Practical approach to Ind AS Implementation (Vol 1&2) (2nd Edition)

Contents at a glance About the Author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Chapter 1

Convergence with IFRS in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 2

Ind AS conversion- Are we ready?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Chapter 3

Ind AS 1: Presentation of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Chapter 4

Ind AS 2: Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Chapter 5

Ind AS 7: Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Chapter 6

Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors . . . . . 153

Chapter 7

Ind AS 10: Events after the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Chapter 8

Ind AS 11: Construction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

Chapter 9

Ind AS 12: Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Chapter 10 Ind AS 16: Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Chapter 11 Ind AS 17: Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 Chapter 12 Ind AS 18: Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Chapter 13 Ind AS 19: Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 Chapter 14 Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Chapter 15 Ind AS 21: The Effects of Changes in Foreign Exchange Rates. . . . . . . . . . . . . . . . . . . 389 Chapter 16 Ind AS 23: Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Chapter 17 Ind AS 24: Related Party Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Chapter 18 Ind AS 27: Separate Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 Chapter 19 Ind AS 28: Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . 449 Chapter 20 Ind AS 29: Financial Reporting in Hyperinflationary Economies . . . . . . . . . . . . . . . . 469 Chapter 21 Ind AS 32: Financial Instruments: Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 Chapter 22 Ind AS 33: Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Chapter 23 Ind AS 34: Interim Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531 xiii

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Chapter 24 Ind AS 36: Impairment of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 Chapter 25 Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . . . . 577 Chapter 26 Ind AS 38: Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607 Chapter 27 Ind AS 40: Investment Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 Chapter 28 Ind AS 41: Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Chapter 29 Ind AS 101: First-time Adoption of Indian Accounting Standards . . . . . . . . . . . . . . . 661 Chapter 30 Ind AS 102: Share-based Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 Chapter 31 Ind AS 103: Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 Chapter 32 Ind AS 104: Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783 Chapter 33 Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations. . . . . . 795 Chapter 34 Ind AS 106: Exploration for and Evaluation of Mineral Resources . . . . . . . . . . . . . . . 823 Chapter 35 Ind AS 107: Financial Instruments: Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 Chapter 36 Ind AS 108: Operating Segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 Chapter 37 Ind AS 109: Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 Chapter 38 Ind AS 110: Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921 Chapter 39 Ind AS 111: Joint Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 961 Chapter 40 Ind AS 112: Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . 983 Chapter 41 Ind AS 113: Fair Value Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 995 Chapter 42 Ind AS 114: Regulatory Deferral Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013 Chapter 43 Income Tax Disclosure Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031

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Table of Contents About the Author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Chapter 1 Convergence with IFRS in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Meaning of “Convergence” with IFRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ‘Convergence’ versus ‘Adoption’. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Convergence strategy in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 MCA roadmap-the notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Salient features of the notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Applicability thresholds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Ind AS implementation – The roadmap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Applicability of Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Exempted companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Applicability of Ind AS on overseas entities and their affiliates in India. . . . . . . . . . . . . . . . . . . . 22 Voluntary Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Meaning of net-worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Materiality concept. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Overriding status of law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 IND AS vs. the Act 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 List of IFRS/IAS currently applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 List of SIC/IFRIC currently applicable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 List of converged IND AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 List of Non-Converged Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 List of converged IFRIC/SIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 List of Non-Converged IFRIC/SIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Recent Updates to Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Deferment of Ind AS 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Consequential amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Amendments to other Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

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Annexure I Annexure II Annexure III Annexure IV Annexure V Annexure VI Annexure VII

The Companies (Indian Accounting Standards) Rules, 2014. . . . . . . . . . . . . . . . . . . . . . .

PIB prescribing the roadmap for Scheduled Commercial Banks . . . . . . . . . . . . . . . . . . . . .

RBI direction regarding Ind AS to be followed by Scheduled Commercial Banks. . . . . . .

IRDA circular regarding instructions to the insurance companies with respect to Ind AS applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MCA clarifications with respect to NBFCs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RBI direction regarding preparedness of banks to submit Proforma Ind AS FS to RBI. . .

RBI direction for All India Financial Institutions with respect to Ind AS applicability. . .

36 41 43 45 47 50 53

Annexure VIII Report of the Implementation Group on Ind AS in Insurance sector in India . . . . . . . . . . 55 Ind AS conversion- Are we ready?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Chapter 2 Ind AS conversion process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Diagnostic review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Preliminary evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Design and action plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Review Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Focus areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Financial reporting factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Accounting Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Tax implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Group policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Industry peers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Management strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Non-financial reporting factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Company personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Training needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 IT system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Human resources system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Treasury and finance function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Stakeholder expectations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Learning from global peers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Chapter 3

Ind AS 1: Presentation of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Purpose of financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Components of financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Presentation of True and Fair View and compliance with Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 xvi

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Departure from compliance with Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Going concern. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Accrual basis of accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Materiality and aggregation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Offsetting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Frequency of reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Comparative information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Consistency of presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Reclassification/Change in accounting policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Identification of the financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Information to be presented either in the Balance Sheet or in the notes. . . . . . . . . . . . . . . . . . . . . . . 75 Current/non-current distinction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Statement of Profit and Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Allocation of profit or loss and other comprehensive income for the period. . . . . . . . . . . . . . . . . . . 80 Information to be presented in the statement of profit and loss or in the notes. . . . . . . . . . . . . . . . . . 80 Information to be presented in the profit or loss section of the statement of profit and loss. . . . . . . . 81 Profit or loss for the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Information to be presented in the other comprehensive income section. . . . . . . . . . . . . . . . . . . . . . 82 Other comprehensive income for the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Statement of changes in equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Information to be presented in the statement of changes in equity. . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Information to be presented in the statement of changes in equity or in the notes. . . . . . . . . . . . . . . 84 Statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Disclosures requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Requirements of other standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Assumptions and sources of estimation uncertainty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Puttable financial instruments classified as equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Other disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Position under the Companies Act, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Ind AS-compliant Schedule III to the Companies Act, 2013-for companies . . . . . . . . . . . . . . . . . . . 88 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . 89 Other amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 xvii

Practical Approach to Ind AS Implementation, 2e

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Chapter 4

Ind AS 2: Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Meaning of Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Measurement of inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Cost of inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Costs of purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Costs of conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Other costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Cost of inventories of a service provider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Techniques for the measurement of cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Cost Formulas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Net realisable value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Recognition as an expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 123 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Chapter 5 Ind AS 7: Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Benefits of cash flow information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Components of cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Presentation of a statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 Reporting cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Reporting cash flows from investing and financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Reporting cash flows on a net basis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Cash flows for financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Foreign currency cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 Interest and dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Taxes on income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Investments in subsidiaries, associates and joint ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 xviii

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Changes in ownership interests in subsidiaries and other businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Non-cash transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Additional requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Other disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Recent amendments issued MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Chapter 6

Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors . . . 153 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Selection and application of accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Consistency of accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Applying changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Retrospective application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Limitations on retrospective application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Disclosure- Change in accounting policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Changes in accounting estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Disclosure- Change in estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Prior period errors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Limitations on retrospective restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Disclosure- Prior period errors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Chapter 7

Ind AS 10: Events after the Reporting Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Breach of a material provision of a long-term loan arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Process of approving the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Adjusting events after the reporting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Non-adjusting events after the reporting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Going concern. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Date of approval for issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Updated disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 xix

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Non-adjusting events after the reporting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Distribution of Non-cash Assets to Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Applicability of guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Recognition of dividend payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Measurement of a dividend payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Accounting for settlement of dividend payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Presentation and disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Chapter 8

Ind AS 11: Construction Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Construction Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Types of construction contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Fixed price contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Cost plus contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Combining and segmenting construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Segmenting construction contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Combining construction contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Additional asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Contract revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Measurement of contract revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Variation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Incentive payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Contract costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Costs that relate directly to a specific contract include: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Costs that may be attributable to contract activity in general include:. . . . . . . . . . . . . . . . . . . . . . . 198 Costs that are specifically chargeable to the customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Excluded costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Costs incurred on securing a contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Recognition of contract revenue and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Reliable estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Determination of outcome of a construction contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 In the case of a fixed price contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 In the case of a cost plus contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Outcome of contract not estimated reliably. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Percentage of completion method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Determination of stage of completion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 xx

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Recognition of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Contract costs that are not probable of being recovered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Recognition of expected losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Changes in estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 Service Concession Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Features of the service concessional agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Treatment of the operator’s rights over the infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Recognition and measurement of arrangement consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Construction or upgrade services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Consideration given by the grantor to the operator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Financial Asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Intangible Asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Combination of Financial Asset and Intangible Asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Operation services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Contractual obligations to restore the infrastructure to a specified level of serviceability. . . . . . . . 208 Borrowing costs incurred by the operator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Items provided to the operator by the grantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Chapter 9

Ind AS 12: Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Tax base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 The tax base of an asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 The tax base of liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 Tax base of items not recognized in balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 Tax base in case of consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Recognition of current tax liabilities and current tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Recognition of deferred tax liabilities and deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 Taxable temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 Deductible temporary differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 Assets carried at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 Initial recognition of an asset or liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Unused tax losses and unused tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 xxi

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Reassessment of unrecognised deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Investments in subsidiaries, branches and associates and interests in joint arrangements. . . . . . . . . . . 226 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 Deferred tax assets and liabilities not to be discounted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Recognition of current and deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Items recognised in profit or loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Items recognised outside profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Deferred tax arising from business combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 Current and deferred tax arising from share-based payment transactions. . . . . . . . . . . . . . . . . . . . . . . 231 Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Exchange differences on deferred foreign tax liabilities or assets . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Income Taxes—Changes in the Tax Status of an Entity or its Shareholders . . . . . . . . . . . . . . . . . . . . . 232 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 234 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 Chapter 10

Ind AS 16: Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Spare parts and servicing equipments etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Measurement unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Assets acquired for safety purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Subsequent costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Day- to- day service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Replacement costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Major inspection costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 Measurement at recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Elements of cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Cessation of recognition cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 Incidental operations before or during construction or development. . . . . . . . . . . . . . . . . . . . . . . . 252 Cost of self-constructed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 Bearer plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 Measurement of cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 Separation of interest elements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 Assets acquired in exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 Commercial substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 xxii

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Measurement after recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 Cost model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 Revaluation model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 Componentization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258 Depreciable amount and depreciation period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 Determination of useful life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 Depreciation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Compensation for impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Derecognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Changes in existing decommissioning, restoration and similar liabilities. . . . . . . . . . . . . . . . . . . . . . . 263 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 Stripping costs in the production phase of a surface mine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 Recognition of production stripping costs as an asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 Initial measurement of the stripping activity asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 Subsequent measurement of the stripping activity asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 268 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 Chapter 11

Ind AS 17: Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Classification of leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 Finance lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 Operating Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 Examples of situations that individually or in combination would normally lead to a lease being classified as a finance lease are:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 Indicators of situations that individually or in combination could also lead to a lease being classified as a finance lease are:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 Combined leases of land and building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281 Leases in the financial statements of lessees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Finance leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Initial recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Subsequent measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 Operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 xxiii

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Leases in the financial statements of lessors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 Finance leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 Initial recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 Subsequent measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 Disclsoure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 Operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 Depreciation policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 Sale and leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 Sale and leaseback transactions resulting in finance lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 Sale and leaseback transactions resulting in operating lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 Sale price is equal to fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 Sale price is less than fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 Sale price is more than fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 Operating Leases—Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 For lessor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 For lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 Evaluating the substance of transactions involving the legal form of a lease . . . . . . . . . . . . . . . . . . . . 298 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299 Determining whether an Arrangement contains a Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 Determining whether an arrangement is, or contains, a lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 Fulfilment of the arrangement is dependent on the use of a specific asset . . . . . . . . . . . . . . . . . 300 Arrangement conveys a right to use the asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 Assessing or reassessing whether an arrangement is, or contains, a lease . . . . . . . . . . . . . . . . . . . . 301 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 304 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 Chapter 12

Ind AS 18: Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 Measurement of revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 Interest element in revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Exchange of services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Goods and services of similar nature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Goods and services of dissimilar nature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .317 Identification of the transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Separating components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Aggregating components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Sale of goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 xxiv

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Conditions of revenue recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Significant risks of ownership retained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 Insignificant risks of ownership retained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Economic benefits associated with the transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Matching concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Rendering of services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Recognition criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Probability of economic benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Percentage of completion method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Stage of completion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Straight-lining of recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Outcome of the transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Interest and Royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Revenue—Barter transactions involving advertising services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Manner of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Customer Loyalty Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Manner of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Measuring the fair value of award credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Transfers of Assets from Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Manner of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Is the definition of an asset met? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 How should the transferred item of property, plant and equipment be measured on initial recognition?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 How should the credit be accounted for?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 How should the entity account for a transfer of cash from its customer?. . . . . . . . . . . . . . . . . . 333 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 Chapter 13

Ind AS 19: Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Short-term employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 All short-term employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Short-term paid absences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Profit-sharing and bonus plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 xxv

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Post-employment benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Defined contribution plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Defined benefit plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Accounting for the constructive obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Present value of defined benefit obligations and current service cost. . . . . . . . . . . . . . . . . . . . . 348 Actuarial valuation method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Attributing benefit to periods of service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .349 Actuarial assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 Actuarial assumptions: mortality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 Actuarial assumptions: discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 Actuarial assumptions: salaries, benefits and medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 Past service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 Gains and losses on settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 Recognition and measurement: plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 Fair value of plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355 Components of defined benefit cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355 Net interest on the net defined benefit liability (asset). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355 Remeasurements of the net defined benefit liability (asset). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 Components of defined benefit cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 Explanation of amounts in the financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 Multi-employer plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 Defined benefit plans that share risks between entities under common control. . . . . . . . . . . . . . . . 360 State plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Insured benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Other long-term employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 Termination benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. . . . . . 363 xxvi

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Availability of a refund or reduction in future contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 The right to a refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Measurement of the economic benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 The economic benefit available as a contribution reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 The effect of a minimum funding requirement on the economic benefit available as a reduction in future contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 When a minimum funding requirement may give rise to a liability. . . . . . . . . . . . . . . . . . . . . . . . . 365 Recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 Chapter 14

Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373

Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Ind AS 20 does not deal with:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Types of grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .374 Recognition of government grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Non-monetary government grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 Presentation of grants related to assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 Presentation of grants related to income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 Repayment of government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 Government assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Chapter 15

Ind AS 21: The Effects of Changes in Foreign Exchange Rates . . . . . . . . . . . . . . . . 389

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 Functional currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 Primary factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 Secondary factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Additional factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Net investment in a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 Monetary items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 Non-monetary items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 Reporting foreign currency transactions in the functional currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Initial recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Reporting at the ends of subsequent reporting periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Recognition of exchange differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 xxvii

Practical Approach to Ind AS Implementation, 2e

Non-monetary items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Monetary items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 Change in functional currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 Use of a presentation currency other than the functional currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 Translation to the presentation currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 Translation of a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 Disposal or partial disposal of a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402 Tax effects of all exchange differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406 Chapter 16

Ind AS 23: Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Borrowing Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Qualifying Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Borrowing costs eligible for capitaliSation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Excess of the carrying amount of the qualifying asset over recoverable amount. . . . . . . . . . . . . . . . . . 418 Commencement of capitaliSation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 Suspension of capitaliSation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 Cessation of capitaliSation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 421 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 Chapter 17

Ind AS 24: Related Party Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 Government-related entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436 Chapter 18

Ind AS 27: Separate Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 Government-related entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 xxviii

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Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 Preparation of separate financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 Chapter 19

Ind AS 28: Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . . 449 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 Significant influence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 Loss of significant influence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 Equity method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 Application of the equity method and its procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 Treatment of unrealized intra-group profits related to associates. . . . . . . . . . . . . . . . . . . . . . . . . . . 452 Accounting treatment of goodwill, bargain purchases and losses with respect to associates. . . . . . 453 Exemptions from applying the equity method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 Classification as held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 Discontinuing the use of the equity method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 Changes in ownership interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 Impairment losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 Recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462 Chapter 20

Ind AS 29: Financial Reporting in Hyperinflationary Economies. . . . . . . . . . . . . . 469 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 The restatement of financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 Historical cost financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 Statement of profit and loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 Gain or loss on net monetary position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 Current cost financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 Statement of profit and loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 Gain or loss on net monetary position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Corresponding figures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 xxix

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Consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Selection and use of the general price index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Economies ceasing to be hyperinflationary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Applying the Restatement Approach under Ind AS 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 Comparison with IAS/IFRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475 Chapter 21

Ind AS 32: Financial Instruments: Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 Presentation- Liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 Puttable instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484 Instruments, or components of instruments, that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation. . . . . . . 485 Reclassification of puttable instruments and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 Settlement in the entity’s own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 Contingent settlement provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487 Settlement options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488 Compound financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 Treasury shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 Interest, dividends, losses and gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 Offsetting a financial asset and a financial liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 Derivative financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 Treatment in consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 499 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Chapter 22

Ind AS 33: Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509 Partly paid shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 xxx

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Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 Dilutive potential ordinary shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514 Options, warrants and their equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514 Convertible instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516 Contingently issuable shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517 Contracts that may be settled in ordinary shares or cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518 Purchased options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518 Written put options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 Retrospective adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520 Rights issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521 Participating equity instruments and two-class ordinary shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523 Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527 Chapter 23

Ind AS 34: Interim Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 Content of an interim financial report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 Minimum components of an interim financial report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 Form and content of interim financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 Significant events and transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 Other Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534 Disclosure of compliance with Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536 Periods for which interim financial statements are required to be presented. . . . . . . . . . . . . . . . . . . . . 537 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Disclosure in annual financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Same accounting policies as annual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Revenues received seasonally, cyclically, or occasionally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Costs incurred unevenly during the financial year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Use of estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Restatement of previously reported interim periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Impairment assessment for Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 541 Recent other amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543

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Chapter 24

Ind AS 36: Impairment of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Identifying an asset that may be impaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Exception. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Indication of potential for impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 External sources of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 Internal sources of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 Dividend from a subsidiary, joint venture or associate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 Measuring recoverable amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 Measuring the recoverable amount of an intangible asset with an indefinite useful life. . . . . . . . . .553 Fair value less costs of disposal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554 Value in use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554 Basis for estimates of future cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554 Composition of estimates of future cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 Estimates of future cash flows shall include: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 Foreign currency future cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558 Recognising and measuring an impairment loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558 Cash-generating units and goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558 Identifying the cash-generating unit to which an asset belongs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558 Recoverable amount and carrying amount of a cash-generating unit. . . . . . . . . . . . . . . . . . . . . . . . . . . 560 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561 Allocating goodwill to cash-generating units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561 Testing cash-generating units with goodwill for impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 Timing of impairment tests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 Corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 Impairment loss for a cash-generating unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 Reversing an impairment loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 External sources of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Internal sources of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 Reversing an impairment loss for an individual asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 Reversing an impairment loss for a cash-generating unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 Reversing an impairment loss for goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 Consequential amendments on deferral of IND AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . 573 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574

