ind as: practical perspectives (nbfcs) · gaap and ind as. the trend of impact of ind as on key...

January 2019

KPMG.com/in

An analysis of published quarterly results of NBFC debt and equity listed companies for the half year ended 30 September 2018

Ind AS: Practical perspectives (NBFCs)

Table of contents

IntroductionBackground to Ind AS adoption for NBFCs

Basis of our analysis Impact on key metrics of NBFCs Analysis of impact of key standardsAnalysis of impact of key standards

Recognition of interest income and expense using effective interest rate method

Expected Credit Loss (ECL)

Derecognition of financial assets

Segment reporting

Deferred tax on special reserves

Employee Stock Option (ESOP) accounting

Earnings per Share (EPS)

First time adoption choices

Specific disclosures/comments provided by companies

Foreword

Appendix 1- Snapshot of companies covered in our analysis

© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved

0 1

0709

1 7

ForewordNon-Banking Financial Companies (NBFCs) have adopted Ind AS from 1 April 2018. These companies have recently published their financial results for the period ended 30 September 2018. As NBFCs embrace Ind AS, KPMG in India, through its publication, ‘Ind AS: Practical perspectives (NBFCs)’ aims to capture emerging trends and practices by analysing these financial results.

In this publication, we analyse the results of 58 NBFCs (28 NBFCs that have their debt securities listed on the BSE and 30 equity listed NBFCs on BSE 500).

The equity listed NBFCs have implemented Ind AS when preparing their financial results for the quarter ended 30 June 2018 while debt listed NBFCs have published their Ind AS results for the first time as at 30 September 2018. With the 30 September 2018 financial results, equity listed NBFCs presented their balance sheet prepared under Ind AS for the first time.

Basis of our analysis is a comparison of the reported financial results for the half year ended 30 September 2017 under the erstwhile Indian GAAP with the restated financial results for the same period under Ind AS, that have been published as comparatives for the period ended 30 September 2018.

As noted in the first quarter, the implementation and disclosures relating to the application of Ind AS in the second quarter too have been substantially impacted by the financial reporting

relaxations provided by the Securities and Exchange Board of India (SEBI) for the first-time adoption of Ind AS. This has brought in diversity in results presented by companies. Most of the companies presented only bare minimum information mandated by SEBI. As a result, the impact of the transition on net worth, the transition related choices made and exemptions availed are not evident in the published results thus far. Further, close to 83 per cent of these NBFCs have reported only separate financial results instead of consolidated financial results. Due to these reasons, the financial results do not fully showcase the extent of qualitative differences between erstwhile Indian GAAP and Ind AS.

The trend of impact of Ind AS on key financial metrics for half year ended 30 September 2017 is in line with the trend observed in the first quarter 30 June 2017 i.e., there is an increase in revenue from operations, finance cost and employee cost under Ind AS in comparison to the erstwhile Indian GAAP while there is a fall in profit after tax. Additionally, we observed that there is an increase in loan loss provision reported by 22 per cent by the equity listed NBFCs while debt listed NBFCs showcased a reduction in the loan loss provision by 28 per cent.

We hope you will find this publication useful in enhancing your understanding of NBFCs’ results under Ind AS and we welcome any suggestions or feedback that you may have.


Sai VenkateshwaranPartner and HeadCFO Advisory KPMG in India

Ruchi RastogiPartnerAssuranceKPMG in India


Background to Ind AS adoption for NBFCs

With the beginning of accounting year 2018, the Non-Banking Financial Companies (NBFCs) adopted Indian Accounting Standard (Ind AS) for the first time. As per the Ind AS implementation road map issued by the Ministry of Corporate Affairs (MCA) on 30 March 2016, NBFCs are required to adopt Ind AS in a phased manner from accounting periods beginning on or after 1 April 2018 (with comparatives for the periods ending on or after 31 March 2018).

Ind AS comprises 391 accounting standards that are largely converged with International Financial Reporting Standards (IFRS) which have been issued by the MCA. Additionally, each year MCA issues annual amendments to Ind AS to maintain convergence with IFRS by incorporating amendments issued by International Accounting Standards Board (IASB).

