A Quick Guide to IND AS

TAXPOINT Page 1
PREFACE

The transition from Indian GAAP to Ind AS is a historic and landmark change. In accordance to its
commitment to G20, India is Converging to IFRS in a phased manner starting from annual beginning on
or after April 1, 2016. The IFRS Converged Standards will be known as Indian Accounting Standards (Ind
AS) and will contain numerous carve outs from IFRS.

The change to Ind AS is a truly positive move that will bring the accounting in India substantially closer
to the accounting followed by the global Companies under IFRS.

This guide provides a brief summary of the recognition, measurement, presentation and disclosure
requirements under the Indian Accounting Standards (referred to as Ind AS or Standards in the guide)
prescribed under section 133 of the Companies Act, 2013, as notified under the Companies (Indian
Accounting Standard) Rules, 2015, in a simple and concise manner and is updated for notifications upto
June, 2015.

This guide is compiled and edited from various materials available on internet by Nisha Suyal Aggarwal,
a Practicing Chartered Accountant. She has 7 years of accounting and auditing experience with top
accounting firms. She has served big sized Companies/Multi Nationals on assignments as per Indian
GAAP, US GAAP and IFRS. She is also a visiting faculty with the Institute of Chartered Accountants of
India (ICAI) for General Management and Communication Skills (GMCS) Classes.

We are committed to help you move to Ind AS in a smooth manner, and look forward to assist you on
this project.

Best Wishes,

TAXPOINT CONSULTING PRIVATE LIMITED

TAXPOINT Page 2
CONTENT AT A GLANCE

Overview of Ind AS Roadmap 4-5

Series of Standards-IAS/IFRS vs Ind AS 6-11

Broad Comparison- IFRS vs Ind AS 12-15

Categorization of Standards 16-18

First time adoption of Ind AS 19-23

Broad Comparison- Ind AS vs I GAAP 24-36

Challenges in First time conversion 37-38

TAXPOINT Page 3
OVERVIEW OF IND AS ROADMAP

Most of the world is now reporting under the International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standard Board (IASB). In July 2002, the European Parliament
had passed a regulation requiring the adoption of IFRS by all EU listed Companies from 2005. Most
Countries across the globe have adopted/converged with IFRS. Only two significant countries, India and
USA, were not using IFRS. USA allows IFRS for foreign private issuers with securities traded on US
exchanges. The US standard setter and the IASB have been converging and working together on
numerous accounting standards. This has resulted in the US GAAP slowly inching forward closer to IFRS.

On February 16, 2015 the Ministry of Company Affairs (MCA) notified the Companies (Indian Accounting
Standards) Rules, 2015 laying down roadmap for the application of IFRS Converged Standards (Ind AS)
to Companies other than Banking Companies, Insurance Companies and Non- Banking Finance
Companies (NBFCs).

The adoption of Ind AS will substantially bring the gap and will bring India at par with the world that
has adopted/converged with IFRS. India opted for conversion approach as against adoption of IFRS
issued by IASB. As a result, IND AS financial statements may not be fully compliant with IFRS. It is
expected that the Institute of Chartered Accountants of India (ICAI) will discuss these issues with IASB
and most of the differences may get resolved in the future.

TAXPOINT Page 4
ROADMAP FOR NON FINANCIAL COMPANIES:

Any Entity may adopt. Accounting

Voluntary Phase
period beginning on or after April 1,
2015

Mandatory Phase 1 Mandatory Phase 2

Accounting periods beginning on or Accounting periods beginning on or

after April 1, 2016 for the below after April 1, 2017 for the below
Companies: Companies:

d. Companies having net worth a. All listed Companies/in the

of Rs. 500 crores or more. process of listing
e. Holding, Subsidiaries, b. Unlisted Companies having
Associates, Joint Ventures of net worth of Rs. 250 crores
the above Companies. or more.
c. Holding, Subsidiaries,
Associates, Joint Ventures of
the above Companies.

Effectively Ind AS are applicable from April 1, 2015 as Companies need to give comparatives for the
year ended March 31, 2016.

If Ind AS are applied voluntarily, then Entity need to prepare its financial statements as per Ind AS
consistently, Option is irrevocable.

For the above purpose, Net worth is to calculated as per financial statements as at March 31, 2014 or
the first audited Financial statements for the period which ends after that date.

Ind AS 101-First time adoption of Ind AS, requires Companies to prepare an Ind AS opening balance
sheet at the transition date.

TAXPOINT Page 5
SERIES OF STANDARDS-IAS/IFRS vs IND AS

TAXPOINT Page 6
SERIES OF STANDARDS-IAS/IFRS vs IND AS
S. No IAS/IFRS Ind AS

1 IAS 1 Presentation of financial Ind AS 1 Presentation of financial

statements statements

2 IAS 2 Inventories Ind AS 2 Inventories

3 IAS 7 Statement of cash flows Ind AS 7 Statement of cash flows

4 IAS 8 Accounting policies, changes in Ind AS 8 Accounting policies, changes in

accounting estimate and errors accounting estimate and errors

5 IAS 10 Events after the reporting Ind AS 10 Events after the reporting period
period

6 IAS 11 Construction contracts

7 IAS 12 Income taxes Ind AS 12 Income taxes

8 IAS 16 Property, plant and equipment Ind AS 16 Property, plant and equipment

9 IAS 17 Leases Ind AS 17 Leases

10 IAS 18 Revenue

11 IAS 19 Employee benefits Ind AS 19 Employee benefits

12 IAS 20 Accounting for government Ind AS 20 Accounting for government

grants and disclosure of grants and disclosure of
government assistance government assistance