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Chapter 25

Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . 577 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 Provisions and other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 Difference between provision and contingent liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581 Present obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 Past event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 Probable outflow of resources embodying economic benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 Reliable estimate of the obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 Contingent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 Contingent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 Best estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 Risks and uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588 Present value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588 Future events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Expected disposal of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 Changes in provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 Use of provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 Application of the recognition and measurement rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 Future operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 Onerous contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 Restructuring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592 A constructive obligation to restructure arises only when an entity:. . . . . . . . . . . . . . . . . . . . . . 592 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Accounting for an interest in a fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Accounting for obligations to make additional contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Liabilities arising from participating in a specific market— Waste electrical and electronic equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 Levies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 598 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 598 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 xxxiii

Practical Approach to Ind AS Implementation, 2e

Chapter 26

Ind AS 38: Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 Identifiability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 Future economic benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 611 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612 Separate acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 Acquisition as part of a business combination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 Recognition of Intangible asset acquired in a business combination . . . . . . . . . . . . . . . . . . . . . . . . 614 Subsequent expenditure on an acquired in-process research and development project . . . . . . . . . . 615 Acquisition by way of a government grant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 Exchanges of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 Commercial substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 Internally generated goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616 Internally generated intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 Research phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 Development phase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 Cost of an internally generated intangible asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619 Recognition of an expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620 Past expenses not to be recognised as an asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620 Measurement after recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621 Cost model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621 Revaluation model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621 Useful life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622 Intangible assets with finite useful lives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623 Amortisation period and amortisation method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623 Residual value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625 Review of amortisation period and amortisation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625 Intangible assets with indefinite useful lives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626 Review of useful life assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626 Recoverability of the carrying amount—impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 Retirements and disposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 Website cost as intangible asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 630 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 xxxiv

Table of Contents

Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Chapter 27

Ind AS 40: Investment Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638 Classification of property as investment property or owner-occupied property. . . . . . . . . . . . . . . . . . . 638 Examples- considered as investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638 Examples- not considered as investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Examples- partially considered as investment property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 Measurement at recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 Initial measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 Measurement after recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641 Accounting policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641 Fair value measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641 Inability to measure fair value reliably. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641 Subsequent measurement-Cost model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642 Disposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 643 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644 Additional disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 645 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Chapter 28

Ind AS 41: Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 Gains and losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654 Inability to measure Fair Value reliably. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655 Government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657 Additional Disclosure- for biological assets where Fair Value cannot be measured reliably. . . . . . 658 Disclosure related to Government grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659

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Chapter 29

Ind AS 101: First-time Adoption of Indian Accounting Standards. . . . . . . . . . . . . 661 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 Opening Ind AS balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Long Term Foreign Currency Monetary Items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Financial assets or intangible assets accounted for in accordance with Appendix-A, Service Concession Arrangements to Ind AS 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Exceptions to the principles that an entity’s opening Ind AS balance sheet should comply with Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Mandatory exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Derecognition of financial assets and financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 Hedge accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 Non-controlling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 Classification and measurement of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 Impairment of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675 Embedded derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 676 Government loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 676 Voluntary exemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Share-based payment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683 Insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 Deemed cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Cumulative translation differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Long Term Foreign Currency Monetary Items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Investments in subsidiaries, joint ventures and associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 Assets and liabilities of subsidiaries, associates and joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . 695 Compound financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695 Designation of previously recognised financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 Fair value measurement of financial assets or financial liabilities at initial recognition. . . . . . . . . . 696 Decommissioning liabilities included in the cost of property, plant and equipment. . . . . . . . . . . . . 696 Financial assets or intangible assets accounted for in accordance with Appendix A, Service Concession Arrangements to Ind AS 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 Extinguishing financial liabilities with equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 Severe hyperinflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 Joint ventures - transition from proportionate consolidation to the equity method . . . . . . . . . . . . . 698 Joint operations—transition from the equity method to accounting for assets and liabilities. . . . . . 698 Transition provisions in an entity’s separate financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . 699 xxxvi

Table of Contents

Stripping costs in the production phase of a surface mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699 Designation of contracts to buy or sell a non-financial item. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Transfers of Assets from Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Non-current assets held for sale and discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Presentation and disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Comparative information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Non-Ind AS comparative information and historical summaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Explanation of transition to Ind ASs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 Reconciliations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 Designation of financial assets or financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 Use of fair value as deemed cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Use of deemed cost for investments in subsidiaries, joint ventures and associates . . . . . . . . . . . . . 703 Use of deemed cost for oil and gas assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Use of deemed cost for operations subject to rate regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Use of deemed cost after severe hyperinflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Interim financial reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 704 Recent other amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 Comparison with IFRS/ IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Chapter 30

Ind AS 102: Share-based Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 Equity-settled share-based payment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 Transactions in which services are received. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 Transactions measured by reference to the fair value of the equity instruments granted. . . . . . . . . . . . 717 Determining the fair value of equity instruments granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717 Treatment of vesting conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717 Treatment of non-vesting conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718 Treatment of a reload feature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 After vesting date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 If the fair value of the equity instruments cannot be estimated reliably. . . . . . . . . . . . . . . . . . . . . . 719 Modifications to the terms and conditions on which equity instruments were granted, including cancellations and settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 Accounting for a modification of a share-based payment transaction that changes its classification from cash-settled to equity-settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 Cash-settled share-based payment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722 xxxvii

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Treatment of vesting and non-vesting conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722 Share-based payment transactions with a net settlement feature for withholding tax obligations. . 722 Share-based payment transactions with cash alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724 Share-based payment transactions in which the terms of the arrangement provide the counterparty with a choice of settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Share-based payment transactions in which the terms of the arrangement provide the entity with a choice of settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726 Share-based payment transactions among group entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 727 Share-based payment arrangements involving an entity’s own equity instruments. . . . . . . . . . . . . 727 Share-based payment arrangements involving equity instruments of the parent . . . . . . . . . . . . . . . 728 A parent grants rights to its equity instruments to the employees of its subsidiary. . . . . . . . . . . 728 A subsidiary grants rights to equity instruments of its parent to its employees. . . . . . . . . . . . . . 729 Share-based payment arrangements involving cash-settled payments to employees. . . . . . . . . . . . 730 Transfer of employees between group entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731 Transitional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733 Recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739 Chapter 31

Ind AS 103: Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745 Definition of a business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746 Identifying a business combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 The acquisition method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749 Identifying the acquirer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749 Determining the acquisition date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 Recognition principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 Classifying or designating identifiable assets acquired and liabilities assumed in a business combination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752 Measurement principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753 Exception to the recognition principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753 Exceptions to both the recognition and measurement principles. . . . . . . . . . . . . . . . . . . . . . . . . 754 Exceptions to the measurement principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755 Recognising and measuring goodwill or a gain from a bargain purchase. . . . . . . . . . . . . . . . . . . . . 755 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755 Bargain purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756 xxxviii

Table of Contents

Consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 Contingent consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 A business combination achieved in stages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760 A business combination achieved without the transfer of consideration. . . . . . . . . . . . . . . . . . . . . . . . 760 Measurement period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 Determining what is part of the business combination transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763 Acquisition-related costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764 Subsequent measurement and accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764 Reacquired rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 Contingent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 Indemnification assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 Contingent consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 Reverse acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 766 Measuring the consideration transferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 766 Preparation and presentation of consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . 766 Non-controlling interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767 Earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768 Business combinations of entities under common control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768 Common control business combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768 Method of accounting for common control business combinations. . . . . . . . . . . . . . . . . . . . . . . . . 769 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770 Business combination after the balance sheet date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 771 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771 Comparison with as and other GAAP principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 773 Chapter 32

Ind AS 104: Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 Embedded derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785 Unbundling of deposit components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 Temporary exemption from some other Ind ASs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 Liability adequacy test. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Impairment of reinsurance assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 Current market interest rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 Continuation of existing practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 Prudence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789 Future investment margins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789 xxxix

Practical Approach to Ind AS Implementation, 2e

Shadow accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789 Insurance contracts acquired in a business combination or portfolio transfer. . . . . . . . . . . . . . . . . . . . 789 Discretionary participation features. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 Insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 Financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Explanation of recognised amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Nature and extent of risks arising from insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 793 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Chapter 33

Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations . . . 795 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797 Non-current assets that are to be abandoned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Measurement of non-current assets (or disposal groups) classified as held for sale . . . . . . . . . . . . . . . 800 Measurement of a non-current asset (or disposal group) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Recognition of impairment losses and reversals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Changes to a plan of sale or to a plan of distribution to owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . 805 Presentation and disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808 Presenting discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808 Gains or losses relating to continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 810 Presentation of a non-current asset or disposal group classified as held for sale . . . . . . . . . . . . . . . 810 Recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815 Chapter 34

Ind AS 106: Exploration for and Evaluation of Mineral Resources. . . . . . . . . . . . . 823

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 Recognition of Exploration and Evaluation Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 Temporary exemption from Ind AS 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 Measurement of Exploration and Evaluation Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 Measurement at recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 Elements of cost of exploration and evaluation assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 Subsequent measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 xl

Table of Contents

Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 Classification of exploration and evaluation assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 Reclassification of exploration and evaluation assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 Specifying the level at which exploration and evaluation assets are assessed for impairment. . . . . 827 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 828 Chapter 35

Ind AS 107: Financial Instruments: Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834 Disclosure requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 Classes of financial instruments and level of disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 Financial assets or financial liabilities at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . 836 Investments in equity instruments designated at fair value through other comprehensive income . 837 Reclassification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837 Offsetting financial assets and financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838 Allowance account for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838 Compound financial instruments with multiple embedded derivatives . . . . . . . . . . . . . . . . . . . . . . 839 Defaults and breaches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 Statement of profit and loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 Other disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840 Accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840 Hedge accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840 Fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841 Nature and extent of risks arising from financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841 Qualitative disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841 Quantitative disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841 Credit risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 Liquidity risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 Market risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 Transfers of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843 Transfer of financial assets that are not derecognised in their entirety . . . . . . . . . . . . . . . . . . . . 843 Transferred financial assets that are derecognised in their entirety. . . . . . . . . . . . . . . . . . . . . . . 843 Supplementary information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 845 xli

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Recent other amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847 Chapter 36

Ind AS 108: Operating Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 Core principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850 Operating segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851 Reportable segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 854 Aggregation criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855 Quantitative thresholds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 860 Restatement of previously reported information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861 General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861 Information about reported segment profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861 Reconciliations of the totals of segment revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862 Entity-wide disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863 Information about products and services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863 Information about geographical areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863 Information about major customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 868 Chapter 37

Ind AS 109: Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 Recognition and derecognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877 Initial recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877 Derecognition of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877 Derecognition of financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 880 Classification of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 880 Amortised cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881 Fair value through other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881 Fair value through profit or loss (FVTPL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881 Option to designate a financial asset at fair value through profit or loss. . . . . . . . . . . . . . . . . . . . . . 881 The entity’s business model for managing financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884 Contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 Classification of financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889 xlii

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Financial liabilities measured at amortised cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889 Option to designate a financial liability at fair value through profit or loss . . . . . . . . . . . . . . . . . . . 890 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891 Initial measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891 Subsequent measurement of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891 Subsequent measurement of financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891 Amortised cost measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 Effective interest method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 Write-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 Recognition of expected credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 Purchased or originated credit-impaired financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 894 Trade receivables, contract assets and lease receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 894 Modified financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896 Measurement of expected credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896 Determining significant increases in credit risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896 Reclassification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897 Financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897 Financial Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898 Gains and losses on a financial asset or financial liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898 A gain or loss on a financial asset or financial liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898 A gain or loss on a financial asset that is measured at amortised cost. . . . . . . . . . . . . . . . . . . . . . . . 899 If an entity recognises financial assets using settlement date accounting. . . . . . . . . . . . . . . . . . . . . 899 Investments in equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899 Liabilities designated as at fair value through profit or loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899 Assets measured at fair value through other comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . 899 Financial assets and financial liabilities- Classification, measurement and subsequent measurement- summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 Derivative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 Measurement of derivative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901 Embedded derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 902 Hybrid contracts with financial asset hosts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903 Other hybrid contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903 Hedge accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904 Hedging instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904 Qualifying instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904 Hedged items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905 Qualifying items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905 Qualifying criteria for hedge accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905 xliii

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Accounting for qualifying hedging relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 906 Fair value hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 907 Cash flow hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 908 Hedges of a net investment in a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 Hedges of a group of items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 Eligibility of a group of items as the hedged item. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 Option to designate a credit exposure as measured at fair value through profit or loss. . . . . . . . . . . . . 911 Eligibility of credit exposures for designation at fair value through profit or loss. . . . . . . . . . . . . . 911 Hedge of a net investment in a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911 Nature of the hedged risk and amount of the hedged item for which a hedging relationship may be designated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911 Where the hedging instrument can be held. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 912 Disposal of a hedged foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 912 Extinguishing financial liabilities with the equity instruments_. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 913 Consequential amendments on deferral of Ind AS 115 issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . 913 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917 Chapter 38

Ind AS 110: Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 Meeting the objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 923 Purpose and design of an investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 926 Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927 Voting rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928 Power with a majority of the voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .928 Majority of the voting rights but no power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929 Power without a majority of the voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929 Contractual arrangement with other vote holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929 Rights from other contractual arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929 The investor’s voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930 Substantive rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932 Protective rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934 Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934 Link between power and returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935 Relationship with other parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .939 Control of specified assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940 Continuous assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 941 Accounting requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 xliv

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Consolidation procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 Uniform accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 Potential voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 943 Reporting date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 943 Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944 Loss of control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944 Determining whether an entity is an investment entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945 Investment entities: exception to consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947 Accounting for a change in investment entity status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947 Recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 953 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 953 Chapter 39

Ind AS 111: Joint Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 961 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 Meeting the objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 Joint arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 Joint control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 Assessing joint control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 963 Types of joint arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 964 Classification of a joint arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 Structure of the joint arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 Joint arrangements not structured through a separate vehicle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 Joint arrangements structured through a separate vehicle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 The legal form of the separate vehicle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967 Assessing the terms of the contractual arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967 Assessing other facts and circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970 Consolidated Financial statements of parties to a joint arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . 972 Joint operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 972 Joint ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973 Separate financial statements of parties to a joint arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973 Joint operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973 Joint ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974 Accounting for sales or contributions of assets to a joint operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 975 Accounting for purchases of assets from a joint operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 975 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 975 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 976

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Ind AS 112: Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . 983 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 984 Meeting the objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 984 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 984 Significant judgements and assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985 Investment entity status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985 Interests in subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986 Non-controlling interests in group’s activities and cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986 Summarised financial information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986 Nature and extent of significant restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 987 Nature of the risks associated with an entity’s interests in consolidated structured entities. . . . . . . 988 Consequences of changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988 Consequences of losing control of a subsidiary during the reporting period . . . . . . . . . . . . . . . . . . 988 Interests in unconsolidated subsidiaries (investment entities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988 Interests in joint arrangements and associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989 Nature, extent and financial effects of an entity’s interests in joint arrangements and associates . . 989 Aggregation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990 Risks associated with an entity’s interests in joint ventures and associates. . . . . . . . . . . . . . . . . . . . . . 990 Interests in unconsolidated structured entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 Nature of interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 Nature of risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 Recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 Chapter 41

Ind AS 113: Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 995 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997 Definition of fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997 The asset or liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997 The transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997 Market participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 998 The price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 998 Application to non-financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999 Highest and best use for non-financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999 Valuation premise for non-financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1000 Application to liabilities and an entity’s own equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1000 General principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1000 xlvi

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Liabilities and equity instruments held by other parties as assets. . . . . . . . . . . . . . . . . . . . . . . . . . 1001 Liabilities and equity instruments not held by other parties as assets. . . . . . . . . . . . . . . . . . . . . . . 1001 Non-performance risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002 Restriction preventing the transfer of a liability or an entity’s own equity instrument. . . . . . . . . . 1002 Financial liability with a demand feature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002 Application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002 Fair value at initial recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Valuation techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Market approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1003 Cost approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Income approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Inputs to valuation techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004 General principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004 Inputs based on bid and ask prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1005 Fair value hierarchy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1005 Level 1 inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1005 Level 2 inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1006 Level 3 inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1007 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1007 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1009 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1009 Chapter 42

Ind AS 114: Regulatory Deferral Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1014 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1015 Rate-regulated activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1015 Temporary exemption from Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1015 Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1016 Continuation of existing accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1016 Applicability of other Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1017 Ind AS 10 Events after the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1017 Ind AS 12 Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 Ind AS 33 Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 Ind AS 36 Impairment of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 Ind AS 103 Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations. . . . . . . . . . . . . . . . . 1018 Ind AS 110 Consolidated Financial Statements and Ind AS 28 Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 xlvii

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Ind AS 112 Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1019 Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1019 Changes in presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1019 Classification of regulatory deferral account balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1019 Classification of movements in regulatory deferral account balances . . . . . . . . . . . . . . . . . . . . . . 1019 Ind AS 114 Vs. First time adoption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1023 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1024 Explanation of activities subject to rate regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1025 Explanation of recognised amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1025 Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1026 Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1026 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1026 Comparison with AS and other GAAP Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1027 Chapter 43

Income Tax Disclosure Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1032 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1032 Past history and journey to reach ICDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1033 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1033 Transitional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1033 Comparative Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1034 Detailed analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 ICDS I- Disclosures of Accounting Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 ICDS I Vs AS 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 ICDS I Vs Ind AS 1 and Ind AS 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 Disclosure requirements under ICDS I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 ICDS II – Valuation of Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1036 ICDS II Vs AS 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1036 ICDS II Vs Ind AS 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1036 Disclosure requirements under ICDS II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1036 ICDS III – Construction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1037 ICDS III Vs AS 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1037 ICDS III Vs Ind AS 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1037 Disclosure requirements under ICDS III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1037 ICDS IV – Revenue Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1038 ICDS IV Vs AS 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1038 ICDS IV Vs Ind AS 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1038 Disclosure requirements under ICDS IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1039 ICDS V – Tangible Fixed Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1039 xlviii

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ICDS V Vs AS 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1039 ICDS V Vs Ind AS 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1039 Disclosure requirements under ICDS V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1040 ICDS VI – Effects of changes in Foreign Exchange Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1040 ICDS VI Vs AS 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1040 ICDS VI Vs Ind AS 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1041 Disclosure requirements under ICDS VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1041 ICDS VII – Government Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1041 ICDS VII Vs AS 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1041 ICDS VII Vs Ind AS 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 Disclosure requirements under ICDS VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 ICDS VIII Vs AS 13 – Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 ICDS VIII Vs AS 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 ICDS VIII Vs Ind AS 32 and Ind AS 109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043 Disclosure requirements under ICDS VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043 ICDS IX– Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043 ICDS IX Vs AS 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043 ICDS IX Vs Ind AS 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1044 Disclosure requirements under ICDS IX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1044 ICDS X- Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . . . . . . . . . . . . . . . 1044 ICDS X Vs AS 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1044 ICDS X Vs Ind AS 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1045 Disclosure requirements under ICDS X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1045 FAQs issued by CBDT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1046 Foreseeable practical issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051

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Convergence with IFRS in India Synopsis

Background ................................................................................................................................................ 1 Meaning of “Convergence” with IFRS ...................................................................................................... 2 ‘Convergence’ versus ‘Adoption’ .............................................................................................................. 3 Convergence strategy in India.................................................................................................................... 3 History ................................................................................................................................................... 3 MCA roadmap-the notification .............................................................................................................. 4 Salient features of the notification ......................................................................................................... 4 IND AS vs. the Act 2013 ......................................................................................................................... 28 List of IFRS/IAS currently applicable ..................................................................................................... 28 List of SIC/IFRIC currently applicable .................................................................................................... 30 List of converged IND AS ....................................................................................................................... 31 List of Non-Converged Ind AS ................................................................................................................ 32 List of converged IFRIC/SIC ................................................................................................................... 33 List of Non-Converged IFRIC/SIC .......................................................................................................... 34 Recent Updates to Ind AS ........................................................................................................................ 34 Deferment of Ind AS 115..................................................................................................................... 34 Amendments to other Ind AS .............................................................................................................. 35

BACKGROUND With the process of and in the era of modernization, it has become imperative to harmonise accounting practices globally, leading to convergence with International Financial Reporting Standard (‘IFRS’), as issued by the International Accounting Standards Board (‘IASB’) in India as well.