The implementation of Ind AS is expected to have a pervasive impact on the financial services sector, not only in terms of accounting changes, but also on several aspects of their business. The largest impact is expected on accounting for financial instruments, on application of Ind AS 109, Financial Instruments (which is based on IFRS 9, Financial Instruments), Ind AS 32, Financial Instruments: Presentation (based on IAS 32, Financial Instruments: Presentation) and Ind AS 107, Financial Instruments: Disclosures (based on IFRS 7, Financial Instruments: Disclosures). The implementation of these financial instrument standards is expected to affect almost all line-items in the financial statements of the NBFCs.

01 | Ind AS: Practical perspectives - Issue 02/2019


Introduction

01. April 2018

Implementation road map

The initial plan of MCA was to implement Ind AS for banks, insurance companies and NBFCs from 1 April 2018 onwards. Earlier this year, the Ind AS implementation date has been deferred for banks by one year and for insurance entities by two years. Certain NBFCs are required to implement Ind AS in phase I from 1 April 2018 and others in phase II from 1 April 2019, as explained below.

The MCA’s notification covers all NBFCs as defined in clause (f) of Section 45-I of the Reserve Bank of India Act, 1934, and includes Housing Finance Companies (HFCs), Merchant Banking Companies, Micro Finance Companies, Mutual Benefit Companies, Venture Capital Fund Companies, Stock Broker or Sub-Broker Companies, Nidhi Companies, Chit Companies, Securitisation and Reconstruction Companies, Mortgage Guarantee Companies, Pension Fund Companies, Asset Management Companies and Core Investment Companies.

NBFCs would be required to prepare both consolidated and separate financial statements based on Ind AS in two phases.

Phase I

For accounting periods beginning from 1 April 2018 onwards, with comparatives for the periods ending on or after 31 March 2018:

I. NBFCs having net worth of INR500 crore or more, and

II. Their holding, subsidiary, joint venture or associate companies, other than those companies already covered under the road map for companies issued by MCA in February 2015.

Phase II

For accounting periods beginning from 1 April 2019 onwards with comparatives for the periods ending on or after 31 March 2019:

I. NBFCs whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of less than INR500 crore.

II. NBFCs that are unlisted companies, having net worth of INR250 crore or more but less than INR500 crore.

III. Holding, subsidiary, joint venture or associate companies of the above class of companies, other than those already covered under the road map for companies issued by MCA in February 2015.

NBFCs with a net worth below INR 250 crore and not covered in Phase I or II will continue to comply with the existing accounting standards in the Indian GAAP.

Reference date for computing net worth

In order to determine if an NBFC is covered by the notification, the net worth is to be calculated in accordance with the separate financial statements of the NBFC as on 31 March 2016 or the first audited financial statements ending after that date.

02


Financial results for the quarter ended 30 September 2018NBFCs may have listed either equity or debt securities on recognised stock exchanges. The equity listed NBFCs have implemented Ind AS in the preparation of their financial results from the quarter ended 30 June 2018, while NBFCs with debt listed securities released their Ind AS results for the first time as at 30 September 2018. In the results for the half year ended 30 September 2018, equity listed NBFCs presented their balance sheet prepared under Ind AS for the first time. In the financial results of 30 September 2018, NBFCs classified their assets and liabilities into current and non-current based on their operating cycle as a liquidity based order of presentation of financial results is not allowed.

On 11 October 2018, Schedule III to the Companies Act, 2013 (2013 Act) was amended. The amendments, inter alia, have incorporated a new division to Schedule III i.e. Division III which provides general instructions for presentation of financial statements of a NBFC. The notification, did not prescribe the accounting period from which the Division III is applicable. Accordingly, there is a mixed practice with respect of the format of balance sheet followed by NBFCs for the financial results of the quarter ended 30 September 2018. On 22 November 2018, the National Stock Exchange Limited (NSE) and the BSE Limited provided a clarification on the applicability date of the Division III of

Schedule III to the 2013 Act. The circulars clarify the following:

• Existing formats till the quarter ended 31 December 2018: According to the circulars issued by both the stock exchanges, listed entities are advised to follow the existing formats of Schedule III till the quarter ended 31 December 2018. Additionally, the entities may submit financial results as per the new format prescribed by MCA (i.e. Division III of Schedule III to the 2013 Act), in addition to existing formats prescribed under the 2013 Act.

• Amended formats for the quarters ending on and after 31 March 2019: NBFCs would present quarterly financial results and annual financial statements in accordance with the revised format.



