Practical approach to Ind AS Implementation (Third 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?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Chapter 3

Ind AS 1: Presentation of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Chapter 4

Ind AS 2: Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Chapter 5

Ind AS 7: Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

Chapter 6

Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors. . . . . . 167

Chapter 7

Ind AS 10: Events after the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

Chapter 8

Ind AS 12: Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

Chapter 9

Ind AS 16: Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247

Chapter 10 Ind AS 17: Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 Chapter 11 Ind AS 19: Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 Chapter 12 Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355 Chapter 13 Ind AS 21: The Effects of Changes in Foreign Exchange Rates. . . . . . . . . . . . . . . . . . . 375 Chapter 14 Ind AS 23: Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 Chapter 15 Ind AS 24: Related Party Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 Chapter 16 Ind AS 27: Separate Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435 Chapter 17 Ind AS 28: Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . 443 Chapter 18 Ind AS 29: Financial Reporting in Hyperinflationary Economies . . . . . . . . . . . . . . . . 465 Chapter 19 Ind AS 32: Financial Instruments: Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Chapter 20 Ind AS 33: Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Chapter 21 Ind AS 34: Interim Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 Chapter 22 Ind AS 36: Impairment of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Chapter 23 Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . . . . 581 xiii

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Chapter 24 Ind AS 38: Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 Chapter 25 Ind AS 40: Investment Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645 Chapter 26 Ind AS 41: Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 Chapter 27 Ind AS 101: First-time Adoption of Indian Accounting Standards . . . . . . . . . . . . . . . 673 Chapter 28 Ind AS 102: Share-based Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 Chapter 29 Ind AS 103: Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 769 Chapter 30 Ind AS 104: Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 Chapter 31 Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations. . . . . . 827 Chapter 32 Ind AS 106: Exploration for and Evaluation of Mineral Resources . . . . . . . . . . . . . . . 855 Chapter 33 Ind AS 107: Financial Instruments: Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865 Chapter 34 Ind AS 108: Operating Segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 883 Chapter 35 Ind AS 109: Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 907 Chapter 36 Ind AS 110: Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969 Chapter 37 Ind AS 111: Joint Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1015 Chapter 38 Ind AS 112: Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . 1037 Chapter 39 Ind AS 113: Fair Value Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051 Chapter 40 Ind AS 114: Regulatory Deferral Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1069 Chapter 41 Ind AS 115: Revenue from Contracts with Customers. . . . . . . . . . . . . . . . . . . . . . . . . 1087 Chapter 42 Income Tax Disclosure Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1155

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Table of Contents About the Author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Convergence with IFRS in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Chapter 1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Exempted companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Applicability of Ind AS on overseas entities and their affiliates in India. . . . . . . . . . . . 28 Voluntary Adoption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Meaning of net-worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Materiality concept. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Overriding status of law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 IND AS vs. the Act 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 List of IFRS/IAS currently applicable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 List of SIC/IFRIC currently applicable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 List of converged IND AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 List of Non-Converged Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 List of converged IFRIC/SIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 List of Non-Converged IFRIC/SIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Updates to Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Earlier Deferment of Ind AS 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Earlier Consequential amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Earlier Amendments to other Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Recent issue of Ind AS 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Recent Consequential amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Recent Amendments to other Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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Annexure I Annexure II Annexure iii Annexure iv

The Companies (Indian Accounting Standards) Rules, 2015. . . . . . . . . . . . . . . . . . . . . . .

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annexure V MCA clarifications with respect to NBFCs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

Annexure VIII Report of the Implementation Group on Ind AS in Insurance sector in India . . . . . . . . . .

Annexure IX IRDA circular regarding deferment of applicability of Ind AS. . . . . . . . . . . . . . . . . . . . . .

MCA clarified Ind AS implementation date for payment banks and small banks Annexure X which are subsidiaries of companies which are governed by the corporate sector roadmap issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annexure XI IRDA/F&A/ORD/ACTS/265/12/2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December, 13, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annexure XII Statement on Developmental and Regulatory Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44 49 51

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

Chapter 2 Ind AS conversion process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diagnostic review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preliminary evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Design and action plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Review Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Focus areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial reporting factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Group policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industry peers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-financial reporting factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Company personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Training needs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IT system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Human resources system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treasury and finance function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stakeholder expectations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Learning from global peers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69 70 70 70 70 71 71 71 71 71 71 71 71 71 72 72 72 72 72 72 72 72 73

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Chapter 3 Ind AS 1: Presentation of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Purpose of financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Components of financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Presentation of True and Fair View and compliance with Ind AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Departure from compliance with Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Going concern. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Accrual basis of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Materiality and aggregation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Offsetting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Frequency of reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Comparative information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Consistency of presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Reclassification/Change in accounting policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Identification of the financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Information to be presented either in the Balance Sheet or in the notes . . . . . . . . . . . . . . . . . . 87 Current/non-current distinction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Statement of Profit and Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Allocation of profit or loss and other comprehensive income for the period. . . . . . . . . . . . . . 92 Information to be presented in the statement of profit and loss or in the notes. . . . . . . . . . . . 92 Information to be presented in the profit or loss section of the statement of profit and loss. 93 Profit or loss for the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Other Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Information to be presented in the other comprehensive income section. . . . . . . . . . . . . . . . . 95 Other comprehensive income for the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Statement of changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Information to be presented in the statement of changes in equity. . . . . . . . . . . . . . . . . . . . . . 96 Information to be presented in the statement of changes in equity or in the notes. . . . . . . . . 96 Statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Disclosures requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Requirements of other standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Assumptions and sources of estimation uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Puttable financial instruments classified as equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Other disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 xvii

Practical Approach to Ind AS Implementation, 3e

Position under the Companies Act, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ind AS-compliant Schedule III to the Companies Act, 2013-for companies. . . . . . . . . . . . . .

Consequential amendments pursuant to ISSUE of Ind AS 115 by MCA . . . . . . . . . . . . . . . . . . . . . .

Other amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101 101 102 103 108 110

Ind AS 2: Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Chapter 4 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Meaning of Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Measurement of inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Cost of inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Costs of purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Costs of conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Other costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Techniques for the measurement of cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Cost Formulas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Net realisable value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Recognition as an expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 135 Other Recent amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Ind AS 7: Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits of cash flow information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Components of cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation of a statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reporting cash flows from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reporting cash flows from investing and financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reporting cash flows on a net basis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows for financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xviii

143 144 144 144 144 146 147 147 148 150 151 152 152 153 154

Table of Contents

Interest and dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Taxes on income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Investments in subsidiaries, associates and joint ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Changes in ownership interests in subsidiaries and other businesses . . . . . . . . . . . . . . . . . . . . . . . . 157 Non-cash transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Additional requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Other disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Previous Amendments issued MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors . . . 167 Chapter 6 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Selection and application of accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Consistency of accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Changes in accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Applying changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Retrospective application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Limitations on retrospective application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Disclosure- Change in accounting policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 Changes in accounting estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Consolidation of financial statements in case the subsidiary and parent are following different method of depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Disclosure- Change in estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Prior period errors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Limitations on retrospective restatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Disclosure- Prior period errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Consequential amendments pursuant to issue of Ind AS 115 issued by MCA . . . . . . . . . . . . . . . . . 183 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 Chapter 7 Ind AS 10: Events after the Reporting Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Breach of a material provision of a long-term loan arrangement. . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Process of approving the Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusting events after the reporting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-adjusting events after the reporting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191 192 192 192 192 193 193 195 xix

Practical Approach to Ind AS Implementation, 3e

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Going concern. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Date of approval for issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Updated disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Non-adjusting events after the reporting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Distribution of Non-cash Assets to Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Applicability of guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Recognition of dividend payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Measurement of a dividend payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Accounting for settlement of dividend payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Presentation and disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 Ind AS 12: Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 8 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The tax base of an asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The tax base of liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax base of items not recognized in balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax base in case of consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of current tax liabilities and current tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of deferred tax liabilities and deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxable temporary differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deductible temporary differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets carried at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Initial recognition of an asset or liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unused tax losses and unused tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reassessment of unrecognised deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments in subsidiaries, branches and associates and interests in joint arrangements. . . . . . .

Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets and liabilities not to be discounted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of current and deferred tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Items recognised in profit or loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Items recognised outside profit or loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax arising from business combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current and deferred tax arising from share-based payment transactions . . . . . . . . . . . . . . . . . . . .

xx

207 208 208 209 209 211 213 213 214 215 215 216 220 222 223 224 225 225 225 227 229 230 230 230 231 231

Table of Contents

Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Exchange differences on deferred foreign tax liabilities or assets. . . . . . . . . . . . . . . . . . . . . . . 233 Income Taxes—Changes in the Tax Status of an Entity or its Shareholders. . . . . . . . . . . . . . . . . . . . 233 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 235 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 Ind AS 16: Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 9 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Spare parts and servicing equipments etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets acquired for safety purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subsequent costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Day- to- day service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Replacement costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Major inspection costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement at recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Elements of cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cessation of recognition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Incidental operations before or during construction or development. . . . . . . . . . . . . . . . . . .

Cost of self-constructed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bearer plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement of cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separation of interest elements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets acquired in exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement after recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revaluation model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Componentization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement showing component-wise annual depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciable amount and depreciation period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determination of useful life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation for impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derecognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

247 248 250 250 250 251 251 252 252 252 254 255 255 257 257 260 260 260 260 261 261 262 262 262 266 267 267 268 269 269 270 270 xxi

Practical Approach to Ind AS Implementation, 3e

Changes in existing decommissioning, restoration and similar liabilities . . . . . . . . . . . . . . . . . . . . .

Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stripping costs in the production phase of a surface mine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of production stripping costs as an asset. . . . . . . . . . . . . . . . . . . . . . . . . . .

Initial measurement of the stripping activity asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subsequent measurement of the stripping activity asset . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequential amendments pursuant to issue of Ind AS 115 issued by MCA . . . . . . . . . . . . . . . . .

Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

271 271 273 274 274 274 275 275 277 278 279 280

Chapter 10 Ind AS 17: Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification of leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Examples of situations that individually or in combination would normally lead to a lease being classified as a finance lease are:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indicators of situations that individually or in combination could also lead to a lease being classified as a finance lease are:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Combined leases of land and building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Leases in the financial statements of lessees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Initial recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subsequent measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Leases in the financial statements of lessors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Initial recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subsequent measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclsoures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale and leaseback transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale and leaseback transactions resulting in finance lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale and leaseback transactions resulting in operating lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale price is equal to fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

285 286 286 287 287 287

xxii

287 289 291 294 294 294 295 298 299 304 304 304 304 305 305 306 306 306 307 307 308 308

Table of Contents

Sale price is less than fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale price is more than fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating Leases—Incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluating the substance of transactions involving the legal form of a lease. . . . . . . . . . . . . . . . . . .

Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determining whether an Arrangement contains a Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determining whether an arrangement is, or contains, a lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fulfilment of the arrangement is dependent on the use of a specific asset. . . . . . . . . . . . . . .

Arrangement conveys a right to use the asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessing or reassessing whether an arrangement is, or contains, a lease . . . . . . . . . . . . . . .

Consequential amendments pursuant to issue of Ind AS 115 issued by MCA . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

308 308 310 310 310 310 311 311 312 312 312 312 316 317 317

Chapter 11 Ind AS 19: Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 Short-term employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 All short-term employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Short-term paid absences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Post-employment benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Defined contribution plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Defined benefit plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Accounting for the constructive obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Present value of defined benefit obligations and current service cost . . . . . . . . . . . . . 331 Actuarial valuation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Attributing benefit to periods of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Actuarial assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 Actuarial assumptions: mortality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 Actuarial assumptions: discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 Actuarial assumptions: salaries, benefits and medical costs. . . . . . . . . . . . . . . . . . . . . . 335 Past service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 Gains and losses on settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 Recognition and measurement: plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 Fair value of plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 Components of defined benefit cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 xxiii

Practical Approach to Ind AS Implementation, 3e

Net interest on the net defined benefit liability (asset) . . . . . . . . . . . . . . . . . . . . . . . . . . 338 Remeasurements of the net defined benefit liability (asset). . . . . . . . . . . . . . . . . . . . . . 339 Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Components of defined benefit cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Explanation of amounts in the financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Multi-employer plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Defined benefit plans that share risks between entities under common control . . . . . . . . . . 343 State plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 Insured benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 Other long-term employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Termination benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Availability of a refund or reduction in future contributions. . . . . . . . . . . . . . . . . . . . . . . . . . 346 The right to a refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Measurement of the economic benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 The economic benefit available as a contribution reduction. . . . . . . . . . . . . . . . . . . . . . 347 The effect of a minimum funding requirement on the economic benefit available as a reduction in future contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 When a minimum funding requirement may give rise to a liability . . . . . . . . . . . . . . . . . . . . 347 Previous Amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ind AS 20 does not deal with:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Government grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Types of grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-monetary government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation of grants related to assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation of grants related to income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repayment of government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Government assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 12

xxiv

355 355 357 358 358 358 362 362 365 365 368 369

Table of Contents

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 Chapter 13 Ind AS 21: The Effects of Changes in Foreign Exchange Rates . . . . . . . . . . . . . . . . 375 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 Functional currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 Primary factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Secondary factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Additional factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Net investment in a foreign operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Monetary items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Non-monetary items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Reporting foreign currency transactions in the functional currency. . . . . . . . . . . . . . . . . . . . . . . . . . 381 Initial recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381 Reporting at the ends of subsequent reporting periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381 Recognition of exchange differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Non-monetary items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 Monetary items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 Change in functional currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Use of a presentation currency other than the functional currency. . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Translation to the presentation currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Translated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 Translation of a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387 Disposal or partial disposal of a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 Tax effects of all exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Foreign Currency Transactions and Advance Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392 Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 393 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 Chapter 14 Ind AS 23: Borrowing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Borrowing Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Borrowing costs eligible for capitalisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Excess of the carrying amount of the qualifying asset over recoverable amount . . . . . . . . . . . . . . .

Commencement of capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

401 401 402 404 405 406 410 410 xxv

Practical Approach to Ind AS Implementation, 3e

Suspension of capitalisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Cessation of capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 412 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Chapter 15 Ind AS 24: Related Party Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Government-related entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

417 417 417 421 425 426 428

Chapter 16 Ind AS 27: Separate Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparation of separate financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

435 435 435 436 440 440 441

Chapter 17 Ind AS 28: Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Significant influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss of significant influence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application of the equity method and its procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of unrealized intra-group profits related to associates . . . . . . . . . . . . . . . . . . . . . .

Accounting treatment of goodwill, bargain purchases and losses with respect to associates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemptions from applying the equity method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification as held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Discontinuing the use of the equity method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in ownership interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemptions from applying the equity method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

443 443 444 444 445 445 446 446

xxvi

447 451 452 452 453 453 455 456

Table of Contents

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 Chapter 18 Ind AS 29: Financial Reporting in Hyperinflationary Economies. . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The restatement of financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Historical cost financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of profit and loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gain or loss on net monetary position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current cost financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of profit and loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gain or loss on net monetary position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corresponding figures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selection and use of the general price index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Economies ceasing to be hyperinflationary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Applying the Restatement Approach under Ind AS 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IAS/IFRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

465 466 466 466 466 468 468 468 468 468 468 469 469 469 469 469 469 470 470 471 471

Chapter 19 Ind AS 32: Financial Instruments: Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation- Liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Puttable instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Settlement in the entity’s own equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contingent settlement provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Settlement options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compound financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest, dividends, losses and gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Offsetting a financial asset and a financial liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

473 474 480 481 483 484 485 485 487 488 489 497 497 499 xxvii

Practical Approach to Ind AS Implementation, 3e

Derivative financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 Treatment in consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 501 Other recent Amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 Chapter 20 Ind AS 33: Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Partly paid shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dilutive potential ordinary shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options, warrants and their equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convertible instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contingently issuable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contracts that may be settled in ordinary shares or cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchased options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Written put options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Retrospective adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rights issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Participating equity instruments and two-class ordinary shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505 506 506 507 507 508 510 511 514 514 515 515 516 517 519 520 520 520 522 523 525 526 526 527 529

Chapter 21 Ind AS 34: Interim Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Content of an interim financial report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Minimum components of an interim financial report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Form and content of interim financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Significant events and transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure of compliance with Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

533 534 534 534 535 535 535 536 539

xxviii

Table of Contents

Periods for which interim financial statements are required to be presented . . . . . . . . . . . . . . . . . . 539 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Disclosure in annual financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Same accounting policies as annual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Revenues received seasonally, cyclically, or occasionally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Costs incurred unevenly during the financial year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Use of estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Restatement of previously reported interim periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 Impairment assessment for Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 543 Other amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546 Chapter 22 Ind AS 36: Impairment of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifying an asset that may be impaired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exception. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indication of potential for impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

External sources of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal sources of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dividend from a subsidiary, joint venture or associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measuring recoverable amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measuring the recoverable amount of an intangible asset with an indefinite useful life . . .

Fair value less costs of disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Value in use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basis for estimates of future cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Composition of estimates of future cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimates of future cash flows shall include:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency future cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognising and measuring an impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash-generating units and goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifying the cash-generating unit to which an asset belongs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recoverable amount and carrying amount of a cash-generating unit. . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocating goodwill to cash-generating units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Testing cash-generating units with goodwill for impairment. . . . . . . . . . . . . . . . . . . . . . . . . .

Timing of impairment tests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

551 552 553 553 553 554 554 554 554 555 555 556 556 556 559 559 560 560 560 560 560 562 564 564 565 566 566 xxix

Practical Approach to Ind AS Implementation, 3e

Impairment loss for a cash-generating unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Reversing an impairment loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570 External sources of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 Internal sources of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 Reversing an impairment loss for an individual asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 Reversing an impairment loss for a cash-generating unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Reversing an impairment loss for goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 576 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 Chapter 23 Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . 581 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 Provisions and other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 Difference between provision and contingent liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 Present obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 Past event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 Probable outflow of resources embodying economic benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Reliable estimate of the obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Contingent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 Contingent assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 Best estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 Risks and uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 Present value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 Future events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Expected disposal of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594 Changes in provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Use of provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Application of the recognition and measurement rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Future operating losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 Onerous contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 Restructuring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597 A constructive obligation to restructure arises only when an entity:. . . . . . . . . . . . . . 597 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599 xxx

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Accounting for an interest in a fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 Accounting for obligations to make additional contributions. . . . . . . . . . . . . . . . . . . . . . . . . . 601 Liabilities arising from participating in a specific market— Waste electrical and electronic equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 Levies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 604 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 Chapter 24 Ind AS 38: Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifiability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future economic benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition as part of a business combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of Intangible asset acquired in a business combination. . . . . . . . . . . . . . . . . . . .

Subsequent expenditure on an acquired in-process research and development project. . . .

Acquisition by way of a government grant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exchanges of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internally generated goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internally generated intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Development phase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost of an internally generated intangible asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of an expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Past expenses not to be recognised as an asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement after recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revaluation model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Useful life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets with finite useful lives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortisation period and amortisation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Residual value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Review of amortisation period and amortisation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

613 614 614 616 616 616 617 618 619 620 620 621 621 621 622 623 623 623 623 625 626 627 627 627 627 629 630 630 631 632 xxxi

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Intangible assets with indefinite useful lives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Review of useful life assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Recoverability of the carrying amount—impairment losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633 Retirements and disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633 Website cost as intangible asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 635 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 635 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 637 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 Chapter 25 Ind AS 40: Investment Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646 Classification of property as investment property or owner-occupied property. . . . . . . . . . . . . . . . 646 Examples - considered as investment property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Examples- not considered as investment property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 Examples - partially considered as investment property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 Measurement at recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 Initial measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 Measurement after recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 Accounting policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 Fair value measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 Inability to measure fair value reliably. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 Subsequent measurement-Cost model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 Disposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 Additional disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 655 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 Chapter 26 Ind AS 41: Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxii

663 663 664 665 665

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Gains and losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Inability to measure Fair Value reliably. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Government grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Additional Disclosure- for biological assets where Fair Value cannot be measured reliably.670 Disclosure related to Government grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 Chapter 27 Ind AS 101: First-time Adoption of Indian Accounting Standards. . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Opening Ind AS balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long Term Foreign Currency Monetary Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial assets or intangible assets accounted for in accordance with Appendix-D, Service Concession Arrangements to Ind AS 115 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exceptions to the principles that an entity’s opening Ind AS balance sheet should comply with Ind AS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mandatory exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derecognition of financial assets and financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hedge accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-controlling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification and measurement of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impairment of financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Embedded derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Government loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Voluntary exemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deemed cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cumulative translation differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long Term Foreign Currency Monetary Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments in subsidiaries, joint ventures and associates . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets and liabilities of subsidiaries, associates and joint ventures. . . . . . . . . . . . . . . . . . . . .