In 2009, India had made a strong commitment to converge Indian accounting standards with IFRS at the G20 summit. The process of issuing a new avatar of Indian accounting principles ie Indian Accounting Standards (‘Ind AS’), as converged with IFRS was kick-started way back in the year 2011 by the 1

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Ministry of Corporate Affairs (‘MCA’); however, due to various constraints, the proposal could not be implemented as decided. MCA had issued 35 draft Ind AS at that time and these Ind AS had gone through the process of preparation by the Institute of Chartered Accountants of India (‘ICAI’), approval by the National Committee on Accounting Standards (‘NACAS’), examined by a technical committee in MCA, approval of the Minister and MCA and, vetting by the Legislative Department of Ministry of Law and Justice.

In the Union Budget 2014–15, the Honourable Minister for Finance, Defence and Corporate Affairs had laid down the strategy for the adoption of Ind AS in a phased manner, clarifying that the respective regulators will separately propose the implementation plans for banks and insurance companies. Likewise, standards with respect to computation of tax were declared to be notified separately.

Fulfilling the commitment made in the Budget statement, the MCA has notified Companies (Indian Accounting Standard) Rules 2015, vide its notification no. G.S.R 111(E), dated 16 February 2015 (‘Ind AS Rules, 2015’). Accordingly, 39 Ind AS are notified and the transition road map for companies other than banking companies, insurance companies and non-banking finance companies (NBFCs) has been released (Refer Annexure I). These standards have been further amended by the MCA vide its notification no. G.S.R. 365 (E), dated 30 March 2016.

With the notification of these most contemporary standards, Indian financial reporting has undergone a seismic shift. It is a paradigm shift that introduces several new and complex concepts, and will involve the application of significant judgement and estimates, accompanied by detailed quantitative and qualitative disclosures. On the whole, it would lead to a better reflection of the financial performance of an entity and more relevant information in the hands of users of Financial Statements (‘FS’).

The ball is now firmly in India Inc’s court. The introduction of Ind AS has immensely impacted the corporate sector because this is not just an accounting change, but something that impacts the whole organisation and the way they do business.

MEANING OF “CONVERGENCE” WITH IFRS Literally, the term “convergence” means attaining consistency between two objects. In the context of “convergence with IFRS”, the concept means harmonization of Indian standards with IFRS and bringing down the differences between the two sets of standards to the minimum possible extent.

This process is governed and affected by several factors, including the economic environment of the country adopting this practice. Most countries are currently undergoing the process of globalization and liberalization, including India; therefore, countries across the globe should speak one accounting language, which can only be possible through the mechanism of convergence. Worldwide, more than 100 countries have assumed the path of convergence with IFRS. For India, there are foreseeable enormous benefits from Ind-AS convergence as it sends the right signal across the world about a corporate move towards better governance and greater transparency which will further strengthen the country’s ability to attract foreign capital and access global capital markets.

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Convergence with IFRS in India

‘CONVERGENCE’ VERSUS ‘ADOPTION’ As discussed above, convergence means harmonisation and bringing down the differences to the minimum possible extent. Adoption, on the other hand means accepting something “as it is”.

Adoption is not possible in India due to various reasons in the current Indian scenario. However, India is prepared for the convergence and the strategy for the same has already been laid down. Ind AS adoption will bring India at par with other countries.

At present, there are numerous concepts and theories under Indian GAAP which differ from that of IFRS. Convergence with IFRS (ie adoption of Ind AS) will significantly bring down these disparities.

CONVERGENCE STRATEGY IN INDIA

History As discussed in preceding paragraphs, while some of the countries have followed the ‘adoption’ approach; others have chosen to go for ‘convergence’, depending upon the needs and constraints of their respective countries. India has also taken the convergence path since adoption model is not possible in India due to various reasons under the current Indian scenario.

To document the process of the convergence in India, the ICAI in the year 2007 had issued a detailed concept paper on convergence with IFRS in India. Post issue of that paper; MCA reported on 13 May 2008, that the initiative for harmonization of Indian Accounting Standards (‘AS’) with the IFRS, which was taken up in 2001 and implemented through notification of Accounting Standard Rules, 2006 (‘AS Rules, 2006’), would be continued by the government with the intention of achieving convergence with IFRS in India. Thereafter, MCA had laid down the strategy for full convergence with IFRS in phases, effective 1 April 2011. Further, to set the specific time frame and to form related strategies, in the year 2009, a Core Group of MCA was set-up with participation from other regulatory bodies (Reserve Bank of India, CAG, Securities Board of India, Insurance Regulatory & Development Authority), Ministry of Finance, ICAI, Chamber & Industry bodies and certain industry representatives.

The year 2010 brought in the detailed revised roadmap from MCA to be applied in phases for specified classes of companies. This was to be implemented with the FY beginning 1 April 2011; however, due to certain obstacles, it could not be implemented as decided.

Along with the roadmap, a set of 35 Ind AS was issued by MCA in February 2011. Right after that, 11 new/revised Ind AS corresponding to the new/revised IFRS were issued by ICAI and sent to the NACAS for its consideration. These standards remained un-notified.

Subsequently, ICAI had also proposed a revised roadmap for implementation of Ind AS in March 2014.

In the Union Budget 2014–15, the Honourable Minister for Finance, Defence and Corporate Affairs had laid down the strategy for the adoption of Ind AS in the phased manner, clarifying that the respective regulators will separately propose the implementation plans for banks and insurance companies. Likewise, standards with respect to the computation of tax were are notified separately.

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MCA roadmap-the notification MCA vide its notification dated 16 February 2015 has notified the much simplified roadmap on Ind AS with easier phased manner to be complied by the specified class of companies. Pursuant to this, the Ind AS Rules, 2015 have been issued, effective from 1 April 2015. This time 39 Ind AS standards are notified. ICAI has recently constituted a group called the Ind AS Transition Facilitation Group (ITFG) to address various issues related to the applicability of Ind AS/implementation of Ind AS raised by preparers, users and other stakeholders. ITFG has issued 6 bulletins so far containing answers to these queries.

Salient features of the notification Applicability thresholds Types of companies

Net worth INR 500 Crore or more

Companies whose equity or debt securities are listed or are in the process of being listed in India or outside India (including holding, subsidiary, joint venture or associate companies of such companies).

First reporting period-Accounting First reporting periodperiods beginning on or after 1 April Accounting periods beginning on 2016. or after 1 April, 2017.

Companies whose equity or debt securities are not listed on any stock exchange in India or outside India (including holding, subsidiary, joint venture or associate companies of such companies).

First reporting period-Accounting First reporting periodperiods beginning on or after 1April, Accounting periods beginning on 2016. or after 1April, 2017.

4

Comparative informationOpening balance sheet as on or after 1 April 2015 and Financial Year (‘FY’) ending on or after 31 March 2016.

Net worth less than INR 500 Crore

Comparative informationOpening balance sheet as on or after 1 April 2016 and FY ending on or after 31 March 2017.

(in this case the net worth has to be INR 250 Crore or more) Comparative informationOpening balance sheet as on or after 1 April 2015 and FY ending on or after 31 March 2016.

Comparative informationOpening balance sheet as on or after 1 April 2016 and FY ending on or after 31 March 2017.

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Convergence with IFRS in India

Ind AS implementation – The roadmap

Query Transition date if company is covered under Phase I What should be the date of transition in case a company covered under Phase I decides to give comparatives for FY 2015-16 and FY 2014-15?

Answer 1 As per the definition of transition date given in Ind AS 101, First Time Adoption of Indian Accounting Standards, an entity is free to select its date of transition. However, as per Ind AS Rules, 2015 companies which are covered under Phase I are mandatorily required to comply with Ind AS from 1 April 2016 with comparatives for FY 2015-16. Accordingly, the date of transition for such companies should be 1 April 2015 and cannot be 1 April 2014.

1

As clarified by ITFG.

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Practical Approach to Ind AS Implementation, 2e

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Query Clarification on adoption of transition date Company X prepared its first IFRS FS for year ended 31 March 2016 (with a transition date to IFRS as 1 April 2014). As per MCA roadmap, company X is mandatorily required to prepare its first Ind AS FS for the year ended 31 March 2017 (with the transition date of 1 April 2015). The question arises as to if can company X select the transition date under Ind AS as 1 April 2014 (used for IFRS) instead of 1 April 2015?

Answer 2 Although company X has already carried out exercise of transition on 1 April 2014 for IFRS, it cannot select transition date under Ind AS as 1 April 2014, it has to be 1 April 2015.

Query As per the roadmap, Ind AS are also applicable to holding, subsidiary, joint venture and associates of companies in certain cases. These terms are defined under the Act 2013, as well as applicable Ind AS and existing AS under the AS Rules, 2006. Therefore, for this purpose, which of the definitions should be used?

Answer While the roadmap does not itself define these terms; it however states that ‘words and expressions used herein and not defined in these rules but defined in the Companies Act shall have the same meaning respectively assigned to them in the Companies Act’.

Ind AS and existing AS under the AS Rules, 2006 are issued under the Act 2013 itself and hence form part of the Act 2013. Therefore, while these terms are also defined under the Act 2013; it seems that the definition prescribed under Ind AS and existing AS under AS Rules, 2006 should be used for the purpose of the roadmap, as these standards specifically deal with accounting aspects.

On the other hand terms defined under the Act 2013 should be used for other regulatory compliance and disclosure purposes.

Query The roadmap requires subsidiary companies also to comply with Ind AS in certain cases. Does this rule apply only to direct subsidiaries or also to indirect/step-down subsidiaries?

Answer The Act 2013, as well as Ind AS, defines the term subsidiary to include direct as well indirect/stepdown subsidiaries. Hence, direct as well as indirect/step-down subsidiaries are covered under the roadmap.

Query Does the roadmap also cover fellow subsidiary companies/fellow associates, ie, other subsidiaries, and associates and joint ventures of the holding company? For example, in the following 2

6

As clarified by ITFG.

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structure, if B Ltd is a listed company falling within phase 1 of the roadmap with no other company falling within the roadmap as such, then what is the applicability of the roadmap for other companies within the group as shown below?

Answer As per the roadmap, Ind AS is mandatory for the holding, subsidiary, joint venture or associate companies of the companies falling within any of the phases. Since B Ltd. is a listed company and falls within Ind AS implementation, its holding company (A Ltd.), its subsidiary companies (C Ltd. and D Ltd.) would also need to apply Ind AS from the same date.

With regard to other affiliates within the group, there are two schools of thoughts: View-1- Since A Ltd. is now indirectly required to comply with Ind AS, therefore, its subsidiaries E Ltd. and F Ltd. would also be covered under the roadmap.

View-2-Roadmaps covers only the holding, subsidiary companies etc. of the companies covered under the roadmap. Therefore, this requirement should not extend to other group companies indirectly. Hence E Ltd. And F Ltd. are not covered under the roadmap.

There is no clarity on this matter as yet and MCA needs to clarify this.

Applicability of Ind AS •

Ind AS shall apply to both stand-alone and consolidated FS, in case these are applicable to a company.

•

The companies falling within the specified criteria of applicability for the first time at the end of an accounting year shall apply Ind AS from the immediate next accounting year.

•

The companies falling within the specified criteria of applicability shall prepare their first set of FS as per Ind AS effective at the end of its first Ind AS reporting period.

•

Once the Ind AS are applied either voluntarily or mandatorily, it shall be irrevocable (even if any of the criteria specified above does not subsequently apply to it)

•

The companies required to prepare the financial statement as per Ind AS shall not be required to prepare another set of FS in accordance with the existing AS under AS Rules, 2006.

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Query As per the roadmap, are the Ind AS to be applied only at CFS level or SFS level as well?

Answer As per the roadmap, it has been clarified that Ind AS are applicable both at the SFS level as well as at CFS level.

Query An unlisted company, Company X, which is not covered under phase 1 or phase 2 of the roadmap intends to apply Ind AS voluntarily for CFS purposes only and not for SFS. For SFS it will continue to apply existing AS under AS Rules, 2006. Is Company X allowed to do so?

Answer As mentioned in the former question, Ind AS application has to be done by a company for CFS, as well as for SFS level as well. Furthermore, Section 129(3) of the Act 2013 mandates preparation of CFS to be in the same form and manner as that of company’s SFS. Consequently, it is not acceptable to apply Ind AS only at the CFS level, and continuing the existing practice for SFS. Query Company X, having net worth of INR 200 Crores as at 31 March 2014; applied Ind AS on voluntary basis for the year 2015-16, with the intent to discontinue use of Ind AS in future, should it not suit. Would Company X be able to do so?

Answer The roadmap clearly mentions that once the Ind AS are applied voluntarily, it shall be irrevocable.

Hence, once voluntarily adopted, Company X would not be able to discontinue the use of Ind AS in future.

Query Ind AS are converged with IFRS to the extent possible with certain carve out/carve in. Instead of using Ind AS, can an Indian company adopt IFRS? Answer The roadmap mandates companies to prepare their FS using Ind AS. It does not allow companies to adopt IFRS, instead of Ind AS. Query Ind AS roadmap required the first time adopter to present comparative numbers. In case a company together with Indian GAAP FS has also been preparing IFRS FS in past, can the IFRS FS be used as previous GAAP for this purpose?

Answer The roadmap does not define the term previous GAAP. This term has been defined under Ind AS 101 as “the basis of accounting that a first time adopter used for its statutory reporting requirement in India immediately before adopting Ind AS.” Hence for an Indian company 8

Chapter 1

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adopting Ind AS for the first time, the previous GAAP would always be Indian GAAP FS, which are filed to the regulators in India. Hence IFRS FS cannot be used for this purpose.

Query Ind AS 1 requires the first time adopters to present comparative figures at least for one year along with the opening balance sheet on the transition date. Whether these figures would be subject to review/audit by any auditor?

Answer The ICAI 3 has recently issued a detailed clarification/ guidance on this matterclarifying the responsibility of the incoming auditor/ predecessor auditor with respect to auditing the corresponding figures for adjustments to transition to Ind AS. As per this guidance, incoming auditor/ predecessor auditors are required to audit the corresponding figures for adjustments to transition to Ind AS in the specified manner in accordance with the applicable auditing standards.

Query By the time Ind AS are actually implemented by Phase 1 and Phase 2 companies and thereafter, the existing IFRS issued by IASB will probably be further reviewed/revised or may be new IFRS would be issued. The purpose of issuing Ind AS was to largely converge with IFRS at each point in time. What would be the impact of this revision under IFRS on Ind AS? Answer Currently, the roadmap does not address this matter. However, as we have observed in past that the amendments to AS issued by ICAI were also incorporated by MCA to the existing AS under AS Rules, 2006. On the same pattern, it is expected that MCA would keep the pace with the developments on IFRS and update Ind AS as well on a timely basis.

Query Whether SEBI’s formats are being revised in compliance with Ind AS? Answer Yes, SEBI has recently notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on 2 September 2015, which are effective from 1 December 2015. These Regulations contain the revised Ind AS compliant formats for publishing the financial results.

Query A Company X is an unlisted company till 31 December 2016. Its net worth as on 31 March 2014 is INR. 560 Crores and hence, falling within phase 1, it prepares Ind AS FS for the year 2016-17. On 1 January 2017, Company X decides to go for listing. As per SEBI’s guidelines it is required to file five year’s restated financial information. Does this information have to be in compliance with Ind AS?

3

As per Implementation Guide on the Auditors’ Report under Ind AS for Transition Phase

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Answer Para 6 of Ind AS 101 seems to somehow provide some guidance in this matter, which talks about preparing the opening BS for first time adopters. This para mentions that the first starting point for accounting in accordance with Ind AS is the transition date. Therefore, restated Ind AS financial data for the last 5 years should not be prepared in accordance with Ind AS since doing so would call for shifting transition date 5 years back, which seems not to be allowed. This issue has to be clarified by SEBI. Query Company X gets a high court approval on 30 June 2016 for some restructuring, application for which was filed in the year 2014-15. The appointed date for implementing the scheme is 1 April 2013. Company X falls within phase 1 and is implementing Ind AS for the FY 2016-17. While giving effect to the scheme effective 1 April 2013, would the previously prepared FS under the then existing Indian GAAP also be converted to Ind AS? Answer It is not clear in cases where schemes takes significant time for approval from the High court, how the accounting needs to be done for earlier years which used the then applicable AS, especially in those cases where a company has moved to Ind AS platform completely. It seems that the previous information should not be changed in accordance with Ind AS; however, MCA needs to clarify this.

Query Whether the guidance notes issued by ICAI from time to time would be applicable post application of Ind AS? Answer The position is not clear as yet. ICAI needs to clarify this.

Query Clarification on applicability of Ind AS on a listed company from FY 2017-18, if such entity becomes an unlisted entity before the beginning of FY 2017-18 Company A (Listed Entity) as on 31 March 2014 having a net worth of INR 50 Crores is no more a listed entity as on 31 March 2015. Is Company A required to comply with Ind AS from FY 2017-18?

Answer 4 As per Rule 4(2)(b) of Ind AS Rules, 2015, if a company has met the specified thresholds as given in sub-r (1) for the first time at the end of an accounting year, then such company shall apply Ind AS from the immediately next accounting year in the manner specified in sub-r (1).

According to the above mentioned requirements, it may be noted that if the threshold criteria for a company are not met immediately before the mandatory applicability date, then such company shall not be required to comply with Ind AS, irrespective of the fact that as on 31 March 2014, the criteria was met.

In the given case, since the Company A ceases to be a listed company before the mandatory applicable date i.e. 2017-18, therefore, it will not be required to apply Ind AS from FY 2017-18.

4

As clarified by ITFG.

10

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Query Ind AS compliance by a listed company with net worth < INR 500 Crores from FY 2016-17, if it becomes associate of company with net worth > INR 500 Crores during FY 2016-17 Is Company Y (listed Co.) with net worth of more than INR 250 Crores but less than INR 500 Crores covered under Phase II required to comply with Ind AS from FY2016-17 if it becomes an associate of Company X with net worth of more than INR 500 Crores on 31 October 2016 but before approval of the results of Company Y for the quarter ended September 2016?