13 IAS 21 The effects of changes in Ind AS 21 The effects of changes in foreign

foreign exchange rates exchange rates

14 IAS 23 Borrowing costs Ind AS 23 Borrowing costs

15 IAS 24 Related-party disclosures Ind AS 24 Related-party disclosures

16 IAS 26 Accounting and reporting by

retirement benefit plans

17 IAS 27 Separate financial statements Ind AS 27 Separate financial statements

TAXPOINT Page 7
S. No IAS/IFRS Ind AS

18 IAS 28 Investment in associates and Ind AS 28 Investment in associates and

joint ventures joint ventures

19 IAS 29 Financial reporting in Ind AS 29 Financial reporting in

hyperinflationary economies hyperinflationary economies

20 IAS 31 Interest In joint ventures

21 IAS 32 Financial Instruments: Ind AS 32 Financial Instruments:

Presentation Presentation

22 IAS 33 Earnings per share Ind AS 33 Earnings per share

23 IAS 34 Interim financial reporting Ind AS 34 Interim financial reporting

24 IAS 36 Impairment of assets Ind AS 36 Impairment of assets

25 IAS 37 Provisions, contingent liabilities Ind AS 37 Provisions, contingent liabilities

and contingent assets and contingent assets

26 IAS 38 Intangible assets Ind AS 38 Intangible assets

27 IAS 39 Financial instruments:

Recognition and measurement

28 IAS 40 Investment property Ind AS 40 Investment property

29 IAS 41 Agriculture Ind AS 41 Agriculture

30 IFRS 1 First time adoption of Ind AS 101 First time adoption of

International Financial International Financial Reporting
Reporting Standards Standards

31 IFRS 2 Share based payment Ind AS 102 Share based payment

32 IFRS 3 Business combinations Ind AS 103 Business combinations

33 IFRS 4 Insurance contracts Ind AS 104 Insurance contracts

34 IFRS 5 Non-current assets held for sale Ind AS 105 Non-current assets held for sale
and discontinued operations and discontinued operations

35 IFRS 6 Exploration for and evaluation Ind AS 106 Exploration for and evaluation of
of mineral resources mineral resources

TAXPOINT Page 8
S. No IAS/IFRS Ind AS

36 IFRS 7 Financial instruments: Ind AS 107 Financial instruments: Disclosures

Disclosures

37 IFRS 8 Operating segments Ind AS 108 Operating segments

38 IFRS 9 Financial instruments Ind AS 109 Financial instruments

39 IFRS 10 Consolidated financial Ind AS 110 Consolidated financial

statements statements

40 IFRS 11 Joint arrangements Ind AS 111 Joint arrangements

41 IFRS 12 Disclosure of interest in other Ind AS 112 Disclosure of interest in other

entities entities

42 IFRS 13 Fair Value measurement Ind AS 113 Fair Value measurement

43 IFRS 14 Regulatory deferral accounts Ind AS 114 Regulatory deferral accounts

44 IFRS 15 Revenue from contracts with Ind AS 115 Revenue from contracts with
customer customer

1 IFRIC 1 Changes in existing Appendix A Changes in existing

decommissioning, restoration to Ind AS 16 decommissioning, restoration and
and similar liabilities similar liabilities

2 IFRIC 2 Members’ shares in co-operative

entities and similar instruments

3 IFRIC 4 Determining whether an Appendix C Determining whether an

arrangement contains a lease to Ind AS 16 arrangement contains a lease

4 IFRIC 5 Rights to interests arising from Appendix A Rights to interests arising from
decommissioning, restoration to Ind AS 37 decommissioning, restoration and
and environmental environmental rehabilitation
rehabilitation funds funds

5 IFRIC 6 Liabilities arising from Appendix B Liabilities arising from

participating in a specific to Ind AS 37 participating in a specific
market—waste electrical and market—waste electrical and
electronic equipment electronic equipment

6 IFRIC 7 Applying the restatement Appendix A Applying the restatement

approach under IAS 29— to Ind AS 29 approach under IAS 29—Financial
Financial reporting in reporting in hyperinflationary
hyperinflationary economies economies

TAXPOINT Page 9
S. No IAS/IFRS Ind AS

7 IFRIC 10 Interim financial reporting and Appendix A Interim financial reporting and
impairment to Ind AS 34 impairment

8 IFRIC 12 Service concession Appendix C Service concession arrangements

arrangements to Ind AS 115

9 IFRIC 13 Customer loyalty programmes Not Not applicable. Superseded by

applicable Ind AS 115

10 IFRIC 14 The limit on a defined benefit Appendix B The limit on a defined benefit
asset, minimum funding to Ind AS 19 asset, minimum funding
requirements and their requirements and their
interaction interaction

11 IFRIC 15 Agreements for the construction Not Not applicable. Superseded by

of real estate applicable Ind AS 115

12 IFRIC 16 Hedges of a net investment in a Appendix C Hedges of a net investment in a

foreign operation to Ind AS 109 foreign operation

13 IFRIC 17 Distributions of non-cash assets Appendix A Distributions of non-cash assets

to owners to Ind AS 10 to owners

14 IFRIC 18 Transfers of assets from Not Not applicable. Superseded by

customers applicable Ind AS 115

15 IFRIC 19 Extinguishing financial liabilities Appendix D Extinguishing financial liabilities

with equity Instruments to Ind AS 109 with equity instruments

16 IFRIC 20 Stripping costs in the Appendix B Stripping costs in the production

production phase of a surface to Ind AS 16 phase of a surface mine
mine

17 IFRIC 21 Levies Appendix C Levies

to Ind AS 37

18 SIC 7 Introduction of the Euro

19 SIC 10 Government assistance–No Appendix A Government assistance–No

specific relation to operating to Ind AS 20 specific relation to operating
activities activities

20 SIC 12 Consolidation– Special Purpose Not Not applicable. Superseded by

Entities applicable Ind AS 110

TAXPOINT Page 10
S. No IAS/IFRS Ind AS

21 SIC 13 Jointly controlled entities–Non- Not Not applicable. Superseded by

monetary contributions by applicable Ind AS 111
venturers

22 SIC 15 Operating leases–Incentives Appendix A Operating leases–Incentives

to Ind AS 17

23 SIC 25 Income taxes–Changes in the Appendix A Income taxes–Changes in the tax

tax status of an enterprise or its to Ind AS 12 status of an enterprise or its
shareholders shareholders

24 SIC 27 Evaluating the substance of Appendix B Evaluating the substance of

transactions in the legal form of to Ind AS 17 transactions in the legal form of
a lease a lease

