the timetable for projects that are important but less urgent and expect to resume discussing these topics after June 2011:

• Financial Statement Presentation (the replacement of IAS 1 and IAS 7), • Financial instruments with characteristics of equity, • Emissions Trading Schemes, Liabilities (IAS 37 amendments), and • Income Taxes.

Additionally, the IASB is deferring publication of exposure drafts for Investment Companies and Annual improvements (see the timetable above) and the IASB and FASB do not expect to complete the phase A of the conceptual framework reporting entity until the Q2 2011.

Further, IASB will consider research and other projects like rate-regulated activities, intangible assets etc. in its future agenda in 2011.

Recently completed projects

• Deferred tax: recovery of underlying assets• Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters• additions to IFRS 9 Financial Instruments in relation to financial liabilities• Management Commentary• Derecognition – Disclosures• Conceptual Framework Phase A• Improvements to IFRSs

Refer http://www.ifrs.org/Current+Projects/IASB+Projects/IASB+Work+Plan.htm for effective dates.

Appendix C–IASB’s ongoing projects

Estimated publication date

Financial Crisis related projects 2011 Q1 2011 Q2

Financial instruments (IAS 39 replacement)

Impairment

IFRSHedge accounting

Asset and liability offsetting

Consolidation

Replacement of IAS 27 IFRS

Disclosures unconsolidated entities IFRS

Investment companies ED

Fair value measurement IFRS

Memorandum of Understanding (MOU) projects

Financial statement presentation (Presentation of OCI) IFRS

Leases IFRS

Revenue recognition IFRS

Joint ventures IFRS

Post-employment benefits (incl. pensions) IFRS

Other Projects

Insurance contracts IFRS

Annual improvements 2009-2011 ED

ED Exposure Draft

25

We can team upTo have a deeper discussion about how Ind AS or IFRS can affect your business, please contact:

Srijit Banerjee+91-99300 [email protected]

Ian Farrar+91-96194 [email protected]

Shrenik Baid+91-98201 [email protected]

Kumar Dasgupta+91-90046 [email protected]

Rahul Chattopadhyay+91-98113 [email protected]

Sunder Iyer+91-98201 29822 [email protected]

Comparison of near final Ind AS with IFRS 26

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This publication has been developed and compiled by the IFRS Team of PricewaterhouseCoopers, India.

This publication has been prepared for general information on matters of interest only, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this material was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers India, its members, employees and agents shall not be responsible for any loss sustained by any person or entity who relies on this publication.

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NJ 130 February 2011 Comparison of Ind AS with IFRS.indd Designed by PwC Brand & Communicatiom, India

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