Report

Report on the equivalence of the Indian Accounting Standards

21 October 2014 | ESMA/2014/1278

Date: 21 October 2014

ESMA/2014/1278

Table of Contents
I

Executive Summary ________________________________________________________ 4

II Requirements with respect to equivalence in the European Union ________________________ 5

III Previous reports on equivalence _______________________________________________ 6
IV Institutional framework in India ________________________________________________7
V Evolution of the process of convergence of Indian accounting standards with IFRS ____________ 8
VI Evolution of the process for implementing the roadmap _______________________________ 11
VII

Enforcement experience ___________________________________________________ 12

VIII Other matters __________________________________________________________ 13

IX Preliminary conclusions _____________________________________________________ 13

Annex I:

Mandate from the European Commission

Annex II:

Paper on the main differences between the converged Indian standards and IFRS, as prepared and provided by the ICAI

Annex III:

Report on Impact Analysis of Indian Accounting Standards (Ind-AS) and One set of Standards vs. Two sets of Standards, The Institute of Chartered Accountants of India, New Delhi,
2013 (please refer to separate document 1278A)

Annex IV:

Proposed New Roadmap for Implementation of Ind-AS converged with IFRS, as prepared by
the ICAI in March 2014

Annex V:

IFRS Jurisdictional Profile India, June 2013 (please refer to separate document 1278 B)

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List of abbreviations and acronyms used in this report

ASB
CESR
EC
EP
EU
ESMA
IAS
IASB
ICAI
IFRS
Ind-AS
IRDA
FRRB
MCA
NACAS
NFRA
QARC
RBI
SEBI

Accounting Standard Board

Committee of the European Securities Regulators
European Commission
European Parliament
European Union
European Securities and Markets Authority
International Accounting Standard
International Accounting Standards Board
Institute of Chartered Accountants in India
International Financial Reporting Standards
Indian Accounting Standards
Insurance Regulatory and Development Authority
Financial Reporting Review Board
Ministry of Corporate Affairs
National Advisory Committee on Accounting Standards
National Financial Reporting Authority
Qualified Audit Report review Committee
Reserve Bank of India
Securities and Exchange Board of India

Executive Summary
This report fulfils the mandate received by the European Securities and Markets Authority (ESMA)
from the European Commission (EC) in February 2014 to provide it with an update on the level of convergence of the Indian Accounting Standards (Ind-AS)1 towards International Financial Reporting
Standards (IFRS) and the quality of application and enforcement of the Ind-AS, so that the EC can provide a progress report to the Council and the European Parliament (EP) in line with its obligations under Commission Regulation (EC) 1569/2007. ESMA and its predecessor the Committee of the European Securities Regulators (CESR) have previously provided the EC with progress reports on the status of
equivalence in June 2009, November 2010 and April 2011.
This report is an update of the last report issued in April 2011 and is intended to be factual in nature,
providing for information purposes much of the source material that has been used to prepare it. It
should be read in conjunction with the reports previously produced.
In preparing this report, ESMA had drawn on information provided by representatives of the Institute
of Chartered Accountants of India (ICAI) and the Securities and Exchange Board of India (SEBI) as
well as information publicly available. The actions taken by India on the convergence of its accounting
standards and on its enforcement process are detailed in specific sections of this report.
Originally, India intended to converge with IFRS in a phased approach beginning in 2011, but the transition to Ind-AS was postponed. Therefore, Ind-AS are not yet applicable in India and a transition date
has not been formally announced by the Ministry of Corporate Affairs (MCA) at the time of this report.
On the basis of the information publicly available or received from stakeholders, ESMA identified areas
of concern with respect to the progress made towards convergence, as presented below:

a) The initial roadmap for implementation of the converged standards by companies has been spread
over several years with significant delays to the process. Following the postponement of this
roadmap in 2011, the ICAI performed an Impact Assessment of Ind-AS in 2013 and subsequently
published in March 2014 a new roadmap for the implementation of Ind-AS converged with IFRS.
The new roadmap proposes that listed and large entities mandatorily use Ind-AS for the preparation of consolidated financial statements from 1 April 2016. However, this roadmap is under the
consideration of the MCA and will only be effective after a formal decision of the Indian government. At the time of this report, ESMA does not have any further indication from the Indian authorities on the adoption timeframe of Ind-AS and their exact content remains uncertain.
b) The strategy followed by the Indian authorities regarding the convergence process has been to
adopt IFRS as issued by the IASB and modify them for the specific Indian legal and economic context. Since 2011, the ICAI has continued the process of developing the Ind-AS based on IFRS as initiated in the past. Consequently, the converged Ind-AS have removed a number of options available within IFRS and introduced several compulsory carve-outs, some of which may constitute sig-

References to the Indian Generally Accepted Accounting Principles (GAAP) relate to the currently applicable and non-converged
standards. References to Ind-AS relate to the Indian standards converged with IFRS.

nificant departures from IFRS. The ICAI expressed its commitment to remove these carve outs,
when possible, even though the impact analysis of the Ind-AS made reference to the inclusion of
additional differences in the Ind-AS.
c) The expertise in India regarding IFRS application and enforcement remains limited. Even though
the ICAI has made a significant effort to prepare auditors and preparers for the implementation of
Ind-AS, this expertise is rather of a theoretical nature and has unproven practical value. Furthermore, only a limited number of issuers already apply IFRS, as they are still required by Indian law
to prepare financial statements in accordance with the Indian Generally Accepted Accounting
Principles (GAAP) currently in force. For the time being, only 8 issuers using Indian GAAP are
listed on the European regulated markets.

I . Requirements with respect to equivalence in the European Union

1. In accordance with the ESMA Founding Regulation (EU 1095/2010), ESMA has the objective to protect
the public interest by contributing to the stability and effectiveness of the financial system, for the Union economy, its citizens and businesses. Article 33(2) of this Regulation requires ESMA to assist the
EC in preparing equivalence decisions pertaining to supervisory regimes in third countries.
2. Under both the European Prospectus Directive2 and Transparency Directive3, third country issuers that
have their securities admitted to trading on an EU regulated market or that wish to make a public offer
of their securities in Europe, are required to produce financial reports using either IFRS adopted pursuant to EC Regulation 1606/2002 (hereinafter EU IFRS) or a third countrys national accounting
standards ("third country GAAP") deemed equivalent to those standards.
3. In December 2007, the European Commission published Regulation (EC) 1569/2007 Commission
Regulation establishing a mechanism for the determination of equivalence of accounting standards applied by third country issuers of securities pursuant to Directives 2003/71/EC and 2004/109/EC of the
European Parliament and of the Council (Commission Regulation on the mechanism). This Regulation established the conditions under which the GAAP of a third country can be considered equivalent
to IFRS pursuant to a definition of equivalence set out in article 2. The Regulation also set out conditions in article 4 under which the accounting standards of other third countries could be considered acceptable for a limited period expiring no later than 31 December 2011.
4. The aim of granting this transitional period was to allow standard setters and regulators in the countries concerned more time to pursue their existing programmes either to converge their accounting
standards with or to adopt IFRS. The countries concerned were Canada, China, India and South Korea.
In 2008, at the ECs request, CESR provided advice on the equivalence of the accounting standards of
those four countries.

http://eur-lex.europa.eu/legal-content/FR/ALL/?uri=CELEX:32003L0071

http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:02004L0109-20080320

5. The Regulation also requires the EC to update the EP at regular intervals on the progress that is being
made by these countries with regard to their respective programmes. Consequently, ESMA has undertaken work and prepared reports at regular intervals on the adoption or convergence of these thirdcountry GAAP to IFRS.
6. Based on the report prepared by ESMA in April 2011 and the uncertainties of the timetable for implementation of the converged standards, the EC decided on 11 April 2012 in its Implementing Decision
2012/194/EU4 that third country issuers shall be permitted to prepare their annual consolidated financial statements and half-yearly consolidated financial statements in accordance with the Generally Accepted Accounting Principles of the Republic of India for financial years starting before 1 January 2015.
7. In February 2014, ESMA received a new mandate from the EC (Annex I) which required ESMA to assess the level of convergence of Ind-AS towards IFRS and the quality of application of Ind-AS. The EC
will use this report to supplement the information contained in earlier reports prepared by ESMA when
it will provide an update to the EP and amend the respective legislation accordingly.
8. In order to fulfil the latest request of the EC in the above mentioned mandate and, consequently, to
supplement its 2011 report, ESMA has assessed the information publicly available and entered into
contact with the Indian authorities during Spring and Summer of 2014.
II

Previous reports on equivalence

9. The aim of this report is to update the information previously provided regarding the process of convergence in India. This update report is part of an on-going process of assessment of the equivalence of
Ind-AS which permits Indian issuers to access European markets using financial statements prepared
in accordance with Ind-AS.
10. In its November 2008 advice (CESR/ 08-859), CESR opined that the convergence programme in India
was comprehensive and there was no reason to doubt that India would be in a position to achieve the
objective of substantial convergence by the end of 2011. This advice was based on the fact that the program was comprehensive and capable of being completed before 31 December 2011 as indicated by the
following elements:
a.

The ICAI had made, in July 2007, a public commitment to adopt IFRS by 31 December
2011;

b. The Indian Government had confirmed publicly, in May 2008, its intention to achieve
convergence with IFRS by the end of 2011;
c.

The ICAI had noted that it might introduce certain modifications into IFRS to reflect "Indian conditions" such as requiring additional disclosures, changing some terminology and
omitting some options or alternative treatments. However, those changes were expected
to be of minor nature, and the stated intention of both the ICAI and the Indian Govern-

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32012D0194&from=EN

ment was that Ind-AS, to all intents and purposes, would be fully IFRS compliant by the
end of the program; and
d. Consequently, effective measures had been taken to secure the timely and complete convergence of Ind-AS to IFRS by 31 December 2011.
11. In June 2009, CESR provided the EC with the update report on the progress made by India in the process of convergence with IFRS (CESR/09-472). This report was approved and endorsed by the EP in
June 2010.
12. In June 2010, CESR received a request from the EC to produce a second update report. The new mandate required CESR to focus its work on publicly available information or on information made available upon request by the authorities concerned.
13. In November 2010, CESR provided a second update report on the progress made in Canada and South
Korea towards adopting IFRS and in India and China towards converging with IFRS (CESR 10-1301).
The information related to India was only based on publicly available information, an exchange of written information with representatives of the Indian authorities and a meeting with a representative of
the IASB.
14. In April 2011, ESMA provided an update report on the progress made on the equivalence of the Ind-AS
with IFRS (ESMA/2011/116). On the basis of additional research and on-the-spot investigation undertaken by ESMA in January 2011, the report identified potential areas of concern with the progress
made towards convergence, as presented below:
a.

The Indian version of IFRS appeared to have a significant number of differences (carveouts) from IFRS, some of which constituted significant departures from IFRS;

b. India had the intention to bring to the IASBs attention some of those specific issues constituting the differences between Ind-AS and IFRS. India did not make a public commitment with respect to the elimination of those differences;
c.