25 SIC 29 Service concession Appendix D Service concession arrangements

arrangements disclosures to Ind AS 115 disclosures

26 SIC 31 Revenue–Barter transactions Not Not applicable. Superseded by

involving advertising services applicable Ind AS 115

27 SIC 32 Intangible assets–website costs Appendix A Intangible assets–Website costs

to Ind AS 38

TAXPOINT Page 11
BROAD COMPARISON- IFRS vs IND AS

TAXPOINT Page 12
BROAD COMPARISON- IFRS vs IND AS

Area IFRS IND AS

Presentation of Components of IFRS financial Components of Ind AS financial

financial statements- statements include- standards-
Components of a. Balance sheet as the year end
financial statements a. Statement of financial position. b. Statement of profit & loss
b. Statement of profit & loss and c. Statement for changes in equity
other comprehensive income. d. Cash flow statement
c. Statement for changes in equity e. Notes having summary of Accounting
d. cash flow statement Policies and other explanatory
e. Notes having summary of information.
significant accounting policies and
other explanatory information.
Presentation of There are specified line items for There is no specified format in Ind AS.
financial statements- Statement of Financial Position, Amendments to IAS 1, "disclosure
Formats of financial Statement of Profit & Loss and other initiatives" are yet to be made to Ind
statements comprehensive income and statement AS-1.
for changes in Equity.
Further, there are further
amendments which are effective for
year beginning on or after January 1,
2016 with permission of early
adoption.
Presentation of Option is there to classify expenses- Only permission to classify expense by
financial statements- classification by nature/classification nature.
Classification of by function, whichever provides more
expense relevant and reliable information.
If classification is by function, specific
disclosures by nature are also
required in the notes.

Presentation of Option is there to either follow single Only one statement comprising profit
financial statements- statement approach or to follow the and loss and other comprehensive
Statement of Profit two statement approach. statement is prepared.
& Loss and other
comprehensive
income
Statement of cash IFRS allows the option to present Interest and dividend inflow and
flows-interest and dividend and interest inflow and outflow cannot be presented as
dividend outflow as operating/investing/ operating activities in case of non
financing activities in consistency financial entities.
with prior periods.

TAXPOINT Page 13
Business Negative goodwill/Bargain purchase Negative goodwill can be recognized in
combinations- gain is recognized in Profit or loss. other comprehensive income or capital
Bargain Purchase reserves.
gain on acquisition
Business Fair value option and basis book value Only on the basis of book values.
combinations- of assets and liabilities acquired.
Common control
transactions
Investment Property Investment property is accounted as Investment property is measured as per
per either cost or fair value model. cost method.
Interest in a Property interest in an operating Property interest in an operating lease
leasehold land lease may be classified as investment cannot be classified as investment
property and accounted as finance property
lease and fair value model is opted.

Increase in Operating Increase in operating lease rentals This increase in rentals in line with
lease rentals with increase in inflation is expected general inflation is not
considered as contingent rent. straight lined and expensed.

Employee benefits- IFRS allow use of high quality Actuarial liability is determined based
discount rates corporate bond yield at the end of the on government securities yield.
reporting period. In case of non
availability of such bonds, market
yield on government bonds.
Government grants Option is available for recognizing at Recognition of government grant at fair
fair value or nominal value and can value and presentation in Balance sheet
either be presented in Balance sheet as setting it up as deferred income.
as setting up as deferred income or as
a way of deduction from the carrying
value of asset.

Effects of changes in Exchange differences on monetary Policy as per previous GAAP is allowed.
foreign exchange items are recognized in profit /loss in
rates- exchange the period in which they arise in the
differences separate financial statements and in
other comprehensive income in
consolidated Financials.
On disposal of the net investments, its
is reclassified from equity to
profit/loss.

Effects of changes in Fact and reason for change in Date of change is also required to be
foreign exchange functional currency should be disclosed in addition to fact and reason
rates- change in disclosed. for change in functional currency.
functional currency

Related part- Inclusive definition of close family In addition to close members defined in
Definition members is there. IFRS, father, mother, brother and sister
are also covered.

TAXPOINT Page 14
Related part- No exemption for disclosures. Exclusion of certain disclosure which
Disclosure may have conflict with confidentiality
requirements requirements of statute/regulations.

Investment in Uniform accounting policies to be Uniform accounting policies to be

associates/joint followed with no exception. followed unless its practicable.
ventures-Uniform
accounting policies

Investment in Either at cost or as an investment in Equity method is not

associates/joint accordance with IFRS 9/IAS 39/using permitted.
ventures-Separate Equity method as per IAS 28 (Equity
financial statement method option is for year beginning
of the investor on or after January 1, 2016).

Financial The instrument is split into debt and Conversion option in certain situations
Instruments- equity portion and conversion option only.
Classification of as an embedded derivative basis the
convertible debts. contractual terms and conditions of
the financial instruments at issuance.

Financial Conversion option to acquire fixed Unlike IFRS, Conversion option to

Instruments- number of equity shares for fixed acquire fixed number of equity shares
Conversion option amount of cash in entity's functional for fixed amount of cash in any
embedded in foreign currency only is treated as equity. currency is treated as equity and also
currency convertible not required to be re measured at fair
bonds. This option is treated as embedded value at every reporting date.
derivative and fair value through
profit and loss account at every
reporting date.

Earning per share- When both financials are prepared, EPS is to be disclosed in stand alone as
disclosure in EPS is required to be disclosed in well as consolidated financials.
separate financial Consolidated financial statements
statements only, however voluntary disclosure of
EPS in standalone financials is
allowed.

Revenue Variable considerations (including Penalties should be accounted for as

potentially contingent considerations) per the substance of the contract.
are only included in the transaction
price to the extent that it is probable
that the amount of cumulative
revenue recognized would not be
subject to a significant future revenue
reversals when such estimates are
revised.