Debt

Source: KPMG in India analysis based on the primary data gathered from BSE 500 equity listed NBFCs and BSE debt-listed NBFCs upto 14 December 2018

Format used to present financial results for the quarter ended 30 September 2018

35

30

25

20

15

10

5

0Equity

No.

of c

ompa

nies

NBFCs that applied Division IIINBFCs that applied Division II

NBFCs that applied both Division II and III

SEBI relaxation for listed companies (both debt and equity)The regulator for listed entities, the Securities and Exchange Board of India (SEBI) on 5 July 2016 and 10 August 2016 issued certain relaxations to enable a smooth transition to Ind AS reporting in the initial three quarters for equity listed entities and first half year for debt listed entities, in relation to submissions made by listed companies. The disclosure requirements and relaxations provided by SEBI are outlined below:

• Timelines for submission of financial results extended: The SEBI provided relaxation to listed companies (both debt and equity) to submit financial results for the quarter/half year ended 30 September 2018 upto 14 December 2018 (earlier upto 14 November 2018).

• Level of assurance for 30 September 2017 financial results: For the comparative quarter/half year ended 30 September 2017, audit/limited review of the financial results is not mandatory. However, management has to exercise necessary due diligence to ensure that the financial results provide a true and fair view of its affairs.

04


30 September 2018 results submission timeline exemption

Did not avail

extension

71%

Availed extension

29%

Source: KPMG in India analysis based on the primary data gathered from BSE 500 listed NBFCs (both debt and equity) upto 14 December 2018

Limited review by

auditors

33%Management prepared

62%

Audited5%

Level of assurance for 30 September 2017 financial results

Source: KPMG in India analysis based on the primary data gathered from BSE 500 listed NBFCs (both debt and equity) upto 14 December 2018


Basis of our analysis

Profile of companies covered

In this edition, of Ind AS: Practical Perspectives (NBFCs), we have analysed the first half year results announced by 58 NBFCs (28 NBFCs that have their debt securities listed on the BSE and 30 equity listed NBFCs on BSE 500). The publication analyses the impact of adoption of Ind AS on the profits of these companies and identifies some of the key Ind AS that contribute to the impacts on net interest income, PAT2 and loan loss provisions (expected credit losses), etc.

Of the 28 debt listed companies analysed in this publication, seven companies are Housing Finance Companies (HFCs) while 21 companies are other NBFCs, and of the 30 equity listed companies analysed, 10 are HFCs while the balance 20 are other NBFCs.

A detailed summary of the companies covered in this publication is presented in Appendix 1.

Availability and comparability of information

As SEBI offered certain relaxations in the presentation format, (detailed analysis provided earlier in this publication) majority of the covered companies presented only the mandatory financial results for the half year ended 30 September 2018.

Basis of analysis

Analysis in the subsequent sections of this publication is based on the profit reconciliations and balance sheet presented for the half year ended 30 September 2017 under the erstwhile Indian GAAP with the restated results for the same period under Ind AS that have been published for the half year ended 30 September 2018.

For our analysis on loan loss provision we have considered the information available as at 30 September 2018.

As necessary explanations/notes to the profit reconciliations have not been provided in a narrative form by all the covered companies, we have determined the nature of adjustments to profit to a particular Ind AS on the basis of the descriptions available in the reconciliations and on the basis of our analysis of those descriptions. It is also pertinent to note that debt listed companies are not required to present additional information by way of investor presentations. Further, certain values and percentages referred to in this publication should be considered as indicative and may change if computed differently and/or on use of different set of assumptions. Additionally, standard-wise/adjustment-wise Ind AS impact analysis on profitability is based on absolute values of adjustments disclosed in the reconciliations.

02. PAT: Profit after Tax



06

Source: KPMG in India analysis based on the primary data gathered from BSE 500 equity listed NBFCs and BSE debt-listed NBFCs upto 14 December 2018

*Represents the change as compared to the erstwhile Indian GAAP

Revenue from operations*

0.81 %

Employee cost*

4.75%

Finance cost*

2.58%

Profit After Tax*

5.31%


Impact on key metrics of debt listed and equity listed NBFCs for the 30 September 2017 half year under erstwhile Indian GAAP and Ind AS


03. EIR: Effective Interest Rate04. ECL: Expected Credit Losses


On an aggregation of the results of all the 30 equity listed companies covered in the analysis, the net profit under Ind AS for the half year ended 30 September 2017 has decreased from INR20,428 crore to INR18,815 crore, a decrease of 7.89 per cent as compared to that under the erstwhile Indian GAAP. This decrease is primarily driven by the impact of EIR3, loan loss provision (ECL4) and employee benefit costs, partly offset by the increase in reversal of the deferred tax liability on special reserves by certain HFCs.