Compound financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Designation of previously recognised financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value measurement of financial assets or financial liabilities at initial recognition. . . .

Decommissioning liabilities included in the cost of property, plant and equipment . . . . . .

Financial assets or intangible assets accounted for in accordance with Appendix D,

673 675 675 676 677 679 681 685 685 685 686 686 688 689 691 692 692 694 694 702 703 703 715 715 715 718 719 720 720 720 720

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Practical Approach to Ind AS Implementation, 3e

Service Concession Arrangements to Ind AS 115 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721 Extinguishing financial liabilities with equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 721 Severe hyperinflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721 Joint ventures - transition from proportionate consolidation to the equity method . . . . . . . 722 Joint operations—transition from the equity method to accounting for assets and liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Transition provisions in an entity’s separate financial statements. . . . . . . . . . . . . . . . . . . . . . 723 Stripping costs in the production phase of a surface mine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 Designation of contracts to buy or sell a non-financial item . . . . . . . . . . . . . . . . . . . . . . . . . . . 724 Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724 Foreign Currency Transactions and Advance Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . 724 Non-current assets held for sale and discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . 724 Presentation and disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Comparative information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Non-Ind AS comparative information and historical summaries. . . . . . . . . . . . . . . . . . . . . . . 725 Explanation of transition to Ind ASs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Reconciliations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725 Designation of financial assets or financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 727 Use of fair value as deemed cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Use of deemed cost for investments in subsidiaries, joint ventures and associates. . . . . . . . 728 Use of deemed cost for oil and gas assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Use of deemed cost for operations subject to rate regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Use of deemed cost after severe hyperinflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Interim financial reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 729 Other amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731 Comparison with IFRS/ IAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 735 Chapter 28 Ind AS 102: Share-based Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity-settled share-based payment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transactions in which services are received. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transactions measured by reference to the fair value of the equity instruments granted. . . . . . . .

Determining the fair value of equity instruments granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of vesting conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of non-vesting conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of a reload feature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

After vesting date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

If the fair value of the equity instruments cannot be estimated reliably. . . . . . . . . . . . . . . . .

Modifications to the terms and conditions on which equity instruments were granted, including cancellations and settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxiv

737 738 738 739 740 740 741 743 743 743 744 744 745 745 745

Table of Contents

Accounting for a modification of a share-based payment transaction that changes its classification from cash-settled to equity-settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash-settled share-based payment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of vesting and non-vesting conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment transactions with a net settlement feature for withholding tax obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment transactions with cash alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment transactions in which the terms of the arrangement provide the counterparty with a choice of settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation of liability and equity components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment transactions in which the terms of the arrangement provide the entity with a choice of settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment transactions among group entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based payment arrangements involving an entity’s own equity instruments. . . . . . .

Share-based payment arrangements involving equity instruments of the parent. . . . . . . . .

A parent grants rights to its equity instruments to the employees of its subsidiary. . . . .

Share-based payment arrangements involving cash-settled payments to employees. . . . . .

Transfer of employees between group entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transitional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Previous amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 29 Ind AS 103: Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definition of a business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifying a business combination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The acquisition method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifying the acquirer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determining the acquisition date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classifying or designating identifiable assets acquired and liabilities assumed in a business combination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exception to the recognition principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contingent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exceptions to both the recognition and measurement principles. . . . . . . . . . . . . . . . . . . . . . .

Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indemnification assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

746 747 748 748 750 750 751 752 752 753 753 754 756 756 757 759 760 764 765 769 770 771 772 773 775 775 777 777 777 778 779 779 779 780 780 780 780 xxxv

Practical Approach to Ind AS Implementation, 3e

Exceptions to the measurement principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Reacquired rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Share-based payment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Assets held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Recognising and measuring goodwill or a gain from a bargain purchase . . . . . . . . . . . . . . . 781 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Bargain purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782 Consideration transferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 A business combination achieved in stages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 A business combination achieved without the transfer of consideration. . . . . . . . . . . . . . . . . . . . . . 786 Measurement period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Determining what is part of the business combination transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . 789 Acquisition-related costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 Subsequent measurement and accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Reacquired rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Indemnification assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 Reverse acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 Measuring the consideration transferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793 Preparation and presentation of consolidated financial statements. . . . . . . . . . . . . . . . . . . . . 793 Non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793 Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Business combinations of entities under common control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Common control business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Method of accounting for common control business combinations. . . . . . . . . . . . . . . . . . . . . 795 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Business combination after the balance sheet date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 800 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801 Comparison with as and other GAAP principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Chapter 30 Ind AS 104: Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Embedded derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unbundling of deposit components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Temporary exemption from some other Ind ASs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liability adequacy test. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impairment of reinsurance assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxvi

813 814 814 815 816 816 816 817 817

Table of Contents

Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current market interest rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Continuation of existing practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prudence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future investment margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shadow accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insurance contracts acquired in a business combination or portfolio transfer. . . . . . . . . . . . . . . . . .

Discretionary participation features. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Explanation of recognised amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature and extent of risks arising from insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequential amendments pursuant to issue of Ind AS 115 issued by MCA . . . . . . . . . . . . . . . . .

Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

818 818 818 819 819 819 819 820 820 820 821 821 821 823 824 825 825

Chapter 31 Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current assets that are to be abandoned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement of non-current assets (or disposal groups) classified as held for sale. . . . . . . . . . . . .

Measurement of a non-current asset (or disposal group). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition of impairment losses and reversals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes to a plan of sale or to a plan of distribution to owners. . . . . . . . . . . . . . . . . . . . . . . .

Presentation and disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presenting discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gains or losses relating to continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation of a non-current asset or disposal group classified as held for sale. . . . . . . . . .

Previous amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

827 827 828 830 832 833 833 836 837 841 841 842 842 843 845 847

Chapter 32 Ind AS 106: Exploration for and Evaluation of Mineral Resources. . . . . . . . . . . . . 855 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 Recognition of Exploration and Evaluation Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 Temporary exemption from Ind AS 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 Measurement of Exploration and Evaluation Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857 xxxvii

Practical Approach to Ind AS Implementation, 3e

Measurement at recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Elements of cost of exploration and evaluation assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subsequent measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification of exploration and evaluation assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reclassification of exploration and evaluation assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition and measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specifying the level at which exploration and evaluation assets are assessed for impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

857 857 857 858 858 858 858 858 858 859 859 859 860

Chapter 33 Ind AS 107: Financial Instruments: Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 866 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 866 Disclosure requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867 Classes of financial instruments and level of disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867 Financial assets or financial liabilities at fair value through profit or loss. . . . . . . . . . . . . . . . 868 Investments in equity instruments designated at fair value through other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 869 Reclassification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 869 Offsetting financial assets and financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870 Allowance account for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870 Compound financial instruments with multiple embedded derivatives. . . . . . . . . . . . . . . . . 871 Defaults and breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871 Statement of profit and loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871 Other disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872 Hedge accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872 Fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 Nature and extent of risks arising from financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . 874 Qualitative disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 Quantitative disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 Credit risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 Liquidity risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 Market risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 Transfers of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 876 Transfer of financial assets that are not derecognised in their entirety. . . . . . . . . . . . . 876 Transferred financial assets that are derecognised in their entirety . . . . . . . . . . . . . . . 877 Supplementary information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878 xxxviii

Table of Contents

Consequential amendments pursuant to Issue of Ind AS 115 by MCA . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Previous amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

878 878 879 880 880

Chapter 34 Ind AS 108: Operating Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Core principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reportable segments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Aggregation criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Quantitative thresholds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restatement of previously reported information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information about reported segment profit or loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reconciliations of the totals of segment revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Entity-wide disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information about products and services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information about geographical areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information about major customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

883 883 884 885 888 889 889 894 895 895 895 895 896 897 897 897 897 901 902

Chapter 35 Ind AS 109: Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 907 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909 Recognition and derecognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 914 Initial recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 914 Derecognition of financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 915 Derecognition of financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918 Classification of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918 Amortised cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918 Fair value through other comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 919 Fair value through profit or loss (FVTPL). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 919 Option to designate a financial asset at fair value through profit or loss. . . . . . . . . . . . . . . . . 919 The entity’s business model for managing financial assets . . . . . . . . . . . . . . . . . . . . . . 924 Contractual cash flows that are solely payments of principal and interest on the principal amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925 Classification of financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929 Financial liabilities measured at amortised cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929 xxxix

Practical Approach to Ind AS Implementation, 3e

Option to designate a financial liability at fair value through profit or loss. . . . . . . . . . . . . . 931 Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 931 Initial measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 931 Subsequent measurement of financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932 Subsequent measurement of financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932 Amortised cost measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934 Effective interest method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934 Write-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 937 Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 937 Recognition of expected credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 937 Purchased or originated credit-impaired financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939 Trade receivables, contract assets and lease receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939 Modified financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940 Measurement of expected credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 941 Determining significant increases in credit risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 941 Reclassification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 Financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 Financial Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944 Gains and losses on a financial asset or financial liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944 A gain or loss on a financial asset or financial liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945 A gain or loss on a financial asset that is measured at amortised cost. . . . . . . . . . . . . . . . . . . 945 If an entity recognises financial assets using settlement date accounting. . . . . . . . . . . . . . . . 945 Investments in equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945 Liabilities designated as at fair value through profit or loss. . . . . . . . . . . . . . . . . . . . . . . . . . . 945 Assets measured at fair value through other comprehensive income. . . . . . . . . . . . . . . . . . . 946 Financial assets and financial liabilities- Classification, measurement and subsequent measurement- summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946 Derivative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947 Measurement of derivative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947 Embedded derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 948 Hybrid contracts with financial asset hosts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 949 Other hybrid contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950 Hedge accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950 Hedging instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950 Qualifying instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 Hedged items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 Qualifying items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 Qualifying criteria for hedge accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952 Accounting for qualifying hedging relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952 Fair value hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 953 Cash flow hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 954 Hedges of a net investment in a foreign operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 956 Hedges of a group of items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957 xl

Table of Contents

Eligibility of a group of items as the hedged item. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957 Option to designate a credit exposure as measured at fair value through profit or loss . . . . . . . . . 957 Eligibility of credit exposures for designation at fair value through profit or loss. . . . . . . . . 957 Hedge of a net investment in a foreign operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 Nature of the hedged risk and amount of the hedged item for which a hedging relationship may be designated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 Where the hedging instrument can be held. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 Disposal of a hedged foreign operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959 Extinguishing financial liabilities with the equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959 Consequential amendments pursuant to issue of Ind AS 115 by MCA. . . . . . . . . . . . . . . . . . . . . . . . 960 Other recent amendments issued by MCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 Chapter 36 Ind AS 110: Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meeting the objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purpose and design of an investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power with a majority of the voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Majority of the voting rights but no power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power without a majority of the voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contractual arrangement with other vote holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rights from other contractual arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The investor’s voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Substantive rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Protective rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Link between power and returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relationship with other parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Control of specified assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Continuous assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidation procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Uniform accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Potential voting rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reporting date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss of control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

969 970 970 970 971 974 976 977 977 977 978 978 978 978 981 982 983 984 988 989 990 990 991 996 996 996 997 997 999 xli

Practical Approach to Ind AS Implementation, 3e

Determining whether an entity is an investment entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1001 Investment entities: exception to consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002 Accounting for a change in investment entity status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002 Previous Amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1007 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1008 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1009 Chapter 37 Ind AS 111: Joint Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meeting the objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessing joint control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Types of joint arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification of a joint arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Structure of the joint arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint arrangements not structured through a separate vehicle. . . . . . . . . . . . . . . . . . . . . . . .