TAXPOINT Page 15
CATEGORISATION OF STANDARDS

TAXPOINT Page 16
CATEGORISATION OF STANDARDS
Income and expense

Ind AS 18 Revenue
Ind AS 11 Construction Contracts
Ind AS 11 (Appendix A and B) Service Concession Arrangements
Ind AS 20 Accounting for Government Grants and Disclosure of Government
Assistance
Ind AS 19 Employee Benefits
Ind AS 102 Share-based Payment
Ind AS 12 Income- taxes
Ind AS 16 Property, Plant and Equipment
Ind AS 38 Intangible Assets
Ind AS 40 Investment Property
Ind AS 2 Inventories
Ind AS 23 Borrowing Costs
Ind AS 17 Leases
Ind AS 36 Impairment of Assets
Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets

Group Accounts
Ind AS 103 Business Combinations
Ind AS 110 Consolidated Financial Statements
Ind AS 111 Joint Arrangements
Ind AS 28 Investment in Associates and Joint Ventures
Ind AS 112 Disclosure of Interest in Other Entities
Ind AS 27 Separate Financial Statements

Financial Instruments and Foreign Exchange

Ind AS 21 The Effects of Changes in Foreign Exchange Rates
Ind AS 109 Financial Instruments
Ind AS 32 Financial Liabilities and Equity
Ind AS 107 Financial Instruments: Disclosures
Ind AS 113 Fair Value Measurements

TAXPOINT Page 17
CATEGORISATION OF STANDARDS
Presentation and Disclosures

Ind AS 1 Presentation of Financial Statements

Ind AS 8 Accounting Policies, Change in Accounting Estimates and Errors
Ind AS 10 Events after the Reporting Period
Ind AS 7 Statement of Cash Flows
Ind AS 33 Earning Per Share
Ind AS 24 Related Party Disclosures
Ind AS 108 Operating Segments
Ind AS 105 Non- current Assets held for Sale and Discontinued Operations
Ind AS 34 Interim Financial Reporting

Industry Specific
Accounting by Real Estate Companies
Ind AS 106 Exploration for and Evaluation of Mineral Resources
Ind AS 114 Regulatory Deferral Accounts
Ind AS 41 Agriculture

TAXPOINT Page 18
FIRST TIME ADOPTION OF IND AS

TAXPOINT Page 19
FIRST TIME ADOPTION OF IND AS
Indian Accounting Standard (Ind AS 101)

 Ind AS 101 prescribes ground rules and accounting policies to be followed in an entity’s first
set of Ind AS Financial Statements.

 Entity shall prepare and present an opening Ind AS Balance sheet at the date of transition to
Ind AS. Hence, there will be 3 Balance sheets in first Ind AS financial statements.

 Use of same accounting policies in opening Ind AS Balance Sheet and in first Ind AS financial
statements.

 Not recognize items as assets and liabilities if Ind AS does not permit such recognition.
Recognize all assets and liabilities whose recognition is required by Ind AS.
Reclassify assets and liabilities and items of equity to the requirements of Ind AS.
Measure all assets and liabilities in accordance with Ind AS.

 The adjustments arising from adoption of new policies (in place of previous GAAP) as per Ind
AS in the opening Ind AS Balance sheet, shall be recognized directly in retained earnings (or,
if appropriate, another category of equity) at the date of transition to Ind AS.

 Entity should explain how the transition has affected its reported Balance sheet, financial
performance and cash flows.

 Exceptions to the principle that Opening Balance sheet shall comply with each Ind AS:

Prohibit retrospective
application of some aspect of
other Ind ASs
Two categories of Exceptions

Grant voluntary exemptions

from some specific
requirements of other Ind ASs

TAXPOINT Page 20
Area Mandatory exceptions to the retrospective application of other
Ind ASs
Estimates An entity's estimates should be consistent with the estimates made for the same
date made for the same date in accordance with previous GAAP unless there is
objective evidence that those were in error. However, adjustments should be
made to reflect changes in accounting policies.
De recognition of De recognition requirements in Ind AS 109 to be applied prospectively for
financial assets and transactions occurring on or after the date of transition to Ind AS.
liabilities

Hedge accounting Ind AS 109-At the date of transition to Ind AS-

i. measure all derivatives at fair value

ii. Eliminate all deferred losses and gains arising on derivatives that were
reported in accordance with previous GAAP as if they were assets or liabilities.

In opening Ind AS Balance sheet, Reflect only hedging relationships that qualify
for hedging accounting as per Ind AS 109.

Transactions entered into before the date of transition to Ind AS shall not be
retrospectively designated as hedges.
Non controlling Apply the following requirements of AS 110 on "Consolidated Financial
interests Statements" prospectively from the date of transition to Ind AS:

(a) the requirement that total comprehensive income should be attributed to the
owners of the parent and to the non-controlling interests even if this results in
the non-controlling interests having a deficit balance.

(b) the requirements under Ind AS 110 for accounting for changes in the parent’s
ownership interest in a subsidiary that do not result in a loss of control, i.e.,
considering such a change as a equity transaction (transaction with owners in
their capacity as owners) to be accounted for accordingly.

(c) the requirements under Ind AS 110 for accounting for a loss of control over a
subsidiary, and the related requirements under Ind AS 105 on ‘Non-current Assets
Held for Sale and Discontinued Operations’.

If Ind AS 103 on ‘Business Combinations’ is applied retrospectively to past business

combinations, should also apply Ind AS 110 from the same date.
Classification and Ind AS 101 provides exemptions to certain classification and measurement
measurement of requirements of financial assets under Ind AS 109, where these are impracticable
financial assets to implement.

Impairment of Certain exemptions are provided under Ind AS 101 to retrospective application of
financial assets Impairment requirements under Ind AS 109 (for recognition and measurement of
expected credit losses).

TAXPOINT Page 21
Embedded derivatives Assess whether an embedded derivative is required to be separated from the host
contract and accounted for as a derivative based on the conditions that existed at
the later of the date it first became a party to the contract; and the date a
reassessment is required under Ind AS 109.

Government loans Ind AS 101 give an exception to prospective application of Ind AS 109 on 'Financial
Instruments' and Ind AS 20 on 'Accounting for Government Grants and Disclosure of
Government Assistance’, i.e., an entity may apply the requirements in Ind AS 109
and Ind AS 20 retrospectively to any government loan originated before the date
of transition to Ind AS. However, this exception is available only in cases where
the information needed for retrospective application of Ind AS 109 and Ind AS 20
had been obtained at the time of initially accounting for that loan.