A similar aggregation of the results of the debt listed companies covered in the analysis reveals a different trend from that observed in case of equity listed companies above. The aggregate profits of all the 28 debt listed companies covered in the analysis revealed that the net profit under Ind AS for the half year ended 30 September 2017 has increased to INR2,908 crore as compared to that under the erstwhile Indian GAAP of INR2,515 crore, an increase of 15.63 per cent. The key differentiating factor in the results of the equity listed companies and debt listed companies was the amortisation of costs and fees on loan origination, expected credit losses and gains or losses on derecognition of financial assets.

For the debt listed companies, both the impact of recognition of interest income and expense on an EIR as well as recognition of loan loss provisioning resulted in an increase in profits under Ind AS when compared to the erstwhile Indian GAAP. Based on our analysis of the reconciliations of the 28 debt listed companies, 12 companies reported a lower loan loss provisioning charge under Ind AS for the half year ended 30 September 2017 when compared to that under the erstwhile Indian GAAP.

08

The following section of this publication highlights some of the key impacts of adoption of Ind AS that have been reported as part of the profit reconciliation for the half year ended 30 September 2017.

Recognition of interest income and expense using EIR method

Interest income and expenses are required to be recognised using EIR, accordingly, directly attributable and incremental fees and costs in respect of loans and borrowings are not to be recognised upfront under Ind AS.

On an aggregate of the revenue from operations of all the 28 debt listed

companies, the revenue recognised under Ind AS was greater than that under erstwhile Indian GAAP by 2.05 per cent while the finance cost recognised under Ind AS was lower than that recognised under the erstwhile Indian GAAP by 1.00 per cent. Similar increase in revenue was also observed in case of the equity listed companies, wherein the revenue under Ind AS for the half year was greater than that under the erstwhile Indian GAAP by 0.58 per cent. However, on the contrary, for those equity listed companies, the finance cost increased by 2.52 per cent under Ind AS when compared to that under the erstwhile Indian GAAP.

Analysis of impact of key standards



Expected Credit Loss (ECL)

A. Overall impact on net worth and erstwhile Indian GAAP loan loss provisions

Equity listed NBFCs

The following table depicts the impact of expected credit losses on previously reported numbers of loan losses for half year ended 30 September 2017

Out of the 30 equity listed NBFCs analysed, 15 of them reported a higher Ind AS provision as compared to erstwhile Indian GAAP. Out of these 15 NBFCs, one NBFC had a substantial jump in the loan loss provision number and the balance 14 NBFCs reported an aggregate increase of 73 per cent in the loan loss provision.

Similar trends are seen in reported loan loss provision of equity listed NBFCs for the quarter ended 30 September 2017.

Debt listed NBFCs

The following table depicts the impact of ECL on previously reported numbers of loan loss provision for half year ended 30 September 2017

Out of the 28 debt NBFCs analysed, 12 of them reported a lower Ind AS provision as compared to erstwhile Indian GAAP. Barring one debt listed NBFC which had a substantial reduction in the loan loss provision number, the average decrease in provision stood at 46 per cent across other 11 debt listed NBFCs.

Aggregate reported loan loss provisions under erstwhile Indian GAAP (INR crore)

Aggregate restated loan loss provisions under Ind AS

(INR crore)

Increase in loan losses

(INR crore)

Percentage increase

7,515 9,164 1,649 22

Aggregate reported loan loss provisions under erstwhile Indian GAAP (INR crore)

Aggregate restated loan loss provisions under Ind AS

(INR crore)

Reduction in loan losses

(INR crore)

Percentage decrease

1,650 1,194 456 28


10

B. Staging analysis

Rebuttal of Days Past Due (DPD) criteria

Ind AS 109 requires staging assessment for retail loans based on DPD criterion. Many companies have used staging criterion in line with the standard (stage 1 – current-30 DPD, stage 2 – 30-90 DPD and stage 3 - > 90 DPD) with an exception of three NBFCs wherein these criteria have been rebutted. Out of the three NBFCs (with staging exception), one company has considered stage 3 as >60 DPD while other two companies have rebutted both stage 1 and 2. These three NBFCs have not provided a detailed rationale in their investor presentations for the rebuttal of the 30 DPD and 90 DPD thresholds provided in the standard. We may expect to see this justification in their year-end financial statements.