There was no experience in India regarding IFRS enforcement, as there were no issuers
applying IFRS; and

d. The roadmap for implementation of the Ind-AS was spread over a 3 year period (2011 to
2014), but significant doubts arose in relation to the launching date of the process.
III

Institutional framework in India

15. The institutions playing a role in the implementation of accounting standards in India are the ICAI and
the MCA. Enforcement of the accounting standards on listed companies in India is mainly done by the
SEBI.
16. Accounting Standards are formulated by the ICAI through its Accounting Standards Board (ASB),
which has the task to develop and establish standards and guidance governing financial accounting and
reporting. Thereafter, the Standards are assessed by the National Advisory Committee on Accounting
Standards (NACAS) of the MCA which recommends them to the Central Government for notifying under the Companies Act, 1956. Once the Government accepts the standards, they are published in the

Official Gazette. In the future, the NACAS will be replaced by the National Financial Reporting Authority (NFRA) under the Companies Act, 2013.
17. The Reserve Bank of India (RBI) is the regulator of banks in India and ordinarily requires banks to
follow the accounting standards issued by the ICAI and endorsed by the Government. A similar process
is applied by the Insurance Regulatory and Development Authority (IRDA) which is the regulator of insurance companies in India.
18. The ICAI has set up a Financial Reporting Review Board (FRRB) to review the financial statements of
listed and non-listed entities. In case of serious non-compliance with financial reporting requirements,
the FRRB submits a report to the relevant enforcers for necessary action against the relevant entity, i.e.,
the MCA for companies, the SEBI for listed companies, the RBI for banks and the IRDA for insurance
entities. In case of serious discrepancies with the auditors opinion on financial statements, the case is
referred to the Director (Discipline) of the ICAI for initiating a disciplinary action against the auditor
under the Chartered Accountants Act, 1949.
19. The SEBI is the regulator of the securities market in India and has the power to enforce financial reporting requirements against issuers and to sanction issuers found to be non-compliant with Ind-AS.
The SEBI has set up a Qualified Audit Report review Committee (QARC) to review qualified audit reports accompanying the financial statements of listed companies. The QARC can refer the qualifications in the auditors reports to the FRRB for its opinion whether these qualifications are justified. Upon receipt of the FRRBs report, the QARC may ask the concerned issuer to restate its financial statements in compliance with the statutory requirements.
IV

Evolution of the process of convergence of Indian accounting standards with IFRS

(technical developments)

20.In 2007, the ASB constituted a Task Force which released a Concept Paper, followed by a public commitment of the ICAI and the Indian Government to converge to IFRS before 31 December 2011. In
2008, the Indian Government confirmed publicly its intention to achieve convergence by 31 December
2011.
21. The strategy behind the process of convergence with IFRS has been to make appropriate modifications
in IFRS in order to achieve convergence, taking into consideration the following matters in India: the
legal and regulatory environment, economic conditions, industry preparedness and practice as well as
the removal of some options permitted under IFRS and differences in concepts.
22. In February 2011, 35 Ind-AS corresponding to IFRS in force on 1 April 2011 (with the exception of IFRS
9 Financial Instruments, IAS 26 Accounting and Reporting by Retirement Benefit Plans, and IAS
41 Agriculture) were posted on the MCAs website5. Each standard issued contained an Appendix
highlighting the differences between the converged Indian standard and the corresponding IFRS.
When providing advice to the EC in 2008, CESR made a detailed assessment of the differences between
Ind-AS and IFRS (Appendix II to CESR 08-859).

http://www.mca.gov.in/MinistryV2/standards.html

23. In the press release accompanying the converged standards in February 2011, the MCA acknowledged
the publication of the standards, which were neither notified under the Companies Act 1956 nor implemented in view of certain tax and other implications. This press release is presented in Annex III of
the 2011 ESMA Report.
24. Following this publication in February 2011, the ICAI has continued to formulate and revise Ind-AS6
based on IFRS issued or revised after 1 April 2011. Seven draft Ind-AS and four draft amendments to
Ind-AS have been sent to the NACAS/NFRA for consideration and are published on the website of the
ICAI for information purposes. The ICAI is also considering 12 new or amended standards issued by
the IASB.
25. In 2014, ESMA requested from the ICAI an update of the analysis of the differences between Ind-AS
and IFRS. The ICAI provided a list of all main changes in the converged Ind-AS compared to IFRS
(Annex II) and the reasons for the modifications made. When there was no difference between IFRS
and Ind-AS, no mention was made. On the basis of consultations regarding those differences, the differences were classified into four categories, presented below, together with relevant examples for each
category:
a.

Standards for which there is no equivalent under Indian converged standards, such as:
i. Accounting for agreements for the construction of real estate: no converged Indian standard has been issued and the method for revenue recognition follows the
percentage of completion method and not the method required under IFRIC 15
Agreements for the Construction of Real Estate.
ii. Accounting for biological assets: the converged Indian standard corresponding to
IFRS 41 Agriculture has not been released as it is considered that the fair value
method cannot be applied because of the lack of information regarding such values in the Indian market. Following the recent publication of amendments to IAS
41 by the IASB in June 2014, Ind-AS 41 is being drafted along the lines of these
amendments.
iii. The provisions of IFRS 15 Revenue from Contracts with Customers, which have
been issued by the IASB but not yet endorsed in the EU, have not been transposed
yet in India. However, the ICAI is in the process of considering these provisions
for early convergence.

b. Indian converged standards with significant departures from IFRS, such as:
i. Accounting for the excess value of net assets acquired over purchase consideration: the converged Indian standard requires recognition of the excess in equity
directly or through other comprehensive income depending on evidence of bargain purchase and not in profit or loss as required under IFRS 3 Business combinations.

http://www.icai.org/post.html?post_id=9258

ii. Financial instruments: For the time being, the ICAI has only issued Ind-AS 39
Financial Instruments: Recognition and Measurement. The provisions of the Indian converged standard for accounting for gains resulting from the deterioration
of own credit risk have been modified and any variation in fair value relating to a
change in own credit risk is not recognised in the financial statements, as required
under IAS 39 Financial Instruments: Recognition and Measurement. The ICAI
is in the process of replacing this standard with the converged standard of IFRS 9
(please refer to paragraphs 26 to 28 of this report).
iii. Obligation to prepare consolidated financial statements. The draft Ind-AS 110
Consolidated Financial Statements removed some exemptions granted to parent
companies under IFRS 10 Consolidated Financial Statements when presenting
consolidated financial statements.
iv. Classification of particular types of financial instruments: the converged Indian
standard has been modified to scope out foreign currency convertible bonds from
the definition of a financial liability as required under IAS 32 Financial Instruments: Presentation.
c.

Specific departures related to first time application (Ind-AS 101 First-time Adoption of
Indian Accounting Standards) such as: issuers are not obliged to provide comparative information for the prior period; they are permitted to use the carrying values of the assets
as on the date of transition as deemed cost. However, the revised roadmap of the ICAI
suggested to revise Ind-AS 101 and required issuers to provide comparatives for the prior
periods in the financial statements. Therefore the ICAI informed ESMA that Ind-AS 101 is
being revised and this departure will be removed.

d. Finally, some minor changes have been made to other standards in order to take into consideration the Indian environment / local conditions.
Financial instruments
26. The working group, created by the RBI in 2010 to address regulatory conflicts and facilitate the formulation of operational guidelines for Indian banks, considered specific implementation issues relevant to
the transition of the banking sector to Ind-AS. In November 2012, the working group submitted its report, proposing changes to the banking law and regulations. However ESMA could not get access to the
conclusions of this report.
27. Following the issuance of IFRS 9 by the IASB in July 2014, the ASB of the ICAI decided that an Ind-AS
corresponding to IFRS 9 should be prepared and considered for the purpose of convergence in line with
the ICAI revised roadmap. The ICAI is also considering the opportunity to allow earlier application of
the Indian converged standard of IFRS 9 in order to ensure a stable platform to the issuers and avoid
changes in the basis of preparation of the financial statements one year after the entry into application
of the Ind-AS.
28.According to information provided by the ICAI, one difference that might still remain relates to the
determination of provisions for impairment which the Indian representatives believe would be better
made following current prudential norms rather than the method required under IAS 39 or being proposed under IFRS 9.

10

The implementing process of the roadmap

29. As indicated in the 2011 ESMA Report, the press release issued by the MCA in 2010 (Annex II of the
2011 Report) with respect to the roadmap distinguished 3 phases, with companies adopting the converged Indian standards with effect from 1 April 2011, 2013 or 2014 depending on a number of criteria
related to the net worth of an entity. Insurance companies were required to apply the converged Indian
standards in 2012 and banks in 2013 or 2014 depending also on the nature of their activities and their
net worth.
30.However, in February 2011, the MCA issued another press release stating that the implementation of
the converged Ind-AS would take place in a phased manner after resolving various issues, including
some related to taxation, and that the exact date of implementation would be disclosed by the Ministry
at a later date. This press release is presented in Annex III of the 2011 ESMA Report.
31. In 2012 and 2013, a certain number of actions have been taken with the objective to make progress in
the implementation of the roadmap:
a.

The Indian Parliament adopted a new Companies Act which incorporates various provisions to facilitate the implementation of the Ind-AS.

b. The Indian Ministry of Finance issued draft Tax Accounting Standards to solve conflicts
between the Ind-AS and taxation rules.
c.

The MCA requested the ICAI to examine the impact of Ind-AS on various sectors of the
economy (including their application to small and medium sized companies) and to suggest a roadmap for implementation.

d. The ICAI performed an impact analysis and published the Report on Impact Analysis of
Indian Accounting Standards (Ind-AS) and One set of Standards vs. Two sets of Standards (Annex III) on the basis of some 350 entities representing the main sectors of the
economy.
32. In the revised roadmap issued in March 2014 (Annex IV) and as a result from the above impact analysis
(Annex III), the ICAI made the following recommendations:
a.

Scope: the Ind-AS should be applied to the consolidated financial statements of (a) entities listed or in the process of listing on any financial market, (b) unlisted companies having a net worth in excess of Rupees 500 crore7 and (c) holding or subsidiaries of companies covered under (a) or (b) for the reporting periods starting on or after 1 April 2016.
The recommendation of the ICAI to only use Ind-AS for the preparation of consolidated
financial statements would have the advantage to avoid implications in terms of income
tax and other statutory requirements related to the distribution of the retained earnings of
a company.

A Crore Rupee is equal to 10 million Rupees

11

b. First time adoption date: the first set of converged Ind-AS shall be applied for the accounting period beginning on or after 1 April 2016, with comparatives for the year ending 31
March 2016 or thereafter.
c.

Use of IFRS: Indian issuers which are already applying IFRS for the purpose of their listing on European or other markets will not be able to apply IFRS for the purpose of their
financial reporting on the Indian market and will be required to apply the Ind-AS as first
time adopters. Moreover, such entities will not be able to use their previous IFRS reporting as the opening balance sheet in the financial statements prepared under the Ind-AS.