Business Combinations A first-time adopter may elect not to apply Ind AS 103 retrospectively to past
business combinations (business combinations that occurred before the date of
transition to Ind ASs). However, if a first-time adopter restates any business
combination to comply with Ind AS 103, it shall restate all later business
combinations and shall also apply Ind AS 110 from that same date.

An entity may apply Ind AS 21 retrospectively to fair value adjustments and

goodwill arising in either:

(a) all business combinations that occurred before the date of transition to Ind
ASs; or

(b) all business combinations that the entity elects to restate to comply with Ind
AS 103.

The exemption for past business combinations also applies to past acquisitions of
investments in associates, interests in joint ventures and interests in joint
operations in which the activity of the joint operation constitutes a business, as
defined in Ind AS 103.

Voluntary Exemptions from other Ind ASs

An entity may elect to use one or more exemptions given in Ind AS 101 in the
context of the following:

a. share-based payment transactions;

b. insurance contracts;
c. deemed cost;
d. leases;
e. cumulative translation differences;
f. investments in subsidiaries, joint ventures and associates;
g. assets and liabilities of subsidiaries, associates and joint ventures;
h. compound financial instruments;
i. designation of previously recognized financial instruments;

TAXPOINT Page 22
 j. fair value measurement of financial assets or financial liabilities at initial recognition;
k. decommissioning liabilities included in the cost of property, plant and equipment;
l. financial assets or intangible assets accounted for in accordance with Appendix C to Ind AS 115,
Service Concession Arrangements;
m. borrowing costs;
n. extinguishing financial liabilities with equity instruments;
o. severe hyperinflation;
p. joint arrangements;
q. stripping costs in the production phase of a surface mine;
r. designation of contracts to buy or sell a non-financial item;
s. revenue from contracts with customers; and
t. non-current assets held for sale and discontinued operations.

TAXPOINT Page 23
BROAD COMPARISON- IND AS vs I GAAP

TAXPOINT Page 24
BROAD COMPARISON- IND AS vs I GAAP
Head IND AS I GAAP
Revenue recognition Single five steps revenue recognition Separate guidance for different types
model for all types of contracts. of contracts with customers.
- Revenue to be recognized on
satisfaction of performance
obligation.
- Specification of accounting for the
incremental cost for getting a
contract and cost directly related to
fulfilling a contract.
- If financing element is significant in
the contract, time value of money to
be considered.
- Requirement of extensive
disclosures (quantitative and
qualitative) about the significant
judgments made by the management
and change in judgments.

Financial instruments Ind AS 32 establishes detailed Notified standards do not prescribe

principles for presenting financial distinction between equity and
instruments as liabilities or equity. liabilities.
Ind AS 32 requires compounded No split is required and classified as
financial instruments like convertible equity or liability on the basis of their
bonds to be split into liability and primary nature.
equity and each component to be
recognized separately.

TAXPOINT Page 25
 Ind AS 109 requires classification of Under Indian GAAP-
financial assets into 3 categories: a. loans and receivable are measured
at cost less provisions
a. Measured at amortized cost b. Interest income on loan-
b. Fair value through other recognized on time proportion basis.
comprehensive income (FVTOCI) c. AS 13 Classify investments as long
c. Fair value through profit & loss term or current. After initial
(FVTPL) recognition, long term investments
And subsequent measurement at are measured at cost, less permanent
amortized cost, FVTOCI, FVTPL. diminution, if any. Current
investments are measured at lower of
cost or Market price.

Ind AS 109 requires classification of No detailed guidance on measurement

financial liabilities into 2 categories of financial liabilities.
on initial recognition and no further
reclassification is allowed:

a. Measured at amortized cost

b. Fair value through profit & loss
(FVTPL) and subsequent measurement
at fair value with gain/loss normally
to Profit or loss.

Ind AS 109 classifies a derivative as a Under I GAAP-

financial instrument or other AS 11 deals with foreign currency
contract. All derivates are measured forward exchange contracts and
at fair value and any gain/losses accounting based on hedging or
(except gain/losses on derivative used speculation purpose (except for
for hedge) are recognized in profit or contracts to hedge a firm
loss. commitment or highly probable
forecast transaction).

Contracts not covered under AS-11

require to be accounted on the basis
of ICAI announcement on Accounting
for derivatives. Option to apply
principles of AS 30 for recognition and
measurement.

ICAI has issued guidance note on

Accounting for derivative contracts
which requires all derivatives to be
measured at fair value and gain/loss
(except for hedge purpose) to be
recognized in profit or loss.

TAXPOINT Page 26
 Does not permit embedded No specific guidance on embedded
derivatives to be separated from host derivatives.
contracts that are financial assets.
Deals with various aspects of hedge AS 11 deals with forward exchange
accounting in a comprehensive contracts for hedging foreign currency
manner. Introduction of new exposures (except contracts for firm
"Expected Credit Loss (ECL) Model, for commitments/highly probable
impairment of financial assets. forecast transactions).
Other contracts are not covered.
However, guidance note on
Accounting for derivative contracts
contains detailed principles for hedge
accounting which are similar to Ind AS
109.
No detailed guidance on impairment.

Deals with de recognition of financial No detailed guidance on de

assets and liabilities in a recognition.
comprehensive manner.
Ind AS requires entities to provide ICAI has issued an announcement on
comprehensive (qualitative and Disclosures regarding Derivative
quantitative) disclosure to evaluate instruments, which requires certain
significance of financial instruments minimum disclosures. However,
for its financial position and guidance note on Accounting for
performance and nature and extent of derivative contracts requires more
risk arising and how the entity is comprehensive disclosures.
managing those risks.