Split of outstanding loan by stages

A total of 18 companies (including 8 HFCs) have disclosed information on composition of outstanding loan by stages.

On the basis of our analysis as at 30 September 2018, on an overall basis, 4.53 per cent of the outstanding loan is classified as stage 3 category (3.86 per cent at 30 June 2018). For NBFCs other than HFCs, the average percentage loans classified in stage 3 category was 7.80 per cent of the total outstanding loan (ranging from 0.38 – 10.01 per cent) and for HFCs the average was 1.5 per cent of the total outstanding loan (ranging from 0.45 – 6.95 per cent).

Loan loss provision (ECL) coverage

The erstwhile Indian GAAP required standard asset provision to be recognised at a specific rate ranging from 0.25 per cent to 0.40 per cent on performing loans depending on whether the company was an NBFC or a HFC. Under Ind AS 109, loan loss provision is required to be recorded at 12-month expected loss for stage 1 loans (good loans) and lifetime losses for stage 2, i.e. loans which have witnessed significant increase in credit risk since inception. Stage 3 loans have been considered as impaired loans for non-performing assets and for analysing ECL coverage for those loans.

Following is the analysis for NBFCs (other than HFCs):

Based on the analysis of disclosures made by nine NBFCs (other than HFCs) for the half year ended 30 September 2018, the loss rates under Ind AS ranged from 0.7 - 2.7 per cent of the gross stage 1 and 2 loans together.

10 NBFCs (other than HFCs) have reported their provision coverage on stage 3 loans within the range of 34 - 94 per cent. This indicates that depending on the outstanding loan, the NBFCs are able to recover approximately 66 to 6 per cent of the exposure at default.

On an overall basis, loan loss provision (ECL) coverage for stage 1 and stage 2 loans together is 1.3 per cent and for stage 3 is 49 per cent for NBFCs (other than HFCs).




Following is the analysis for HFCs

Based on the analysis of disclosures made by six HFCs for the half year ended 30 September 2018, the loss rates under Ind AS ranged from 0.3 - 2.0 per cent of the gross stage 1 and 2 loans together.

Six HFCs have reported their provision coverage on stage 3 loans within the range of 19 - 39 per cent. This indicates that depending on the outstanding loan, the HFCs are able to recover approximately 81 to 61 per cent of the exposure at default.

On an overall basis, loan loss provision (ECL) coverage for stage 1 and stage 2 is 0.7 per cent and for stage 3 is 34 per cent for HFCs.

Gross/net non-performing assets

Following is the analysis for NBFCs (other than HFCs):

A total of 10 NBFCs (other than HFCs) have reported their gross and net Non-Performing Assets (NPA) using Ind AS numbers. Stage 3 loans are classified as NPAs.

The gross NPAs reported by these NBFCs ranged from 0.40 - 10 per cent and net NPAs ranged from 0.10 – 6.8 per cent.

Following is the analysis for HFCs:

A total of 11 HFCs have reported their gross and net NPA using Ind AS numbers. Stage 3 loans are classified as NPAs.

The gross NPAs reported by these NBFCs ranged from 0.45 – 17.4 per cent and net NPAs ranged from 0.35 – 14.8 per cent.

Use of conservative approach for loan loss provisioning under Ind AS by certain HFCs

On the basis of our analysis, few companies (mainly HFCs) have continued to retain loan loss provisions held under erstwhile Indian GAAP over and above the loan loss provision (ECL) requirements under Ind AS, based on their articulation of a ‘prudence’ driven approach. This fact has been highlighted by such companies.

Derecognition of financial assets

Generally, under Ind AS, securitisation structures that are most commonly used in India would not qualify the de-recognition criteria. However, Reserve Bank of India (RBI) compliant assignment transactions are likely to meet Ind AS derecogntion criteria. As a result, companies would need to bring back the securitised assets in their books and record them as collateralised borrowings. On assignment transactions, the excess interest spread retained by the companies would be recorded as gains upfront rather than on a deferred basis as is done currently under erstwhile Indian GAAP.