33. In his budget speech to the Indian Parliament on 11 July 20148 the Honourable Minister of Finance of
India, Arun Jaitley, underlined that there was an urgent need to converge the Ind-AS with IFRS. In this
respect, he proposed that Indian companies apply Ind-AS from the financial year starting on or after 1
April 2016 on a mandatory basis and from the financial year starting on or after 1 April 2015 on a voluntary basis. The minister also considered that the date of implementation of Ind-AS for banks or insurance companies will be separately notified on the basis of the work of the respective regulators.
34. The roadmap was further amended by the ICAI in August 2014 to take into account the budget speech
of the Finance Minister and his suggestion that the Ind-AS may be applied to both standalone and consolidated financial statements in a phased manner. According to the information available to ESMA,
the proposed roadmap is currently in the process of being finalised by the MCA, but no planned date
for official adoption has been communicated to ESMA.
VI

Future plans related to convergence

35. As there are still a number of significant differences between the converged Ind-AS and IFRS, ESMA
asked for information on future plans of the Indian authorities with respect to convergence. The Indian
authorities expressed their intention to further reduce or even to eliminate the differences. While doing
so, the Indian authorities will cooperate with the IASB while also calling for consideration of these differences in the process of amending or revising the relevant IFRS standards.
36. Even though the appointment term of the Indian member on the board of the IASB expired in 2013,
India remains active in the IASB sending comment letters on Exposure Drafts issued by the IASB. It
also organised the 8th IFRS Regional Policy Forum in March 2014.
37. The recommendations included in the Impact Assessment Report (Annex III) refer to some changes in
the current version of the Ind-AS that, if implemented, may imply additional differences from IFRS
such as introducing an exception to the definition of current liabilities in Ind-AS 1 or providing additional local guidance with regard to revenue recognition.
VII

Enforcement experience

http://indiabudget.nic.in/ub2014-15/bs/bs.pdf

12

38.The SEBI is the main enforcer for listed companies in India and its role has substantially increased with
the adoption of the Companies Act, 2013 as this Act recognized SEBIs authority to refer proceedings to
the Court and the National Company Law Tribunal for undertaking enforcement actions.
39. In order to undertake its new role, the SEBI informed ESMA that it carried out in 2013 and 2014 an
internal restructuring of its enforcement mechanism in order to strengthen its review process and be
able to take effective enforcement actions. The enforcement department now carries out all the enforcement proceedings alone and ensures follow-up actions such as issuing notices, organising hearings, passing orders and handling court proceedings.
40.Because of the current obligation of companies to use Indian GAAP when listed on Indian capital markets, SEBI has no experience enforcing any standards other than the current Indian GAAP. Companies
which prepare financial statements under IFRS because of a listing abroad are not subject to enforcement in India.
VIII Other matters
41. As indicated in our previous reports, India has taken actions to ensure an appropriate process of education and training for the relevant participants in the financial reporting process.
42. An IFRS Certificate Course (100 hours) and an IFRS e-learning Course (60 hours) are being conducted
by the ICAI. As of April 2014, 127 of IFRS Certificate Course have been completed and around 5000
members of the ICAI have undergone this course. The certificate is only granted to participants after
clearing the written examination. The ICAI also issued Educational Materials on several Ind-AS to provide guidance on IFRS-converged Ind-AS: Ind-AS 1, Presentation of Financial Statements; Ind-AS 2,
Inventories, Ind-AS 7, Statement of Cash Flows; Ind-AS 18, Revenue; Ind-AS 37, Provisions, Contingent Liabilities and Contingent Assets; and Ind-AS 108, Operating Segments.

IX

Preliminary conclusions

43. On the basis of the information available, ESMA identified the following areas of concern with the progress made towards convergence:
a.

The strategy followed by the Indian authorities regarding the convergence process has
been to adopt IFRS as issued by the IASB and modify them for the specific Indian legal
and economic context. Consequently, the converged Indian Standards have removed a
number of options available within IFRS and introduced several compulsory carve-outs,
some of which may constitute significant departures from IFRS. The ICAI expressed its
commitment to remove these carve outs, when possible, even though the impact analysis
of the Ind-AS made reference to the inclusion of additional differences in the Ind-AS.

b. The new roadmap for the implementation of Ind-AS, as prepared by the ICAI in March
2014, proposes their use for the preparation of consolidated financial statements from 1
April 2016. However, this roadmap will only be effective after a formal decision of the Indian government. At the time of this report, ESMA does not have any further indication
from the Indian authorities. As significant delays occurred in the past, ESMA concludes
that the adoption timeframe of Ind-AS and their exact content remain uncertain.

13

c.

With regard to the expertise in IFRS application and enforcement, the ICAI has made a
significant effort to prepare auditors and preparers for the implementation of Ind-AS.
However, at the moment, this expertise is rather of a theoretical nature and therefore has
unproven practical value.

14

Annex I: Mandate from the European Commission to ESMA for an updated report

15

Annex II: Paper on the main differences between the converged Indian standards and IFRS, as prepared and provided by the ICAI

Differences between IFRSs/IASs and Ind-ASs

A. Carve-outs
Ind-AS 11, Construction Contracts
Appendices A and B to Ind-AS 11 (corresponding to IFRIC 12) and (SIC 29), Service Concession Arrangements and Service Concession Arrangements: Disclosures respectively would not be notified along with
the other standards and their application has been deferred.

Ind-AS 17, Leases

Appendix C to Ind-AS 17 (corresponding to IFRIC 4), Determining Whether an Arrangement contains a
Lease would not be notified along with the other standards and its application has been deferred.

Ind-AS 18, Revenue

(i) A footnote has been added in paragraph 1 to Ind-AS 18, Revenue, that for rate regulated entities, this
standard shall stand modified, where and to extent the recognition and measurement of revenue of such
entities is affected by recognition and measurement of regulatory assets/liabilities as per the Guidance
Note on the subject being issued by the Institute of Chartered Accountants of India.
(ii) On the basis of principles of the IAS 18, IFRIC 15 on Agreement for Construction of Real Estate prescribes that construction of real estate should be treated as sale of goods and revenue should be recognised
when the entity has transferred significant risks and rewards of ownership and retained neither continuing
managerial involvement nor effective control. IFRIC 15 has not been included in Ind-AS 18. Such agreements have been scoped out from Ind-AS 18 and have been included in Ind AS 11, Construction Contracts.

Ind-AS 21, The Effects of Changes in Foreign Exchange Rates

Ind-AS 21 permits an option to recognise exchange differences arising on translation of certain long-term
monetary items from foreign currency to functional currency directly in equity. In this situation, Ind-AS 21
requires the accumulated exchange differences to be amortised to profit or loss in an appropriate manner.
IAS 21 does not permit such a treatment.

Draft Ind-AS 28, Investment in Associates and Joint Ventures (as amended)
(i) Paragraph 17 has been deleted and consequently paragraph 16 has been modified, as the applicability or
exemptions to the Ind-AS is governed by the Companies Act and the Rules made thereunder. However,
paragraph numbers have been retained in Ind-AS 28 (as amended) to maintain consistency with IAS 28
(as amended in 2011).
(ii) References to mutual funds, unit trusts and similar entities including investment linked insurance
funds, have been deleted in paragraphs 18 and 19 of Ind-AS 28 (as amended) as the Companies Act, 1956,

16

is not applicable to mutual funds, unit trusts and similar entities including investment linked insurance
funds and, thus, this standard would not be applicable to such entities.
(iii) Similarly to the current Ind-AS 28 in place, the draft Ind-AS 28 was modified and where the financial
statements of an associate are prepared as of a date different from that of the investor, IAS 28 (as amended
in 2011) requires that this difference should not be more than three months. However, paragraph 34 of
Ind-AS 28 (as amended) provides that this difference should not be more than three months, unless, in
case of an associate, it is impracticable. Similarly, paragraph 35 of Ind-AS 28 (as amended) requires use of
uniform accounting policies, unless, in case of an associate, it is impracticable, which IAS 28 (as amended
in 2011) does not provide. These changes have been made because the investor does not have control over
the associate, it may not be able to influence the associate to prepare additional financial statements or to
follow the accounting policies that are followed by the investor.
(iv) Paragraph 32(b) has been modified on the lines of Ind-AS 103, Business Combinations to transfer
excess of the investors share of the net fair value of the investees identifiable assets and liabilities over the
cost of investment in capital reserve whereas in IAS 28 (as amended in 2011), it is recognised in profit or
loss.

Ind-AS 32, Financial Instruments: Presentation

As an exception to the definition of financial liability in paragraph 11 (b) (ii), Ind-AS 32 to consider the
equity conversion option embedded in a convertible bond denominated in foreign currency to acquire a
fixed number of entitys own equity instruments as an equity instrument if the exercise price is fixed in any
currency. This exception is not provided in IAS 32.

Ind-AS 39, Financial Instruments: Recognition and Measurement

(i) A provision has been added to paragraph 48 of Ind-AS 39 that in determining the fair value of the financial liabilities which upon initial recognition are designated at fair value through profit or loss, any
change in fair value consequent to changes in the entitys own credit risk shall be ignored. IAS 39 requires
all changes in fair values in such liabilities to be recognised in profit or loss.
(ii) IAS 39 does not change the requirements relating to employee benefit plans that comply with IAS 26,
Accounting and Reporting by Retirement Benefit Plans. Ind AS 39 does not mention so as IAS 26 is not
relevant for companies

Ind-AS 103, Business Combinations

IFRS 3 requires bargain purchase gain arising on business combination to be recognised in profit or loss.
Ind-AS 103 requires the same to be recognised in other comprehensive income and accumulated in equity
as capital reserve, unless there is no clear evidence for the underlying reason for classification of the business combination as a bargain purchase, in which case, it shall be recognised directly in equity as capital
reserve.

Ind-AS 106, Exploration for and Evaluation of Mineral Resources

Ind-AS 106 corresponding to IFRS 6, Exploration for and Evaluation of Mineral Resources, would not be
notified immediately as it is under consideration of the Government.

17

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

(i) Presentation of comparatives in the First-time Adoption of Ind-AS101 (corresponding to IFRS 1)
IFRS 1 defines transitional date as beginning of the earliest period for which an entity presents full comparative information under IFRS. It is this date which is the starting point for IFRS and it is on this date
the cumulative impact of transition is recorded based on assessment of conditions at that date by applying
the standards retrospectively except to the extent specifically provided in this standard as optional exemptions and mandatory exceptions. Accordingly, the comparatives, i.e., the previous year figures are also
presented in the first financial statements prepared under IFRS on the basis of IFRS.
Ind-AS 101, however, requires an entity to provide comparatives as per the existing notified Accounting
Standards. It is provided that, in addition to aforesaid comparatives, an entity may also provide comparatives as per Ind-AS on a memorandum basis.
(ii) Reconciliations
IFRS 1 requires reconciliations for opening equity, total comprehensive income, cash flow statement and
closing equity for the comparative period to explain the transition to IFRS from previous GAAP.
As Ind-AS 101, provides an option to provide a comparative period financial statements on memorandum
basis. Where the entities do not exercise this option and, therefore, do not provide comparatives, they
need not provide reconciliation for total comprehensive income, cash flow statement and closing equity in
the first year of transition but are expected to disclose significant differences pertaining to total comprehensive income. Entities that provide comparatives would have to provide reconciliations which are similar to IFRS.
(iii) Elimination of effective dates prior to transition date under Ind-AS 101 First-time Adoption of Indian
Accounting Standards (corresponding to IFRS 1)
IFRS 1 provides for various dates from which a standard could have been implemented. For example, IFRS
1 provides that an entity is encouraged, but not required, to apply IFRS 2 Share-based Payment to equity
instruments that were granted on or before 7 November 2002 or to instruments that were granted after 7
November 2002 and vested before the later of (a) the date of transition to IFRSs and (b) 1 January 2005.
Further, IFRS 1 provides that an entity would have had to adopt the de-recognition requirements in IAS 39
prospectively for transactions entered after 1 January, 2004.
Ind-AS 101 provides that all these dates would be changed to coincide with the transition date elected by
the entity adopting these converged standards.
(iv) Cost of Non-current Assets Held for Sale and Discontinued Operations on the date of transition on
First-time Adoption of Indian Accounting Standards (Ind-AS)
Ind-AS 101 provides transitional relief that while applying Ind-AS 105 - Non-current Assets Held for Sale
and Discontinued Operations, an entity may use the transitional date circumstances to measure such assets or operations at the lower of carrying value and fair value less cost to sell.
(v) Transitional Relief from retrospective application of certain
Benefits