Ind AS 113 provides a framework and No detailed guidance on methodology

provides fair value, provides principle for fair value measurements.
based guidance on measurement of
fair value and requires information.
Business Acquisitions Ind AS 103 applies to most business There is no Comprehensive Standard
combinations-Where the acquiree dealing with all business combinations
loses its existence and where acquiree and I GAAP does not differentiate
continues its existence. between common control and
Business combinations of entities business combination.
under common control are counted
using the pooling of interest method
and all other under the acquisition
method.

TAXPOINT Page 27
 Acquisition accounting is based on I GAAP is based on legal form and
legal form does not deal with reverse
acquisitions.
It requires net assets taken over In case of acquisition in subsidiaries,
including contingent liabilities and associates or Joint Ventures, net
intangible assets to be recognized at assets are recognized at book value.
fair value. In purchase method, I GAAP allows
book value or fair value method.
Contingent liabilities are generally not
recorded as liabilities here.

Prohibits amortization of goodwill Goodwill from amalgamation in the

arising on business combinations and nature of purchase is amortized to
requires it to be tested for P&L over a period which may not
impairment on annual basis. exceed five years.
Goodwill arising under AS-10, AS-21,
AS-23 and AS-27 need not be
amortized though there is no
prohibition.

Deals with accounting for pre existing No guidance for such situations.
relationships of acquiree and acquirer
and for re acquired rights by the
acquirer in a business combination.
Choice is there for each business I GAAP does not provide this option.
combination transaction to measure It requires minority interest in a
Non controlling interest (minority) in subsidiary to be measured at the
an acquiree at its fair value or at the proportionate share of book value of
non controlling interest's net assets.
proportionate share of the acquiree's
net identifiable interests.

In a business combination achieved in AS-21 recognizes step acquisition and

stages, re measurement of previously goodwill/Capital reserve at each
held equity interest at acquisition stage is done on book values and
date fair value. historical cost basis.
Provisions, Contingent Ind AS 37 requires provision to be Does not recognize the concept of
Liabilities and created for constructive obligations. constructive obligations.
Contingent Assets
If time value of money is material, AS 29 prohibits discounting the
Provision should be the present value amounts of provisions.
of the expenditures expected to be
required to settle the obligation.
Restructuring provision is made based Restructuring provision is made based
on Constructive obligation. on legal obligation.

TAXPOINT Page 28
 Disclosure of contingent assets is AS 29 Prohibits disclosure of
required when the inflow of economic contingent asset in the financial
benefits is probable. statements.
Group Accounts Ind AS-110 requires Consolidated AS 21 does not mandate preparation
Financial Statements (CFS), in which of CFS. The Act requires preparation
it consolidates all its subsidiaries, of CFS for accounting periods
subject to limited exemptions and beginning on or after April 1, 2014.
exceptions. Hence consideration of both is
required here to decide for
preparation of CFS.
There is no exception for There are conditions when a
consolidation of subsidiaries other subsidiary is not required to be
than investment related to consolidated and is accounted under
investment entities. AS-13-Control is intended to be
temporary or subsidiary operates
under long term restrictions.
Mandates the use of uniform It provides an exemption from the use
accounting policies for subsidiaries of uniform accounting policies for the
and joint ventures. consolidation of subsidiaries,
associates and joint ventures on the
ground of impracticality.

Definition of Control as per Ind AS is AS 21 defines control as ownership of

very wide and substance based. majority voting rights and/or power
to control the composition of the
board of Directors.
Existence of substantive potential The concept of "de facto control" does
voting rights are considered to assess not exist under I GAAP.
Control "de facto control" -Practical
ability to direct the relevant activities
of the investee unilaterally is
considered for deciding Control.

New term "Structured Entity" (SE), an Concept of "Structured Entity" does

entity whose activities are restricted not exist under I GAAP.
to the extent they are not directed by
a governing body.
It allows a maximum of three months It allows a six month gap for
gap between the financial statements subsidiaries and jointly controlled
of a parent or investor and those of entities. No maximum time gap is
its subsidiary, associate or joint prescribed for Associates.
ventures.

TAXPOINT Page 29
 Changes in ownership interests of a It does not provide any guidance on
subsidiary (that do not result in the changes in ownership interest of a
loss of control) are accounted for as subsidiary that do not result in loss of
equity. control.
Losses incurred by subsidiary to be Excess losses attributable to Minority
allocated between the controlling shareholders over the carrying amount
(parent) and non controlling (minority of minority interest are adjusted
interests), even if it results in deficit against the majority interest, unless
balance of non controlling interest. the minority has a binding obligation
to, and is able to, fund the losses.

Joint control is defined as Joint control is defined as

contractually agreed sharing of contractually agreed sharing of
control of an arrangement, which control over an economic activity.
exists only when decisions about Control is the power to govern the
related activities requires the financial and operating policies of an
unanimous consent of parties sharing economic activity so as to obtain
control. benefits from it.
A joint venturer recognizes its A joint venturer reports its interest in
interest in a joint venture as an a jointly controlled entity using the
investment using equity method. proportionate consolidation.

Income Taxes Ind AS 12 is based on the balance AS 22 is based on the Income

sheet liability method, which focuses statement liability method, which
on temporary differences. focuses on timing differences.
It requires the recognition of deferred The cost of a business combination is
taxes in case of business allocated to the identifiable assets
combinations. acquired and liabilities assumed by
reference to their fair values.
Business combination does not give
rise to such deferred tax adjustment.

Deferred tax assets arising from Deferred tax assets on carry forward
unused tax losses or tax credits can losses/unabsorbed depreciation is
be recognized only to the extent that recognized only to the extent that
it has sufficient taxable temporary there is virtual certainty supported by
differences, or other convincing convincing evidence that sufficient
evidence that sufficient taxable profit future taxable income will be
will be available against which available against which such deferred
deferred tax asset can be realized. tax assets can be realized.

An entity should recognize a deferred Deferred tax assets in the

tax liability in Consolidated Financials Consolidated Financials are a simple
for all taxable temporary differences aggregation of deferred tax
associated with investments in recognized by various entities of the
subsidiaries, branches and associates group.
and interest in joint ventures.