Joint arrangements structured through a separate vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . .

Classification of a joint arrangement: assessment of the parties’ rights and obligations arising from the arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The legal form of the separate vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessing the terms of the contractual arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessing other facts and circumstances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Financial statements of parties to a joint arrangement . . . . . . . . . . . . . . . . . . . . . . . .

Joint operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate financial statements of parties to a joint arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting for sales or contributions of assets to a joint operation. . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting for purchases of assets from a joint operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1015 1016 1016 1016 1016 1016 1017 1018 1019 1019 1019 1019

Chapter 38 Ind AS 112: Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meeting the objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Significant judgements and assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment entity status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interests in subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-controlling interests in group’s activities and cash flows. . . . . . . . . . . . . . . . . . . . . . . .

1037 1038 1038 1038 1039 1039 1040 1040

xlii

1020 1021 1021 1024 1026 1026 1027 1027 1027 1028 1029 1029 1029 1030

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Summarised financial information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature and extent of significant restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature of the risks associated with an entity’s interests in consolidated structured entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequences of changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequences of losing control of a subsidiary during the reporting period. . . . . . . . . . . .

Interests in unconsolidated subsidiaries (investment entities). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interests in joint arrangements and associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature, extent and financial effects of an entity’s interests in joint arrangements and associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Aggregation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risks associated with an entity’s interests in joint ventures and associates. . . . . . . . . . . . . . . . . . .

Interests in unconsolidated structured entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature of interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature of risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amendments issued by MCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1041 1042 1042 1042 1042 1043 1044 1044 1044 1045 1045 1045 1045 1046 1048 1048

Chapter 39 Ind AS 113: Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1052 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1052 Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053 Definition of fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053 The asset or liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053 The transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053 Market participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1054 The price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1054 Application to non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1055 Highest and best use for non-financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1055 Valuation premise for non-financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1056 Application to liabilities and an entity’s own equity instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . 1056 General principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1056 Liabilities and equity instruments held by other parties as assets. . . . . . . . . . . . . . . . . . . . . 1057 Liabilities and equity instruments not held by other parties as assets. . . . . . . . . . . . . . . . . . 1057 Non-performance risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1058 Restriction preventing the transfer of a liability or an entity’s own equity instrument. . . . 1058 Financial liability with a demand feature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1058 Application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1060 Fair value at initial recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1060 Valuation techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1060 Market approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1060 xliii

Practical Approach to Ind AS Implementation, 3e

Cost approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inputs to valuation techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inputs based on bid and ask prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value hierarchy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 1 inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 2 inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 3 inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1061 1061 1061 1061 1062 1063 1063 1064 1064 1065 1067 1067

Chapter 40 Ind AS 114: Regulatory Deferral Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1069 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1070 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1071 Rate-regulated activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1071 Temporary exemption from Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1071 Changes in accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1072 Continuation of existing accounting policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1072 Applicability of other Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073 Ind AS 10 Events after the Reporting Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073 Ind AS 12 Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074 Ind AS 33 Earnings per Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074 Ind AS 36 Impairment of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074 Ind AS 103 Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074 Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations. . . . . . . . . . . . 1074 Ind AS 110 Consolidated Financial Statements and Ind AS 28 Investments in Associates and Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074 Ind AS 112 Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1075 Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1075 Changes in presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1075 Classification of regulatory deferral account balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1075 Classification of movements in regulatory deferral account balances. . . . . . . . . . . . . . . . . . 1075 Ind AS 114 Vs. First time adoption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1079 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1080 Explanation of activities subject to rate regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1081 Explanation of recognised amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1081 Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1082 Disclosure of Interests in Other Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1082 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1082 Comparison with AS and other GAAP Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1083 xliv

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Chapter 41 Ind AS 115: Revenue from Contracts with Customers. . . . . . . . . . . . . . . . . . . . . . . 1087 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1089 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1089 Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1090 Identifying the contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1090 Combination of contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1092 Contract modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1093 Identifying performance obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1096 Non-refundable upfront fees (and some related costs). . . . . . . . . . . . . . . . . . . . . . . . . 1096 Promises in contracts with customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1098 Distinct goods or services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1099 Principal versus agent considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1100 Licensing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1102 Sales-based or usage-based royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1103 Customer options for additional goods or services. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1104 Customers’ unexercised rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1108 Satisfaction of performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1109 Repurchase agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1110 Performance obligations satisfied over time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1112 Entity’s performance does not create an asset with an alternative use. . . . . . . . . . . . 1112 Right to payment for performance completed to date. . . . . . . . . . . . . . . . . . . . . . . . . . 1113 Performance obligations satisfied at a point in time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1115 Consignment arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1116 Bill-and-hold arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1117 Customer acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1117 Measuring progress towards complete satisfaction of a performance obligation . . . . . . . . 1117 Methods for measuring progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1118 Reasonable measures of progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1119 Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1120 Determining the transaction price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1120 Variable consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1120 Constraining estimates of variable consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1126 The existence of a significant financing component in the contract . . . . . . . . . . . . . . 1127 Non-cash consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1129 Consideration payable to a customer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1131 Allocating the transaction price to performance obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 1132 Allocation based on stand-alone selling prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1132 Allocation of a discount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1134 Allocation of variable consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1135 Changes in the transaction price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1135 Contract costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1136 Incremental costs of obtaining a contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1136 Costs to fulfil a contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1137 Amortisation and impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1138 Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1140 xlv

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Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1140 Contracts with customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1140 Disaggregation of revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1140 Contract balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141 Performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141 Transaction price allocated to the remaining performance obligations. . . . . . . . . . . . . . . . . 1142 Significant judgements in the application of Ind AS 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1142 Determining the timing of satisfaction of performance obligations. . . . . . . . . . . . . . . . . . . . 1142 Assets recognised from the costs to obtain or fulfil a contract with a customer. . . . . . . . . . 1142 Effective date and transition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1143 Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1143 Transition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1143 Service Concession Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1144 Features of the service concessional agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Treatment of the operator’s rights over the infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Recognition and measurement of arrangement consideration. . . . . . . . . . . . . . . . . . . . . . . . 1145 Construction or upgrade services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Consideration given by the grantor to the operator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Financial Asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Intangible Asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1146 Combination of Financial Asset and Intangible Asset. . . . . . . . . . . . . . . . . . . . . . . . . . 1147 Operation services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1148 Contractual obligations to restore the infrastructure to a specified level of serviceability. 1148 Borrowing costs incurred by the operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1148 Items provided to the operator by the grantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1148 Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1149 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1150 Comparison with IFRS/IAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1150 Comparision with Ind AS 11/18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1152 Chapter 42 Income Tax Disclosure Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Past history and journey to reach ICDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transitional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparative Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Detailed analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ICDS I- Disclosures of Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ICDS I Vs AS 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ICDS I Vs Ind AS 1 and Ind AS 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure requirements under ICDS I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ICDS II – Valuation of Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xlvi

1155 1155 1156 1156 1157 1157 1157 1158 1159 1159 1159 1159 1159 1160

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ICDS II Vs AS 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1160 ICDS II Vs Ind AS 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1160 Disclosure requirements under ICDS II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1161 ICDS III – Construction Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1161 ICDS III Vs AS 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1161 ICDS III Vs Ind AS 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1162 Disclosure requirements under ICDS III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1162 ICDS IV – Revenue Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1162 ICDS IV Vs AS 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1162 ICDS IV Vs Ind AS 115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1163 Disclosure requirements under ICDS IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1163 ICDS V – Tangible Fixed Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1164 ICDS V Vs AS 10 (R). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1164 ICDS V Vs Ind AS 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1165 Disclosure requirements under ICDS V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1165 ICDS VI – Effects of changes in Foreign Exchange Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1165 ICDS VI Vs AS 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1165 ICDS VI Vs Ind AS 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1166 Disclosure requirements under ICDS VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1166 ICDS VII – Government Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1166 ICDS VII Vs AS 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1166 ICDS VII Vs Ind AS 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1167 Disclosure requirements under ICDS VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1167 ICDS VIII Vs AS 13 – Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1167 ICDS VIII Vs AS 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1167 ICDS VIII Vs Ind AS 32 and Ind AS 109. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1168 Disclosure requirements under ICDS VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1168 ICDS IX– Borrowing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1168 ICDS IX Vs AS 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1168 ICDS IX Vs Ind AS 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1169 Disclosure requirements under ICDS IX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1169 ICDS X- Provisions, Contingent Liabilities and Contingent Assets. . . . . . . . . . . . . . . . . . . . 1169 ICDS X Vs AS 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1169 ICDS X Vs Ind AS 37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1170 Disclosure requirements under ICDS X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1170 FAQs issued by CBDT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1171 Foreseeable practical issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1176

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Background ................................................................................................................................................ 2 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 ......................................................................................................................... 34 List of IFRS/IAS currently applicable ..................................................................................................... 35 List of SIC/IFRIC currently applicable .................................................................................................... 36 List of converged IND AS ....................................................................................................................... 37 List of Non-Converged Ind AS ................................................................................................................ 39 List of converged IFRIC/SIC ................................................................................................................... 39 List of Non-Converged IFRIC/SIC .......................................................................................................... 40 Updates to Ind AS .................................................................................................................................... 40 Earlier Deferment of Ind AS 115 ......................................................................................................... 40 Recent issue of Ind AS 115.................................................................................................................. 42 Recent Amendments to other Ind AS .................................................................................................. 43

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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 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, G.S.R. 258(E), dated 17 March 2017 and G.S.R. 310(E) dated 28 March 2018 (Refer CD, accompanying Volume 2).