requirements of Ind-AS 19 Employee

Ind-AS 19 requires recognition of actuarial gains and losses for post-employment defined benefit plans
and other long-term employment benefit plans in other comprehensive income immediately and are not
reclassified to profit or loss in a subsequent period. However, Ind-AS 101 provides that a first-time adopter
may elect to recognise all cumulative actuarial gains and losses subsequent to the date of transition to IndAS in other comprehensive income.
(vi) Exemption as a consequence of optional treatment prescribed in Ind-AS 21, The Effects of Changes in
Foreign Exchange Rates, in context of exchange differences arising on account of certain long-term monetary assets or long-term monetary liabilities
Ind-AS 101 provides that on the date of transition, if there are long-term monetary assets or long-term
monetary liabilities mentioned in paragraph 29A of Ind-AS 21, an entity may exercise the option mentioned in that paragraph regarding spreading the unrealised Gains/Losses over the life of Assets/Liabilities
either retrospectively or prospectively. If this option is exercised prospectively, the accumulated exchange
differences in respect of those items are deemed to be zero on the date of transition.
18

(vii) Exemptions regarding designation of previously recognised financial instruments

Ind-AS 101 provides that the financial instruments carried at amortised cost should be measured in accordance with Ind-AS 39 from the date of recognition of financial instruments unless it is impracticable
(as defined in Ind-AS 8) for an entity to apply retrospectively the effective interest method or the impairment requirements of Ind-AS 39. If it is impracticable to do so then the fair value of the financial asset at
the date of transition to Ind-ASs shall be the new amortised cost of that financial asset at the date of transition to Ind-ASs.
Ind-AS 101 provides another exemption that financial instruments measured at fair value shall be measured at fair value as on the date of transition to Ind-AS.
(viii) Definition of previous GAAP under Ind-AS 101 First-time Adoption of Indian Accounting Standards
IFRS 1 defines previous GAAP as the basis of accounting that a first-time adopter used immediately before
adopting IFRS.
Ind-AS 101 defines previous GAAP as the basis of accounting that a first-time adopter used immediately
before adopting Ind-AS for complying with the reporting requirements in India.
(ix) Cost of Property, Plant and Equipment (PPE), Intangible Assets, Investment Property, on the date of
transition of First-time Adoption of Ind-AS.
Ind-AS 101 provides an entity an option to use carrying values of all assets as on the date of transition in
accordance with previous GAAP as an acceptable starting point under Ind-AS.

Draft Ind-AS 41, Agriculture (as amended)

IAS 41 - Agriculture, requires measurement of biological assets, viz., living animals and plants at fair value
and recognizing gains and losses arising on such measurement in profit or loss. The standard presumes
availability of fair values for various biological assets. In the Indian market, since fair values of biological
assets, such as, standing crops, plants, living animals etc. are not readily available and where available
their reliability is doubtful, it is proposed to revise the Standard and not to issue the standard as it is.

Draft Ind-AS 110, Consolidated Financial Statements (as amended)

Paragraph 4(a) has been deleted as the applicability or exemption to the Ind-AS is governed by the Companies Act and the Rules made thereunder.

Draft Ind-AS 111, Joint arrangements (as amended)

The transitional provisions given in paragraph numbers C2-C13 of Appendix C in IFRS 11 have not been
given in Ind AS 111, since all transitional provisions related to Indian ASs, wherever considered appropriate, have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding
to IFRS 1, First-time Adoption of International Financial Reporting Standards. In order to maintain consistency with paragraph numbers of IFRS 11, the paragraph numbers are retained in Ind AS 111.

Draft Ind-AS 113, Fair value measurement (as amended)

(i) Paragraphs 7(b) refers to Ind AS 26, Accounting and Reporting by Retirement Benefit Plans which is
not relevant for the companies. Hence the paragraph is deleted. In order to maintain consistency with the
paragraph numbers of IFRS 13, the paragraph number is retained in Ind AS 113.
(ii) Paragraph D18 D46 of Appendix D and IGA8-IGA9 in Appendix on Amendments to guidance on
other Ind ASs deals with IFRS 9 Financial Instruments, as only Ind AS 39 corresponding to IAS 39 is made

19

applicable. Hence, these paragraphs have been deleted. However, in order to maintain consistency with
the paragraph numbers of IFRS 13, the paragraph number are retained in Ind AS 113.
(iii) Appendix C is not relevant as the date of application will be notified under the Companies Act. However, in order to maintain consistency with IFRS 13, the same has been retained.
(iv) Following paragraphs of Appendix D have been deleted as they are not relevant: D11,D 61, D77, D94,
D96, D113, D122, D123, D135, D137,D141, D142, D145 D146. However, in order to maintain consistency
with the paragraph numbers of IFRS 13, the paragraph numbers are retained in Ind-AS 113.
(vi) Paragraphs D124-D130 and IGA13 that deal with IAS 41 Agriculture have been deleted as the relevant
changes have already been incorporated in the Exposure Draft of Ind AS 41.
(vii) Paragraphs D131-D134 refer to IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments which is not relevant for the companies. Hence the paragraphs are deleted. In order to maintain
consistency with the paragraph numbers of IFRS 13, the paragraph numbers are retained in Ind AS 113.

B. Other major changes in Indian Accounting Standards vis-a-vis IFRSs/IASs not

resulting in carve-outs
Ind-AS 1, Presentation of Financial Statements
With regard to preparation of Statement of profit and loss, IAS 1, Presentation of Financial Statements,
provides an option either to follow the single statement approach or to follow the two statement approach.
While in the single statement approach, all items of income and expense are recognised in the statement of
profit and loss, in the two statements approach, two statements are prepared, one displaying components
of profit or loss (separate income statement) and the other beginning with profit or loss and displaying
components of other comprehensive income. Ind-AS 1 allows only the single statement approach.
IAS 1 requires preparation of a Statement of Changes in Equity as a separate statement. Ind-AS 1 requires
the Statement of Changes in Equity to be shown as a part of the balance sheet.
IAS 1 gives the option to individual entities to follow different terminology for the titles of financial statements. Ind-AS 1 is changed to remove alternatives by giving one terminology to be used by all entities.
IAS 1 permits the periodicity, for example, of 52 weeks for preparation of financial statements. Ind-AS 1
does not permit it.
IAS 1 requires an entity to present an analysis of expenses recognised in profit or loss using a classification
based on either their nature or their function within the equity. Ind-AS 1 requires only nature-wise classification of expenses.
IAS 1 contains Implementation Guidance. Ind-AS 1 does not include the same because various enactments
have prescribed formats, e.g., Schedule VI to the Companies Act, 1956.
Different terminology is used in accordance with existing laws, so that e.g., the term balance sheet is used
instead of Statement of financial position and Statement of profit and losses is used instead of Statement of comprehensive income.

Ind-AS 7, Statement of Cash Flows

In case of other than financial entities, IAS 7 gives an option to classify the interest paid and interest and
dividends received as item of operating cash flows. Ind-AS 7 does not provide such an option and requires
these items to be classified as items of financing activity and investing activity, respectively.
IAS 7 gives an option to classify the dividend paid as an item of operating activity. However, Ind-AS 7
requires it to be classified as a part of financing activity only.

20

Ind-AS 8, Accounting Policies, Changes in Accounting Estimates and Errors

Ind-AS 8 has been amended to provide that in absence of specific Ind-AS on the subject, management may
also first consider the most recent pronouncements of the IASB and in absence thereof those of the other
standard-setting bodies that use a similar conceptual framework to develop accounting standards, other
accounting literature and accepted industry practices.

Ind-AS 16, Property, Plant and Equipment

The text of paragraph 8 has been changed to clarify more precisely that servicing equipment also qualifies
as property, plant and equipment when an entity expects to use them during more than one period.
Ind-AS 19, Employee Benefits
According to Ind-AS 19 the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19, the government
bonds can be used only where there is no deep market of high quality corporate bonds.
To illustrate treatment of gratuity subject to ceiling under Indian Gratuity Rules, an example has been
added in paragraph 73 of Ind-AS 19.

Ind-AS 20, Accounting for Government Grants and Disclosure of Government Assistance
IAS 20 gives an option to measure non-monetary government grants either at their fair value or at nominal value. Ind-AS 20 requires measurement of such grants only at their fair value. Thus, the option to
measure these grants at nominal value is not available under Ind-AS 20.
IAS 20 gives an option to present the grants related to assets, including non-monetary grants at fair value
in the balance sheet either by setting up the grant as deferred income or by deducting the grant in arriving
at the carrying amount of the asset. Ind-AS 20 requires presentation of such grants in balance sheet only
by setting up the grant as deferred income. Thus, the option to present such grants by deduction of the
grant in arriving at the carrying amount of the asset is not available under Ind-AS 20.

Ind-AS 21, The Effects of Changes in Foreign Exchange Rates

When there is a change in functional currency of either the reporting currency or a significant foreign operation, IAS 21 requires disclosure of that fact and the reason for the change in functional currency. IndAS 21 requires an additional disclosure of the date of change in functional currency.
The following examples have been included in Ind-AS 21, The Effects of Changes in Foreign Exchange
Rates, as Appendix B:
-An example to clarify the provisions of paragraph 14.
-An example to clarify impairment loss in Paragraph 25.
-An example to clarify paragraphs 33 and 37.
The date of change of functional currency should also be disclosed in paragraph 57.

Ind-AS 23, Borrowing Costs

IAS 23 provides no guidance as to how the adjustment prescribed in paragraph 6(e) is to be determined.
Ind-AS 23 provides guidance in this regard.

21

Ind-AS 24, Related Party Disclosures

In Ind-AS 24, disclosures which conflict with confidentiality requirements of statute/regulations are not
required to be made since Accounting Standards cannot override legal/regulatory requirements.
Paragraph 24A (reproduced below) has been included in the Ind-AS 24. It provides additional clarificatory
guidance regarding aggregation of transactions for disclosure.
24A Disclosure of details of particular transactions with individual related parties would frequently be
too voluminous to be easily understood. Accordingly, items of a similar nature may be disclosed in aggregate by type of related party. However, this is not done in such a way as to obscure the importance of significant transactions. Hence, purchases or sales of goods are not aggregated with purchases or sales of
fixed assets. Nor a material related party transaction with an individual party is clubbed in an aggregated
disclosure.
In the definition of the close members of the family of a person, relatives as specified under the meaning
of relative under the Companies Act, 1956, has been included.