TAXPOINT Page 30
 Deferred taxes are recognized on Deferred tax is not recognized on such
temporary differences that arise from eliminations.
the elimination of profits and losses
resulting from intra group
transactions.
Increased disclosure requirements

Employee benefits and Ind AS 19 requires the impact of re It requires such actuarial gain/losses
share based payments measurement in net defined benefit to be recognized in the Statement of
liability (asset) to be recognized in Profit & Loss.
other comprehensive income.
Unvested past service costs are being Entity should recognize unvested past
recognized immediately as they service cost as an expense on a
occur. straight line basis over the average
period until the benefits become
vested.

Termination benefits liability has to Termination benefits liability has to

be recognized at the earlier of when be recognized only when there is a
the entity can no longer withdraw the present obligation as a result of a past
offer of those benefits and when the event, it is probable that an outflow
entity recognizes a restructuring cost. of resources embodying economic
benefits will be required to settle the
obligation, and a reliable estimate
can be made of the amount of the
obligation.

Ind AS 102-Share based payment It covers only Employee share based

applies to both employee and non payments.
employee share based payments.
Employee share based payments Option to use either the intrinsic
should be accounted for using fair value method or the fair value
value method. method.
A subsidiary needs to account for Clear cut guidance is not available
ESOPs issues to its employees by its under I GAAP.
parent entity either as equity settled
or cash settled plans, depending on
specified criteria.

Enhanced disclosure requirements for

defined benefit plans.

TAXPOINT Page 31
Property, Plant and Ind AS 16 mandates component AS 10 recommends but does not
equipment accounting. require it. However, the Act requires
Companies to apply component
accounting mandatorily from the
financial years commencing April 1,
2015.
Ind AS 16 defines cost of a PPE as its Finance element is not separated
cash price equivalent at its except in case of hire purchase.
recognition date. And in case
payment is deferred beyond normal
credit terms, excess paid is
considered as interest expense and
taken to statement of profit & loss
over the credit period.

No option is there in Ind AS 21 for the AS 11 allows Companies to adjust

effects of changes in foreign currency exchange differences arising on long-
exchange rates. term foreign currency monetary item
to the carrying value of PPE.
Under Ind AS 16, an item of PPE is Under AS 6, Management has the
depreciated based on its estimated option of treating the useful lives and
useful life and residual value and if residual value prescribed in Schedule
these are different with those II as maximum or can use the same as
prescribed in Schedule II of the indicative only.
Companies Act, 2013, Companies will
need to disclose justification for using
different values/useful lives.

Also, it requires useful life, I GAAP recommends periodic review

depreciation method and residual of useful lives but its not mandatory
value to be reviewed at least at the here.
end of financial year.

Change in depreciation method is Change in depreciation method is

treated as change in accounting treated as change in accounting policy
estimate and is applied prospectively. and is applied retrospectively.
If an asset is revalued, entire class of Revaluation is not required for all the
that asset needs to be revalued and assets in that class. Also, there is no
revaluation to be done periodically. need to update revaluation regularly.
Intangible Assets An Intangible asset can have Rebuttable presumption that useful
indefinite useful lives and are life of an intangible asset should not
required to be tested for impairment exceed 10 years.
at least on an annual basis and are
not amortized.

TAXPOINT Page 32
 An entity can chose revaluation model Revaluation is prohibited under I
for subsequent measurement, if there GAAP.
is an active market for the underlying
intangible assets.
There is a rebuttable presumption Schedule II to the Companies Act,
that an amortization method based on 2013 allows revenue based
the revenue generated by an activity amortization for toll roads created
that includes the use of an intangible under the service concession
asset is inappropriate. arrangements.

Expenditure on advertising and No such guidance.

promotional activities to be
recognized as an expense when it is
incurred.

Investment Property Investment property us dealt in a Briefly dealt under AS 13.

detailed manner in Ind AS 40.

Measurement using Cost model-Cost Investment property is accounted as

less accumulated depreciation and long term investment i.e. at cost less
accumulated impairment, if any. other than temporary diminution in
the value of property. Depreciated
cost model is applied for subsequent
measurement.

Fair value disclosure is required even Fair value disclosure is not

though cost model is used. mandatory.

Inventories Ind AS 2 exclude from its scope only AS 2 exclude all aspects of accounting
the measurement of inventories held for producers’ inventories of mineral
by producers of minerals and mineral oils, ores and gases, to the extent
products, to the extent they are that they are measured at net
measured at net realizable value in realizable value.
accordance with well-established
practices in those industries.

Ind AS 2 does not contain these scope AS 2 exclude from its scope the work
exclusions. in progress arising in the ordinary
course of business of service providers
and under construction contracts.
A broker trading firm, if decided to AS 2 applies to commodity broker-
measure its inventories at fair value traders. Hence they need to measure
less cost to sell, Ind AS 2 does not inventories at lower of cost and net
apply to measurement of inventories. realizable value.

TAXPOINT Page 33
 When inventory is acquired on AS 2 does not require for separation
deferred settlement terms, of finance element.
identification of finance element
separately over the period of
financing.

Same cost formula should be used Formula used should reflect the
consistently for all inventories having fairest possible approximation to the
similar nature and use to the entity. cost incurred in bringing the items of
inventory to their present location
and condition.

Impairment Ind AS 36 is applicable to investment AS 28 does not apply to impairment of

in subsidiaries, associates and joint the above assets.
ventures in the separate financial
statements of the parent.
Ind AS 36 requires an entity to AS 28 requires an entity to test the
estimate the below assets for below assets for impairment at least
impairment at least at the end of each financial year even
annually(Performed at the same time if there is no indicator of impairment:
every year) even if there is no a. An intangible asset that is not yet
indicator of impairment: available for use
a. An intangible asset with indefinite b. Amortized over a period of 10 years
useful life or not yet available for use from the date when the asset is
b. Goodwill acquired in a business available for use.
combination.
Goodwill is allocated to Cash Goodwill is allocated to Cash
Generating Units (CGUs) that are Generating Units (CGUs) only when
expected to benefit from the the allocation can be done on a
synergies of the business combination reasonable and consistent basis. When
from which it arose. There is no all the allocation cannot be
bottom up or top down approach. performed, two levels of impariments
are carried out- Bottom up test and
top down test.
It does not permit an impairment loss It requires reversal in subsequent
recognised for goodwill to be reversed period when it was caused by a
in a subsequent period. specific external event of an
exceptional nature that is not
expected to recur and subsequent
external events have reveresd the
effect of that event.
It requires additional disclosures for No such extra disclosures are
significant CGU or group of CGUs. required.
External disclosures include
significant assumptions, headroom
and impact of reasonably changes in
key assumptions.