Further, would the financial results of Company Y for the quarter ended 30 September 2016 be prepared in accordance with Ind AS? Answer 5 As per Rule 4(1)(ii)(c) of the Ind AS Rules, 2015, holding, subsidiary, joint venture or associate of companies falling under threshold specified in Rule 4(1)(ii) are required to comply with Ind AS from FY 2016-17 or 2017-18 as the case may be.

In the given case, Company X is required to adopt Ind AS from FY 2016-17 as per the road map and since Company Y becomes an associate of Company X during FY 2016-17, therefore, Company Y will also be required to prepare its FS as per Ind AS for the year ended 31 March 2017.

As far as the quarterly results of the quarter ending on September 2016 are concerned, since the Company Y has become an associate of Company X on 31 October 2016, therefore, Company Y will prepare Ind AS FS from the quarter ending December 2016 onwards and not for quarter ending on September 2016.

Query Applicability of Ind AS on unlisted co. with net worth < INR 250 Crores from FY 2016-17, if it becomes holding of a listed company. with net worth >INR 500 Crores Is Company Y (an unlisted company) with net worth of less than INR 250 Crores required to comply with Ind AS from FY 2016-17, if it becomes holding of Company X (a listed company) during the FY 2016-17?

Answer 6 As per Rule 4(1)(ii)(c) of Ind AS Rules 2015, holding, subsidiary, joint venture or associates of companies falling under threshold specified in Rule 4(1)(ii) are required to comply with Ind AS from FY 2016-17 or 2017-18 as the case may be.

In the given case, Company X is required to adopt Ind AS from FY 2016-17 as its net worth is more than INR 500 Crores. Since Company Y has acquired the shares of Company X and has become the holding of Company X, therefore, Company Y will also be required to prepare its FS as per Ind AS for the year ended 31 March 2017.

5

As clarified by ITFG.

6

As clarified by ITFG.

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Query Adoption of Ind AS for change in status as subsidiaries A listed Company A with net worth of INR 600 Crores as on 31 march 2014 has three unlisted subsidiaries namely â&#x20AC;&#x201C;Company X, Company Y and Company Z with net worth of INR.100 Crores, INR 400 Crores and INR 210 Crores respectively on this date. Now, Company A sells its investments in all the three companies on the following dates: a) Company X: 31 December 2014 b) Company Y: 31 December 2015 c) Company Z: 31 December 2016 Whether these subsidiaries are required to prepare their FS as per Ind AS or existing AS (the AS Rules, 2006) for the FY beginning 1 April 2016?

Answer 7 Company A meets the specified threshold of INR. 500 Crores as at 31 March 2014; therefore, ordinarily Company A, together with its subsidiaries are required to comply with Ind AS under Phase I (i.e. FY 2016-17). However, due to subsequent change in status as subsidiary, the applicability of Ind AS as per existing AS for FY beginning 1 April 2016 would be as follows: a) Company X: Existing AS would be applicable as no more a subsidiary as at 1 April 2016 b) Company Y: Existing AS would be applicable as no more a subsidiary as at 1 April 2016 c) Company Z: Ind AS would be applicable it is still a subsidiary as at 1 April 2016 Query Applicability of Ind AS on loosing the status as subsidiary post Ind AS implementation date Company ABC, a listed company having a net worth of INR 200 Crores on 31 March 2014, had a subsidiary Company XYZ whose net worth was INR 600 Crores as at 31 March 2015. Company XYZ was incorporated in January 2015 only for the purposes of its divestment. The FS of Company XYZ were not consolidated with that of Company ABC as at 31 March 2015 in view of requirements of AS 21, Consolidated FS. Company ABC entered into an agreement with a Company PQR, which is the proposed acquirer of Company XYZ. The ownership was transferred in the first fortnight of April 2016. Is Company ABC required to comply with Ind AS from the FY 2016-17?

Answer 8 If an existing company meets the net worth criteria before mandatory applicability dates laid down in the roadmap, the company would be required to follow Ind AS as per the dates for implementation of Ind AS prescribed in the roadmap, i.e., FY 2016-17 or 2017-18, as the case may be.

7

As clarified by ITFG.

8

As clarified by ITFG.

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Consistent approach would be followed to consider the definitions given in Ind AS both for the purpose of preparing FS and determining the relationship with another entity (i.e. subsidiary, associate, joint venture etc.) for the purpose of applicability of Ind AS. Therefore, the relationship between Company ABC and Company XYZ should be determined in accordance with Ind AS. Hence, it is irrelevant to consider the fact that Company XYZ was not a subsidiary company of Company ABC as per the previous GAAP. In the given case, Ind AS will be mandatorily applicable to Company XYZ from FY 2016-17 as its net worth is more than INR 500 Crores. Company ABC, being a holding company of Company XYZ as at 31 March 2015, should comply with Ind AS from the FY 2016-17.

Query Ind AS applicability due to change in status as associates Company A had invested 26% in Company B and as per AS Rules, 2006 it had accounted and reported Company B as its associate company as on 31 March 2016 under previous GAAP. As on 1 April 2015, Company A which is required to comply with Ind AS from FY 2016-17 concluded that it has no more significant influence over Company B under Ind AS. However, Company C owns share warrants in Company B that gives it an additional voting power over the financial and operating policies of Company B. Therefore, as per the requirements of Ind AS 28, Company B is an associate company of Company C. Is Company B required to comply with Ind AS, if Company A and Company C as a standalone entity do not meet any criteria given in Ind AS roadmap?

Answer 9 As per the rule 4A of the Companies (Accounts) Rules, 2014, the FS shall comply with Ind AS and items contained in the FS shall be prepared in accordance with definitions and other requirements specified in AS or Ind AS. In the present case since Company B has become an associate of Company C and ceases to be an associate of Company A under Ind AS. Therefore, as regards Company A, Company B need not to comply with Ind AS from the F.Y.201617 as Company B is no more its associate.

As far as Company C is concerned, if Company C voluntarily complies with Ind AS or meet any specified criteria on standalone basis, then Company B being its associate company will be required to comply with Ind AS from the same FY from which Company C starts preparing its FS as per Ind AS.

Exempted companies Following classes of companies are exempted from the applicability of this notification. As per the notification, separate roadmaps were to be issued for these classes of companies: â&#x20AC;˘ Insurance companies; 9

As clarified by ITFG.

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Practical Approach to Ind AS Implementation, 2e

â&#x20AC;˘ â&#x20AC;˘

Chapter 1

Banking companies; and NBFCs

Post that, the Press Information Bureau (Government of India, MCA) issued a PIB dated 18 January 2016, prescribing the roadmap for Scheduled Commercial Banks (excluding Regional Rural Banks), Insurers/Insurance Companies and Non-Banking Financial Companies. It was further stated that the draft Notification/Rules, as required, would be issued by the MCA, RBI and IRDA in due course (Refer Annexure II).

Further, in accordance with the press release issued by MCA, as mentioned above, the RBI on 11 February 2016 advised that scheduled commercial banks (excluding RRBs) shall follow the Ind AS as notified under the Ind AS Rules, 2015, subject to any guideline or direction issued by the RBI in this regard (Refer Annexure III).

Furthermore, IRDA, vide its circular dated 01 March 2016 issued brief instructions to the insurance companies with respect to Ind AS applicability (Refer Annexure IV).

Then on 30 March 2016, MCA had issued certain clarifications with respect to NBFCs (Refer Annexure V).

Further, RBI on 23 June 2016 issued certain directions for banks for their preparedness to submit Proforma Ind AS FS to RBI (Refer Annexure VI). RBI had further issued directions on 04 August 2016 for All India Financial Institutions with respect to Ind AS applicability (Refer Annexure VII).

Recently, a report of the Implementation Group on Ind AS in Insurance sector in India has been issued in December 2016, making its recommendation on this sector to IRDA on Ind AS implementation (Refer Annexure VIII).

Following is the brief analysis of the applicability of Ind AS to different types of entities, as mentioned above:

(See the brief analysis in the next page)

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Practical Approach to Ind AS Implementation, 2e

16

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17

Practical Approach to Ind AS Implementation, 2e

18

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19

Practical Approach to Ind AS Implementation, 2e

20

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Query What is the applicability of the roadmap for the following class of companies?

•

Government companies as defined under the Act 2013

•

Venture capital funds (VCFs) and mutual funds (MFs)

Answer •

Neither the Act 2013 nor the roadmap exempt government companies from Ind AS compliance.

Therefore, Ind AS are applicable to government companies.

•

The roadmap applies to companies only. Since VCFs and MFs are funds, as governed by the Securities and Exchange Board of India (SEBI); therefore, it seems that the current roadmap does not apply to these.

Query Company X has its subsidiary, Company Y, which is an NBFC. Company X is covered under mandatory phase 1 of the roadmap. Is Company Y being a subsidiary of Company X, also required to adopt Ind AS from the same date?

Answer As per the roadmap, a separate timeline are issued for NBFCs (either from FY beginning 1 April 2018 or 2019) and hence these companies are not required to prior apply Ind AS either voluntarily or mandatorily. Hence, Company Y is not required to adopt Ind AS from the same date as its parent, Company X for its statutory reporting.

However, while preparing CFS, Company X would need Company Y’s Ind AS-compliant group reporting package for facilitating the consolidation. Hence, Company Y would prepare the Ind AS compliant financial data for the purpose of consolidation with Company X. Query Applicability of Ind AS to a company falling in Phase II being the subsidiary of an NBFC Company X is falling under Phase II of MCA roadmap and hence Ind AS are applicable to it from FY 2017-18. Company X is a subsidiary of Company Y who is an unlisted NBFC having net worth of INR 285 Crores. What will be the date of applicability of Ind AS for company X and company Y? If Ind AS applicability date for parent NBFC is different from the applicability date of corporate subsidiary, then, how will the consolidated FS of parent NBFC be prepared?

Answer 10 As per Ind AS Rules, read with Companies (Ind AS) (Amendment) Rules, 2016, NBFCs having net worth of less than INR 500 Crores shall apply Ind AS from 1 April 2019 onwards. Further, the holding, subsidiary, joint venture, associate of such an NBFC other than those covered by corporate roadmap shall also apply Ind AS from 1 April 2019.

10

As clarified by ITFG.

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Therefore, Company Y shall apply Ind AS from 1 April 2019. Company X shall apply Ind AS in its individual FS from FY 2017-18 (as per the corporate roadmap) and for the FY 2017-18 and 2018-19, Company X shall also prepare its individual FS as per AS Rules 2006 to facilitate the preparation of consolidated FS by parent Company Y. Query Applicability of Ind AS on charitable companies being associate of a Phase 1 company Company X is being covered under Phase I of Ind AS and needs to apply Ind AS from FY 2016-17.

Company Y which is an associate company of Company X is a charitable organization and registered under Section 8 of the Act 2013. Whether Company Y is required to comply with Ind AS from FY 201617?

Answer 11 As per Ind AS Rules, holding, subsidiary, joint venture or associate companies of companies falling under Phase I are required to comply with Ind AS from FY 2016-17.

Further, companies covered under section 8 are not exempted from the requirements of Section 133 and Section 129 of the Act 2013. Hence, Company Y, being an associate of Company X will be required to comply apply Ind AS from FY 2016-17.

Query Applicability of Ind AS on Core Investment Company exempted by RBI from certain regulations/directions.

Whether a Core Investment Company having net worth of more than INR 500 Crores as on 31 March 2014 be regarded as NBFC for the purpose of applicability of Ind AS, if RBI exempts such Core Investment Company from certain regulations/directions?

Answer 12 As per definition of NBFC given under Ind AS Rules, 2015, a Core Investment Company is specifically included in the definition of NBFC. Therefore, Core Investment Company will be regarded as NBFC for the purpose of implementation of Ind AS, irrespective of the fact that it has been exempted from certain regulation/directions by RBI.

Applicability of Ind AS on overseas entities and their affiliates in India â&#x20AC;˘

Overseas affiliates of an Indian company may prepare its standalone FS in accordance with the requirements of the specific jurisdiction, provided that such Indian company shall prepare its consolidated FS in accordance with Ind AS, either voluntarily or mandatorily, if it meets the criteria.

â&#x20AC;˘

Indian company which is one of the affiliates of a foreign company shall prepare its FS in accordance with the Ind AS either voluntarily or mandatorily, if it meets the criteria.

11

As clarified by ITFG.

12

As clarified by ITFG.

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Query Company X is an Indian un-listed company, having its overseas holding company, Company Y. The net worth of companies X and Y are INR 230 Crores and INR 700 Crores respectively. Will Company X fall within the roadmap?

Answer Company X is not covered under the roadmap because its net worth is below INR 250 Crores and the applicability criteria are not evaluated from the perspective of the foreign parent, even if the foreign parent has a net worth greater than INR 500 Crores.

Query Applicability of Ind AS to an Indian subsidiary of a foreign company Company X (net worth INR. 600 Crores) and Y (net worth INR. 100 Crores) are Indian companies and subsidiaries of a foreign company Z (net worth more than INR. 500 Crores) in FY 2015-16. For the FY 2016-17 will X, Y and Z prepare the FS using Ind AS or existing AS? Answer 13 Company Z not being an Indian company is not required to prepare its FS using Ind AS. Since Z is not required to prepare FS based on Ind AS, its net worth would not be the basis for deciding whether X or Y are required to prepare FS based on Ind AS. Company X would be required to prepare FS for the FY 2016-17 as per AS, having its own net worth more than INR 500 Crores.

Company Y would not be required to prepare FS for the FY 2016-17 as per Ind AS, having its own net worth less than INR 500 Crores.

Query An overseas subsidiary company, Company X of an Indian parent company, Company Y (covered in phase 1), has a net worth of INR 650 Crores. Is Company X required to follow Ind AS for its SFS? Answer Company X is not required to follow Ind AS for its SFS and can prepare the same in accordance with the requirements of the specific jurisdiction, even if its net worth exceeds INR 500 Crores.

Voluntary Adoption Any company may voluntarily adopt this roadmap earlier than the aforementioned timelines.

Query Can a company, Company X, which is not covered under the roadmap, voluntarily adopt Ind AS but partially? For rest of the matters, Company X will continue applying existing AS under AS Rules, 2006.

13

As clarified by ITFG.

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Answer No. As per the roadmap, Ind AS or the existing AS under AS Rules, 2006 are to be applied in entirety and partial adoption is not permissible. However wherever no explicit guidance has been prescribed for certain transactions by the existing AS, under AS Rules, 2006; the company may refer to the guidance contained within Ind AS or other GAAP. Having said so, this guidance should not be conflicting with any items that are well covered by the existing AS under AS Rules, 2006.

Query A listed company, Company X, follows the year ending December 2014 as its FY. In accordance with the requirements of the Act 2013, it has to change the same to March and hence is preparing its FS for 15 months for the period beginning 1 January 2015 upto 31 March 2016. Company X wants to adopt Ind AS for its FS as mentioned above on a voluntary basis. Can company X do so?

Answer As per roadmap, Ind AS are applicable to a company based on the beginning of FY. In accordance with the roadmap, the earliest date from which a company can start applying Ind AS on voluntary basis is the FYs beginning on or after 1 April 2015. Hence, Company X is not allowed to apply Ind AS on voluntary basis for its FS for the period beginning from 1 January 2015 to 31 March 2016.

Query Company X is a listed company with net worth of INR 450 Crores as at 31 March 2014 and hence covered in mandatory phase 2 of the roadmap applicable from 1 April 2017. Another company, Company Y is an unlisted company with net worth of INR 240 Crores as at 31 March 2014 and hence not covered under mandatory phase 1 and 2 of the roadmap. Both the companies, X and Y want to voluntarily apply Ind AS effective 1 April 2016. Are they allowed to do so?

Answer As per the roadmap, â&#x20AC;&#x153;Any Company may comply with the Ind AS for the FS for the accounting periods beginning on or after 1 April 2015 with the comparatives for the period ending on 31 March 2015, or thereafterâ&#x20AC;?. Therefore, it seems that any company (either falling within phase 1 or 2, or not falling within any of the phases) may apply Ind AS voluntarily for the accounting periods beginning on or after 1 April 2015. Even the voluntary adoption seems to be available not only in the first year; but also in subsequent years, eg companies not falling within phases 1 or 2 and voluntarily applying Ind AS w.e.f.

1 April 2017. Hence, Companies X and Y can voluntary adopt Ind AS w.e.f. 1 April 2016.

Query Applicability of Ind AS on subsidiaries and associates if holding company voluntary adopts Ind AS from F.Y.2015-16 Company X is the holding company of Company A and Company B is an associate of Company A. Are Company A and B required to follow Ind AS from FY 2015-16, if Company X has decided to adopt Ind AS voluntarily from 2015-16?

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Answer 14 As per Ind AS Rules, 2015, any company may voluntarily adopt Ind AS from F.Y. 2015-16 and accordingly its holding, subsidiary, joint venture or associate company (whether through direct or indirect association) are also required to adopt the Ind AS from the same date as per the road map.

In the given case since, Company A being the subsidiary of Company X is required to adopt Ind AS from F.Y. 2015-16. Further, Company B is a direct associate of Company A, however, Company X through Company A has significant influence over Company B indirectly.

Accordingly, Company B shall also comply with Ind AS from the F.Y. 2015-16.

Meaning of net-worth • The term “net worth” shall have the meaning as defined under the Act 2013.

• It shall be calculated in accordance with the stand-alone FS of the company as on •

31 March 2014.

For companies, not existing on 31 March 2014 or existing; however, falling under the specified thresholds after 31 March 2014, the net worth shall be calculated on the basis of the first audited FS ending after that date.

Query For the purpose of the roadmap, is the net worth for determining applicability of Ind AS to be calculated as per Indian GAAP or Ind AS as on a particular date?

Answer The roadmap only mentions that “Net worth shall have the same meaning assigned to it under clause (57) of section 2 of the Act 2013”. This definition provides only for the constituents of net worth; however, it does not state as to which standards are to be used to calculate this. It seems that a company should first evaluate the applicability criteria basis the current standards in use (ie existing AS under AS Rules, 2006) and only then apply the roadmap.

Query Compliance of Ind AS by companies with negative net worth Will the following companies need to comply with Ind AS: a) Company A (listed) having negative net worth of INR 600 Crores b) Company B (unlisted) having negative net worth of INR 300 Crores Answer 15 Since the net worth of both the companies is negative and less than INR 500 Crores therefore, as per Ind AS Rules, Ind AS will not be applicable on both from FY 2016-17 (Phase I). However, 14

As clarified by ITFG.

15

As clarified by ITFG.

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Practical Approach to Ind AS Implementation, 2e

Chapter 1

Phase II covers all listed entities having net worth less than INR 500 Crores and unlisted entities having net worth of INR 250 Crores or more but less than INR 500 Crores Accordingly: a) Ind AS will be applicable on company A from FY 2017-18 (Phase II) b) Ind AS will not be applicable on company B, even in Phase II unless it meets the net worth criteria subsequently or Ind AS becomes applicable as part of the group or it voluntarily applies Ind AS. Query Inclusion of capital reserve in the nature of government grant in the calculation of net worth to assess the Ind AS applicability.

A company received grant from the government which is in the nature of promoter’s contribution and the same was included in capital reserve. This Grant has been accounted as per AS 12, Accounting for Government Grants. Is such capital reserve required to be included for computation of net worth to assess Ind AS applicability?