Draft Ind-AS 27, Separate Financial Statements (as amended)

Paragraphs 8 and 16 have been deleted and paragraphs 6 and 17 have been modified as the applicability or
exemptions to the Ind-AS is governed by the Companies Act and the Rules made thereunder.
A sentence has been added in paragraph 9 of Ind-AS 27, Consolidated and Separate Financial Statements
requiring that for companies the form of consolidated financial statements as given in Appendix C to this
standard shall be applied to the extent circumstances admit.

Ind-AS 29, Financial Reporting in Hyperinflationary Economies

Ind-AS 29 requires an additional disclosure regarding the duration of the hyperinflationary situation existing in the economy.

Ind-AS 33, Earnings per Share

IAS 33 provides that when an entity presents both consolidated financial statements and separate financial
statements, it may give EPS related information in consolidated financial statements only, whereas, the
Ind-AS 33 requires EPS related information to be disclosed both in consolidated financial statements and
separate financial statements.
Paragraph 2 of IAS 33 requires that the entire standard applies to:
(a) the separate or individual financial statements of an entity:
(i) whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or
foreign stock exchange or an over-the-counter market, including local and regional markets) or
(ii) that files, or is in the process of filing, its financial statements with a Securities Regulator or other regulatory organisation for the purpose of issuing ordinary shares in a public market; and
(b) the consolidated financial statements of a group with a parent:
(i) whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign
stock exchange or an over-the-counter market, including local and regional markets) or
(ii) that files, or is in the process of filing, its financial statements with a Securities Regulator or other regulatory organisation for the purpose of issuing ordinary shares in a public market.

22

It also requires that an entity that discloses earnings per share shall calculate and disclose earnings per
share in accordance with this Standard.
The above have been deleted in the Ind-AS as the applicability or exemptions to the Indian Accounting
Standards is governed by the Companies Act and the Rules made there under.
Paragraph 4 has been modified in Ind-AS 33 to clarify that an entity shall not present in separate financial
statements, earnings per share based on the information given in consolidated financial statements, besides requiring as in IAS 33, that earnings per share based on the information given in separate financial
statements shall not be presented in the consolidated financial statements.
In Ind-AS 33, the following paragraph has been added after paragraph 12:
Where any item of income or expense which is otherwise required to be recognized in profit or loss in
accordance with accounting standards is debited or credited to securities premium account/other reserves,
the amount in respect thereof shall be deducted from profit or loss from continuing operations for the
purpose of calculating basic earnings per share.
Paragraph 15 of Ind-AS 33 has been amended by adding the phrase, irrespective of whether such discount
or premium is debited or credited to securities premium account to further clarify that such discount or
premium shall also be amortised to retained earnings.

Ind-AS 34, Interim Financial Reporting

A footnote has been added to paragraph 1 of Ind-AS 34, Interim Financial Reporting that Unaudited Financial Results required to be prepared and presented under Clause 41 of Listing Agreement with stock
exchanges is not an Interim Financial Report as defined in paragraph 4 of this Standard.

Ind-AS 39, Financial Instruments: Recognition and Measurement

(i) The transitional provisions given in IAS 39 and IFRIC 6, IFRIC 16 and IFRIC 19 have not been given in
Ind AS 39, since Accounting Standard corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards, will deal with the same. The transitional provisions given in IAS 39 and
IFRIC 6, IFRIC 16 and IFRIC 19 have not been given in Ind AS 39, since all transitional provisions related
to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of
Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial
Reporting Standards
(ii) Different terminology is used in accordance with the terminology of IAS 1.

Ind-AS 40, Investment Property

IAS 40 permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind-AS 40 permits only the cost model.

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

Paragraph 3 of Ind-AS 101 specifies that an entitys first Ind-AS financial statements are the first annual
financial statements in which the entity adopts Ind-ASs in accordance with Ind-ASs notified under the
Companies Act, 1956 whereas IFRS 1 provides various examples of first IFRS financial statements.
Paragraph 4 of IFRS 1 provides various examples of instances when an entity does not apply this IFRS.
Ind-AS 101 does not provide the same.
IFRS 1 requires specific disclosures if the entity provides non-IFRS comparative information and historical
summaries. Such disclosures are not required under Ind-AS 101.

23

Ind-AS 103, Business Combinations

IFRS 3 excludes from its scope business combinations of entities under common control. Appendix C of
Ind-AS 103 gives guidance in this regard.

C. IAS and relevant Interpretations not included in Ind-AS as these are considered
not relevant for companies in India
1. Ind-AS corresponding to IAS 26 - Accounting and Reporting by Retirement Benefit Plans, has not been
considered relevant for companies, therefore, the same is not being notified under the Companies Act,
1956.
2. IFRIC 2 - Members Shares in Co-operative Entities and Similar Instruments issued by IASB has not
been considered relevant for companies, as only an individual can hold shares in cooperative entities,
therefore, the same is not being notified under the Companies Act, 1956.
3. SIC 7 - Introduction of the Euro issued by IASB has not been considered relevant in the Indian context,
therefore, the same has not been issued.
4. Paragraph 1(b) of IAS 28 has been deleted in Ind-AS 28 as the Companies Act, 1956, is not applicable to
mutual funds, unit trusts and similar entities including investment linked insurance funds and, thus, this
standard would not be applicable to such entities.
Similar change has been made in Ind-AS 31, Interests in Joint Ventures.
5. Paragraph 1(b) of IAS 31 has been deleted in Ind-AS 31 as the Companies Act, 1956, is not applicable to
mutual funds, unit trusts and similar entities including investment linked insurance funds and, thus, this
standard would not be applicable to such entities.

24

Annex III: Report on Impact Analysis of Indian Accounting Standards (Ind-AS) and One set
of Standards us. Two sets pf Standards. The Institute of Chartered Accountants of India,
New Delhi, 2013

R
Report
t
on
I
Impact
t Analysis off
India
an Acccountin
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and
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wo setss of Staandard
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On

T Insstitute of
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o Indiaa
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Contents
Paragraph No.
Executive Summary and Recommendations

I-X

Historical Background

1-5

Recent Developments

6 - 11

Part A Impact Analysis of Indian AS on Principal Sectors of

12 - 15

Economy
Part B One set of Standards vs. Two sets of Standards

22 - 44

Annexures

Page Nos.

A:

48 - 52

List of Indian ASs placed on MCA website and corresponding

revised Indian AS formulated by ICAI

B:

New Indian ASs (Post February, 2011) corresponding to new

53

IFRS formulated by the ICAI

C:

Revised road map for implementation of Indian Accounting

54 - 56

Standards
D:
E:

List of Companies invited for Workshops

List of Associations, Regulators /Boards invited for the

57 - 62
63 - 64

Workshops
F:

List of Participants at the Workshops

65 - 66

G:

List of Amendments and Changes required in Ind AS 39 based

67 - 69

on IFRS for SMEs

H:

Marked Copy of Indian AS 8, formulated as Exposure Draft

70 - 91

of AS 5 (revised) Accounting Policies, Changes in Accounting

Estimates and Errors
I:

Table showing major differences between existing Accounting

92 - 100

Standards (AS) and Indian Accounting Standards

J:

Summery of Accounting Standards Frameworks for Private

Sector

101 -106

Executive Summary and Recommendations

I.

The Core Group on Convergence of Indian Accounting Standards with IFRS,

constituted by the Ministry of Corporate Affairs (MCA), at its last meeting held on
August 23, 2013, decided that the Institute of Chartered Accountants of India (ICAI)
should conduct an impact analysis of Indian Accounting Standards (hereinafter in
this Report referred to as Ind AS) converged with IFRS on the principal sectors of
economy since Ind AS were placed on the MCA website in February 2011. The
Core Group also desired that the ICAI should study and recommend whether one set
of Ind AS can be made applicable to all companies including small and one person
companies, with exemptions/relaxations. The Core Group requested the ICAI to
submit its recommendations on the aforesaid aspects by October 15, 2013
(paragraphs 6 to 10).

II.

The ICAI, through its Accounting Standards Board (ASB), conducted the impact
analysis of Ind AS on the principal sectors of economy and also analysed whether
one set of Ind AS can be applied to all companies including small and one person
companies. This Report contains the process, findings and recommendations in
respect of the aforesaid aspects (paragraph 11).

Part A - Impact Analysis of Ind AS on Principal Sectors of Economy

III.

Keeping in view the time constraint of submitting its Report by October 15, 2013,
the ICAI selected 301 companies from public and private sectors having turnover
in excess of rupees Two Thousand Crore, representing principal sectors of
economy, viz., Power, Telecom, Automobiles, Information Technology, Oil and
Gas, Infrastructure Real Estate Development, Construction and Transportation,
Steel, Pharmaceuticals, Manufacturing, Retail, FMCG, Agriculture and others.
Apart from these companies, thirty eight trade and industry associations and five
Regulators /industry Boards were also selected to provide their inputs on the
impact of Ind AS on the profitability and financial position of the companies with
a view to highlight the areas of concerns needed to be addressed through carve
1

outs, if necessary, or by providing additional guidance wherever required. For this

purpose, the ICAI conducted three Workshops at Mumbai, Delhi and Chennai at
which all the aforesaid organisations were invited. As many as 75 officials
representing these organisations participated in the Workshops, whereat issues
were discussed in-depth (paragraphs 12 to 14).
IV.

Only with regard to one Indian Accounting Standard namely Ind AS 1 on,
Presentation of Financial Statements, the ICAI is of the tentative view that a carve
out may be required, by providing an exception to the definition of current
liability to recognise that in the situation of routine procedural type of noncompliances with the terms of a long term loan, e.g., non-submission of stock
statement in time, which are normally subsequently regularised, non-current loan
should not be considered as a current liability. It may be mentioned that since the
carve-out, if decided to be made, would mean change in the Ind AS, it is required
to undergo the due process including issuance of the exposure draft by the ASB,
approval of the ICAIs Council and the National Financial Reporting Authority.
This may take some time before it is finalised (paragraph 15.I.5).

V.

The ICAI recommends the following with regard to Ind AS/Appendices to Ind AS,
which were deferred by the MCA at the time the Ind AS were placed on its
website:

VI.

(i)

Ind AS 106, Exploration for and Evaluation of Mineral Resources, as

recommended by NACAS may be notified since the concerns expressed by
the MCA and the industry are being addressed by the ICAI in consultation
with the industry

(ii)

It is reiterated that Appendix C, (Appendix to Ind AS 17) Determining

whether an Arrangement Contains a Lease, provides correct accounting
based on substance of the transaction rather than its legal form.

(iii)

It is reiterated that Appendices A and B, (Appendices to Ind AS 11)

Service Concession Arrangements, provide correct accounting treatment.

Many concerns raised by the industry can be addressed by providing additional

guidance separately by the ICAI and, accordingly, no change in Ind AS would be
required. In respect of certain concerns, e.g., revenue recognition by Telecom and
Information Technology companies, the ICAI feels no changes in Ind AS are
2

required as the principles prescribed in Ind AS would result in improvements in

accounting (paragraph 15).
VII.