Out of the 11equity and debt listed companies for which equity reconciliation was available at 1 April 2017, five companies have reported gain on the past securitised/assigned portfolios. The impact ranged from 1 - 9 per cent of the previously reported net worth under erstwhile Indian GAAP at 1 April 2017.

12

Segment reporting

Ind AS requires segment disclosures to be based on the components of the company that the management monitors while making decisions about operating matters, i.e. it requires looking at the company 'through the eyes of the management’. This approach is different from that followed under erstwhile Indian GAAP and is likely to lead to identification to different operating segments. Of the debt listed companies that presented operating segment related information, none of the companies indicated a change in the segments from those reported under the erstwhile Indian GAAP. The trend in segment reporting for equity listed companies indicates that the operating segments have changed for 7 out of the 30 equity listed companies.

Deferred tax on special reserves

Ind AS requires companies to recognise deferred tax assets or liabilities using a balance sheet approach, i.e. comparing the Ind AS carrying value of the asset or liability to its tax base. In the recent past regulators like RBI and the National Housing Bank (NHB) have mandated banks and HFCs to create a Deferred Tax Liability (DTL) on the special reserve in line with an opinion from the Expert Advisory Committee (EAC)5.

Considering the nature and intent of transferring a certain amount to the special reserve for claiming tax deduction on such transfer and supporting the intent of non-withdrawal or utilisation in future (for example through a board resolution), one could consider this as sufficient evidence to classify such a difference as a permanent difference. Accordingly, DTL may not be created in respect of such special reserves under Ind AS. The entities should exercise judgement when evaluating whether to create a DTL on a special reserve based on the facts and circumstances in each case. As a good practise, an entity should also provide a detailed disclosure of its position and explain the accounting rationale for the approach adopted.

Of the 10 equity listed HFCs covered in the analysis, six HFCs have reversed the deferred tax liability recognised in respect of the special reserves upon transition to Ind AS. Of the seven HFCs that had their debt securities listed, one HFC has reversed the deferred tax liability on special reserves.

Employee Stock Option (ESOP) accounting

Share based payments are required to be measured with reference to their fair value unlike in erstwhile Indian GAAP where companies had an accounting policy choice to measure the same at intrinsic value or fair value.


05. Note - EAC opinion Volume - XXVI – Query No. 18 - Creation of a deferred tax liability on a special reserve created under Section 36(1) (viii) of the Income-t axAct, 1961 finalised on 15 May 2006. EAC opinion Volume - XXVII – Query 18 - Creation of a deferred tax liability on a special reserve created under Section 36(1)(viii) of the Income tax Act, 1961 finalised on 9 August 2007.



13 out of 28 debt listed companies covered in the analysis indicated that the charge under Ind AS on account of ESOP was different from that under erstwhile Indian GAAP. Of these 13 companies, one company presented a reversal of expenses under Ind AS as compared to the erstwhile Indian GAAP. For the other 12 companies, the increase in ESOP cost as compared to the profit before taxes under erstwhile Indian GAAP for the half year ended 30 September 2017 was in the range of 0.19 – 15.14 per cent. In the case of one NBFC that reported a reversal of expenses on account of ESOP, the reversal for the half year was approximately 1.25 per cent of the profit before taxes under erstwhile Indian GAAP for the half year ended 30 September 2017.

Of the 30 equity listed companies, 14 companies indicated that the charge under Ind AS on account of ESOP was different from that under erstwhile Indian GAAP. Similar to the trend in debt listed companies above, one equity listed company presented a reversal of expenses under Ind AS as compared to the erstwhile Indian GAAP representing the 2.23 per cent of the profit before tax for that company. In case of the other equity listed companies, the increase in cost on account of ESOP was in the range of 0.02 - 7.13 per cent of the profit before taxes under erstwhile Indian GAAP.

Earnings per Share (EPS)

Of the 28 debt listed companies covered, one company that had reported a profit under erstwhile Indian GAAP has reported a loss under Ind AS. Of the remaining companies, 18 companies presented an increase in basic EPS and nine companies presented a decrease in EPS. The same trend was observed on a comparison of the diluted EPS.