Answer 16 As per Section 2(57) of the Act 2013 all reserves created out of profits are included in calculation of ‘net worth’. On a literal interpretation of the definition, it may be concluded that capital reserve in the nature of promoter’s contribution should not be included to calculate net worth as the same is not explicitly mentioned in the definition of net worth. However, in substance, the capital reserve in the nature of promoter’s contribution is a capital contribution by promoters and should be included in the calculation of net worth. Further, AS 12 also states that Government Grants in the nature of promoter’s contribution are recognized in shareholders fund. Therefore such a capital reserve should be included for computation of net worth.

However, it may be noted that capital reserve in the nature of promoter’s contribution should be included in the net worth only for the purpose of Ind AS applicability and not for determining net worth under other provisions of the Act 2013.

Query Can a company, not falling within phases 1 or 2 as at 31 March 2014, fall within the roadmap afterwards when it meets any of the criteria?

Answer As per the roadmap, “For companies which are not in existence on 31 March 2014, or an existing company falling under any of the thresholds specified in sub-rule (1) for the first time after 31 March 2014, the net worth shall be calculated on the basis of the first audited FS ending after that date in respect of which it meets the thresholds specified in sub-rule (1)” Therefore, a company which does not fall within phase 1 or 2 as at 31 March 2014, can very well fall within the roadmap afterwards when it meets any of the criteria of the roadmap. Hence, a company needs to revisit the criteria every year end.

16

As clarified by ITFG.

26

Chapter 1

Convergence with IFRS in India

Query Applicability of Ind AS due to change in net worth subsequently A Company X had net worth of above INR 250 Crores but less than INR 500 Crores as at the end of the FYs 2013-14 and 2014-15 and is expected to exceed INR 500 Crores in FY 2015-16. Whether X is required to comply with Ind AS from FY 2017-18 (Phase II) or from FY 2016-17 (Phase I)?

Answer 17 Ind AS compliance dependents on net worth calculation and for that rule 4(2) of the Ind AS Rules, 2015 has provides that: a) the net worth of the company shall be calculated in accordance with standalone FS of the company as on 31 March 2014 or as per first audited FS after that date. b) for companies which do not exist on that date or which exist but meet the specified threshold limit as specified in sub rule (1) after that date , the net worth shall be calculated on the basis of first audited FS ending after that date in respect of which it meets the threshold limit.

Since X exists on 31 March 2014 and its net worth meets the one of the threshold limits of INR 500 Crores on 31 March 2016 (even though threshold limits of INR 250 Crores was already met on 31 March 2014), X would comply with Ind AS from FY 2016-17 (Phase I) .

Query Implementation of Ind AS on the basis of net worth threshold criteria on various dates A debt-listed company has net worth of INR 1,260.83 Crores, INR 1,411.43 Crores and Rs 485.22 Crores as on 31 March 2014, 31 March 2015 and 31 March 2016, respectively. Whether company A is required to comply with Ind AS from FY 2017-18?

Answer 18 Companies whose net worth in accordance with the stand-alone FS as on 31 March 2014 is INR 500 Crores or more shall comply with Ind AS for the accounting periods beginning on or after 1 April 2016. If the net worth threshold criteria for a company are once met then it shall be required to comply with Ind AS, irrespective of the fact that as on later date its net worth falls below the criteria specified. Hence, company A will be required to follow Ind AS from FY 2016-17.

Materiality concept â&#x20AC;˘

Ind AS are intended to apply only to items which are material in nature.

Overriding status of law â&#x20AC;˘

Ind AS are intended to be in conformity with the provisions of applicable laws. However, if due to subsequent amendments in the law, a particular Ind AS is found to be inconsistent with such law, the provisions of the said law shall prevail.

17

As clarified by ITFG.

18

As clarified by ITFG.

27

Practical Approach to Ind AS Implementation, 2e

Chapter 1

IND AS vs. THE ACT 2013 Particulars

The Act 2013

Ind AS

Statement of Changes in Equity

The term ‘FS’ as defined under the Act 2013 includes ‘Statement of Changes in Equity’ as one of the constituents, together with Balance Sheet and Statement of profit and loss etc.

However, no format and other information for preparation of the same has been prescribed by the Act 2013*.

Ind AS 1 on ‘Presentation of FS’, defines ‘FS’ comprising of ‘the Statement of Changes in Equity’.

Ind AS also provides information to be presented in detail in this Statement. Ind AS also mandates this statement to be presented as a part of Balance Sheet.

Associate

The Act 2013 defines the term ‘Associate company’ to means a company in which the other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

Ind AS 23 on ‘Investment in Associate’ defines associate as an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

For the purposes of this definition, ‘significant influence’ means control of at least 20% of total share capital, or of business decisions under an agreement.

Significant influence means the same as explained in the Companies Act, 2013.

Definition of Control

The Act 2013 defines the term ‘Control’ to include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly.

Ind AS 110 on ‘Consolidated FS’ defines the term ‘control’ as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Presentation of Minority Interest

Sch III to the Act 2013 provides that the minority interest is to be shown within equity, separately from the equity of the parent.

Disclosure of minority (noncontrolling interest) as per Ind AS 110 on ‘CFS’ is also similar to Sch III to the Act 2013.

*MCA has issued the Ind AS compliant Sch III for the companies. (Refer Volume 2 for the text of Sch III)

LIST OF IFRS/IAS CURRENTLY APPLICABLE Following are the currently applicable IFRS/IAS: IAS 1 : Presentation of financial statements

28

Chapter 1

IAS 2 IAS 7 IAS 8 IAS 10 IAS 11 IAS 12 IAS 16 IAS 17 IAS 18 IAS 19 IAS 20 IAS 21 IAS 23 IAS 24 IAS 26 IAS 27 IAS 28 IAS 29 IAS 32 IAS 33 IAS 34 IAS 36 IAS 37 IAS 38 IAS 39 IAS 40 IAS 41 IFRS 1 IFRS 2 IFRS 3 IFRS 4 IFRS 5 IFRS 6 IFRS 7 IFRS 8 IFRS 9 IFRS 10

Convergence with IFRS in India

: Inventories : Statement of Cash Flows : Accounting Policies, Changes in Accounting Estimates and Errors : Events after the Reporting Period : Construction Contracts (See Note-1) : Income Taxes : Property, Plant and Equipment : Leases : Revenue (See Note-1) : Employee Benefits : Accounting for Government Grants and Disclosure of Government Assistance : The Effects of Changes in Foreign Exchange Rates : Borrowing Costs : Related Party Disclosures : Accounting and Reporting by Retirement Benefit Plans : Consolidated and Separate financial statements : Investments in Associates : Financial Reporting in Hyperinflationary Economies : Financial Instruments: Presentation : Earnings per Share : Interim Financial Reporting : Impairment of Assets : Provisions, Contingent Liabilities and Contingent Assets : Intangible Assets : Financial Instruments: Recognition and Measurement (See Note-2) : Investment Properties : Agriculture : First-time Adoption of International Financial Reporting Standards : Share-based Payment : Business Combinations : Insurance Contracts : Non-current Assets Held for Sale and Discontinued Operations : Exploration for and Evaluation of Mineral Assets : Financial Instruments: Disclosures : Operating Segments : Financial Instruments : Consolidated Financial Statements 29

Practical Approach to Ind AS Implementation, 2e

IFRS 11 IFRS 12 IFRS 13 IFRS 14 IFRS 15

Chapter 1

: Joint Arrangements : Disclosure of Interests in Other Entities : Fair Value Measurement : Regulatory Deferral Accounts : Revenue from Contracts with Customers (See Note-1)

Note-1: This standard would be superseded by IFRS 15: Revenue from Contracts with Customers which applies to an annual reporting period beginning on or after 1 January 2018.

Note-2: This standard would be superseded by IFRS 9, Financial Instruments which applies to an annual reporting periods beginning on or after 1 January 2018

LIST OF SIC/IFRIC CURRENTLY APPLICABLE Following are the currently applicable SIC/IFRIC: SIC 7 : Introduction of the Euro SIC 10 : Government Assistance – No Specific Relation to Operating Activities SIC 15 : Operating Leases – Incentives SIC 25 : Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders SIC 27 : Evaluating the Substance of Transactions in the Legal Form of a Lease SIC 29 : Service Concession Arrangements: Disclosures SIC 31 : Revenue – Barter Transactions Involving Advertising Services SIC 32 : Intangible Assets – Web Site Costs IFRIC 1 : Changes in Existing Decommissioning, Restoration and Similar Liabilities IFRIC 2 : Members' Shares in Co-operative Entities and Similar Instruments IFRIC 4 : Determining Whether an Arrangement Contains a Lease IFRIC 5 : Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IFRIC 6 : Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment IFRIC 7 : Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 9 : Reassessment of Embedded Derivatives IFRIC 10 : Interim Financial Reporting and Impairment IFRIC 12 : Service Concession Arrangements IFRIC 13 : Customer Loyalty Programmes IFRIC 14 : IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction IFRIC 15 : Agreements for the Construction of Real Estate IFRIC 16 : Hedges of a Net Investment in a Foreign Operation IFRIC 17 : Distributions of Non-cash Assets to Owners IFRIC 18 : Transfers of Assets from Customers 30

Chapter 1

IFRIC 19 IFRIC 20 IFRIC 21

Convergence with IFRS in India

: : :

Extinguishing Financial Liabilities with Equity Instruments Stripping Costs in the Production Phase of a Surface Mine Levies

LIST OF CONVERGED IND AS Following is the listing of the Ind AS, which are converged with IFRS/Ind AS: IAS/IFRS

Title

Ind AS

IAS 1

Presentation of Financial Statement

1

IAS 2

Inventories

2

IAS 7

Statement of Cash Flows

7

IAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

8

IAS 10

Events after the Reporting Period

10

IAS 11

Construction Contracts

11 (See Note-1)

IAS 12

Income Taxes

12

IAS 16

Property, Plant and Equipment

16

IAS 17

Leases

17

IAS 18

Revenue

18 (See Note-1)

IAS 19

Employees Benefits

19

IAS 20

Accounting for Governments Grants and disclosure of Government 20 Assistance

IAS 21

The Effects of Changes in Foreign Exchange Rates

21

IAS 23

Borrowing Costs

23

IAS 24

Related Party Disclosures

24

IAS 27

Separate financial statements

27

IAS 28

Investments in Associates and Joint Ventures

28

IAS 29

Financial Reporting in Hyperinflationary Economics

29

IAS 32

Financial Instruments: Presentation

32

IAS 33

Earnings Per Share

33

IAS 34

Interim Financial Reporting

34

IAS 36

Impairment of Assets

36

IAS 37

Provisions, Contingent Liabilities and Contingent Assets

37

IAS 38

Intangible Assets

38

IAS 40

Investment Property

40

31

Practical Approach to Ind AS Implementation, 2e

Chapter 1

IAS/IFRS

Title

Ind AS

IAS 41

Agriculture

41

IFRS 1

First-time adoption of Indian Accounting Standards

101

IFRS 2

Share-Based Payments

102

IFRS 3

Business Combinations

103

IFRS 4

Insurance Contracts

104

IFRS 5

Non-Current Assets Held for Sale and Discontinued Operations

105

IFRS 6

Exploration for and Evaluation of Mineral Resources

106

IFRS 7

Financial Instruments: Disclosures

107

IFRS 8

Operating Segments

108

IFRS 9

Financial Instruments

109 (See Note-2)

IFRS 10

Consolidated financial statements

110

IFRS 11

Joint Arrangements

111

IFRS 12

Disclosure of Interests in Other Entities

112

IFRS 13

Fair Value Measurement

113

IFRS 14

Regulatory Deferral Accounts

114

IFRS 15

Revenue from Contracts with Customers

115 (See Note-1)

Note-1: Ind AS 11 and Ind AS 18 were replaced by Ind AS 115, on issue of the Companies (Indian Accounting Standards) Rules, 2015 by MCA. However, in view of the future applicability of IFRS 15, MCA has recently deferred Ind AS 115 for future period. Consequently, the previous standards, i.e Ind AS 11 and 18 are revived in the intervening period. (Further analysis is given under the succeeding paragraphs)

Note-2: Though IFRS 9 would apply to an annual reporting periods beginning on or after 1 January 2018; however Ind AS 109 is applicable earlier to it, being incorporated under the (Companies Accounting Standards) Rules, 2015.

LIST OF NON-CONVERGED IND AS Following is the listing of the Ind AS, which are not converged with IFRS/Ind AS: IAS/IFRS

Title

Ind AS

IAS 26

Accounting and Reporting by Retirement Benefit Plans

(See note-1)

IAS 39

Financial Instruments: Recognition and Measurement

(See note 2)

Note-1: IAS 26 is not applicable for companies, hence not incorporated under Ind AS. Note-2: IAS 39 has been substituted by IFRS 9. Ind AS 109 corresponds to IFRS 9. As mentioned earlier, since Ind AS 109 is applicable now, therefore, IAS 39 is no longer applicable.

32

Chapter 1

Convergence with IFRS in India

LIST OF CONVERGED IFRIC/SIC Following is the listing of the Ind AS, which are converged with SIC/IFRIC: SIC/IFRIC

Title

Ind AS

SIC 10

Government Assistance-No Specific relation to operating activities

20 (Appendix A)

SIC 15

Operating Leases-Incentives

17 (Appendix A)

SIC 25

Income Taxes- Changes in the Tax Status of an Enterprise or its Shareholders 12 (Appendix A)

SIC 27

Evaluating the Substance of Transactions in the Legal Form of a Lease 17 (Appendix B)

SIC 29

Disclosures- Service Concession Arrangements

11 (Appendix B)

SIC 31

Revenue-Barter Transactions Involving Advertising Services

18 (Appendix A)

SIC 32

Intangible Assets-Website Costs

38 (Appendix A)

IFRIC 1

Changes in Existing Decommissioning, Restoration and Similar Liabilities 16 (Appendix A)

IFRIC 4

Determining Whether an Arrangement Contains a Lease

IFRIC 5

Rights to Interests Arising from Decommissioning , Restoration and Environmental Funds 37 (Appendix A)

IFRIC 6

Liabilities Arising from Participating in a Specific MarketWaste Electrical and Electronic Equipment

37 (Appendix B)

IFRIC 7

Applying the Restatement Approach under IAS 29- Financial Reporting in Hyperinflationary Economics

29 (Appendix A)

IFRIC 9

Reassessment of Embedded Derivatives

Included as a part of Ind AS 109

IFRIC 10

Interim Financial Reporting and Impairment

34 (Appendix A)

IFRIC 12

Service Concession Arrangements

11 (Appendix A)

IFRIC 13

Customer Loyalty Programmes

18 (Appendix B)

IFRIC 14

IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirement and their Interaction

19 (Appendix B)

IFRIC 16

Hedges of a Net Investment in a Foreign Operation

109 (Appendix C)

IFRIC 17

Distributors of Non-cash Assets to Owners

10 (Appendix A)

IFRIC 18

Transfers of Assets from Customers

18 (Appendix C)

IFRIC 19

Extinguishing Financial Liabilities with Equity Instruments

109 (Appendix D)

IFRIC 20

Stripping Costs in the Production Phase of a Surface Mine

16 (Appendix B)

IFRIC 21

Levies

37 (Appendix C)

17 (Appendix C)

33

Practical Approach to Ind AS Implementation, 2e

Chapter 1

LIST OF NON-CONVERGED IFRIC/SIC Following is the listing of the Ind AS, which are not converged with SIC/IFRIC: SIC/IFRIC

Title

Ind AS

SIC 7

Introduction of the EURO

(See Note)

IFRIC 2

Member's Shares in Co-operative Entities and Similar Instruments

(See Note)

IFRIC 15

Agreement for the Construction of Real Estate

A guidance note has been issued

by ICAI on Accounting for Real Estate Transactions

Note: This standard is not relevant for Indian companies.

RECENT UPDATES TO IND AS

Deferment of Ind AS 115 Ind AS 11, Construction Contracts (Corresponding to IAS 11) and Ind AS 18, Revenue (Corresponding to IAS 18) were replaced by Ind AS 115 (Corresponding to IFRS 15, which would be applicable to an annual reporting period beginning on or after 1 January 2018), on issue of the Companies (Indian Accounting Standards) Rules, 2015 by MCA. However, in view of the future applicability of IFRS 15; MCA has recently deferred Ind AS 115 for future period. Consequently, the previous standards, i.e Ind AS 11 and 18 are revived in the intervening period.

Hence this book incorporates Ind AS 11, Ind AS 18 and other consequential amendments made to other standards in place of Ind AS 115.

(Refer Volume 2 and respective chapters for the text of these amendments)

Consequential amendments Consequential amendments have been made to the following Ind ASs because of the deferral of Ind AS 115:

34

•

Ind AS 101 : First-time Adoption of Indian Accounting Standards

•

Ind AS 103 : Business Combinations

•

Ind AS 104 : Insurance Contracts

•

Ind AS 107 : Financial Instruments: Disclosures

•

Ind AS 109 : Financial Instruments

•

Ind AS 1

: Presentation of financial statements

•

Ind AS 2

: Inventories

•

Ind AS 12 : Income Taxes

Chapter 1

Convergence with IFRS in India

•

Ind AS 16 : Property, Plant and Equipment

•

Ind AS 17 : Leases

•

Ind AS 23 : Borrowing Costs

•

Ind AS 32 : Financial Instruments: Presentation

•

Ind AS 34 : Interim Financial Reporting

•

Ind AS 36 : Impairment of Assets

•

Ind AS 37 : Provisions, Contingent Liabilities and Contingent Assets

•

Ind AS 38 : Intangible Assets

•

Ind AS 40 : Investment Property

Amendments to other Ind AS Subsequent to the issue of one set of Ind AS on 16 February 2015 on the basis of IFRS, IFRS also keep getting updated through the process of gradual amendments from time to time. Therefore, to keep pace with those amendments, some of the Ind AS have also been amended by MCA vide its notification no.

G.S.R. 365 (E), dated 30 March 2016. These amendments have also been incorporated under respective chapters. These amendments are carried out in the following standards: •

Ind AS 1

: Presentation of financial statements

•

Ind AS 19 : Employee Benefits

•

Ind AS 28 : Investments in Associates and Joint Ventures

•

Ind AS 34 : Interim Financial Reporting

•

Ind AS 101 : First-time Adoption of Indian Accounting Standards

•

Ind AS 105 : Non-current Assets Held for Sale and Discontinued Operations

•

Ind AS 107 : Financial Instruments: Disclosures

•

Ind AS 110 : Consolidated Financial Statements

•

Ind AS 112 : Disclosure of Interests in Other Entities

(Refer Volume 2 and respective chapters for the text of these amendments by MCA) Together with these amendments, MCA has also amended certain existing AS, issued under AS Rules, 2016, vide its notification no. G.S.R. 364 (E) dated 30 March 2016. These amendment Rules ,ie the Companies (Accounting Standards) Amendment Rules 2016, amended the existing AS 2, AS 4, AS 13, AS 14, AS 21 and AS 29 and replaced the existing AS 6 and AS 10 with revised AS 10. Refer Volume 2 for the text of these amendments by MCA. Very recently MCA has also amended Ind AS 7 and Ind AS 102, vide its notification no. G.S.R. 258(E) dated 17 March 2017. Refer Volume 2 for the text of these amendments by MCA.

