lecture meet on indas day 2 presented by ca kusai goawala for pune branch of wirc 6 th to 8 th july...
TRANSCRIPT
Lecture meet on IndASDay 2
Presented by
CA Kusai Goawala
For Pune Branch of WIRC
6th to 8th July 2015
CA KUSAI GOAWALA
IAS 1 : Presentation of Financial Statements
• This is Revised Schedule VI (1956) or Schedule III (2013) equivalent of IFRS.
• No specific rigid format
• Compulsory line items to be included.
• Complete set of FS are as under :
a)Statement of Financial Position
b) Comprehensive Income
i) Statement of Profit and Loss
ii) Other Comprehensive Income
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c) Statement of Changes in Equity for the period
d) Cash Flowe) Notes
f) Statement of FP as at the earliest comparable period (Restated)
• No schedules – all schedules to be given in notes
• All IndAS compliance required for True and Fair view.
• Explicit and unreserved statement to be made that all IndAS complied with.
• Cannot rectify inappropriate accounting policy by disclosure
• Materiality : which can influence economic decision of users make on basis of FS.
• Going Concern – implied
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IAS 1 : Presentation of Financial Statements
• When reclassification of item of previous year give reasons for the same
• Classification of Assets and Liabilities• Current / Non Current
• Classification of Income / Expenses• Nature of Expenses/ FunctionExtra Ordinary Items – Not to be bifurcatedCritical JudgementsEstimation Uncertainties CA KUSAI
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IFRS 1 : First Time adoption of IFRS
• Retrospective Applications• Restate previous comparable period• Opening IndAS Statement of Financial Position• Say first time adoption in 2017-18 :• Full IndAS compliance for year ended 31.3.2017 and 2016.• Only Statement of Financial Position (B/s) to be restated as of 31.3.2015.• Transitional provisions in each IndAS does not apply to first time adoption• It applies to changes in policies due to introduction of new standard
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Apply IndAS in• Its First IndAS FS• Interim Financial report- Part of period covered by its 1st IndAS FS
Opening IndAS Balance Sheet • Prepare IndAS BS 1st day E.g. 1st FS is for 31.03.2017 Op.Bal. for 31.03.2015• Apply latest version of IndAS.• Can apply ‘not yet mandatory’ IndAS – Provided the same allows early application.
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IndAS First Balance Sheet• Shall include
– Three BS
– Two P&L
– Two CF
– Two statements of changes in equity• Recognise Assets & Liabilities which is required under
IndAS• Derecognise Assets & Liabilities if IndAS does not
permit• Reclassify Assets & liabilities as per IndAS• Measure Assets & Liabilities as per IndAS
Explanation of transition to IndAS• Reconciliation of previous GAAP & IndAS – Equity
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Exceptions
• Para 14-17• Para 14 – Estimates . No change as given in previous GAAP• Para 15 – Information received after date of transition. Non
adjusting events. (Prospective not retrospective) • Para 16 – Previous GAAP estimates not required.
– No need to make retrospective • Para 17 – Comparative figures – The above apply
• Appendix C and D • Previous GAAP carrying amounts can be considered as
deemed cost
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• Appendix C
1. Business Combinations i) May not consider BC before date of transition. ii) However, if apply to one than apply to all subsequent BC.iii) Carrying amount of Goodwill on transition date will be continued subject to impairment test and reclassification.
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Taxable Temporary Differences vs Permanent
Differences
• Accounting Profit v/s Taxable Profit
• Method – Balance Sheet v/s Profit and Loss
• Reassessment on yearly basis
• Tax Base
• Undistributed Dividend of investee company –
Temporary Difference
• Tax Losses and Tax Credits – Prudence
• Investments in JV/Subsidiaries/Associates/Branches –
Control over distribution CA KUSAI GOAWALA
•Tax Rate – Substantially Enacted
•No discounting – Absolute Figures]
•Tax Losses – Recognition of DTA- Virtual Certainty vs
Probable
•Offset rules
•Business Combinations
•ESOP related tax assets/liabilities
•Non Current Asset/Liability
•CFS – eliminated profit on intra group transaction –
temporary difference.
•Tax Holiday ??– India specific – may get customized. CA KUSAI GOAWALA
• Case Study – Elimination of Intragroup Profits
H an entity taxed at 30% - S subsidiary at 34%
•S Sells inventory – cost Rs.100000/- to H for
Rs.120000/-
•Eliminate unrealised profit of Rs.20000
•DTA of 6000 = 30% of 20000/-.
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Sr. No.
Point for Consideration
IndAS 12 (Income taxes) AS 22 (Accounting for taxes on income)
1 Deferred Income Taxes
Temporary differences Timing differences
2 Recognition of DTA and DTL
Recognized for all Temporary differences except which arise from Initial recognition of goodwill or which is not at a BC
Recognized for all Timing differences
3 Recognition of DTA
Recognized to the extent it is probable that future taxable profits will be available.
Recognized only when virtual certainty is present support by convincing evidence.
4 Investments in subsidiaries, branches & associates and interest in JV
DTL for all taxable Temporary differences are recognized. Except -•Investor can control reversals.• Temporary differences will not reverse.
Not recognized.
5 Deferred Tax on Unrealised intra-group profits
Recognized at Buyer’s rate Not recognized .
6 Classification Always classified as Non-Current DTA after Investments and DTL after Unsecured Loans (ASI 7)
Comparisons
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IndAS 23 - Borrowing Costs
• Generally – Interest is period cost
• Capitalise Borrowing Cost to Qualifying
Asset
• What is Borrowing cost ?