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 2

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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.

‘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.

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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.

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 had subsequently 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 14 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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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?

Answer1 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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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?

Answer2 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

Clarification on the date of transition to be considered for the purpose of preparation of balance sheet Ind AS 101, First Time Adoption of Ind AS requires presentation of balance sheet at the date of transition to Ind AS. Is a company whose date of transition is 1 April 2016, required to prepare its balance sheet at the end of the day or at the start of the day (eg if the transition date is 1 April 2016, then balance sheet will be prepared at the close of day of 1 April or at the start of 1 April (i.e. closing of 31 March)?

Answer3 As per para 6 of Ind AS 101 and as per the example provided under para 8 of Ind AS 101, balance sheet will be prepared as on date of transition to Ind AS i.e. beginning of business on 1 April 2016 ( or equivalently, close of business on 31 March 2016).

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.

2

As clarified by ITFG.

3

As clarified by ITFG.

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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

Applicability of IND AS to fellow subsidiary and investor of an Ind AS compliant company Company B is a listed entity covered in phase II of Ind AS roadmap. Company A is an unlisted entity having net worth less than INR 250 crores and holding company of Company B. Company D is an unlisted entity and holds 25% in Company B (i.e. Company D is an investor company of Company B) and has net worth of less than INR 250 crores. Company C is a fellow subsidiary of Company B i.e. subsidiary of the holding Company A. Whether Ind AS is applicable to Company C and Company D? Answer4 As per the roadmap for applicability of Ind AS, holding, subsidiary, joint venture or associate companies of companies which meet the specified criteria are required to comply with the Ind AS. In the given case, since Company B meets the criteria for Ind AS adoption, therefore, its holding company i.e. Company A would also be required to adopt Ind AS from the same date.

As far as Company C is concerned, it may be noted that Ind AS applies to holding, subsidiary, joint venture and associate companies of the companies which meet the net worth/listing criteria and this requirement does not extend to another fellow subsidiary of a holding company which is required to adopt Ind AS because of its holding company relationship with a subsidiary meeting the net worth/listing criteria. Such fellow subsidiaries may, however, voluntarily opt to prepare their financial statements as per Ind AS. Therefore, Company C is not mandatorily required to adopt Ind AS for its statutory reporting. However, it may apply the same voluntarily for the purpose of its statutory reporting. In this case, since, the holding company will be required to prepare separate and consolidated financial statements mandatorily under Ind AS as one of its subsidiary meets the specified criteria, therefore Company C would be required to furnish the Ind AS complaint financial data to its holding company for the purpose of consolidation.

With regard to Ind AS applicability for Company D, it may be noted that Company D is just an investor company and does not qualify as a holding company of Company B and hence, it is not required to comply with Ind AS by virtue of Company B falling under the threshold of Ind AS applicability. However, for consolidation purposes, Company B will be required to provide financial statement data prepared in accordance with Companies (Accounting Standards) Rules, 2006 for the purpose of preparation of consolidated financial statements of Company D as per these rules.

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As clarified by ITFG.

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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 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.

Considering the response to the previous query clarified by the ITFG, Ind AS should not be applicable to the other affiliates within the group i.e. E Ltd. and F Ltd.. Therefore, E Ltd. and F Ltd are not mandatorily required to adopt Ind AS for its statutory reporting. However, they may apply the same voluntarily for the purpose of its statutory reporting. In this case, since, the holding company i.e. A Ltd. will be required to prepare separate and consolidated financial statements mandatorily under Ind AS as one of its subsidiary meets the specified criteria, therefore E Ltd. and F Ltd would be required to furnish the Ind AS complaint financial data to its holding company i.e. A Ltd. for the purpose of consolidation.

Applicability of Ind AS

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

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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.

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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.

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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)

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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.

Chapter 1

Convergence with IFRS in India

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 9

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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 ICAI5 had subsequently issued a detailed clarification/ guidance on this matter clarifying 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, 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 also revised in compliance with Ind AS? Answer Yes, SEBI had 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. Further, vide CIR/CFD/CMD/15/2015, dated 30 November 2015, further formats for publishing financial results were issued. These formats were further liberalized by SEBI vide its circular no.

CIR/CFD/FAC/62/2016, dated 5 July 2016.

5

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

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Query SEBI (ICDR) Regulations 2009 require disclosure of financial information for each of the five financial years immediately preceding the filing of the offer document. Whether a Ind AS compliant company which is in the process of filing its offer document with SEBI would be required to give the financial information for each of the preceding five years as per Ind AS? Answer In order to align the disclosure requirements for financial information in the offer document as specified under SEBI (ICDR) Regulations, 2009 with the requirements of Ind AS specified under MCA Roadmap, the SEBI has vide its circular no. SEBI/HO/CFD/DIL/CIR/P/2016/47 dated 31 March 2016 clarified that the disclosure of financial information in accordance with Ind AS in the offer document shall be made in the following manner: a.

For issuer companies to which Ind AS is applicable in Phase I of MCA Roadmap (beginning from FY 2016-17):

a.

For issuer companies to which Ind AS is applicable in Phase I of MCA Roadmap (beginning from FY 2016-17):

Period of filing of Offer Document Upto March 31, 2017 Between April 1, 2017 and March 31, 2018 Between April 1, 2018 and March 31, 2019 Between April 1, 2019 and March 31, 2020 On or after April 1, 2020

Latest financial year

Third financial year

Indian GAAP Ind AS

Second Latest financial year Indian GAAP Ind AS

Second earliest financial year Indian GAAP Indian GAAP

Earliest financial year

Ind AS

Ind AS

Ind AS

Indian GAAP

Indian GAAP

Ind AS

Ind AS

Ind AS

Ind AS

Indian GAAP

Ind AS

Ind AS

Ind AS

Ind AS

Ind AS

Indian GAAP Ind AS*

Indian GAAP Indian GAAP

* To be disclosed by making suitable restatement adjustments to the accounting heads from their values as on the date of transition following accounting policies consistent with that used at date of transition to Ind AS. Disclosure of interim period, if any, shall be made in line with the accounting policies followed for latest financial year.

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b.

For issuer companies to which Ind AS is applicable in Phase II of MCA Roadmap (beginning from FY 2017-18), the above timelines w.r.t. filing of offer documents shall be followed with time lag of one year.

c.

The issuer company may, at its discretion, choose to present all the five year periods as per Ind AS framework.

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?

Answer6 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.

Query Clarification on applicability of IND AS to a company having net worth less than INR 250 crores as on 31 March 2017 in various scenarios A Company A Ltd. has net worth of less than INR 250 crores as on 31 March 2017. What is the status of applicability of Ind AS for the company in the following scenarios: Scenario 1: the company was in the process of listing as at the beginning of the year i.e. 1st April 2017 and the company ultimately gets listed as at the end of the year March 2018; Scenario 2: the company is listed at the beginning of the year and during the year it gets de-listed; Scenario 3: the process of listing began during the year, for e.g. in the month of May 2017 and the company ultimately gets listed as at the end of the year i.e. March 2018. Will there be any difference if the company gets listed in April, 2018 i.e. it was in process of listing as at the yearend; 6

As clarified by ITFG.

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Scenario 4: the company issued listed debentures in the month of May 2017. However, in the month of January 2018, the debentures got de-listed.

Answer7 As per Rule 4(1) of the Companies (Ind AS) (Amendments) Rules, 2015 read with Companies (Ind AS) (Amendment) Rules, 2016. ‌‌. (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 sub- rule (1), as the case may be Considering the above mentioned guidance, ITFG has given the following responses to the aforesaid scenarios w.r.t. the status of Ind AS applicability: Scenario 1: Since the company began the process of listing as at the beginning of the year but had net worth less than INR 250 crores, it shall be required to comply with Ind AS from the financial year 2017-18. Accordingly, A Ltd. shall prepare Ind AS financial statements for the financial year 2017-18.

Scenario 2: Since the company is listed at the beginning of the year it shall be required to comply with Ind AS from the same year irrespective of the fact that the company gets de-listed as at the end of the year. Accordingly, A Ltd. shall prepare Ind AS financial statements for the financial year 2017-18.

Scenario 3: Although the company was neither listed as at the beginning of the period nor it began the process of listing as at the beginning of the year, but it began the process of listing during the year and ultimately got listed as at the end of the year then it shall be required to comply with Ind AS from the same year in which it began the process of listing. Furthermore, in case the company gets listed during the year say from November 2017, then it will be required to provide Ind AS financial statements for the quarter ending December 2017 and consequently for the year ending March 2018.

Moreover, with respect to the case where listing was done in April 2018, the company was in the process of listing as at the year end, therefore, in that scenario also, it will be required to comply with Ind AS and provide financial statements as per Ind AS for the year ending March 2018.

Scenario 4: In the given case, the company was not listed as at the beginning of the reporting period. However, it issued listed debentures during the year, i.e. in the month of May 2017 which 7

As clarified by ITFG.

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got de-listed in the month of January 2018. Accordingly, the company has neither the status of a listed entity /or in the process of listing at the beginning of the year as well nor at the end of the year. Hence, it will not be required to comply with Ind AS. 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? Answer8 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?

Answer9 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

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As clarified by ITFG.

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As clarified by ITFG.

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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.

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?

Answer10 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?

Answer11 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.

10

As clarified by ITFG.

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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?

Answer12 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. Query Applicability of Ind AS to non â&#x20AC;&#x201C; corporate entities A Company A, a first time adopter of Ind AS, has incorporated a partnership firm M/s A&B Associates with another company i.e. B. Whether Ind AS will be applicable to M/s A&B Associates? Also whether Ind AS is applicable to non-corporate entities?

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As clarified by ITFG.

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Answer13 It has been clarified that Ind ASs notified under the Companies (Ind AS) Rules, 2015, are applicable to corporates only and non-corporates cannot even apply the same voluntarily.

However, where a relevant regulator specifically provides for implementation of Ind AS, the noncorporate entities would be required to apply the same.

Therefore, in the given case, Ind AS would not be applicable to M/s A&B Associates. However, for the purpose of consolidation, it would be required to provide its financial statements data prepared as per Ind AS to Company A , if it qualifies as a subsidiary/joint venture/associate of Company A.

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: ● Insurance companies; ● 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).

Also, 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).

Subsequently, IRDA, vide its circular dated 28 June 2017 deferred the applicability of Ind AS on insurance companies for a period of two years from the date of its original implementation (Refer Annexure IX).

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As clarified by ITFG.