35

Practical Approach to Ind AS Implementation, 2e

Chapter 1

ANNEXURE I The Companies (Indian Accounting Standards) Rules, 2014 19 In exercise of the powers conferred by section 133 read with section 469 of the Companies Act, 2013 (18 of 2013) and sub-section (1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the National Advisory Committee on Accounting Standards, hereby makes the following rules, namely: 1. Short title and commencement. – (1)

These rules may be called the Companies (Indian Accounting Standards) Rules, 2015

(2)

They shall come into force on the 1st day of April, 2015.

2. Definitions.(1)

(2)

In these rules, unless the context otherwise requires,(a)

“Accounting Standards” means the standards of accounting, or any addendum thereto for companies or class of companies as specified in rule 3;

(b)

“Act” means the Companies Act, 2013 (18 of 2013);

(c)

“Annexure” in relation to these rules means the Annexure containing the Indian Accounting Standards (Ind AS) appended to these rules;

(d)

“entity” means a company as defined in clause (20) of section 2 of the Act;

(e)

“financial statements” means financial statements as defined in clause (40) of section 2 of the Act;

(f)

“net worth” shall have the meaning assigned to it in clause (57) of section 2 of the Act.

Words and expressions used herein and not defined in these rules but defined in the Act shall have the same meaning respectively assigned to them in the Act.

3. Applicability of Accounting Standards. – (1)

The accounting standards as specified in the Annexure to these rules to be called the Indian Accounting Standards (Ind AS) shall be the accounting standards applicable to classes of companies specified in rule 4.

(2)

The Accounting standards as specified in Annexure to the Companies (Accounting Standards) Rules, 2006 shall be the Accounting Standards applicable to the companies other than the classes of companies specified in rule 4.

(3)

A company which follows the Indian Accounting Standards (Ind AS) specified in Annexure to these rules in accordance with the provisions of rule 4 shall follow such standards only.

19

w.e.f. 1-04-2015, vide G.S.R111(E), dt. 16-02-2015.

36

Chapter 1

(4)

Convergence with IFRS in India

A company which follows the accounting standards specified in Annexure to the Companies (Accounting Standards) Rules, 2006 shall comply with such standards only and not the Standards specified in Annexure to these rules.

4. Obligation to comply with Indian Accounting Standards (Ind AS). â&#x20AC;&#x201C; (1)

The Companies and their auditors shall comply with the Indian Accounting Standards (Ind AS) specified in Annexure to these rules in preparation of their financial statements and audit respectively, in the following manner, namely:(i)

any company may comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning on or after 1st April, 2015, with the comparatives for the periods ending on 31st March, 2015, or thereafter;

(ii)

the following companies shall comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2016, with the comparatives for the periods ending on 31st March, 2016, or thereafter, namely:(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of rupees five hundred crore or more; (b) companies other than those covered by sub-clause (a) of clause (ii) of sub-rule (1) and having net worth of rupees five hundred crore or more; (c) holding, subsidiary, joint venture or associate companies of companies covered by subclause (a) of clause (ii) of sub- rule (1) and sub-clause (b) of clause (ii) of sub- rule (1) as the case may be; and

(iii) the following companies shall comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2017, with the comparatives for the periods ending on 31st March, 2017, or thereafter, namely:(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than rupees five hundred crore; (b) companies other than those covered in clause (ii) of sub- rule (1) and sub-clause(a) of clause (iii) of sub-rule (1), that is, unlisted companies having net worth of rupees two hundred and fifty crore or more but less than rupees five hundred crore. (c) holding, subsidiary, joint venture or associate companies of companies covered under sub-clause (a) of clause (iii) of sub- rule (1) and sub-clause (b) of clause (iii) of subrule (1), as the case may be: Provided that nothing in this sub-rule, except clause (i), shall apply to companies whose securities are listed or are in the process of being listed on SME exchange as referred to in Chapter XB or on the Institutional Trading Platform without initial public offering in accordance with the provisions of Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Explanation 1. - SME Exchange shall have the same meaning as assigned to it in Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

37

Practical Approach to Ind AS Implementation, 2e

Chapter 1

Explanation 2. - â&#x20AC;&#x153;Comparativesâ&#x20AC;? shall mean comparative figures for the preceding accounting period.

(2)

For the purposes of calculation of net worth of companies under sub-rule (1), the following principles shall apply, namely:(a)

the net worth shall be calculated in accordance with the stand-alone financial statements of the company as on 31st March, 2014 or the first audited financial statements for accounting period which ends after that date;

(b)

for companies which are not in existence on 31st March, 2014 or an existing company falling under any of thresholds specified in sub-rule (1) for the first time after 31st March, 2014, the net worth shall be calculated on the basis of the first audited financial statements ending after that date in respect of which it meets the thresholds specified in sub-rule (1).

Explanation.- For the purposes of sub-clause (b), the companies meeting the specified thresholds given in sub-rule (1) for the first time at the end of an accounting year shall apply Indian Accounting Standards (Ind AS) from the immediate next accounting year in the manner specified in sub-rule (1).

Illustration .- (i) The companies meeting threshold for the first time as on 31st March, 2017 shall apply Ind AS for the FY2017-18 onwards. (ii) The companies meeting threshold for the first time as on 31st March, 2018 shall apply Ind AS for the financial year 2018-19 onwards and so on.

(3)

Standards in Annexure to these rules once required to be complied with in accordance with these rules, shall apply to both stand-alone financial statements and consolidated financial statements.

(4)

Companies to which Indian Accounting Standards (Ind AS) are applicable as specified in these rules shall prepare their first set of financial statements in accordance with the Indian Accounting Standards (Ind AS) effective at the end of its first Indian Accounting Standards (Ind AS) reporting period.

Explanation.- For the removal of doubts, it is hereby clarified that the companies preparing financial statements applying the Indian Accounting Standards (Ind AS) for the accounting period beginning on 1stApril, 2016 shall apply the Indian Accounting Standards (Ind AS) effective for the financial year ending on 31st March, 2017.

(5)

Overseas subsidiary, associate, joint venture and other similar entities of an Indian company may prepare its standalone financial statements in accordance with the requirements of the specific jurisdiction: Provided that such Indian company shall prepare its consolidated financial statements in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets the criteria as specified in sub-rule (1).

(6)

38

Indian company which is a subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets the criteria as specified in sub-rule (1).

Chapter 1

Convergence with IFRS in India

(7)

Any company opting to apply the Indian Accounting Standards (Ind AS) voluntarily as specified in sub-rule (1) for its financial statements shall prepare its financial statements as per the Indian Accounting Standards (Ind AS) consistently.

(8)

Once the Indian Accounting Standards (Ind AS) are applied voluntarily, it shall be irrevocable and such companies shall not be required to prepare another set of financial statements in accordance with Accounting Standards specified in Annexure to Companies (Accounting Standards) Rules, 2006.

(9)

Once a company starts following the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily on the basis of criteria specified in sub-rule (1), it shall be required to follow the Indian Accounting Standards (Ind AS) for all the subsequent financial statements even if any of the criteria specified in this rule does not subsequently apply to it.

5. Exemptions.The insurance companies, banking companies and non-banking finance companies shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatorily as specified in sub-rule (1) of rule 4.

ANNEXURE [See rule 3] A. General Instruction. â&#x20AC;&#x201C; (1)

Indian Accounting Standards, which are specified, are intended to be in conformity with the provisions of applicable laws. However, if due to subsequent amendments in the law, a particular Indian Accounting Standard is found to be not in conformity with such law, the provisions of the said law shall prevail and the financial statements shall be prepared in conformity with such law.

(2)

Indian Accounting Standards are intended to apply only to items which are material.

(3)

The Indian Accounting Standards include paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. An individual Indian Accounting Standard shall be read in the context of the objective, if stated, in that Indian Accounting Standard and in accordance with these General Instructions.

B. Indian Accounting Standards (Ind AS) â&#x20AC;&#x201C; Ind AS 101 First-time Adoption of Indian Accounting Standards Ind AS 102 Share-based Payment Ind AS 103 Business Combinations Ind AS 104 Insurance Contracts (effective date for insurance cos. to be announced separately).

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations Ind AS 106 Exploration for and Evaluation of Mineral Resources Ind AS 107 Financial Instruments: Disclosures Ind AS 108 Operating Segments

39

Practical Approach to Ind AS Implementation, 2e

Ind AS 109 Ind AS 110 Ind AS 111 Ind AS 112 Ind AS 113 Ind AS 114 Ind AS 115

Financial Instruments Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Regulatory Deferral Accounts Revenue from Contracts with Customers

Ind AS 1 Ind AS 2 Ind AS 7 Ind AS 8 Ind AS 10 Ind AS 12 Ind AS 16 Ind AS 17 Ind AS 19 Ind AS 20 Ind AS 21 Ind AS 23 Ind AS 24 Ind AS 27 Ind AS 28 Ind AS 29 Ind AS 32 Ind AS 33 Ind AS 34 Ind AS 36 Ind AS 37 Ind AS 38 Ind AS 40 Ind AS 41

Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Income Taxes Property, Plant and Equipment Leases Employee Benefits Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates Borrowing Costs Related Party Disclosures Separate Financial Statements Investments in Associates and Joint Ventures Financial Reporting in Hyperinflationary Economies Financial Instruments: Presentation Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property Agriculture

40

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Convergence with IFRS in India

ANNEXURE II PIB prescribing the roadmap for Scheduled Commercial Banks

Press Information Bureau Government of India Ministry of Corporate Affairs 18-January-2016 19:54 IST Roadmap drawn-up for implementation of Indian Accounting Standards (Ind AS) converged with International Financial Reporting Standards (IFRS) for Scheduled Commercial Banks (Excluding RRBs), Insurers/Insurance Companies and Non-Banking Financial Companies (NBFCâ&#x20AC;&#x2122;s) In pursuance to the Budget Announcement by the Union Finance Minister Shri Arun Jaitley, after consultations with Reserve Bank of India (RBI), Insurance Regulatory and Development Authority(IRDA) and Pension Fund Regulatory and Development Authority (PFRDA), the following roadmap for implementation of Indian Accounting Standards (Ind AS) converged with International Financial Reporting Standards (IFRS) for Scheduled commercial banks (excluding RRBs), insurers/insurance companies and Non-Banking Financial Companies (NBFCâ&#x20AC;&#x2122;s) has been drawn up: (I.) Scheduled commercial banks (excluding RRBs) and Insurer/Insurance Companies: (a) Scheduled commercial banks (excluding Regional Rural Banks (RRBs), All-India Termlending Refinancing Institutions (i.e. Exim Bank, NABARD, NHB and SIDBI) and Insurers/Insurance companies would be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Ind AS would be applicable to both consolidated and individual financial statements. (b)

Notwithstanding the roadmap for companies, the holding, subsidiary, joint venture or associate companies of Scheduled commercial banks (excluding RRBs) would be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter.

(c)

Urban Cooperative Banks (UCBs) and Regional Rural Banks (RRBs) shall not be required to apply Ind AS and shall continue to comply with the existing Accounting Standards, for the present.

(II.) NBFCs: NBFCs will be required to prepare Ind AS based financial statements in two phases: (a)

Under Phase I, the following categories of NBFCs shall be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards with comparatives for the periods ending March 31, 2018 or thereafter. Ind AS would be applicable to both consolidated and individual financial statements.

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Practical Approach to Ind AS Implementation, 2e

(b)

Chapter 1

(i)

NBFCs having net worth of Rs.500 crores or more.

(ii)

Holding, subsidiary, joint venture or associate companies of companies covered under (a)(i) above, other than those companies already covered under the corporate roadmap announced by the Ministry of Corporate Affairs (MCA), Government of India (GoI).

Under Phase II, the following categories of NBFCs shall be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2019 onwards with comparatives for the periods ending March 31, 2019 or thereafter. Ind AS would be applicable to both consolidated and individual financial statements. (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 less than Rs.500 crores.

(ii)

NBFCs other than those covered in (a)(i) and (b)(i) above, that are unlisted companies, having net worth of Rs.250 crores or more but less than Rs.500 crores.

(iii)

Holding, subsidiary, joint venture or associate companies of companies covered under (b) (i) and (b)(ii) above, other than those companies already covered under the corporate roadmap announced by the MCA, GoI.

NBFCs having net worth below INR 250 Crores and not covered under the above provisions shall continue to apply Accounting Standards specified in Annexure to Companies (Accounting Standards) Rules, 2006.

(III.)Scheduled commercial banks (excluding RRBs)/NBFCs/insurance companies/insurers shall apply Indian Accounting Standards (Ind AS) only if they meet the specified criteria, they shall not be allowed to voluntarily adopt Indian Accounting Standards (Ind AS). This, however, does not preclude an insurer/insurance company/NBFC from providing Ind AS compliant financial statement data for the purposes of preparation of consolidated financial statements by its parent/investor, as required by the parent/investor to comply with the existing requirements of law.

Draft Notification/Rules, as required, would be issued by the Ministry of Corporate Affairs, RBI and IRDA in due course.

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ANNEXURE III RBI direction regarding Ind AS to be followed

by Scheduled Commercial Banks RBI/2015-16/315 DBR.BP.BC.No.76/21.07.001/2015-16 All Scheduled Commercial Banks

February 11, 2016

(excluding Regional Rural Banks) Madam / Dear Sir, Implementation of Indian Accounting Standards (Ind AS) The Ministry of Corporate Affairs (MCA), Government of India has notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015. A reference is also invited to the Press Release dated January 18, 2016 issued by the MCA outlining the roadmap for implementation of International Financial Reporting Standards (IFRS) converged Indian Accounting Standards for banks, non-banking financial companies, select All India Term Lending and Refinancing Institutions and insurance entities.

2.

In this connection, it is advised that scheduled commercial banks (excluding RRBs) shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the Reserve Bank in this regard, in the following manner: (i)

Banks shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Ind AS shall be applicable to both standalone financial statements and consolidated financial statements. â&#x20AC;&#x153;Comparativesâ&#x20AC;? shall mean comparative figures for the preceding accounting period.

(ii)

Banks shall apply Ind AS only as per the above timelines and shall not be permitted to adopt Ind AS earlier.

3.

Banks are advised to take note of the Press Release dated January 18, 2016 issued by the MCA which states that notwithstanding the roadmap for companies, the holding, subsidiary, joint venture or associate companies of banks shall be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 and thereafter.

4.

Ind AS implementation is likely to significantly impact the financial reporting systems and processes and, as such, these changes need to be planned, managed, tested and executed in advance of the implementation date. Banks are advised to set up a Steering Committee headed by an official of the rank of an Executive Director (or equivalent) comprising members from cross-functional areas of the bank to immediately initiate the 43

Practical Approach to Ind AS Implementation, 2e

Chapter 1

implementation process. The name and details of the designated official and the team shall be forwarded by email. The Audit Committee of the Board shall oversee the progress of the Ind AS implementation process and report to the Board at quarterly intervals. The critical issues which need to be factored in the Ind AS implementation plan include the following: a) Ind AS Technical Requirements: Diagnostic analysis of differences between the current accounting framework and Ind AS, significant accounting policy decisions impacting financials, drafting accounting policies, preparation of disclosures, documentation, preparation of proforma Ind AS financial statements, timing the changeover to Ind AS, and dry-run of accounting systems and end-to-end reporting process before the actual conversion. b) Systems and processes: Evaluate system changes - assessment of processes requiring changes, issues having significant impact on information systems (including IT systems), and develop/strengthen data capture system, where required. c) Business Impact: Profit planning and budgeting, taxation, capital planning, and impact on capital adequacy. d) People - Evaluation of resources: Adequate and fully dedicated internal staff for implementation, comprehensive training strategy and program. e) Project management: Managing the entire process-holistic approach to planning and execution by ensuring that all linkages are established between accounting, systems, people and business, besides effective communication strategies to stakeholders.

5.

Banks shall assess the impact of the Ind AS implementation on their financial position including the adequacy of capital, taking into account the Basel III capital requirements and place quarterly progress reports to their Boards. Banks also need to be in preparedness to submit proforma Ind AS financial statements to the Reserve Bank from the half-year ended September 30, 2016, onwards.

6.

The Reserve Bank shall also take steps to facilitate the implementation process. To begin with, from April 2016, the Reserve Bank shall hold periodic meetings with banks in this regard. The Reserve Bank shall issue necessary instructions/guidance/clarifications on relevant aspects as and when required.

7.

Banks shall disclose in the Annual Report, the strategy for Ind AS implementation, including the progress made in this regard. These disclosures shall be made from the financial year 2016-17 until implementation.

8.

The Boards of the banks shall have the ultimate responsibility in determining the Ind AS direction and strategy and in overseeing the development and execution of the Ind AS implementation plan.

9.

The directions contained herein are issued under Section 35A of the Banking Regulation Act, 1949 and banks shall ensure strict compliance of the same.

Yours faithfully, (Sudarshan Sen) Principal Chief General Manager 44

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Convergence with IFRS in India

ANNEXURE IV IRDA circular regarding instructions to the insurance companies with respect to Ind AS applicability IRDA CIRCULAR Ref: IRDA/ F&A/ CIR/IFRS/038/03/2016

Date: 01-03-2016

Implementation of Indian Accounting Standards (Ind AS) in insurance sector The Ministry of Corporate Affairs (MCA), Government of India has notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015. A reference is also invited to the Press Release dated January 18, 2016 issued by the MCA outlining the roadmap for implementation of International Financial Reporting Standards (IFRS) converged Indian Accounting Standards (Ind As) for banks, non-banking financial companies, select All India Term Lending and Refinancing Institutions and Insurers.

2. In this connection, it is advised that Insurers shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the Authority in this regard, in the following manner: (i) Insurers shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018. Ind AS shall be applicable to both standalone financial statements and consolidated financial statements. â&#x20AC;&#x153;Comparativesâ&#x20AC;? shall mean comparative figures for the preceding accounting period. (ii) Insurers shall apply Ind AS only as per the above timelines and shall not be permitted to adopt Ind AS earlier.

3. Ind AS implementation is likely to significantly impact the financial reporting systems and processes and, as such, these changes need to be planned, managed, tested and executed in advance of the implementation date. Insurers are advised to set up a Steering Committee headed by an official of the rank of an Executive Director (or equivalent) comprising members from cross-functional areas of the insurer to immediately initiate the implementation process.

The name and details of the designated official and the team, if not forwarded earlier, shall be forwarded by email. The Audit Committee of the Board shall oversee the progress of the Ind AS implementation process and report to the Board at quarterly intervals. The critical issues which need to be factored in the Ind AS implementation plan include the following: (i) Ind AS Technical Requirements: Diagnostic analysis of differences between the current accounting framework and Ind AS, significant accounting policy decisions impacting financials, drafting accounting policies, preparation of disclosures, documentation, preparation of proforma Ind AS financial statements, timing the changeover to Ind AS, and dry-run of accounting systems and end-to- end reporting process before the actual conversion.

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(ii) Systems and processes: Evaluate system changes - assessment of processes requiring changes, issues having significant impact on information systems (including IT systems), and develop/strengthen data capture system, where required. (iii) Business Impact: Profit planning and budgeting, taxation, capital planning, and impact on solvency. (iv) People - Evaluation of resources: Adequate and fully dedicated internal staff for implementation, comprehensive training strategy and program. (v) Project management: Managing the entire process-holistic approach to planning and execution by ensuring that all linkages are established between accounting, systems, people and business, besides effective communication strategies to stakeholders.