• Interest and commitment charges
• Amortization of discounts
• Processing Fees/Other related cost
• Finance charges when asset acquired in
finance lease
• Exchange difference – FC Loan –
equivalent local interestCA KUSAI GOAWALA
• Interest cost to be worked on effective
interest method. Does not include imputed cost of
owners equity
• What is a Qualifying Asset
Takes substantial time (more than 12 months –
rebuttable) for completion.
• How to compute borrowing cost for
capitalisation
• First specific borrowing for QA
• If general purpose borrowing used, apply
weighted average rate.
• Cannot capitalise – Biological Assets at FV,
Repetitive inventory items
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IAS 24 : Related Party Disclosures
• Related Parties Definition :
• Category 1• Holding – Subsidiaries• Joint Ventures• Associates
• Category 2• Key Management Personnel of Entity or parent• Close Relatives of KMP• Entities which are controlled/jointly controlled/
having significant influence of KMP/Relatives
• Employees Retirement Benefit Plans
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• KMP who has authority and responsibility for
planning/directing
• Common director need not mean Related Party
• Common KMP – Yes
• KMP in one and director in another – ability to
exercise significant influence
• Relatives – Spouse/Domestic Partner, Children of
both, Dependants of
self/partner.
• Names to be given in cases where absolute control
exists even if
no transactions. - Parent/Subsdiary onlyCA KUSAI GOAWALA
• All kinds of transactions to be reported :
• Sales• Purchase• Services received/rendered• Loans received/given• Guarantees given/received• Dues from/to• KMP Compensation • Any other transactions Lease, Transfer of R &
D, transfer under • license agreements, Management contracts.
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Case Study
Related party relationship are wider under IndAS24 as against AS18
If Entity P has control over A and has significant influence over B.
Under AS18 A and B are not related However they are related party under
IndAS24
Sr. No.
Point for Consideration
IAS 24 (Related Party Disclosures)
AS 18 (Related Party Disclosures)
1 Related Parties Includes post employment benefit plans of the reporting entity or its related party
Post employment benefit plans not included
2 Definition of relative
Uses the term “a close member of that person’s family” .
Uses the term “relatives of an individual”
3 Compensation to KMP
Disclosed as aggregate and separately for (a) short term employee benefits (b) post employment benefits (c) other long term benefits (d) termination benefits and (e) share based payments
Disclosed as aggregate of all items of compensation
Comparisons
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IndAS 108 – Operating Segments
• Identification of Operating Segment (OS)
• As per internal reporting norms to CEO
• Qualitative thresholds
To provide
• Quantitative thresholds
• 10% of revenue / profits / assets
• If OS does not cover 75% then add other
segments also
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Information to be disclosed
• Measurement
• Reconciliations
• Restatement
• Product & services
• Geographical Segments
• Major Customers >10%
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Sr. No.
Point for Consideratio
n
InAS 8 (Operating Segments)
AS 17 (Segment Reporting)
1 Identification of segments
Based on financial information on how to allocate resources and in assessing performance
2 sets of segments i.e. business and geographical using risks and rewards approach
2 Measurement
Segment Revenue/Expense/Result/Asset/Liability not defined
Segment Revenue/Expense/Result/Asset/Liability have been defined
3 Disclosures Revenue from a customer if exceeds 10% of total segment revenue
No such requirement
Comparisons
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IndAS 16 : Property Plant and Equipments
• Definition of Asset – Only Tangible Items are covered
• Recognition of an item of PPE
• Measurement of an item of PPE : Cost model or
Revaluation model If Revaluation model – Assess at regular intervals• Accounting for changes in decommissioning and restoration costs• First Time application – Deem Cost
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• Revaluation of an item of PPE : Upward = Revaluation Surplus a/c – OCI
• and Downward = P&L a/c
• Depreciation method : SLM or WDV
• Change in method of Depreciation : Change in accounting policy – Prospective effect Derecognition
• Gain/loss on derecognition Component Accounting
To depreciate significant components separately if Useful life differs
Replacement of Components
• The new part shall be capitalized if it fulfills therecognition criteria and the replaced part shall be
derecognised
• Replaced part to be derecognized CA KUSAI GOAWALA
Sr. No.
Point for Consideration
IAS 16 (Property, Plant & Equipment)
AS 6 & 10 (Depreciation Accounting & Accounting for
Fixed Assets)
1 Measurement Models
Cost or Revaluation model Only Cost model allowed ; revaluation permitted subject to conditions
2 Change in method of depreciation
Change in Accounting Estimate, prospectively
Change in Accounting Policy, retrospectively
3 Deferred Receipt on Disposal
Deferred Consideration – Effective Interest
Not required
4 Replacement Costs The new part shall be capitalized if it fulfills the recognition criteria and the replaced part shall be derecognized
The new part shall be capitalized if it fulfills the recognition criteria ; otherwise expensed out
5 Cost of major inspection
Capitalised Expensed out
6 Frequency of Revaluation
If Revaluation model is adopted, at the end of every reporting period
Not prescribed
7 Revaluation Both Upward and DownwardRevaluation allowed subject to carrying amount of asset not exceed its fair value.
Only UpwardNo concept of fair value while revaluation
8 Frequency of estimation of Residual Value
To review at least at each reporting period
Not prescribed
9 Scope All fixed assets covered, except property under as investment property (included in IAS 40).
All fixed assets covered
10 Depreciation Fixed Assets are REQUIRED to be componentized and depreciated separately.
Fixed Assets are NOT REQUIRED to be componentized and depreciated separately. Sch II effective from 1.4.2015
Comparisons
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