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Post that, Further, MCA vide General Circular no. 10/ 2017, dated 13 September, 2017 clarified that payment banks and/or small finance banks which are subsidiaries of holding company which is governed by the corporate sector roadmap would be governed by the banking sector roadmap; however, the said holding company would continue to be governed by the corporate roadmap. (Refer Annexure X) IRDA vide its Order No. IRDA/F&A/ORD/ACTS/265/12/2017 dated 13 December 2017, has constituted a working group on new standard on insurance contracts (equivalent to IFRS 17 â&#x20AC;&#x201C; Insurance Contracts which is expected to become effective w.e.f. 1 January 2021) (Refer Annexure XI).

Recently, RBI, vide its press release dated 05 April 2018 deferred the applicability of Ind AS on Scheduled Commercial Banks excluding RRBs for a period of one year from the date of its original implementation (Refer Annexure XII).

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

[See the brief comparative summary in the next few pages]

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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?

Answer14 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.

14

As clarified by ITFG.

25

Practical Approach to Ind AS Implementation, 3e

Chapter 1

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 2016-17?

Answer15 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?

Answer16 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. Query A Company A carries on the activities of NBFC; however, it has recently applied for the registration as NBFC which is awaited from the RBI. Whether the Ind AS roadmap would be applicable to A which is not registered with the RBI?

15

As clarified by ITFG.

16

As clarified by ITFG.

26

Chapter 1

Convergence with IFRS in India

Answer17 As per Rule 4(1)(iii) of the Companies (Indian Accounting Standards) (Amendments) Rules, 2016, “NBFC” means a NBFC 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 SubBroker Companies, Nidhi Companies, Chit Companies, Securitisation and Reconstruction Companies, Mortgage Guarantee Companies, Pension Fund Companies, Asset Management Companies and Core Investment Companies.”

In view of the above, the above definition covers a company which is carrying on the activity of NBFC. Therefore, a company which is carrying on the activity of NBFC but not registered with RBI will also be subject to the Ind AS roadmap.

Query Clarification on preparation of financial statements as per Ind AS w.r.t NBFC which is a registered stock broker but has applied for terminating its membership to the stock exchange The Company is a registered stock-broker recognised by the Securities and Exchange Board of India (SEBI). The net worth of the Company as on 31st March 2015 is INR 500 crores. As per the Ind AS Rules, it falls under the definition of Non-Banking Financial Companies (NBFCs) roadmap and accordingly, is required to apply Ind AS from 1st April 2018 onwards.

In the month of July 2016, the company applied for terminating its membership to the exchange. It was awaiting clearance from SEBI as of June 2017. It received clearance from the Board in the month of August 2017 accepting their termination. The company also have debt listed securities.

Whether the company should have prepared Ind AS financial statements as a Phase 1 non-NBFC corporate entity as of 31 March 2017 given it has applied for termination of membership with the exchange in the month of July 2016?

Answer18 In the given case, considering the definition of NBFC given under Companies (Ind AS) (Amendment) Rules, 2016 and Rule 4(1)(iv) of the Companies (Ind AS) (Amendment) Rules, 2016, it appears that the company being a stock-broker was falling under the definition of NBFC and hence as per its net worth was required to comply with Ind AS from 1 April 2018 onwards.

However, since in the given case, the company had applied for termination of its membership as a stock-broker in July 2016. Therefore, it needs to be evaluated that whether the company is carrying on the activities of an NBFC or not. Also, it has been earlier clarified that if a company which is carrying on the activity of NBFC but not registered with RBI will also be subject to the roadmap for the applicability of Ind AS as applicable to any other NBFC. However, the requirements with regard to registration, eligibility of a company to operate as NBFC (pending registration) etc. are governed by the Reserve Bank of India Act, 1934 and Rules laid down

17

As clarified by ITFG.

18

As clarified by ITFG.

27

Practical Approach to Ind AS Implementation, 3e

thereon and should be separately.

Chapter 1

evaluated by the entity based on its own facts and circumstances

Basis the above guidance, it has been clarified that if the company was carrying on the activities of an NBFC during the period it was awaiting approval from RBI, then it shall be required to comply with Ind AS as per the roadmap applicable to NBFC. However, if it ceases to carry on the activities of NBFC then the roadmap as applicable to non- NBFC companies should have been followed based on its net worth.

In the given case, assuming that the company was not carrying on the activities of NBFC from July 16 onwards as it has applied for termination of its membership in July 2016, then as per its net worth it should have complied with Ind AS from July 2016 onwards.

Applicability of Ind AS on overseas entities and their affiliates in India â&#x2014;?

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&#x2014;?

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.

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? Answer19 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.

19

As clarified by ITFG.

28

Chapter 1

Convergence with IFRS in India

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.

Query Applicability of Ind AS to an Indian Branch Office of Foreign Company A Company A incorporated in USA with limited liability, has established a branch office in India, with the permission of RBI, to provide consultancy services in India. The branch office remits the amounts earned by it to Company A(i.e. Head Office) net of applicable Indian taxes and subject to RBI guidelines. As on April 1, 2016, it has more than 500 crore balance as “Head Office account”.

Whether the Indian branch office of ABC & Company would be required to comply with Ind AS? Answer20 As per the roadmap issued by the MCA, a “company” as defined in Section 2(20) of the Companies Act 2013 is required to comply with Ind AS i.e. a company which is incorporated under the Companies Act 2013 or under any previous company law. In this case, the Branch office of a foreign company is established in India but it is not incorporated under the Act and is only an extension of the foreign company in India. Further, Rule 6 of the Companies (Ind AS) Rules, 2015 states that “ Indian company which is subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with Ind AS if it meets the criteria as specified in sub-rule (1)”. Accordingly, in the given case, the branch office of Company A is not required to comply with Ind AS.

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.

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 20

As clarified by ITFG.

29

Practical Approach to Ind AS Implementation, 3e

Chapter 1

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?

Answer21 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.

21

As clarified by ITFG.

30

Chapter 1

Convergence with IFRS in India

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 Answer22 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, 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.

22

As clarified by ITFG.

31

Practical Approach to Ind AS Implementation, 3e

Chapter 1

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?

Answer23 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.

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)?

23

As clarified by ITFG.

32

Chapter 1

Convergence with IFRS in India

Answer24 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?

Answer25 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.

Query Inclusion of ESOP reserve in the calculation of net worth to assess the Ind AS applicability Whether ESOP reserve is required to be included while computing the net worth of a company to assess the applicability of Ind AS on the company?

Answer26 As per Rule 2(1)(f) of Companies (Ind AS) Rules, 2015, “net worth” shall have the meaning assigned to it as in clause (57) of section 2 of the Companies Act, 2013 which does not specifically includes ESOP reserve.

However, it may be noted that the Guidance Note on Accounting for Employee Share-based Payments, provides that an enterprise should recognize an expense for the services received in an equity-settled employee share-based payment plan when it receives the services, with a corresponding credit to an appropriate equity account, say ‘Stock Options Outstanding Account’ 24

As clarified by ITFG.

25

As clarified by ITFG.

26

As clarified by ITFG.

33

Practical Approach to Ind AS Implementation, 3e

Chapter 1

which is transitional in nature as it gets ultimately transferred to another equity account such as share capital, securities premium account and/or general reserve as recommended in the subsequent paragraphs of Guidance Note.

Accordingly, it has been clarified that for the purpose of Ind AS applicability, ESOP reserve is required to be included while calculating the net worth of a company. However, the same shall not be considered while calculating the net worth of a company under other provisions of the Companies Act, 2013.

Materiality concept ●

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

Overriding status of law ●

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.

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.

34

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

Chapter 1

Convergence with IFRS in India

Particulars

The Act 2013

Ind AS

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 and recently on 27 July 2017, ICAI has issued the Guidance Note with respect to same. (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 IAS 2 : Inventories IAS 7 : Statement of Cash Flows IAS 8 : Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 : Events After the Reporting Period IAS 12 : Income Taxes IAS 16 : Property, Plant and Equipment IAS 17 : Leases (will be superseded by IFRS 16 as of 1 January 2019) IAS 19 : Employee Benefits IAS 20 : Accounting for Government Grants and Disclosure of Government Assistance IAS 21 : The Effects of Changes in Foreign Exchange Rates IAS 23 : Borrowing Costs IAS 24 : Related Party Disclosures IAS 26 : Accounting and Reporting by Retirement Benefit Plans IAS 27 : Separate financial statements IAS 28 : Investments in Associates & Joint Ventures IAS 29 : Financial Reporting in Hyperinflationary Economies IAS 32 : Financial Instruments: Presentation IAS 33 : Earnings Per Share IAS 34 : Interim Financial Reporting 35

Practical Approach to Ind AS Implementation, 3e

IAS 36 IAS 37 IAS 38 IAS 40 IAS 41 IFRS 1 IFRS 2 IFRS 3 IFRS 4 IFRS 5 IFRS 6 IFRS 7 IFRS 8 IFRS 9 IFRS 10 IFRS 11 IFRS 12 IFRS 13 IFRS 14 IFRS 15

Chapter 1

: : : : : : : : : : : : : : : : : : : :

Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property Agriculture First-time Adoption of International Financial Reporting Standards Share-based Payment Business Combinations Insurance Contracts (will be superseded by IFRS 17 as of 1 January 2021) Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Assets Financial Instruments: Disclosures Operating Segments Financial Instruments (See Note-1) Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Regulatory Deferral Accounts Revenue from Contracts with Customers (See Note-2) Note-1: This standard has been recently made effective, superseding the erstwhile IAS 39. IFRS 9 is applicable to an annual reporting period(s) beginning on or after 1 January 2018.

Note-2: This standard has been recently made effective, superseding the erstwhile IAS 11 and IAS 18.

IFRS 15 is applicable 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 (will be superseded by IFRS 16 as of 1 January 2019) 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 (will be superseded by IFRS 16 as of 1 January 2019) SIC 29 : Disclosure-Service Concession Arrangements 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

36

Chapter 1

Convergence with IFRS in India

IFRIC 4

:

IFRIC 5

:

IFRIC 6

:

IFRIC 7

:

IFRIC 9 IFRIC 10 IFRIC 12 IFRIC 14

: : : :

IFRIC 16 IFRIC 17 IFRIC 19 IFRIC 20 IFRIC 21 IFRIC 22

: : : : : :

Determining Whether an Arrangement Contains a Lease (will be superseded by IFRS 16 as of 1 January 2019) Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies Reassessment of Embedded Derivatives Interim Financial Reporting and Impairment Service Concession Arrangements IAS 19 â&#x20AC;&#x201C; The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Hedges of a Net Investment in a Foreign Operation Distributions of Non-cash Assets to Owners Extinguishing Financial Liabilities with Equity Instruments Stripping Costs in the Production Phase of a Surface Mine Levies Foreign Currency Transactions & Advanced Consideration

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 12

Income Taxes

12

IAS 16

Property, Plant and Equipment

16

IAS 17

Leases

17

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 37

Practical Approach to Ind AS Implementation, 3e

Chapter 1

IAS/IFRS

Title

Ind AS

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

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: Initially, MCA had issued the Companies (Indian Accounting Standards) Rules, 2015 vide its notification dated 16 February 2015, wherein a total of 39 standards including Ind 115 were issued.