4. Insurers shall assess the impact of the Ind AS implementation on their financial position including the adequacy of capital, taking into account the solvency regulations requirements and place quarterly progress reports to their Boards. Insurers also need to be in preparedness to submit proforma Ind AS financial statements to the Authority from the quarter ended December 31, 2016, onwards. The proforma Ind As financial statements shall be filed within the time lines specified in the Authorityâ&#x20AC;&#x2122;s circular No. IRDA /F&I /CIR /F&A /012 /01 /2010 dated 28th January, 2010 5. The Authority shall also take steps to facilitate the implementation process. To begin with, from July 2016, the Authority shall hold periodic meetings with insurers in this regard. The Authority shall issue necessary instructions / guidance / clarifications on relevant aspects as and when required.

6. Insurers shall disclose in the Annual Report, the strategy for Ind AS implementation, including the progress made in this regard. These disclosures shall be made from the financial year 201516 until implementation.

7. The Boards of the insurers shall have the ultimate responsibility in determining the Ind AS direction and strategy and in overseeing the development and execution of the Ind AS implementation plan.

8. The directions contained herein are issued under Section 34 of the Insurance Act, 1938 and insurers shall ensure strict compliance of the same.

9. All Insurers are advised to place this communication before the ensuing meeting of their Board of Directors and confirm the compliance.

(T S Vijayan) Chairman

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ANNEXURE V MCA clarifications with respect to NBFCs New Delhi, the 30th March, 2016 G.S.R. 365 (E).—In exercise of the powers conferred by section 133 read with section 469 of the Companies Act, 2013 (18 of 2013) and sub-section (1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the National Advisory Committee on Accounting Standards, hereby makes the following rules to amend the Companies (Indian Accounting Standards) Rules, 2015, namely:— 1. Short title and commencement.-(1) These rules may be called the Companies (Indian Accounting Standards) (Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Indian Accounting Standards) Rules, 2015 (hereinafter referred to as the principal rules) in rule 2, in sub-rule (1), after clause (f), the following clause shall be inserted, namely:‘(g) “Non-Banking Financial Company” means a Non-Banking Financial Company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and includes Housing Finance Companies, 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.’.

3. In the principal rules, in rule 4,(I) in sub-rule (1),-

(a) in clause (i), for the words “any company” the words “ any company and its holding, subsidiary, joint venture or associate company” shall be substituted; (b) after clause (iii), the following clauses shall be inserted, namely:“(iv) Notwithstanding the requirement of clauses (i) to (iii), Non-Banking Financial Companies (NBFCs) shall comply with the Indian Accounting Standards (Ind ASs) in preparation of their financial statements and audit respectively, in the following manner, namely:(a) The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the 1st April, 2018, with comparatives for the periods ending on 31st March, 2018, or thereafter— (A) NBFCs having net worth of rupees five hundred crore or more; (B) holding, subsidiary, joint venture or associate companies of companies

covered under item (A), other than those already covered under clauses (i), (ii) and (iii) of sub-rule (1) of rule 4.

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(b) The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the 1st April, 2019, with comparatives for the periods ending on 31stMarch, 2019, or thereafter— (A) NBFCs whose equity or debt securities are listed or in the process of listing on

any stock exchange in India or outside India and having net worth less than rupees five hundred crore;

(B) NBFCs, that are unlisted companies, having net worth of rupees two-hundred

and fifty crore or more but less than rupees five hundred crore; and

(C) holding, subsidiary, joint venture or associate companies of companies

covered under item (A) or item (B) of sub-clause (b), other than those already covered in clauses (i), (ii) and (iii) of sub-rule (1) or item (B) of sub-clause (a) of clause (iv).

Explanation.- For the purposes of clause (iv), if in a group of Companies, some entities apply Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules, 2006 and others apply accounting standards as specified in the Annexure to these rules, in such cases, for the purpose of individual financial statements, the entities should apply respective standards applicable to them. For preparation of consolidated financial statements, the following conditions are to be followed, namely:(i) where an NBFC is a parent (at ultimate level or at intermediate level), and prepares consolidated financial statements as per Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules, 2006, and its subsidiaries, associates and joint ventures, if covered by clause (i), (ii) and (iii) of sub-rule (1) has to provide the relevant financial statement data in accordance with the accounting policies followed by the parent company for consolidation purposes (until the NBFC is covered under clause (iv) of sub-rule (1); (ii) where a parent is a company covered under clause (i), (ii) and (iii) of sub-rule (1) and has an NBFC subsidiary, associate or a joint venture, the parent has to prepare Ind AS-compliant consolidated financial statements and the NBFC subsidiary, associate and a joint venture has to provide the relevant financial statement data in accordance with the accounting policies followed by the parent company for consolidation purposes (until the NBFC is covered under clause (iv) of sub-rule (1). (v) Notwithstanding clauses (i) to (iv), the holding, subsidiary, joint venture or associate companies of Scheduled commercial banks (excluding RRBs) would be required to prepare Ind AS based financial statements for accounting periods beginning from 1st April, 2018 onwards, with comparatives for the periods ending 31st March, 2018 or thereafter:”; (II) in sub-rule (2), for the words brackets and figure “sub-rule (1)’’ the words, brackets and figures

“clause (i), and (iii) of sub-rule (1)’’, shall be substituted, wherever they occur;

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(III) after sub-rule (2), the following sub-rule shall be inserted, namely:-

“(2A) For the purposes of calculation of net worth of Non-Banking Financial Companies covered under clause (iv) of sub-rule (1), the following principles shall apply, namely:(a) the net worth shall be calculated in accordance with the stand-alone financial statements of the NBFCs as on 31st March, 2016 or the first audited financial statements for accounting period which ends after that date; (b) for NBFCs which are not in existence on 31st March, 2016 or an existing NBFC falling first time, after 31st March, 2016, the net worth shall be calculated on the basis of the first audited stand-alone financial statements ending after that date, in respect of which it meets the thresholds.

Explanation.- For the purposes of sub-clause (b), the NBFCs meeting the specified thresholds given in sub- clause (b) of clause (iv) of sub-rule (1) for the first time at the end of an accounting year shall apply Indian Accounting Standards (Ind ASs) from the immediate next accounting year in the manner specified in sub- clause (b) of clause (iv) of sub-rule (1).

Illustration - (i) The NBFCs meeting threshold for the first time as on 31st March, 2019 shall apply Ind AS for the financial year 2019-20 onwards. (ii) The NBFCs meeting threshold for the first time as on 31st March, 2020 shall apply Ind AS for the financial year 2020-21 onwards and so on.’’; (IV) in the Explanation to sub-rule (4),-

(a) after the words, figures and letters ‘the Indian Accounting Standards (Ind AS) for the accounting period beginning on 1stApril, 2016’ the words, figures and letters ‘‘or 1stApril, 2018, as the case may be’’ shall be inserted; (b) after the words, figures and letters ‘effective for the financial year ending on 31st March, 2017’ the words, figures and letters ‘or 31st March, 2019, as the case may be’, shall be inserted; (V) in the proviso to sub-rule (5), sub-rule (6) and sub-rule (9), the words ‘either voluntarily or

mandatorily’ shall be omitted.

4. for rule 5, the following rule shall be substituted, namely:“(5) The Banking Companies and Insurance Companies shall apply the Ind ASs as notified by the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA) respectively. An insurer or insurance company shall however, provide Ind AS compliant financial statement data for the purposes of preparation of consolidated financial statements by its parent or investor or venturer, as required by the parent or investor or venturer to comply with the requirements of these rules.’’.

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ANNEXURE VI RBI direction regarding preparedness of banks to submit Proforma Ind AS FS to RBI RBI/2015-16/429 DBR.BP.BC.No.106/21.07.001/2015-16

June 23, 2016

All Scheduled Commercial Banks (excluding Regional Rural Banks) Madam / Dear Sir, Implementation of Indian Accounting Standards (Ind AS) Please refer to circular DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016 on the captioned subject in terms of which banks have been directed to be in preparedness to submit Proforma Ind AS Financial Statements to the Reserve Bank from the half-year ended September 30, 2016, onwards.

Banks shall submit Proforma Ind AS Financial Statements, for the half year ended September 30, 2.

2016 latest by November 30, 2016 to the Principal Chief General Manager, Department of Banking Regulation, Central Office, Reserve Bank of India, Mumbai. Banks shall be guided by the Ind ASs notified by the Ministry of Corporate Affairs, Government of India under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2016, as amended from time to time, in this regard. [reference G.S.R.111(E) dated February 16, 2015 and G.S.R.365(E) dated March 30, 2016]. Banks shall also refer to the Report of the Working Group on â&#x20AC;&#x153;Implementation of Ind AS by Banks in Indiaâ&#x20AC;? placed on the RBI website on October 20, 2015.

3.

The Proforma Ind AS Financial Statements shall include the following:-

(a)

Balance Sheet including Statement of Changes in Equity (Annex I & II).

(b)

Profit and Loss Account (Annex III).

(c)

Notes (Annex IV).

4. The formats as per the Annexes are solely for the preparation and submission of proforma Ind AS financial statements to the Reserve Bank. The formats for the Ind AS financial statements for the accounting periods beginning April 1, 2018 shall be notified separately. It is also clarified that banks shall continue to be guided by the extant instructions issued vide circular Ref. DBOD.No.BP.BC.78/C.686/91-92 dated February 6, 1992 (as amended from time to time) with respect to the preparation and presentation of financial statements for the financial years 2016-17 and 2017-18.

5. Banks may refer to Annex V for the broad application guidance on the major line items/sub-line items in the financial statements. Banks may email to the Reserve Bank for specific clarifications/issues, in this regard.

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6. To begin with, banks which are not in a position to submit both standalone and consolidated proforma Ind AS financial statements for the half year ended September 30, 2016 are permitted to submit only standalone financial statements. However, banks shall submit both proforma Ind AS standalone and consolidated financial statements in the subsequent periods.

7. Banks shall disclose significant accounting policies including, inter alia, the following: (i)

financial assets and financial liabilities, including use of fair value option in designating financial assets or financial liabilities at Fair Value Through Profit or Loss (FVTPL) upon initial recognition.

(ii)

impairment of financial assets, with the following details: •

Methodology for computation of expected credit losses (ECL).

•

Level of segmentation in the portfolio used.

•

Criteria used for determination of movement from Stage 1 (12 month ECL) to Stage 2 and Stage 3 (lifetime ECL).

•

The method used to compute lifetime ECL.



The manner in which the forward looking information has been incorporated in the ECL estimates- the information provided should include both discussion of the judgment required and how it is applied in determining the allowance.



The treatment for non-fund based facilities.



The methodology for computation of ECL for revolving credit facilities.



The areas where the bank intends to refine work on in this ECL estimate and the work plan / timeline to achieve it.



The impact of movement from the current approach to the ECL approach- reconciliation of the stock of provisions under the current reporting requirements with the opening Ind AS 109 allowance. A comparison of the impairment allowance under ECL for the half-year ended September 30, 2016 with the corresponding provisions under the extant Prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP) norms shall also be disclosed.

Banks may note that Ind AS 109 is not specific in terms of the approach to be followed when measuring expected credit losses. The Reserve Bank expects banks to adopt sound expected credit loss methodologies commensurate with the size, complexity, and risk profile specific to individual banks. Banks may also note that the Reserve Bank shall finalise the policy on expected credit loss provisioning, taking into account the impairment requirements under Ind AS 109, after due deliberations, and considering various factors including, inter alia, the inputs as above. Banks are therefore advised to maintain flexibility while designing the systems and processes in this regard. (iii) derivatives and hedge accounting. (iv) derecognition of financial assets and financial liabilities. (v) employee benefits. (vi) offsetting financial instruments.

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(vii) income taxes. (viii) significant areas of estimation uncertainty , critical judgements and assumptions in applying accounting policies. (ix) Approach on exemptions under Ind AS 101 First Time Adoption of Indian Accounting Standards.

8. For the purpose of preparation of proforma Ind AS financial statements for the half year ending September 30, 2016, the notional date of transition to Ind ASs shall be the beginning of business as on April 01, 2016 (or equivalently close of business as on March 31, 2016). This however, does not change the date of transition for the purpose of preparation of Ind AS financial statements for the accounting periods beginning April 1, 2018, which shall be as per the provisions of Ind AS 101 First Time Adoption of Indian Accounting Standards.

9. The Proforma Ind ASs Financial Statements shall also include: (i) (a) reconciliation of equity reported in accordance with the existing financial reporting requirements as at April 1, 2016 to its equity in accordance with Ind ASs as on the same date. (b) reconciliation of equity reported in accordance with the existing financial reporting requirements as at September 30, 2016 to its equity in accordance with Ind ASs as on the same date. (ii) reconciliation of the total comprehensive income in accordance with Ind AS for the half year ended September 30, 2016 with the profit or loss under the existing financial reporting requirements.

10. The reconciliations required by paragraph 9 above shall be given in sufficient detail to understand the material adjustments to the Balance Sheet and Statement of Profit and Loss, thereby explaining how the transition from the existing financial reporting to Ind ASs affected the reported Balance Sheet and financial performance. The detail shall be such as to enable the Reserve Bank to understand the significant adjustments to equity that will impact regulatory capital. The Reserve Bank does not require the proforma Ind AS financial statements to be audited and understands that this information, while being a fair estimate of the impact to opening equity, is subject to change.

11. Please note that the submission of proforma Ind AS financial statements to the Reserve Bank shall not be construed as validation, in any form, of the financial statements, by the Reserve Bank.

Yours faithfully, (Sudarshan Sen) Principal Chief General Manager For further information, please refer https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10456

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ANNEXURE VII RBI direction for All India Financial Institutions with respect to Ind AS applicability RBI/2016-17/34 RBI/2016-17/DBR.FID.No. 1/01.02.000/2016-17

August 04, 2016

All India Financial Institutions (Exim Bank, NABARD, NHB and SIDBI) Madam / Dear Sir, Implementation of Indian Accounting Standards (Ind AS) The Ministry of Corporate Affairs (MCA), Government of India has notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015. A reference is also invited to the Press Release dated January 18, 2016 issued by the MCA outlining the roadmap for implementation of International Financial Reporting Standards (IFRS) converged Indian Accounting Standards for banks, non-banking financial companies, select All India Term Lending and Refinancing Institutions and insurance entities.

2.

In this connection, it is advised that select All-India Term Lending and Refinancing Institutions(AIFIs) (Exim Bank, NABARD, NHB and SIDBI), shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the Reserve Bank in this regard, in the following manner: (i) AIFIs shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Ind AS shall be applicable to both standalone financial statements and consolidated financial statements. â&#x20AC;&#x153;Comparativesâ&#x20AC;? shall mean comparative figures for the preceding accounting period. (ii) AIFIs shall apply Ind AS only as per the above timelines and shall not be permitted to adopt Ind AS earlier.

3.

AIFIs are advised to take note of the Press Release dated January 18, 2016 issued by the MCA which states that All India Term-lending Refinancing Institutions (i.e. EXIM Bank, NABARD, NHB and SIDBI) would be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 and thereafter.

4. Ind AS implementation is likely to significantly impact the financial reporting systems and processes and, as such, these changes need to be planned, managed, tested and executed in advance of the implementation date. Each AIFI is advised to set up a Steering Committee headed by an official of the rank of an Executive Director (or equivalent) comprising members from cross-functional areas of the AIFI to immediately initiate the implementation process. The name and details of the designated official and the team may be forwarded by email to us. The Audit Committee of the Board shall oversee the progress of the Ind AS implementation process and report to the Board at quarterly intervals. The critical issues which need to be addressed in the 53

Practical Approach to Ind AS Implementation, 2e

5.

6.

7.

8.

9.

Chapter 1

Ind AS implementation plan include the following: a) Ind AS Technical Requirements: Diagnostic analysis of differences between the current accounting framework and Ind AS, significant accounting policy decisions impacting financials, drafting accounting policies, preparation of disclosures, documentation, preparation of proforma Ind AS financial statements, timing the changeover to Ind AS, and dry-run of accounting systems and end-to-end reporting process before the actual conversion. b) Systems and processes: Evaluate system changes - assessment of processes requiring changes, issues having significant impact on information systems (including IT systems), and develop/strengthen data capture system, where required. c) Business Impact: Profit planning and budgeting, taxation, capital planning, and impact on capital adequacy. d) People - Evaluation of resources: Adequate and fully dedicated internal staff for implementation, comprehensive training strategy and program. e) Project management: Managing the entire process-holistic approach to planning and execution by ensuring that all linkages are established between accounting, systems, people and business, besides effective communication strategies to stakeholders.

AIFIs shall assess the impact of the Ind AS implementation on their financial position including the adequacy of capital, taking into account the Basel III capital requirements, as and when these are made applicable to the AIFIs, and submit quarterly progress reports to their Boards. AIFIs also need to be in preparedness to submit proforma Ind AS financial statements as per the formats given in Annex I to IV, and the associated guidance given in Annex V, to the Reserve Bank from the half-year ended September 30, 2016, onwards. The guidelines for preparation of the proforma Ind AS financial statement are given in the Appendix. The proforma statements for the half year ended September 30, 2016 shall be submitted latest by November 30, 2016.

Considering that the financial year of NHB is from July to June, it may prepare proforma Ind AS financial statements for the half-year ended December 31, 2016 which shall be submitted latest

by February 28, 2017.

The Reserve Bank shall also take steps to facilitate the implementation process by holding periodic meetings with AIFIs. The Reserve Bank shall issue necessary instructions/guidance/ clarifications on relevant aspects as and when required.

AIFIs shall disclose in their Annual Report, the strategy for Ind AS implementation, including the progress made in this regard. These disclosures shall be made from the financial year 2016-17 until full implementation.

The Boards of the AIFIs shall have the ultimate responsibility in determining the Ind AS direction and strategy and in overseeing the development and execution of the Ind AS implementation plan.

The directions contained herein are issued under Section 45L of the Reserve Bank of India Act, 1934 and AIFIs shall ensure strict compliance of the same.

Yours faithfully, (Rajinder Kumar) Chief General Manager For further information, please refer https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT34475686CBBD9144C7AAF824DF6F16A41F.PDF

54

Chapter 1

Convergence with IFRS in India

ANNEXURE VIII Report of the Implementation Group on Ind AS in Insurance sector in India Forwarding Letter

December 29, 2016 To, Smt. V.R.Iyer Member (F&l) Insurance Regulatory and Development Authority of India 3rd Floor, Parishram Bhavan, Basheer Bagh, Hyderabad-500004 Madam, Sub: Report of the Implementation Group (IG) on Ind AS in Insurance Sector in India This has reference to the Order Ref: IRDA/F&A/ORD/ACTS/201/11/2015 dated 17th November 2015 and the first meeting of the IG wherein, I was entrusted with the responsibility of being Group Head.

I have great pleasure in submitting the report of the Implementation Group on Ind AS in the Insurance Sector in India. This Report details the recommendations of the group constituted to examine the implications of implementing Ind AS, address the implementation issues and facilitate formulation of operational guidelines to converge with Ind AS in the Indian Insurance sector. The Authority may examine the recommendations in the Report for appropriate incorporation in the relevant Regulations/guidelines.

On behalf of the members and special invitees of the Group and on my behalf, I convey my sincere thanks for entrusting us with this responsibility.