In case of equity listed companies, one NBFC reported a loss under Ind AS although it reported a profit under the erstwhile Indian GAAP. Of the other 29 equity listed companies, 16 companies reported an increase in EPS under Ind AS as compared to that under the erstwhile Indian GAAP while 14 companies reported a decrease in the EPS under Ind AS as compared to that under the erstwhile Indian GAAP.

First time adoption choices

The companies have not provided specific disclosures on choices availed by them under Ind AS 101, First- time Adoption of Indian Accounting Standards barring one instance where past securitisation transactions, which otherwise do not qualify for derecognition have been grandfathered and gain has been recognised. As a result, we expect to see narrative explanations for first time exemptions and exceptions adopted by companies in the annual financial statements for the year ending 31 March 2019.

14

Specific disclosures/comments provided by companies

A common theme arising from the reading of the financial results and the investor presentations is that a number of companies have provided specific comments on the possibility that the financial results of the current and previous periods (under Ind AS) may require adjustments if additional clarifications are provided by the regulator on specific accounting matters. There could be a change in the use of one or more optional exemptions on application of Ind AS to financial statements for the year ending 31 March 2019.

Further, certain companies have also indicated that the specific provisions created under erstwhile Indian GAAP were continued to be recognised under Ind AS as a matter of prudence/conservatism although the requirement under the ECL model was lower.

This area will need a close watch towards the year-end once published financial statements are available.




16

Company name

Company typeEquity listed/

Debt listed NBFC

Whether availed

relaxation in financial result timelines given

by SEBI?

Whether 31 March 2018 results have

been provided?

Level of assurance for 30 September

2017

Equity under erstwhile

Indian GAAP

Equity recociliation

presented as at 1 April 2017

ECL under Ind AS > provision

under erstwhile

Inidian GAAP on 1 April 2017

Reversal of provision in Q2 (30 September

2017)

Rebuttal of 30/90 day threshold

Changes in reportable

segments as compared to Indian GAAP

Company A NBFC Equity listed No YesLimited review

by auditors >INR7,500

crore

Presented in investor

presentationYes No Not presented No

Company B NBFC Equity listed No Yes Audited Upto INR2,500

crorePresented in

financial resultsYes Yes

Yes, default set at >60 DPD

No

Company C HFC Equity listed No Not disclosedManagement

prepared Not presented Not presented Not presented No Not presented No

Company D NBFC Equity listed No Not disclosedManagement


Company E NBFC Equity listed No YesLimited review

by auditors INR2,500 to

INR5,000 crore


presentationYes No No Yes

Company F HFC Equity listed Yes Not disclosedLimited review

by auditors Not presented Not presented Not presented No Not presented No

Company G NBFC Equity listed No Not disclosedManagement

preparedINR5,000 to

INR 7,500 crore


presentationYes No Not presented No

Company H HFC Equity listed Yes Not disclosedManagement


Company I HFC Equity listed No Not disclosedLimited review

by auditors Not presented Not presented Not presented Yes Not presented No

Company J HFC Equity listed Yes Not disclosedLimited review

by auditors Not presented Not presented Not presented Yes No No

Appendix 1- Snapshot of companies covered in our analysis

© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved

17 | Ind AS: Practical perspectives - Issue 02/2019 18

Company name


Debt listed NBFC

Whether availed


by SEBI?


been provided?


2017


Indian GAAP




under erstwhile



2017)




Company K HFC Equity listed No Not disclosedLimited review


Company L NBFC Equity listed Yes Not disclosedManagement

prepared Not presented Not presented Not presented Yes Not presented No

Company M HFC Equity listed No Not disclosedLimited review

by auditors Not presented Not presented Not presented No No Yes

Company N NBFC Equity listed No Not disclosedManagement

prepared Not presented Not presented Not presented No No Yes

Company O HFC Equity listed No Not disclosedManagement


Company P NBFC Equity listed No YesManagement

preparedUpto INR2,500

crore


presentationYes No Not presented Yes

Company Q NBFC Equity listed No Not disclosedManagement

preparedINR5,000 to

INR7,500 crore


presentationYes Yes No No

Company R NBFC Equity listed No Not disclosedLimited review

by auditors Not presented Not presented Not presented No Not presented Yes

Company S NBFC Equity listed No Not disclosedManagement


Company T NBFC Equity listed Yes Not disclosedManagement

preparedINR5,000 to

INR7,500 crore


presentationYes No No Yes

Company U HFC Equity listed No Not disclosedManagement


Company V NBFC Equity listed No Not disclosedLimited review




Company name


Debt listed NBFC

Whether availed


by SEBI?


been provided?