However, in view of the future applicability of IFRS 15, MCA had subsequently deferred Ind AS 115 for future period vide its notification dated 30 March 2016. Consequently, two new standards, ie Ind AS 11 and Ind AS 18 were issued in the intervening period. Recently, IFRS 15 has become effective and is applicable to annual periods beginning on or after 1 January 2018, thereby superseding the existing IAS 11 and IAS 18. Subsequently, MCA vide its notification dated 28 March 2018 has also issued the

38

Chapter 1

Convergence with IFRS in India

Companies (Indian Accounting Standards) (Amendment) Rules, 2018 wherein it has issued the much awaited Ind AS 115, effective from 1 April 2018. Consequently, Ind AS 11 and 18 which were issued in the intervening period are now omitted with certain other consequential amendments to some of the other Ind ASs. This book contains a complete chapter on Ind AS 115, together with all the chapters updated for these consequential amendments. Further, these consequential amendments are also given at the end of each of the respective chapters for the ease of reference.

Note-2: Though IFRS 9 has now become effective and is applicable to annual reporting periods beginning on or after 1 January 2018; however Ind AS 109 had become 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)

Note: IAS 26 is not applicable for companies, hence not incorporated under Ind AS.

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 12 (Appendix A) Shareholders

SIC 27

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

SIC 29

Disclosure- Service Concession Arrangements

115 (Appendix E)

SIC 32

Intangible Assets-Web Site Costs

38 (Appendix A)

IFRIC 1

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

IFRIC 4

Determining Whether an Arrangement Contains a Lease

IFRIC 5

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

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 Economies

29 (Appendix A)

17 (Appendix C)

39

Practical Approach to Ind AS Implementation, 3e

Chapter 1

SIC/IFRIC

Title

Ind AS

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

115 (Appendix D)

IFRIC 14

IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirements 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 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)

IFRIC 22

Foreign Currency Transactions and Advanced Consideration

21 (Appendix B)

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)

Note: This standard is not relevant for Indian companies.

UPDATES TO IND AS

Earlier Deferment of Ind AS 115 Initially, MCA had issued the Companies (Indian Accounting Standards) Rules, 2015 vide its notification dated 16 February 2015, wherein a total of 39 standards including Ind 115 were issued.

However, in view of the future applicability of IFRS 15, MCA had subsequently deferred Ind AS 115 for future period vide its notification dated 30 March 2016. Consequently, two new standards, ie Ind AS 11 and Ind AS 18 were issued in the intervening period.

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

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

40

â&#x2014;?

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

â&#x2014;?

Ind AS 103 : Business Combinations

Chapter 1

Convergence with IFRS in India

●

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

●

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

Earlier 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 had 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 were 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 had 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, 41

Practical Approach to Ind AS Implementation, 3e

Chapter 1

AS 14, AS 21 and AS 29 and replaced the existing AS 6 and AS 10 with revised AS 10.

Subsequently, MCA had 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.

Recent issue of Ind AS 115 Recently, IFRS 15 has become effective and is applicable to annual periods beginning on or after 1 January 2018, thereby superseding the existing IAS 11 and IAS 18. Subsequently, MCA vide its notification dated 28 March 2018 has also issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2018 wherein it has issued the much awaited Ind AS 115, effective from 1 April 2018. Consequently, Ind AS 11 and 18 which were issued in the intervening period are now omitted with certain other consequential amendments to some of the other Ind ASs. This book contains a complete chapter on Ind AS 115, together with all the chapters updated for these consequential amendments. Further, these consequential amendments are also given at the end of each of the respective chapters for the ease of reference.

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

Recent Consequential amendments Consequential amendments had been made to the following Ind ASs because of the issue of Ind AS 115:

42

●

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 8

: Accounting Policies, Changes in Accounting Estimates and Errors

●

Ind AS 12 : Income Taxes

●

Ind AS 16 : Property, Plant and Equipment

●

Ind AS 17 : Leases

●

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

●

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

Chapter 1

Convergence with IFRS in India

Recent 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 had also been amended by MCA vide its notification no.

G.S.R. 365 (E), dated 30 March 2016, G.S.R. 258(E), dated 17 March 2017 and G.S.R. 310(E) dated 28 March 2018. These amendments have also been incorporated under respective chapters. These amendments were carried out in the following standards: ●

Ind AS 1

: Presentation of financial statements

●

Ind AS 2

: Inventories

●

Ind AS 12 : Income Taxes

●

Ind AS 16 : Property, Plant and Equipment

●

Ind AS 28 : Investments in Associates and Joint Ventures

●

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

●

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

●

Ind AS 103 : Business Combinations

●

Ind AS 104 : Insurance Contracts

●

Ind AS 109 : Financial Instruments

●

Ind AS 112 : Disclosure of Interests in Other Entities

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

43

Practical Approach to Ind AS Implementation, 3e

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ANNEXURE I The Companies (Indian Accounting Standards) Rules, 201527 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.

27

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

44

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.

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Practical Approach to Ind AS Implementation, 3e

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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)

46

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

47

Practical Approach to Ind AS Implementation, 3e

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

48

Chapter 1

Chapter 1

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. (i)

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

49

Practical Approach to Ind AS Implementation, 3e

(ii) (b)

Chapter 1

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.

50

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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 (excluding Regional Rural Banks)

February 11, 2016

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 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 51

Practical Approach to Ind AS Implementation, 3e

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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

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ANNEXURE IV IRDA circular regarding instructions to the insurance companies with respect to Ind AS applicability Ref: IRDA/ F&A/ CIR/IFRS/038/03/2016 Date: 01-03-2016

IRDA CIRCULAR

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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Practical Approach to Ind AS Implementation, 3e

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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 SubBroker 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) 1. 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.

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

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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.

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.

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(iv) derecognition of financial assets and financial liabilities. (v) employee benefits. (vi) offsetting financial instruments. (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 61

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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

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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

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ANNEXURE IX IRDA circular regarding deferment of applicability of Ind AS IRDA CIRCULAR Ref: IRDA/F&A/CIR/ACTS/146/06/2017

Date: 28-06-2017

IMPLEMENTATION.OF IND AS IN THE INSURANCE SECTOR The Authority, in order to prepare the insurance industry for Implementation of Ind AS and to provide suitable guidelines wherever required, had constituted an Implementation Group vide Order reference no. IRDA/ F&A/ ORD/ ACTS /201/11/2015 dated 17th November 2015. The Implementation Group had submitted their Report on 29th December 2016. The draft of the Regulations recommended by the Implementation Group were issued as Exposure draft for comments from all stakeholders.

Simultaneously, insurance companies have also been directed to submit Proforma Reports effective quarter ending December 2016.

2. Further, in the press release dated 18th January 2016 the Ministry of Corporate Affairs (MCA) have laid down the roadmap for implementation of Ind AS for the insurance sector whereby, insurers/insurance companies are required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards with one year comparatives. Rule 4 of the Companies (Indian Accounting Standards) (Amendment) Rules, 2016 further states that "The Banking Companies and Insurance Companies shall apply the Ind AS as notified by the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA) respectively".

3. In the meantime, the International Accounting Standards Board on 18th May 2017 issued the much awaited IFRS 17 Insurance Contracts which replaces IFRS 4, which was brought in as an interim standard. As the IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches, it is difficult for stakeholders to compare the financial performance of otherwise similar companies. The developments around release of IFRS 17 have resulted in the IRDAI reviewing the position in the matter of Implementation of Ind AS in the insurance sector in India.

4. The Board of the Authority at its meeting held on 31st May 2017 noted the peculiarities of the insurance sector in India, particularly the fact that India does not have a standard equivalent to IAS 39 on Financial Instruments: Recognition and Measurement. The Implementation of the Ind AS in the present form will lead to a position where assets will be valued on fair value / market value basis and liabilities will continue to be valued as per the existing formula based approach. This is likely to lead to mismatch in the asset and liability valuation and also cause volatility in the financial statements of the insurance companies. Further, compliance costs would be incurred twice, once immediately on implementation of Ind AS and secondly when IFRS 17 is implemented in India.

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5. The Authority therefore, approved the Regulatory override whereby the implementation of Ind AS in the Insurance Sector in India has been deferred for a period of two years and the same shall now be implemented effective 2020-21.

6. However, the requirement of submitting Proforma Ind AS financial statements on a quarterly basis shall continue to be governed as directed under IRDAI circular reference IRDA/F&A/CI R/ACTSI 262112/2016 dated 30th December 2016.

Member (Life) (In-charge of Finance & Accounts)

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ANNEXURE X MCA clarified Ind AS implementation date for payment banks and small banks which are subsidiaries of companies which are governed by the corporate sector roadmap issued by MCA F.No. 01/01/2009 – CL – V (Pt. IV) Government of India Ministry of Corporate Affairs

To

General Circular No. 10/2017

5th Floor, A Wing, Shastri Bhawan, Dr. R.P. Road, New Delhi – 110001 Dated:- 13th September 2017

All Regional Directors, All Registrar of Companies, All stakeholders Sub:- Obligation to comply with the Indian Accounting Standards (Ind AS) and Rule 4 of Companies (Inian Accounting Standards) Rules, 2015 – Payment Banks, Small Finance Banks which are subsidiaries of Corporates – reg.

Sir, This Ministry vide notification no. GSR 365 (E), dated 30.03.2016 notified Companies (Indian Accounting Standards) Rules, 2015. Some stakeholders have sought clarifications with regard to implementation of Ind AS wherein the holding company has Payment Banks or Small Finance Banks as its subsidiaries.

2. The matter has been examined and it is hereby clarified that the holding company if it is covered by the corporate sector roadmap for implementation of Ind AS, shall follow the corporate sector roadmap and if the company has got payment bank or small finance bank as its subsidiary then subsidiary company shall follow the banking sector roadmap prescribed vide RBI circular DBR.BP.BC.No.76/21.07.001/2015-16 dated 11th February, 2016 on “Implementation of Indian Accounting Standards (Ind AS)” read with circular DBR.NBD.No.25/16.13.218/2016-17 dated 6th October, 2016 on “Operating Guidelines for Payment Banks”. However, the Payment Banks or Small Finance Banks shall provide the Ind AS financial data to its holding company for the purpose of consolidation.