TAXPOINT Page 34
Leases Ind AS 17 deals with lease of land and AS 19 excludes lease of land from its
composite leases. It also requires a scope. EAC provides guidance on long-
lease which includes both land and term lease of land and states that
building, to be classified separately. lease will be in the nature of sale and
should be accounted for accordingly.

Ind AS 17 does not mandate straight Lease rentals are straight lined over
lining of lease escalation if they are in the lease term.
line with the expected general
inflation compensating the lessor for
expected inflationary cost.

In case a sale and leaseback Both excess and deficiency to be

transaction results in a finance lease, deferred and amortized over the lease
excess amount is deferred and term in proportion to the depreciation
amortized over the lease term, on the leased assets.
however no particular amortization
method is prescribed.
It requires identification of lease from There is no guidance on identification
a transaction structured as sale, of lease contained in a transaction
purchase or rendering of service. structured as sale, purchase or
The below two criteria indicate the rendering of service and such
existence of lease: transactions are generally accounted
based on their legal form.
a. Fulfillment of the arrangement is
dependent on the use of a specific
asset or assets, and
b. The arrangement conveys a right to
use the asset.
The effects of changes Ind AS 21 is based on the concept of AS 11 is based on the concept of
in foreign exchange Functional currency. It is the currency Reporting currency. Normally the
rates of the primary economic environment currency of the country in which an
in which an entity operates. entity is domiciled is used.
There is no distinction between It distinguishes between integral and
integral and non integral foreign non integral foreign operations and
operations. Any exchange gain/loss to prescribes separate accounting
recognize the transaction in its treatment.
functional currency is recognized in
the profit or loss for the period.

It requires exchange differences There are two options. In first option,

arising on translation/settlement of an entity can recognize exchange
all foreign monetary items, including differences as income/expense in
foreign currency monetary items, to profit or loss for the period in which
be recognized as income/expense in they arise and second option is to
the profit or loss in for the period in defer/capitalize exchange differences
which they arise. arising on long term foreign currency
monetary items.

TAXPOINT Page 35
Presentation of Ind AS 1 Set out overall requirements AS 1 deals only with disclosure of
financial statements for the presentation of financial accounting policies. The format and
statements, guidelines for their disclosure requirements are set out
structure and minimum requirements under Schedule III to the Companies
for their content. Act, 2013.

All changes in equity (other than There is no concept of other

transactions with owners) to be shown comprehensive income.
as separate component titled as "
other comprehensive income".
All transaction with equity holders to There is no concept of SOCIE.
be presented in a separate statement
known as ' Statement of Changes in
Equity" (SOCIE).
Ind AS 1 requires disclosure of Critical No such disclosures are required
judgments made by the management under I GAAP.
in application of accounting policies,
key sources of estimation uncertainty,
information required to evaluate the
entity's objective, policies and
processes for managing capital.

Prohibition for extraordinary items. Specifically requires disclosure of

certain item as extra ordinary items.
In case of retrospective application of Impact of material changes in
an accounting policy- retrospective accounting policies to be shown in the
restatement/ reclassification- a third financial statement for current
balance sheet as at the beginning of period.
the earliest comparative period is
required.

If the regulatory framework requires, Compliance with all notified

or otherwise do not prohibit accounting standard is mandatory.
departure, the entity can depart from
the requirement of Ind AS if its
misleading in nature or conflicting
with the objectives of financial
statements set out in the framework.

Related party Definition of Related party is quite AS 18 definition is not based on the
disclosures broad in Ind AS 24. principles of reciprocity.

Includes close members of family of Includes only relative of KMPs as

Key Management Personnel (KMP) as related party.
well as that of persons who exercise
control/significant influence over the
entity.

Any Director whether executive or Excludes non executive directors from

otherwise are covered. the definition of KMP.

TAXPOINT Page 36
Segment reporting Ind AS 108 adopts Management It adopts Management reporting
reporting approach. approach.
No requirement to report on product If an entity's internal structure and
or geographical basis. management reporting system is
based on either product line or
geography, AS 17 requires the entity
to choose one as its primary segment
reporting format.

Amount of each segment item Segment information to be prepared

reported is the measure reported to in conformity with the entity's
the Chief Operating Decision Maker accounting policies for preparing its
(CODM) in Management reports, even financial statements.
if its not prepared in conformity with
accounting policies.

Terms like segment revenue, segment Clear definition in I GAAP.

profit/loss, segment assets, and
segment liabilities are not defined
here.
A measure of profit and loss for each It specifies the item to be disclosed
reportable segment to be disclosed for each reportable segment.
along with additional line items which
are provided to CODM.

TAXPOINT Page 37
CHALLENGES IN FIRST TIME CONVERSION

TAXPOINT Page 38
CHALLENGES IN FIRST TIME CONVERSION

 The transition process is complex and time consuming for many entities as it demands staff
training, data collection, analysis of contracts and other arrangements and new or modified
Information system requirements.

 Involvement of senior management in many decisions as there is no one fit answer to these
questions and require time and careful considerations to achieve an optimal end result.

a. Choices among voluntary exemptions which are relevant and will lead to best outcome
for the entity.
b. Selection of accounting policies.

 This conversion has impact on taxes as well. Income Computation and Disclosure Standards
(ICDS) are notified by the government and in the past, tax authorities have considered
accounting treatment while deciding tax liabilities, therefore this conversion may increase the
possibility of tax litigations.

 This conversion will require entities to modify its IT Systems as well so that the financial data
produced confirm to Ind AS.

 This transition will require entities to make significant changes in their internal financial
reporting framework to ensure its operating effectively.

TAXPOINT Page 39