Yours faithfully, (P.R. Ramesh) Group Head-Implementation Group For further information, please refer https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3040

55

Table of Contents

Chapter 1 – Indian Accounting Standard (Ind AS) Disclosure Checklist ���������������������������������� 1-190 Standards Covered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Format of Checklist. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Abbreviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 3

Chapter 2 – Comparison of ICDS with Ind AS (Bare text) ���������������������������������������������������������� 191-258 Chapter 3 – Summary of Ind ASs ����������������������������������������������������������������������������������������������������� 259-446 Ind AS 1: Presentation of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 261-266 Ind AS 2: Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267-269 Ind AS 7: Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270-273 Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274-278 Ind AS 10: Events after the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . 279-281 Ind AS 11: Construction Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282-286 Ind AS 12: Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287-291 Ind AS 16: Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292-296 Ind AS 17: Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297-300 Ind AS 18: Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301-306 Ind AS 19: Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306-313 Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314-316 Ind AS 21: The Effects of Changes in Foreign Exchange Rates . . . . . . . . . . . . 317-321 Ind AS 23: Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322-323 Ind AS 24: Related Party Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324-327 Ind AS 27: Separate Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328-329 Ind AS 28: Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . 330-333 Ind AS 29: Financial Reporting in Hyperinflationary Economies. . . . . . . . . . 334-337 Ind AS 32: Financial Instruments: Presentation. . . . . . . . . . . . . . . . . . . . . . . . . 338-341 vii

Practical Approach to Ind AS Implementation, 2e Ind AS 33: Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342-346 Ind AS 34: Interim Financial Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347-351 Ind AS 36: Impairment of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352-357 Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets . . . . . . 358-362 Ind AS 38: Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363-368 Ind AS 40: Investment Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369-372 Ind AS 41: Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373-374 Ind AS 101: First-time Adoption of Indian Accounting Standards. . . . . . . . . 375-379 Ind AS 102: Share-based Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380-386 Ind AS 103: Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387-392 Ind AS 104: Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393-397 Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398-401 Ind AS 106: Exploration for and Evaluation of Mineral Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402-404 Ind AS 107: Financial Instruments: Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . 405-409 Ind AS 108: Operating Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410-414 Ind AS 109: Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415-423 Ind AS 110: Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 424-429 Ind AS 111: Joint Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430-434 Ind AS 112: Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . 435-440 Ind AS 113: Fair Value Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441-445 Ind AS 114: Regulatory Deferral Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446-448

Chapter 4 – Other Annexures Annexure 1 – Amendments to Ind AS issued by MCA, 30 March 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449-506 Annexure 1A – Amendments to Ind AS issued by MCA, 17 March 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507-514 Annexure 2 - Amendments to Schedule III issued by MCA, 6 April 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515-535 Annexure 2A – Amendments to Schedule III issued by MCA, 30 March 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536-538 Annexure 3 – Clarifications on ICDS, issued by CBDT. . . . . . . . . . . . . . . . . . . 539-546

Chapter 5 – IFRS based Annual Report ������������������������������������������������������������������������������������������ 547-636 viii

Table of Contents (Vol. 1)

Chapter 1

Convergence with IFRS in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 2

Ind AS conversion- Are we ready?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Chapter 3

Ind AS 1: Presentation of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Chapter 4

Ind AS 2: Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Chapter 5

Ind AS 7: Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Chapter 6

Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors . . . . . 153

Chapter 7

Ind AS 10: Events after the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Chapter 8

Ind AS 11: Construction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

Chapter 9

Ind AS 12: Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Chapter 10 Ind AS 16: Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Chapter 11 Ind AS 17: Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 Chapter 12 Ind AS 18: Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Chapter 13 Ind AS 19: Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 Chapter 14 Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Chapter 15 Ind AS 21: The Effects of Changes in Foreign Exchange Rates. . . . . . . . . . . . . . . . . . . 389 Chapter 16 Ind AS 23: Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Chapter 17 Ind AS 24: Related Party Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Chapter 18 Ind AS 27: Separate Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 Chapter 19 Ind AS 28: Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . 449 Chapter 20 Ind AS 29: Financial Reporting in Hyperinflationary Economies . . . . . . . . . . . . . . . . 469 Chapter 21 Ind AS 32: Financial Instruments: Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 Chapter 22 Ind AS 33: Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Chapter 23 Ind AS 34: Interim Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531 Chapter 24 Ind AS 36: Impairment of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 Chapter 25 Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . . . . 577 Chapter 26 Ind AS 38: Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607 ix

Practical Approach to Ind AS Implementation, 2e

Chapter 27 Ind AS 40: Investment Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 Chapter 28 Ind AS 41: Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Chapter 29 Ind AS 101: First-time Adoption of Indian Accounting Standards . . . . . . . . . . . . . . . 661 Chapter 30 Ind AS 102: Share-based Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 Chapter 31 Ind AS 103: Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 Chapter 32 Ind AS 104: Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783 Chapter 33 Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations. . . . . . 795 Chapter 34 Ind AS 106: Exploration for and Evaluation of Mineral Resources . . . . . . . . . . . . . . . 823 Chapter 35 Ind AS 107: Financial Instruments: Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 Chapter 36 Ind AS 108: Operating Segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 Chapter 37 Ind AS 109: Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 Chapter 38 Ind AS 110: Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921 Chapter 39 Ind AS 111: Joint Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 961 Chapter 40 Ind AS 112: Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . 983 Chapter 41 Ind AS 113: Fair Value Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 995 Chapter 42 Ind AS 114: Regulatory Deferral Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013 Chapter 43 Income Tax Disclosure Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031

x

Chapter 1

Indian Accounting Standard (Ind AS) Disclosure Checklist Synopsis

Standards Covered ..................................................................................................................................... 1 Format of Checklist.................................................................................................................................... 3 References .................................................................................................................................................. 3 Abbreviation .............................................................................................................................................. 3

STANDARDS COVERED •

Ind AS 101

First-time Adoption of Indian Accounting Standards

•

Ind AS 102

Share-based Payment

•

Ind AS 103

Business Combinations

•

Ind AS 104

Insurance Contracts

•

Ind AS 105

Non-current Assets Held for Sale and Discontinued Operations

•

Ind AS 106

Exploration for and Evaluation of Mineral Resources

•

Ind AS 107

Financial Instruments: Disclosures

•

Ind AS 108

Operating Segments

•

Ind AS 109

Financial Instruments

•

Ind AS 110

Consolidated Financial Statements

•

Ind AS 111

Joint Arrangements

•

Ind AS 112

Disclosure of Interests in Other Entities

•

Ind AS 113

Fair Value Measurement

•

Ind AS 114

Regulatory Deferral Accounts

•

Ind AS 1

Presentation of Financial Statements

•

Ind AS 2

Inventories

1

Practical Approach to Ind AS Implementation, 2e

•

Ind AS 7

Statement of Cash Flows

• •

Ind AS 8 Ind AS 10

Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period

•

Ind AS 11

Construction Contracts(See note)

•

Ind AS 12

Income Taxes

• •

Ind AS 16 Ind AS 17

Property, Plant and Equipment Leases

•

Ind AS 18

Revenue(See note)

• •

Ind AS 19 Ind AS 20

•

Ind AS 21

Employee Benefits Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates

• • •

Ind AS 23 Ind AS 24 Ind AS 27

Borrowing Costs Related Party Disclosures Separate Financial Statements

• •

Ind AS 28 Ind AS 29

Investments in Associates and Joint Ventures Financial Reporting in Hyperinflationary Economies

• •

Ind AS 32 Ind AS 33

Financial Instruments: Presentation Earnings per Share

• •

Ind AS 34 Ind AS 36

Interim Financial Reporting Impairment of Assets

• •

Ind AS 37 Ind AS 38

Provisions, Contingent Liabilities and Contingent Assets Intangible Assets

• •

Ind AS 40 Ind AS 41

Investment Property Agriculture

Chapter 1

Note: Ind AS 11, Construction Contracts (Corresponding to IAS 11) and Ind AS 18, Revenue (Corresponding to IAS 18) were replaced by Ind AS 115 (Corresponding to IFRS 115, which would be applicable to an annual reporting period beginning on or after 1 January 2018), on issue of the Companies (Indian Accounting Standards) Rules, 2015 by MCA. However, in view of future applicability of IFRS 15; MCA has recently deferred Ind AS 115 for future period. Consequently, the previous standards, ie Ind AS 11 and 18 are revived in the intervening period.

Hence, this book incorporates Ind AS 11, Ind AS 18 and other consequential amendments made to other standards in place of Ind AS 115.

(Refer Volume II and respective chapters in Volume I for the text of these amendments)

2

Chapter 1

Indian Accounting Standard (Ind AS) Disclosure Checklist

FORMAT OF CHECKLIST The disclosure checklist has been prepared in a specific format to enable gathering all disclosure requirements in a systematic matter and review thereof. The disclosures have been arranged by Ind AS. It has been designed to provide all the Ind AS disclosures generally required for a complete set of annual FS.

REFERENCES The references in the left-hand margin of the checklist represent the paragraphs referencing of a particular Ind AS in respect of which, the disclosure has been given. For example, ‘1p10’ indicates IndAS 1 paragraph 10. The designation ‘DV’ (disclosure voluntary) has been mentioned at a few places to indicate that a particular Ind AS encourages, but does not require, that specific disclosure.

The additional notes and explanations wherever needed are given in the Annexure.

The box in the right-hand margin is to enable choosing the appropriate option with respect to a particular disclosure requirement, as mentioned below: Y (‘Yes’) – the appropriate disclosure has been made; N (‘No’) – the required disclosure has not been made (In case the required disclosure has not been made, the reason for the same should also be stated with the help of a detailed note) NA (‘Not applicable’) – the item does not apply to the reporting entity

ABBREVIATION

List of abbreviations used throughout the checklist are as follows: BS

Balance Sheet

CFS

Consolidated Financial Statements

CGU

Cash-Generating Unit

FS

Financial Statements

FV

Fair Value

FY

Financial Year

GAAP

Generally Accepted Accounting Principles

Ind AS

Indian Accounting Standards

KMP

Key Management Personnel

MCA

Ministry of Corporate Affairs

3

Practical Approach to Ind AS Implementation, 2e

OCI

Other Comprehensive Income

PPE

Property, Plant and Equipment

PV

Present Value

RPT

Related Party Transaction

SOCE

Statement of Changes in Equity

4

Chapter 1

Chapter 1

Indian Accounting Standard (Ind AS) Disclosure Checklist

INDIAN ACCOUNTING STANDARD (IND AS) DISCLOSURE CHECKLIST Reference No.

Disclosures

Y

N

NA

Ind AS 1 Presentation of Financial Statements 1p10

Whether the entity has a complete set of FS comprises: a) a Balance Sheet (BS) as at the end of the period; b) a statement of profit and loss for the period; c) Statement of Changes in Equity (SOCE) for the period; d) a statement of cash flows for the period; e) notes, comprising significant accounting policies and other explanatory information; ea) comparative information in respect of the preceding period as specified in paragraphs 38 and 38A (mentioned below); and f) a BS as at the beginning of the preceding period when the entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its FS, or when it reclassifies items in its FS in accordance with paragraphs 40A–40D (paragraphs 40A, 40B and 40D are mentioned below and refer point 1 of Annexure for paragraph 40C).

1p10A

Whether the entity has presented a single statement of profit and loss, with profit or loss and other comprehensive income presented in two sections.

Whether the sections have been presented together, with the profit or loss section presented first followed directly by the other comprehensive income section.

1p11

Whether the entity has presented with equal prominence all of the financial statements in a complete set of financial statements.

1p13

Whether the entity has included the review of the following, when it presents, outside the financial statements, a financial review by management that describes and explains the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces. (a) the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to maintain and enhance financial performance, including its dividend policy;

5

Practical Approach to Ind AS Implementation, 2e

Reference No.

Disclosures (b) the entity’s sources of funding and its targeted ratio of liabilities to equity; and (c) the entity’s resources not recognised in the balance sheet in accordance with Ind ASs.

6

1p15

Whether the financial statements presents a true and fair view of the financial position, financial performance and cash flows of the entity.

1p16

a) Whether the entity whose FS complies with Ind ASs has made an explicit and unreserved statement of such compliance in the notes. b) Whether the entity has not described FS as complying with Ind ASs unless they comply with all the requirements of Ind ASs.

1p17(c)

Whether the entity has provided additional disclosures when compliance with the specific requirements in Ind ASs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

1p18

Check whether the entity has not rectified inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material.

1p20

Check when the entity departs from a requirement of an Ind AS in accordance with paragraph 19 (Refer point 2 of Annexure), whether it has disclosed: a) that management has concluded that the FS present a true and fair view of the entity’s financial position, financial performance and cash flows; b) that it has complied with applicable Ind ASs, except that it has departed from a particular requirement to present a true and fair view; c) i. the title of the Ind AS from which the entity has departed; ii. the nature of the departure; iii. the treatment that the Ind AS would require; iv. the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of FS set

Chapter 1

Y

N

NA

Chapter 1

Reference No.

Indian Accounting Standard (Ind AS) Disclosure Checklist

Disclosures

Y

N

NA

out in the Framework; v. the treatment adopted; and d) for each period presented, the financial effect of the departure on each item in the FS that would have been reported in complying with the requirement.

1p21

Whether the entity has made disclosures set out in above paragraph point (c) and (d), when it has departed from a requirement of an Ind AS in a prior period, and that the departure affects the amounts recognized in the FS for the current period.

1p23

In the extremely rare circumstances in which management concludes that compliance with a requirement in an Ind AS would be so misleading that it would conflict with the objective of FS set out in the Framework, but the relevant regulatory framework prohibits departure from the requirement, then whether the entity has, to the maximum extent possible, reduced the perceived misleading aspects of compliance by disclosing: a) i. the title of the Ind AS in question; ii. the nature of the requirement; iii. the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of FS set out in the Framework; and b) for each period presented, the adjustments to each item in the FS that management has concluded would be necessary to present a true and fair view.

1p25

Whether the material uncertainties related to events or conditions that may cast significant doubt upon the entityâ&#x20AC;&#x2122;s ability to continue as a going concern have been disclosed, when management is aware, in making its assessment.

1p25

When the entity does not prepare FS on a going concern basis, whether it has disclosed: a) the fact; b) the basis on which it prepared the FS; and c) the reason why the entity is not regarded as a going concern.

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Practical Approach to Ind AS Implementation, 2e

Reference No.

8

Disclosures

1p27

Whether the entity has prepared its financial statements, except for cash flow information, using the accrual basis of accounting.

1p29

a) Whether the entity has separately presented each material class of similar items. b) Whether the entity has separately presented items of a dissimilar nature or function unless they are immaterial except when required by law.

1p30

If a line item is not individually material, whether it is aggregated with other items either in those statements or in the notes.

1p32

Whether the entity has not offset assets and liabilities or income and expenses, unless required or permitted by an Ind AS.

1p36

When the entity changes the end of its reporting period and presents FS for a period longer or shorter than one year, then whether it has disclosed the following, in addition to the period covered by the FS: a) the reason for using a longer or shorter period; and b) the fact that amounts presented in the FS are not entirely comparable.

1p38

a) Whether the entity has presented comparative information in respect of the preceding period for all amounts reported in the current periodâ&#x20AC;&#x2122;s FS. b) Whether the entity has included comparative information for narrative and descriptive information if it is relevant to understanding the current periodâ&#x20AC;&#x2122;s FS.

1p38A

Whether the entity has presented, minimum, two BSs, two statements of profit and loss, two statements of cash flows and two SOCEs, and related notes.

1p38C

a) Whether the entity has presented comparative information in addition to the minimum comparative FS required by Ind ASs, as long as that information is prepared in accordance with Ind ASs. b) Whether this comparative information consists of one or more statements referred to in

Chapter 1

Y

N

NA

Chapter 1

Reference No.

Indian Accounting Standard (Ind AS) Disclosure Checklist

Disclosures

Y

N

NA

paragraph 10 (mentioned above), but need not comprise a complete set of FS. When this is the case, whether the entity has presented related note information for those additional statements.

1p40A

Whether the entity has presented a third balance sheet as at the beginning of the preceding period in addition to the minimum comparative financial statements required in paragraph 38A (mentioned above) if: (a) it applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements or reclassifies items in its financial statements; and (b) the retrospective application, retrospective restatement or the reclassification has a material effect on the information in the balance sheet at the beginning of the preceding period.

1p40B

In the circumstances described in paragraph 40A (mentioned above), whether the entity has presented three balance sheets as at: (a) the end of the current period; (b) the end of the preceding period; and (c) the beginning of the preceding period.

1p40D

Whether the date of opening balance sheet is as at the beginning of the preceding period regardless of whether the entityâ&#x20AC;&#x2122;s financial statements present comparative information for earlier periods or not.

1p41

When the entity reclassifies comparative amounts, whether it has disclosed (including as at the beginning of the preceding period): a) the nature of the reclassification; b) the amount of each item or class of items that is reclassified; and c) the reason for the reclassification.

1p42

When it is impracticable to reclassify comparative amounts, whether the entity has disclosed: a) the reason for not reclassifying the amounts, and b) the nature of the adjustments that would have been made if the amounts had been reclassified.

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Practical Approach to Ind AS Implementation, 2e

Reference No.

Disclosures

1p45

Whether the entity has retained the presentation and classification of items in the financial statements from one period to the next unless: (a) it is apparent, following a significant change in the nature of the entityâ&#x20AC;&#x2122;s operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors; or (b) an Ind AS requires a change in presentation.

1p49

Whether the entity has clearly identified the financial statements and distinguished them from other information in the same published document.

1p51

Whether the entity has clearly identified each financial statement and the notes.

1p51

Whether the entity has displayed the following information prominently, and repeated it when necessary for the information presented to be understandable: a) the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period; b) whether the FS are of an individual entity or a group of entities; c) the date of the end of the reporting period or the period covered by the set of FS or notes; d) the presentation currency, as defined in Ind AS 21 The effects of changes in Foreign Exchange Rates; and e) the level of rounding used in presenting amounts in the FS.

1p53

The entity often makes FS more understandable by presenting information in thousands, lakhs, millions or crores of units of the presentation currency.

In such cases, whether the entity has disclosed: a) the level of rounding; and b) has not omitted material information.

10

Chapter 1

Y

N

NA

Chapter 1

Reference No. 1p54

Indian Accounting Standard (Ind AS) Disclosure Checklist

Disclosures

Y

N

NA

Whether the entity has disclosed the following amounts for the period in the BS: a) Property, Plant and Equipment (PPE); b) investment property; c) intangible assets; d) financial assets (excluding amounts shown under (e), (h) and (i)); e) investments accounted for using the equity method; f) biological assets within the scope of Ind AS 41 Agriculture; g) inventories; h) trade and other receivables; i) cash and cash equivalents; j) the total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations; k) trade and other payables; l) provisions; m) financial liabilities (excluding amounts shown under (k) and (l)); n) liabilities and assets for current tax, as defined in Ind AS 12 Income Taxes o) deferred tax liabilities and deferred tax assets, as defined in Ind AS 12 Income Taxes; p) liabilities included in disposal groups classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations; q) non-controlling interests, presented within equity; and r) issued capital and reserves attributable to owners of the parent.

1p55

Whether the entity has presented additional line items (including by disaggregating the line items listed in paragraph 54), headings and subtotals in the BS when such presentation is relevant to an understanding of the entityâ&#x20AC;&#x2122;s financial position.

1p55A

When an entity presents subtotals in accordance with paragraph 55, whether those subtotals shall: (a) be comprised of line items made up of amounts recognised and measured in accordance with Ind AS; (b) be presented and labelled in a manner that makes the

11