Some concerns were expressed regarding implementation of Ind AS related to

preparation of consolidated financial statements in view of different definitions of
control, associate and subsidiary in the Companies Act, 2013, as compared to
those contained in the relevant Ind AS and the Explanation to section 129 (3) of
the said Act that for the purpose of preparation of consolidated financial
statements, the word subsidiary includes associate and joint venture. The ICAI
notes that the Draft Rule 9.4 issued by MCA clarifies that consolidated financial
statements shall be prepared in accordance with Accounting Standards, which may
be interpreted to mean that the definitions used in the Standards should be applied
and that the associates and joint ventures should be consolidated as per the
relevant Standards. It may be noted that at present also, the definition of relative
in the existing notified Accounting Standard (AS) 18, Related Party Disclosures,
is different as compared to the definition under the Companies Act, 1956
(paragraph 15).

Part B One set of Standards vs. Two sets of Standards

VIII. After an in-depth examination of the arguments for one set of Ind AS for all
companies, including small and one person companies, the ICAI recommends that
there should be two sets of Accounting Standards - one set comprising Ind AS for
large, public interest companies and the other set containing simplified
measurement principles with fewer disclosures for smaller companies - for the
following reasons:
(i)

Impracticability to formulate one set of Ind AS providing

exemptions/relaxations from measurement principles (See paragraphs 25 to
36 of the Report for detailed analysis).

(ii)

Experience of other counties that have implemented IFRS shows that IFRS
are enforced only on public interest entities and that other GAAPs exist for
non-public interest entities (See paragraph 38)

(iii)

The number of private and small companies is much larger as compared to

large, public interest entities in India making it extremely onerous on the
part of managements of the companies to implement full Ind AS, even with
3

exemptions/relaxations, in view of skills and expertise available with them

(See paragraphs 40 and 41).
(iv)

Information needs of non-public interest, smaller companies is different as

compared to that for large, public interest companies [See paragraph 42
(b)].

(v)

The language of Ind AS, coupled with measurement principles, is complex.

Therefore, keeping in view the skills available with smaller companies, a
set of simplified Accounting Standards is a necessity, if these are to be
implemented effectively [See paragraph 42 (c) ].

(vi)

The set of Ind AS is too voluminous to be gone through by small

companies.
Such companies require a simplified smaller set
understandable to their managements who are not expected to have
necessary skills and expertise [Paragraph 42 (iv)].

(vii)

A second set of Standards does not mean that the recognition and
measurement principles would be significantly different for Ind AS in all
cases (See paragraph 43).

(viii) The Companies Act 2013, itself recognises two sets of Accounting
Standards in various sections (See paragraph 39).
IX.

The ICAI suggests that the second set of Accounting Standards may
comprise the upgraded existing Accounting Standards for small and one
person companies (See paragraph 44).

Other recommendations on an issue arising during discussion with Industry

X.

There was an unanimous view that going forward, those Ind AS should be
implemented which correspond to the IFRS in force as on the date of
implementation. Thus, for instance, if Ind AS are enforced on one class of
companies from 1st April 2015, then those Ind AS that correspond to IFRS
effective on that date should be implemented and not those Ind AS that are
placed on the MCA website which correspond to IFRS in force in 2011, as
this would be a backward step resulting in India losing its international
4

standing. The ICAI agrees with this view and as far as ICAI is concerned, it
has formulated Ind AS that are at par with most of the new IFRS and the
revised IFRS issued by the International Accounting Standards Board after
February 2011 (Paragraph 17).

Historical Background
1. In 2007, the Institute of Chartered Accountants of India (ICAI) decided to converge with
IFRS. The Ministry of Corporate Affairs (MCA), Government of India, also supported
the initiative of ICAI to converge with IFRS from 1st April, 2011, in order to bring the
accounting practices followed in India at par with the best international practices. In this
direction, the MCA issued a Press Release in January 2010 containing a road map for
convergence for different classes of companies, starting from 1st April, 2011, in a phased
manner.
2. The Ministry of Corporate Affairs placed on its website 35 Indian Accounting Standards
(Ind AS) converged with IFRS in force on 1st April, 2011, formulated by the ICAI after
recommendation thereof by National Advisory Committee on Accounting Standards
(NACAS). The MCA in its Press Release stated that it will implement the Ind AS in a
phased manner after various issues including tax related issues are resolved with the
concerned departments. As far as possible no change was made in the Ind AS from the
corresponding IFRS unless absolutely warranted keeping in view the Indian conditions
and circumstances. Accordingly, certain departures were made keeping in view the then
economic environment prevailing in the country. In certain cases, departures were made
in view of conceptual differences which were taken up by the ICAI with the International
Accounting Standards Board (IASB). A list of Ind AS placed on the MCA website in
February 2011 with the corresponding IFRS in force at that time is reflected in Annexure
A to this Report.
3. With a view to continue to remain at par with the IFRSs which are being revised and new
IFRSs being issued by the IASB, the ASB, after approval by the Council of the Institute,
initiated the process of revising the existing Ind AS and issuing new Ind AS in
convergence with the new/revised IFRS, so that whenever the Government decides to
converge with IFRS, the Ind AS corresponding to the IFRS effective on that date are
available.
4. Post-February 2011, to achieve convergence with the IFRS, the Council of the ICAI
finalised seven new/revised Ind AS along with certain amendments to other Ind AS
corresponding to the new/revised IFRS issued by the IASB which were forwarded to
NACAS for its consideration, except a few recent revisions/amendments in IFRS which
are in the process of being finalised. Annexure A contains the list of revised Ind AS
corresponding to the existing Ind AS placed on the MCAs website and the list of new
Ind AS is contained in Annexure B. The list of revised/new Ind AS is placed on the
ICAIs website.

5. In the expectation of passing of the new Companies Act and the expected changes in the
tax laws, the Ministry of Corporate Affairs in September 2012 requested the ICAI to
suggest a revised road map for implementation of Ind AS. The revised road map
formulated by the ICAI was considered and approved by NACAS and was forwarded to
the MCA in April 2013 for further action. The revised road map recommended
implementation of Ind AS from 1st April, 2015, on the lines of the earlier road map issued
by the MCA (The roadmap finalized by NACAS and forwarded to the MCA is
reproduced in Annexure C).
Recent developments
6. The Indian Parliament recently passed the new Companies Act, 2013, which incorporates
provisions that facilitate implementation of Ind AS in the country. Further, the Ministry
of Finance formulated the drafts of the Tax Accounting Standards which are expected to
come into force from April 2014. It is felt that with these changes in the relevant laws,
road is paved for the implementation of Indian Accounting Standards converged with
IFRS.
7. A meeting of the Core Group on Convergence of Indian Accounting Standards with
IFRS, constituted by the Ministry of Corporate Affairs, Government of India, was held on
August 23, 2013 on the revised road map for applicability of Indian Accounting
Standards (Ind AS) submitted by the National Advisory Committee on Accounting
Standards (NACAS) based on the road map finalized and forwarded to the NACAS by
the ICAI.
8. At the above meeting of the Core Group, a concern was expressed that since the Ind AS
formulated in 2011 were approved keeping in view the economic environment prevailing
in the country at that time, it would be appropriate that an impact analysis in the current
scenario of the Ind AS on the principal sectors of the economy may be conducted. It was
felt that the impact analysis may also consider the Ind AS converged with IFRS issued
subsequent to 2011 formulated by the ICAI and placed on its website since the revised
roadmap recommended that the Ind AS corresponding to the IFRS in force as on 1st
April, 2015 should be implemented. The ICAI agreed to carry out this impact study.
9. The road map submitted by the NACAS, in line with the earlier road map issued by the
MCA in 2010, recommended that there should be two separate sets of Accounting
Standards. The first set would comprise the Indian Accounting Standards (Ind AS)
converged with the IFRS which should be applicable to the specified classes of public
interest and large companies. The second set would comprise the existing notified
Accounting Standards and should be applicable to other companies. At the meeting of
the Core Group held on August 23, 2013, a view was expressed that there should be only
7

one set of Accounting Standards applicable to all companies, namely, the Ind AS. If
necessary, exemptions/relaxations in respect of various requirements of the Ind AS
primarily with regard to measurement and disclosures may be identified to reduce the
burden of smaller companies. On the other hand, there was also a view that since the Ind
AS converged with IFRS even after exemptions/relaxations would be complex for the
smaller companies who lack the necessary expertise to implement them, there is a need
for simpler Accounting Standards for such companies.
10. In view of divergence of views, the Core Group requested the ICAI to also study whether
one set of Accounting Standards can be applied to all companies including one person
companies and small companies as defined in the Companies Act, 2013. The ICAI was
also requested to study the option of second set of Accounting Standards as to how it
would be consistent with the first set of Accounting Standards so that at least the
recognition and, to a large extent, the measurement principles are the same. The Core
Group requested the ICAI to complete the aforesaid study and the impact analysis and
submit its suggestions by October 15, 2013.
11. The ICAI, through its Accounting Standards Board, as per the decision of the Core
Group, conducted the impact analysis of the Ind AS on the principal sectors of economy
and also studied the issue of one set of Ind AS versus two sets of standards applicable to
different classes of companies. This Report, accordingly, contains the process, findings
and recommendations in respect of the aforesaid two aspects. Part A of the Report
contains impact analysis of Ind AS on the principal sectors of economy and Part B
contains the study of one set of Ind AS versus two sets of Standards.

Part A

Impact Analysis of Ind AS on Principal Sectors of Economy

Process
12. The Accounting Standards Board of the ICAI while deciding the manner of conducting
the impact analysis felt that to analyse the impact of Ind AS, ideally, Ind AS should be
used for preparing financial statements of individual companies pertaining to different
sectors. The Board, however, noted that to do so would require considerably long period
of time which would be much beyond October 15, 2013, i.e., the date by which the MCA
desired the ICAI to complete the analysis and submit its recommendations. The Board,
therefore decided that, given the time frame, it would be appropriate to seek the views of
larger companies, trade and industry associations, industry-specific regulators, e.g.,
Telecom Regulatory Authority of India (TRAI) and the industry Boards like the Tea
Board, relating to significant sectors of economy. With this in view, 301 companies
8

belonging to both public sectors and private sectors whose turnover was in excess of
Rupees Two Thousand Crore were selected for the purpose of impact analysis. It was
ensured that these companies represented the principal sectors of economy, viz., Power,
Telecom, Automobiles, Information Technology, Oil and Gas, Infrastructure Real
Estate Development, Construction and Transportation, Steel, Drugs and Pharmaceuticals,
Manufacturing, Retail, FMCG, Agriculture and others. With regard to Non-Banking
Financial Companies, Banks and Insurance Companies, since the call for implementation
of Ind AS was decided to be taken up by the relevant regulators, viz., the Reserve Bank
of India and the Insurance Regulatory and Development Authority, the entities from the
aforesaid sectors were not included in the impact analysis. Accordingly, letters were sent
to the selected companies, trade and industry associations and regulators/industry Boards
to highlight their concerns, if any, on implementation of Ind AS, so that, where
appropriate, changes can be made in the Ind AS. The letters also invited the
representatives of these companies and associations to discuss their concerns at the
workshops decided to be organized at Delhi, Mumbai and Chennai (list of these
companies is set out in Annexure D and the list of the trade and industry associations
along with the list of regulators/industry Boards is given in Annexure E).
13. The Workshops were conducted by the ASB on 1st October, 2013 at Mumbai, 4th
October, 2013 at Delhi and 8th October, 2013 at Chennai whereat 75 representatives of
industry associations and companies representing various sectors of economy attended
and participated in the deliberations (list of participants is given in Annexure F). At the
Workshops, a presentation was made on the current status of Ind AS vis--vis the IFRS,
existing carve outs in the Indian Accounting Standards and major impact areas compared
to existing Accounting Standards. The participants were requested to provide their inputs
as to whether the existing carve outs are needed in view of the changed economic
scenario and the subsequent changes, if any, in the IFRS corresponding to which the
ICAI had developed the Ind AS and whether some other carve outs are required keeping
in view the changed economic and legal conditions.
14. Apart from the inputs received from the participants at the Workshops, the ICAI also
considered the impact analysis conducted by various other organisations, inculding a
regulator (Telecom Regulatory Authority of India for Telecom Companies). The findings
and recommendations contained in this Report accordingly are based on the aforesaid
analysis and the inputs received from various participants at the Workshops.
Impact Analysis on Principal Sectors
15. The concerns were raised by the following major sectors of economy:

A: Real Estate Development

B: Infrastructure including Power
C: Oil & Gas Exploration and Production
D: Telecom
E: Information Technology
F: Drugs & Pharmaceuticals
G: Automobiles and
H: Retail.
The concerns raised by the companies pertaining to the aforesaid sectors and the general
comments, and the manner in which these can be addressed in the view of the ICAI are
contained in the following table:

ConcernsRaised

Howtheconcernscanbeaddressed

A:Realestatedevelopmentsector
Revenuerecognitionforrealestatesales
On a concern expressed by various real estate
development companies, IndAS had carved out
IFRIC 15, Agreements for the Construction of Real
Estate, whose application may have required real
estateentitiestodefertherecognitionofrevenue
from the real estate sale till the completion of
construction. Instead, the scope of IndAS 11,
Construction Contracts, has been amended to
includeaccountingforrealestatedevelopers.This
willrequiretheseentitiestoapplythepercentage
of completion method (POCM) for recognition of
revenuefromrealestatesales.

ICAI may provide similar guidance with regard to

recognition of revenue from real estate sales
separately as has been done in the case of the
existingnotifiedAccountingStandards.

While,incaseoftheexistingAccountingStandard,
i.e., AS 9, Revenue Recognition and AS 7,
AccountingforConstructionContracts,theICAIhas
issuedaGuidanceNoteonhowtoapplythePOCM
for recognition of revenue from real estate sales,
there is no guidance insofar as Ind AS 11,
ConstructionContracts,isconcerned.Accordingly,
the absence of the guidelines, may again lead to
diversity of practice, particularly, in the
consideration of cost of land as a part of
construction.
B:Infrastructureincludingpowersector
Publicprivatepartnershipininfrastructure(Service

10

ConcessionArrangements)
1. IndASprovidesspecificguidanceonaccounting
for such arrangements in which the public
sector(Govt.)controlsorregulatestheservices
provided with the infrastructure and their
prices, and controls any significant residual
interestintheinfrastructure.

It is noted that while notifying the Ind AS on its

website, the MCA indicated that the accounting
forServiceConcessionArrangementsasprescribed
in Appendices A and B of Ind AS 11, Construction
Contracts,shallbedeferredinviewofthefactthat
the industry had expressed an apprehension that
sinceAppendixArequiresinteraliarecognitionof
intangibleassets,e.g.,therighttocollecttollfrom
the roads constructed by the operator, the banks
may not advance loans against such intangible
assets.

Under Ind AS, the accounting of such

arrangements is split up into the initial
construction phase and the subsequent
operations phase. The operator will have to
allocate the total consideration to each phase
basedontheirrelativefairvalues.
It may, however, be noted that recently the MCA
hasamendedScheduleXIVtotheCompaniesAct,
The operator will have to recognise the 1956,whichprescribestherateofdepreciationon
compensation receivable for the construction intangible assets recognised for rights obtained
phase as either: (a) a financial asset to the to collect toll on the roads constructed by the
extent that it has an unconditional right to operatoras,atpresent,therearenorequirements
receive cash irrespective of usage of the regarding accounting for service concession
infrastructure(forexample,wheretheoperator arrangements. Accordingly, Schedule II to the
receives a predetermined payment from the CompaniesAct,2013requiresthatamortisationof
government irrespective of the actual usage); intangibleassetscreatedunderserviceconcession
or (b) an intangible asset, to the extent that arrangements should be in accordance with the
consideration is dependent on usage of the Accounting Standards. Further, recently, the
infrastructure(forexample,whereoperatorhas industry has also informed that even though the
a right to charge the users based on usage of intangible assets are being recognized by
the infrastructure for a defined term). In infrastructure companies, the banks have no
certain arrangements, both a financial asset issues in providing loans against such assets.
and an intangible asset may need to be While the other concerns expressed by the
recognised.Allsuchassetsarerecordedbased industry may remain, the ICAI reiterates its view
ontheirfairvalues.Intheconstructionphase, that the accounting treatments provided in
theoperatorwillhave to recogniserevenueas Appendices A and B to Ind AS 11 are appropriate
per Ind AS 11 on construction contracts to the keepinginviewthesubstanceofthetransactions.
extent of the value of the services performed
(i.e.costofconstructingtheinfrastructureasset
withareasonablemargin).
Duringtheoperationsphase,accountingwillbe
determined by the type of arrangement with
the grantor. In the case of a financial asset
model, the operator will recognise an interest
incomeover thelifeofthearrangementanda
serviceincome towardsanyadditionalservices
like for operations and maintenance. In the
caseofanintangibleassetmodel,theoperator
will recognise the amounts collected from

11

usersoftheinfrastructureassetsasincome
The intangible asset will be amortised in
accordancewiththeprincipleslaiddowninInd
AS38onintangibleassets.Further,contractual
obligationstomaintainorrestoreinfrastructure
are recognised and measured in accordance
with Ind AS 37 on provisions, contingent
liabilities and contingent assets; irrespective of
themodelfollowed.
Generally,theintangibleassetmodelwillapply
toeconomicinfrastructureprojectssuchastoll
roads,bridges,portsetc.andthefinancialasset
model will apply to social infrastructure
projectssuchashospitals,schools,government
administrativebuildingsetc.
Currently, under Indian GAAP, operators
generally
recognize
and
depreciate
infrastructure assets (both existing and those
constructed or purchased by the operator) as
their own property, plant and equipment.
Amounts received from the Government and
user charges are generally recorded as income
over the period of the arrangement. No
separateincomeisgenerallyrecognisedduring
theconstructionperiod.
Adoption of Ind AS will affect operators
revenue recognition and profit pattern during
theperiodofthearrangement. Thechangein
the profit profile could also impact the timing
or ability to pay dividends in certain years
during the term of the project. Additionally,
the operators balance sheet composition will
also change, as assets previously classified as
fixedassetswillnowbeseparatelyclassifiedas
financial assets or intangible assets. The
accountingforserviceconcessionarrangements
underIndASwillsignificantlyaltersomeofthe
key ratios in the financial statements of the
operators,whichmayrequirerenegotiationof
loancovenantswithlenders.
2. It was noted at a Workshop that since the The ICAI may provide separate guidance in this
AccountingStandardsBoardoftheICAIisinthe regard.
process of formulating a Guidance Note on

12

Accounting
for
Service
Concession
Arrangements for use until Ind AS come into
force. The Guidance Note would be based on
AppendicesAandBtoIndAS11,andwould
contain guidance in the Indian context with
regard to the application of the principles
contained in the Appendices. Accordingly,
similarguidancemaybeprovidedinthecontext
of Ind AS to facilitate implementation of the
saidAppendices.
RateregulatedActivities
3. Ind AS 18, Revenue, contains a footnote which
states that in respect of the enterprises which
are subject to tariff control by the regulatory
authorities(termedasRateRegulatedEntities),
the revenue may need to be levied in
accordance with the Guidance Note on the
subject to be issued by the Institute of
Chartered Accountants of India. The status of
theGuidanceNoteisnotclear

The Accounting Standards Board has already

issued a Guidance Note on Accounting for Rate
Regulated Activities in the context of existing
notified Accounting Standards. It is felt that the
same Guidance Note with certain minor changes
canbeusedinthecontextofIndASaswell.The
Accounting Standards Board of the ICAI is in the
process of examining the said Guidance Note
keepinginviewtheseaspectswhichisexpectedto
befinalisedshortly.

EmbeddedDerivatives

4.

Apowersectorcompanyraisedtheissuethat
IndAS39,FinancialInstruments:Recognition
and Measurement requires that an
embedded derivative should be separated
fromthehostcontractandaccountedforasa
derivative if certain conditions are met.
However, paragraph AG 33 (d) of Ind AS 39
exempts entities from separation of
embeddedderivativesinthefollowingcases:

The ASB had earlier examined the matter and

decidedthataclarificationcanbeissuedonwhat
iscommonlyusedcurrencyunderparagraphAG
33(d)ofIndAS39,inconsultationwithIASB.

(i)Ifthecontractisdenominatedinthefunctional
currency of either of the parties to the
contract.
(ii) If the contract is denominated in a currency
which is used around the world international
trade.
(iii) If the contract is denominated in a currency
which is commonly used in contracts to
purchase or sell nonfinancial items in the
economic environment in which the

13

transactiontakesplace.

Contracts for procurement of power plant

equipment in foreign currencies, which are not
covered by these exemptions, have the following
impacts:

1) The cost of equipment would be

computed at the forward exchange rate
fortherelevantcurrencyprevailingonthe
date of contract for settlement at the
expecteddateofsupply.
2) The changes in forward rates for the
unexecuted and unpaid portion of the
contract shall be recognised in the profit
and loss account at the end of each
accountingperiod.