2017


Indian GAAP




under erstwhile



2017)




Company W NBFC Equity listed No Not disclosedLimited review


Company X NBFC Equity listed Yes Not disclosedManagement

prepared Not presented Not presented Not presented No Not presented Yes

Company Y HFC Equity listed No Not disclosedLimited review


Company Z NBFC Equity listed No Not disclosedManagement

preparedINR5,000 to

INR7,500 crore


presentationYes Yes No No

Company AA NBFC Equity listed No Not disclosedManagement


Company AB NBFC Equity listed Yes Not disclosedManagement

preparedINR2,500 to

INR5,000 crore


presentationYes Yes

Yes, stage 1 is 0-60 DPD

No

Company AC NBFC Equity listed Yes Not disclosedLimited review


Company AD NBFC Equity listed No Not disclosedLimited review

by auditors Not presented Not presented Not presented Yes

Yes, stage 1 is 0-60 DPD

No

Company AE HFC Debt listed No Not disclosedLimited review


Company AF HFC Debt listed No Not disclosedManagement


Company AG NBFC Debt listed No YesLimited review


Company AH NBFC Debt listed No Not disclosedManagement

preparedUpto INR2,500

crore


presentationYes Yes Not presented No



Company name


Debt listed NBFC

Whether availed


by SEBI?


been provided?


2017


Indian GAAP




under erstwhile



2017)




Company AI NBFC Debt listed No Not disclosedManagement

prepared Not presented Not presented Not presented No Not presented Not presented

Company AJ HFC Debt listed No Not disclosedManagement

prepared Not presented Not presented Not presented Yes Not presented Not presented

Company AK NBFC Debt listed No Not disclosedManagement

preparedNot presented Not presented Not presented No Not presented Not presented

Company AL NBFC Debt listed Yes Not disclosedManagement

preparedNot presented Not presented Not presented No Not presented No

Company AM HFC Debt listed No Not disclosedManagement

preparedNot presented Not presented Not presented Yes Not presented Not presented

Company AN NBFC Debt listed No Yes Audited Not presented Not presented Not presented No Not presented No

Company AO HFC Debt listed No Not disclosedLimited review


Company AP NBFC Debt listed No YesLimited review

by auditors Not presented Not presented Not presented No Not presented Not presented

Company AQ NBFC Debt listed Yes Not disclosedLimited review


Company AR NBFC Debt listed Yes Not disclosedManagement

preparedNot presented Not presented Not presented No No Not presented

Company AS NBFC Debt listed No Not disclosedManagement

preparedNot presented Not presented Not presented Yes Not presented No

Company AT NBFC Debt listed No Not disclosedManagement




Company name


Debt listed NBFC

Whether availed


by SEBI?


been provided?


2017


Indian GAAP




under erstwhile



2017)




Company AU NBFC Debt listed Yes Not disclosedManagement


Company AV NBFC Debt listed Yes Not disclosedManagement


Company AW NBFC Debt listed No Not disclosedLimited review

by auditors Not presented Not presented Not presented Yes Not presented Not presented

Company AX HFC Debt listed No Not disclosedManagement


Company AY NBFC Debt listed Yes Not disclosedManagement


Company AZ NBFC Debt listed Yes Not disclosedManagement


Company BA HFC Debt listed No Not disclosedManagement


Company BB NBFC Debt listed Yes Not disclosedManagement


Company BC NBFC Debt listed Yes Not disclosedManagement


Company BD NBFC Debt listed No Yes AuditedINR2,500 to

INR5,000 crore Presented in

financial resultsYes No Not presented Not presented

Company BE NBFC Debt listed No Not disclosedManagement


Company BF NBFC Debt listed No Not disclosedManagement




KPMG in India contacts: Sai Venkateshwaran Partner and Head CFO Advisory T: +91 22 3090 2020E: [email protected]

Ruchi Rastogi Partner Assurance T: +91 124 334 5205E: [email protected]

KPMG.com/in

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

This document is meant for e-communication only. (052_THL0119)

Follow us on: kpmg.com/in/socialmedia

ind as: practical perspectives (nbfcs) · gaap and ind as. the trend of impact of ind as on key...

Documents