KEY DIFFERENCES- AS VS. IND AS

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AGENDA

• Operating segments

• Related party transactions

• Provisions, Contingent Liabilities and Contingent Assets

• Revenue

• Construction contracts

IND-AS 108

OPERATING SEGMENTS

AS 17 VS. IND AS 108

Identification of Segments

AS 17

• AS 17 requires identification of two sets of segments—

• one based on related products and services,

• the other on geographical areas based on the risks and returns approach.

• One set is regarded as primary segments and the other as secondary segments.

• Because of ambiguity, many entities claim that they have only ‘one’ segment.

Ind AS 108

• Ind AS 108 segment identification is based on ‘management approach’ .

• Operating segments are identified based on the internal reports regularly reviewed

by the entity’s chief operating decision maker.

• Will result in incomparable information for similar companies.

• Generally popular with management as more aligned with internal reporting.

AS 17 VS. IND AS 108Restatement

Indian GAAP

• If new segment is identified, corresponding data for comparative purpose is also

required.

Ind-AS

• If any entity changes the structure of its internal organization that causes the

composition of reportable segment to change, corresponding information for

earlier periods, including interim periods will be restated.

IND-AS 24

RELATED PARTY DISCLOSURES

AS 18 VS. IND AS 24

Related parties

• Ind AS 24 Definition of related parties is entirely different compared to AS 18.

• There may be several new related parties as per Ind AS 24 due to the new

definition.

AS 18 VS. IND AS 24Definition of close members of the family

Indian GAAP

AS 18, covers ‘Relatives’ who may be expected to influence, or be influenced by,

that individual in his/her dealings with the reporting enterprise.

Ind-AS

Ind AS 24, covers Close members of the family of KMP.

AS 18 VS. IND AS 24

Key Management Personnel/ post employment benefit plans

Ind-AS 24

• covers KMP of the entity as well those of its parent as related parent

• Ind AS 24 includes any director whether executive or otherwise

• Post employment benefit plans are treated as related parties

IND-AS 37

PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

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AS 29 VS. IND AS 37Discounting of provisions

Indian GAAP

AS 29- prohibits discounting the amounts of provision

Ind AS 37

Ind AS 37- provisions to be at present value if time value of money is material

The increase in liability is treated as borrowing cost.

AS 29 VS. IND AS 37Recognition of Provisions

Indian GAAP

As per AS 29 provisions are recognized based on legal obligation.

Ind-AS 37Provisions are recognized based on Constructive Obligation

IND-AS 18 & 11

REVENUE AND CONSTRUCTION CONTRACTS

BACKGROUND

• MCA issued IFRS converged standards (Ind AS)

• included Ind AS 115 (equivalent of IFRS 115) Revenue from contracts with

customer

• IFRS 15 is Joint project of FASB and IASB

• Representation from stakeholders as to impact of this and time required

• IASB confirmed deferral of IFRS 15

• After deferral, MCA also deferred Ind AS 115

• Post deferment, MCA notified

• Ind AS 11 Ind AS 18

AS 9/ AS 7 VS. IND AS 18/11

Measurement of revenue

Indian GAAP

recognized at the contractual amount of consideration

Ind-AS

measured at the fair value of the consideration

AS 9 VS. IND AS 18

Customer Loyalty programmes (CLP)

Indian GAAP

• Technical guide on retail sector

• Recognize ‘Deferment Model’ and ‘Provision Model’

• Per guide, deferment model is preferred

Ind-AS

• As per IND AS 18, award credits to the customers are treated as different

component of sales transaction.

• Fair value of the award credits/ points is estimated separately at the time of

sales transactions and recorded separately.

AS 9 VS. IND AS 18

Multiple element arrangements

Indian GAAP

• ICAI issued technical guide on Accounting issues in retail sector

• Deferment model is preferred model

Ind-AS

• Requires separation of different components and book revenue when

revenue recognition criteria is met

AS 9 VS. IND AS 18

Discounts, rebates and schemes

Indian GAAP

Cash discount and certain schemes are reported as expenditure in financial

statements.

Ind-AS

Under IND AS 18, rebates, discounts, schemes cost will be reduced from revenue

when sales is recognized.

AS 9 VS. IND AS 18

Recognition of revenue from interest

Indian GAAP

AS 9 requires the recognition from interest on time proportion basis as per

contractual terms

Ind-AS

• IND AS 18 requires interest to be recognised using the effective interest method

as set out in Ind AS 109.

AS 9 VS. IND AS 18

Revenue from rendering of services

Indian GAAP

As per AS 9 revenue is recognised using either by completed services or

proportionate completion method.

Ind-AS

As per IND AS 18 revenue is recognised in the period in which services would be

rendered, generally under percentage completion method.

AS 9 VS. IND AS 18

Revenue from Barter transactions

Ind-AS

• IND AS 18 specifically deals with the exchange of goods and services of similar

and dissimilar nature.

• For dissimilar goods and services, accounting will generally be on the fair value

of goods and services received.

• For similar goods and services, no revenues and costs are to be separately

recognized

AS 9 VS. IND AS 18

Disclosure of excise duty

Indian GAAP

• As per AS 9 , excise duty is reduced from the gross revenue and reported on

net basis.

Ind-AS

• As per IND AS 18, only gross inflows of economic benefits received by the

Company on it’s own account.

• However, excise duty collected is duty on manufacture and is considered as

revenue and

• excise duty payment as expenditure.

AS 9 VS. IND AS 18

Transfer of assets from customers

Indian GAAP

• No specific guidance to acquire such assets.

• Varied practices.

Ind-AS

• Customer contribution that meet definition of asset, would be recognized as an

asset.

• On initial recognition, the cost of asset is measured at fair value.

• Revenue will be recognized when related performance obligations are

satisfied.

AS 9 VS. IND AS 18

Revenue from agreement of real estate development

Indian GAAP

Current guidance note requires POCM for recognizing revenue on transactions and

activities that have same economic substance as Construction Contracts.

Ind-AS

• Revenue would be recognized as per Guidance Note issued by ICAI.

• Guidance note allows percentage of completion with specific threshold/

guidelines.

• Will remain as Major carve out from IFRS till Ind AS 115 is notified.

AS 7 VS. IND AS 11

Service concession ArrangementsIndian GAAP

• In 2008 and 2014, ICAI issued one exposure draft on this but final version was never

issued or notified.

• Varied practices with some enterprises reporting infrastructure as PPE.

Ind-AS

• Ind-AS 11 provides specific guidance for Public to Private arrangements in which

• The public sector entity controls/ regulates the services provided and prices

• Public entity controls any significant residual interest in the infrastructure.

• Operator would not recognize Infrastructure as PPE.

• It would recognize either a Financial Asset or an Intangible Asset or both.

JUST TO RECAP...

It is clear the consequences are far wider than financial reporting issues and extend to various significant business and regulatory matters including :

Entities will also need to communicate the impact of IND-AS convergence to their investors to ensure they understand the shift from Indian GAAP to IND-AS.

CFS

Thank you