3. This issues with the approval of competent authority.

Yours faithfully, (Sudhir Kapoor) Deputy Director

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ANNEXURE XI IRDA/F&A/ORD/ACTS/265/12/2017

December, 13, 2017

ORDER Working Group on new standard on Insurance Contracts (equivalent to IFRS 17 Insurance Contracts) The Authority had constituted a Working Group on new standard equivalent to IFRS 17- Insurance Contracts of the International Accounting Standards Board (IASB), vide its order dt. 21.08.2017. It was an initial step towards early adoption of the new standard in the Insurance sector. The working group was advised to furnish its recommendations based on the specified terms of reference, within three months.

The working group had few meetings during which the members deliberated on various aspects of the new standard, IFRS 17. The group felt that the standard was very exhaustive, complex and introduced new concepts hitherto not applied and for which there was very limited experience to share even internationally. It was also felt that considering the magnitude of impact the implementation of the standard is likely to have on the Insurance industry in India, as well as the financial statements and disclosures of insurers, it requires a detailed study before implementation.

Therefore, in order to enable a more detailed examination of the provisions contained in the IFRS 17 by the working group, the Authority has decided to grant extention of the time limit for review of the new standard (IFRS 17) up to 30th June, 2018, as requested by the working group.

The constitution and the terms of reference of the working group shall remain the same as that contained in the order of the Authority dt. 21.08.2017. The working group shall furnish its report and recommendations to the Authority by 30th June, 2018.

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ANNEXURE XII Statement on Developmental and Regulatory Policies This Statement sets out various developmental and regulatory policy measures for strengthening regulation and supervision; broadening and deepening financial markets; improving currency management; promoting financial inclusion and literacy; and, facilitating data management.

I. Regulation and Supervision ………….

3. Deferment of Indian Accounting Standards (Ind AS) implementation Scheduled Commercial Banks (SCBs), excluding Regional Rural Banks (RRBs), were required to implement Indian Accounting Standards (Ind AS) from April 1, 2018 vide our Circular dated February 11, 2016. However, necessary legislative amendments – to make the format of financial statements, prescribed in the Third Schedule to Banking Regulation Act 1949, compatible with accounts under Ind AS – are under consideration of the Government. In view of this, as also the level of preparedness of many banks, it has been decided to defer implementation of Ind AS by one year by when the necessary legislative changes are expected. ………….

Press Release : 2017-2018/2642

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Jose J. Kattoor Chief General Manager

Chapter 2

Ind AS conversion- Are we ready?

Synopsis

Ind AS conversion process....................................................................................................................... 70 Diagnostic review ................................................................................................................................ 70 Preliminary evaluation ......................................................................................................................... 70 Design and action plan......................................................................................................................... 70 Implementation .................................................................................................................................... 71 Review Assessment ............................................................................................................................. 71 Focus areas ............................................................................................................................................... 71 Financial reporting factors ................................................................................................................... 71 Non-financial reporting factors ............................................................................................................ 72 Learning from global peers ...................................................................................................................... 72 Concluding remarks ................................................................................................................................. 73

The Finance Minister during his Budget Speech in July 2014 had given a head start to the implementation of Ind AS, stating that the Ind AS converged with International Financial Reporting Standards (IFRS) shall be applied starting from 1 April 2015 and 1 April 2016 on voluntary and mandatory basis respectively. This was further confirmed by the MCAâ&#x20AC;&#x2122;s Press Release dated 2 January 2015, setting out the revised roadmap for implementation of Ind AS. This project came into reality vide MCA notification dated 16 February 2015 notifying the much simplified roadmap on Ind AS with easier phased manner for specified class of companies, barring Insurance companies, Banking companies; and non-banking finance companies.

The companies covered under phase I, had already applied Ind AS while the companies covered under phase II are in the process of applying Ind AS; however, now this roadmap has left very little breathing time for transition to Ind AS, with respect to the other companies like NBFCs, Banks and Insurance Companies. This change has an all dimensional organizational impact, rather than just an accounting transformation and hence requires intelligent and timely communication with those charged with governance, including key managerial personnel, board of directors, audit committees, shareholders and other stakeholders. Additionally, Ind AS implementation will have a wide-ranging impact on a companyâ&#x20AC;&#x2122;s internal processes, systems, controls, other financial and non-financial items.

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Chapter 2

Effective Ind AS implementation will necessitate systematic tactical evaluation, robust strategy, alignment of related resources, effective project management and most importantly, a smooth amalgamation of all such modifications into customary business operations in a timely manner.

This Chapter is intended to summarize the key details on Ind AS convergence process, together with the associated impact areas and way forward.

IND AS CONVERSION PROCESS Under Ind AS conversion process, an entity is required to modify its financial reporting system from its current GAAP to Ind AS. On an obvious note, the differences between the two sets of principles may vary from one entity to another, basis nature, size and the current accounting policies chosen. Indian entities now falling within the transition can learn from the experiences of Indian companies or overseas entities who adopted IFRS in past or from the experiences of phase I companies who have already adopted Ind AS from the FY 2016-17. The degrees of the conversion project will not only depend upon the GAAP differences, but also, other important factors, including the quality and elasticity of the existing financial reporting systems, related infrastructure, the people, size and complexity of the organization.

Given the fact that other companies like NBFCs, Banks and Insurance Companies would be required to present comparatives for the year 2017-18 (in case of NBFCs), 2018-19 (in case of Scheduled Commercial Banks (excluding Regional Rural Banks)) and for the year 2019-20 (in case of insurance companies), it is pertinent to note that some of the Indian companies, falling under phase I, phase II and certain European companies had consumed somewhere between 18 months to two years’ time for conversion to IFRS from their local GAAP. Therefore, learning from their experiences, it is high time for these Indian entities to start building up the right set of processes for timely and efficient conversion.

A correct start will help them to retain and hire the right set of people, reduce the burden on resources on the implementation date and increase trust of the stakeholders with correct and timely reporting.

Following are some of the broad steps required for a basic conversion process for an entity:

Diagnostic review The first and the most critical assessment is the identification of accounting and reporting differences and the related impact on the company’s operations, technology systems and processes. It also requires drawing a detailed map for future gradual phases of the conversion.

Preliminary evaluation Basis the detailed exercise conducted by the management, this phase will provide the delta between the current process vis–à–vis future expectations and the current resources vis–à–vis the required ones.

Design and action plan This phase involves sketching up the entire conversion strategy into detailed process maps, setting up project infrastructure, project management function, and consequent strategic modifications. It also involves identification of various issues with respect to accounting and reporting, tax implications, system up-gradation, including re-designing needs for these matters. This entire process will build up the Ind AS core team, provide time-tables for detailed future actions and resolutions to expected problems and ways to counter them.

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Implementation Implementation involves rolling out detailed process maps for the company to have a trial run of the designed system to ensure their functionality well before actual implementation schedule. This will help to smoothly transition into a new accounting world.

Review Assessment The review phase evaluates the report card as to how various developed systems have actually resulted into the desired results and if there are any issues within the functional model. This not only involves thorough evaluation of the end results but also needs provision of on-going training to the companyâ&#x20AC;&#x2122;s personnel regarding the latest Ind AS developments so as to ensure correct and updated financial reporting.

FOCUS AREAS Following are some of the key factors that one needs to consider while planning activities around the conversion process.

Financial reporting factors Accounting Practices Needless to say, accounting practices is the most affected area due to this conversion process.

Therefore, it is imperative that the differences resulting from these changes are identified timely and corresponding new accounting policies and practices are developed.

Tax implications There would be significant tax implications on adoption of Ind AS, given the current tax structure in India.

Group policies Due to the geography of the group and its members, it is obvious to have differences in accounting policies. Therefore, to ensure bridging of gap between the inconsistencies to make the group fully compliant with Ind AS would be a significant matter.

Industry peers The accounting practices adopted by the industry peers will have a significant bearing on any company, while choosing its own set of accounting policies.

Management strategies The conversion would momentously impact the way management strategies are being formed and how the decision making and financial communication model works. All level of management personnel, including Board of Directors, Audit Committee and other Key Managerial Personnel would need to significantly change their thought process around the same.

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Non-financial reporting factors Company personnel Due to the conversion process, the company needs to create a project team and work streams, set timescales and accountabilities to meet the desired implementation deadline.

Training needs The company needs to develop and execute training programmes for employees, including key financial personnel across functions and locations to meet their conversion needs.

IT system IT systems will need to be suitably modified to meet the revised needs to transition from the current financial reporting systems and the desired reports. The company needs to evaluate if the systems are to be modified internally or to take external help.

Human resources system This conversion process will impact other systems like human resources systems. Therefore, suitable modifications are required to be carried out to these accordingly.

Treasury and finance function With revised ratios and other statistics arising from a revised financial reporting system, the treasury or finance department is most likely to be impacted, having the responsibility for managing sources of financing of the entity. Therefore, pursuant to these changes, existing contracts may be subject to reconsideration and discussions with financial lenders.

Stakeholder expectations With the introduction of a new reporting system, it is of utmost importance for the company to ensure stakeholder’s expectations are managed in a satisfactory and timely manner.

LEARNING FROM GLOBAL PEERS Adoption of, or convergence with IFRS is happening across the globe. So far, more than 100 countries worldwide, have assumed the path of convergence with IFRS. India has chosen to converge with IFRS, rather than go for complete adoption.

It is always better to learn from others’ experience than our own. Countries in the EU at large have adopted IFRS for accounting periods beginning on, or after 1 January 2005. Following are some of the practical difficulties faced by them during their conversion process:

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Lack of co-ordination between project teams and business segments

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Absence or lack of adequate support from senior management at an early stage of the project.

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Lack of technical training and misunderstanding of results.

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The quantum, complications and the related timeframe of the project getting undermined.

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Inferior project management system.

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Failure in timely updation of modified numbers into the systems.

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Non-involvement of tax personnel at all levels during conversion process.

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Underestimating effect of marginal accounting differences, which turned into significant items impacting the financial reporting system.

CONCLUDING REMARKS Though the conversion process and its effective implementation is a tough and ongoing job, yet it could turn into a worthwhile effort and provide results. Comparable and reliable financial information provide a strong path enabling global markets to operate effectively and pave the way for international investments and business.

So, considering this goal at the macro level, it will give a boost to everyone to gear up to the pace of the globally changing and challenging environment. It is not yet too late, so start today to plan for the holistic move and implementation within the available short timeframe for the remaining companies i.e. companies which are yet to apply Ind AS, eg NBFCs, Banks and Insurance Companies etc.

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