Accordingly, thereisanimpactonthecostofthe
asset and an increase in the volatility of earnings
reportedbytheIndiancorporates.
It was also mentioned that the proposed
accounting provision of Ind AS 39 does not have
muchrelevancefortherateregulatedentitieslike
NTPC, as in India their fixed assets for tariff
purposes are valued at costs incurred as per the
CERC Regulations. Therefore, the rate regulated
entitiescanbeexemptedfromtheseprovisionsof
Ind AS 39, Financial Instruments: Recognition and
Measurement.
C:Oil&GasExplorationandProductionsector
Explorationandevaluationexpenditure
Currently, two alternative methods are available It may be noted that application of Ind AS 106,
under IGAAP to account for exploration and Exploration for and Evaluation of Mineral
Resources, had been deferred by the MCA while
evaluation(E&E)expenditure:
placingtheIndASonitswebsiteforthefollowing
Full cost method requires all exploration and reasons:
development costs to be capitalised, even for
TheMinistryofCorporateAffairswasofview
unsuccessfulwells.
thatfromthedefinitionoftheExploration
andEvaluationAssetsgiveninAppendixA
Successful efforts method: Here all costs are

14

initially capitalised as intangible assets. If

commercially viable reserves are determined,
costspertainingtothatblockisaddedtoPPEand
depreciatedoveritsusefullife.
UnderIndAS106,thereisnospecificrequirement
to follow any of the above methods. Ind AS 106
requiresanentitytosegregateE&Eexpensesinto
thefollowingthreephases:
Preexplorationphase:Expensestobechargedto
the statement of profit and loss, unless the
expense meets the definition of an asset under
anyIFRS.
Exploration & evaluation (E&E) phase: IFRS
providesentitieswithan accountingpolicy choice
to either capitalise such expenses or charge
againstprofits.
Development phase: The expenses during the
development phase are capitalised based on
recognition and measurement principles of
intangibleassetsstandard(IndAS38).
Ind AS 106 requires E&E assets to be tested for
impairment if there are facts suggesting that the
carrying amount of an asset may exceed its
recoverable amount. An asset may be tested for
impairment if the companys right to explore in a
particularareawillexpireinthenearfutureandis
notexpectedtoberenewed,thecompanyhasnot
plannedanysignificantexplorationexpenditurein
thearea,orthecompanyseffortshavenotledto
thediscoveryofanycommerciallyviableresources
inthearea.
The current practice of international companies
seems to suggest that the full cost method may
notbeanacceptablepracticeunderIndAS.
In India, all companies except a few companies,
follow successful costing method. Therefore, the
impactwouldnotbemuch.Thosecompaniesthat
follow full costing method are allowed to carry
forwardtheircurrentcostsoftheassetsunderInd
AS 101. Only going forward, adoption of the
successful efforts method will result in lower

of the Standard, it appears that the entity

may treat the exploration and evaluation
assets as expenditure or as assets
depending upon the accounting policy
adopted by it meaning thereby that
sometimestheentitymaytreatitasassets
and at other times, it may treat it as
expenditure defeating the very purpose of
thepresentationofthetrueandfairviewof
the financial statements as required by
section211oftheCompaniesAct.Thefact
is that the entity may change such
accounting policy at any time depending
uponitswhimsandfanciesandatthesame
timedeclareintheDirectorsReportthatit
hasfullycompliedwith IndAS106 notified
under the Act leading to creating an
impressioninthemindofthepublicthatit
has complied with the Ind AS 106 whereas
the Ind AS 106 has not prescribed any
accounting treatment and has left it to the
corporates to adopt any treatment
depending upon the its own accounting
policy. Thus, when the corporates have to
adoptanyaccountingtreatmentdepending
uponitsownaccountingpolicy,thereisno
need to have such an Ind AS creating false
impression of strictness in the mind of the
public.
The matter was considered by NACAS at its 45th
meetingwhichdecidedasfollows:
TheCommitteeconsideredtheissueandfeltthat
it would be necessary to issue the proposed
Standard as it allows companies in the relevant
sectorsuchasOilandGasCompaniestocontinue
capitalization of expenditure incurred on
Exploration for and Evaluation of Mineral
Resources in their balance sheets in accordance
withtheirexistingaccountingpolicies.AsotherInd
ASs converged with IFRS do not permit such
capitalization, such companies would not be able
tocapitalizesuchexpenditureaspertheirexisting
accounting policies. Apart from this, the Standard
provides specific guidance on assessment of the
impairment of the Exploration and Evaluation
Assetswherethesearecapitalized.TheCommittee

15

profits in the current year as expenditure

pertaining to unsuccessful efforts will be
immediatelyrecognisedinthestatementofprofit
and loss . The carrying value of assets will be
reduced by the amount of expenses in the year
and so will the net worth. Lower profits will
adversely impact return on assets and return on
capitalemployedintheyearofchangeandleadto
higher returns in subsequent years on account of
the lower base. The table below summarises the
impact of the change from the full cost to the
successfuleffortmethod:

alsofeltthatintheabsenceofthestandard,there
would be absolutely no standardization of
accounting policies as no other standard, even
partlydealswiththesubject.
The Committee also expressed its view that a
company cannot arbitrarily change its accounting
policiesasapprehendedbytheMCAinviewofthe
requirements of Ind AS 8 Accounting Policies,
ChangesinAccountingEstimatesandErrors,which
lays down the situations in which an accounting
policycanbechanged.

Impact of change from full cost to successful At its 48th meeting, the NACAS again considered
effortmethod
the matter and noted that certain oil and gas
exploration companies had expressed their
Impacton
Currentyear
Subsequentyears
concerns that Ind AS 106 is not a complete
Standard and that the Guidance Note on
Netprofit
Lower
Higher
Accounting for Oil and Gas Producing Activities
Fixedassets
Lower
Lower
issuedbytheICAIneededtoberevisedasitdoes
Networth
Lower
Lower
not
address certain concerns of such companies.
ROA
Lower
Higher
However, these concerns primarily do not affect
ROCE
Lower
Higher
Ind AS 106. It was further noted that Ind AS 106
was a limited scope standard. The Committee
thereforefeltthatIndAS106wouldbeacceptable
providedthat
(ii) the concerns of the industry are met in the
GuidanceNote;and
(iii) there is no conflict between the Guidance
NoteandIndAS106.
Withaviewtoaddresstheconcernsoftheoiland
gas companies, the existing Guidance Note on
AccountingforOilandGasProducingActivitieshas
beenrevisedbytheICAIinthecontextofexisting
AccountingStandards.Therepresentativesofthe
industry were extensively involved in the revision
oftheGuidanceNote.However,inthecontextof
Ind AS 106, the Guidance Note may have
differenceswithIndAS106insofarasimpairment
ofassetsisconcerned.Thematterwasconsidered
bytheASBwhichadvisedtheResearchCommittee
of the ICAI to follow the position stated in Ind AS
106.Thematterwas consideredbytheResearch
Committee which has revised the Guidance Note
tomeettheconcernsoftheindustryinthecontext

16

of the existing Accounting Standards and that

insofarasIndAS106isconcerneditdecidedthatit
would revise the Guidance Note once the Ind AS
106isimplementedbytheGovernmentasadvised
byASBsothatthereisnoconflictwithIndAS106.
Keeping this in view, the NACAS decided to
recommend to the Ministry of Corporate Affairs
that Ind AS 106 should not be deferred and it
shouldalsobenotifiedalongwiththeotherIndian
AccountingStandardsastheICAIwouldrevisethe
GuidanceNote.
Restoration/Abandonmentcosts
1. Both IGAAP and Ind AS require companies to 1. Itisfeltthatthediscountingoftheamountof
provisionforrestorationcostisinlinewiththe
provide for restoration costs, net of salvage
approachofIndAStovaluesuchitemsatnet
value. UnderIndAS,aprovisionisrequired
tobecreatedattheinitialstagebydiscounting
presentvaluewhichreflectsthetrueeconomic
the eventual estimated liability to its present
valueofsuchamounts.
value. The discount is unwound by way of
recognisinganinterestexpenseoverthelifeof
theasset.IGAAPdonotrequirediscountingof
abandonmentcosts.
Adoption of Ind AS will lead to lower fixed
assets and liabilities as companies will now
have to discount the eventual liability rather
than recognizing the total amount as liability
andaddingittothecostofproduction.Itwill
alsoresultinlowerdepreciation(duetolower
fixed assets) and higher finance costs on
account of unwinding the discount over the
lifeoftheasset.
2. Oil and gas companies presently provide for 2. Ind AS 101 already permits companies to
continue to carry forward the carrying
restoration/abandonmentcostsonthebasisof
amountsofproperty,plantandequipmentas
current costs rather than on the basis as
pertheexistingIGAAPatthetimeoffirsttime
required in Ind AS. It was suggested that for
thepurposeofthefirsttimeadoptionofIndAS,
adoptionofIndAS.Sinceabandonmentcosts
such companies should be permitted to carry
would form part of the oil and gas producing
forward the abandonment cost at the current
property,thesamecancontinuetobepartof
cost.
the carrying amount of the said asset in case
an oil and gas company decides to adopt this
option provided under Ind AS 101. However,
goingforward,theprovisionshouldbecreated
inaccordancewiththeprincipleslaiddownin
IndASasdiscussedat1above.

17

Chargingofdepreciationonoilwells
The Ind AS requires charging of depreciation on
the basis of the useful life of the assets. It also
allows use of unit of production method as the
method of depletion in case of oil and gas
reserves. On the other hand, Schedule II to the
new Companies Act, 2013 indicates a life of 25
years for oil wells. Since the life of an oil well
dependsupontherateofextractionofoilfromthe
well,itwouldnotbeappropriatetoprescribeany
life for the oil well even though it may be
indicative.

ItissuggestedtotheMCAthattheoilcompanies
may be required to follow the unit of production
method as the appropriate method of depletion
instead of prescribing/indicating the useful life of
oilwellinScheduleII.

Componentisationofassets
IAS 16, Property, Plant and Equipment, requires
componentisationoffixedassetssuchasproperty,
plantandmachinery.Thereisnoexemptionfrom
componentisation at the time of the first time
adoptionofIndAS101.Intheoilandgasindustry,
someoftheassetsaremorethan50yearsoldand,
therefore, arriving at the cost of components
would be very difficult to arrive at. Some of the
assetsmighthavebeencompletelywrittenoffbut
may still be operational. In view of this, it would
be a challenge for the oil and gas companies to
followthecomponentapproachatthetimeoffirst
timeadoption.

It is noted that Schedule II to the Companies Act,

2013 also requires componentisation of the
property,plantandequipmentandthatthereare
nospecificrelaxationsinthisregardatthetimeof
thefirsttimeapplicationofScheduleII.Whilethe
concern is understandable yet it is not
insurmountable that the component approach
cannot be adopted at the time of first time
adoption.Onecanalwaysarriveattheappropriate
basis on which the assets can be segregated into
major components since it is only in respect of
significant components where the lives are
different that the component approach would
havetobeadopted.TheICAIcanprovideseparate
guidanceforadoptionofcomponentapproach.

Functionwise presentation of expenses in the While IFRS permits functionwise classification of

expenses also where appropriate, a conscious
statementofprofitandloss
decision was taken by the MCA not to allow
Oil and gas companies feel that even though functionwiseclassificationintheIndASinviewof
currently also the statement of profit and loss the difficulties involved as well as to ensure
requires naturewise presentation of expenses, comparabilitybetweenthecompanies.
keeping in view the nature of the industry, it
would be appropriate to have functionwise
classificationunderIndASalsoasinIFRS.
D: Telecom sector
Revenue Recognition- Activation fee (Customer
Connection revenue)
TreatmentunderIndAS18

It is felt that the treatment of the activation

charges depends on its nature. Some of the
companies are deferring the activation charges
overtheperiodofrenderingofserviceaswouldbe

18

doneunderIndAS,inasituationwhereactivation
Activation fee/installation charges or similar feescontainsserviceelement.AsIndAS18makes
nature of other charges is recognized over the sucharequirementabundantlyclear,comparedto
expectedlifeofthecustomerandisnotpermitted AS9whichlaysdownonlythegeneralprinciples.It
wouldonlyimproveaccountingforactivationfees.
toberecognizedupfront.

TreatmentunderexistingAS9
There is no specific guidance under the existing
Accounting Standard. Companies are generally
recognising activation revenue/other similar
revenueupfrontandshowingrevenueintheyear
ofreceipt.
ImpactonaccountsonadoptionofIndAS
AdoptionofIndASwillaffect(reduce)therevenue
of the relevant year in which the mobile
connection is given due to its spread over the
expectedlifeofthecustomer.Thiswillbeacaseof
defermentofrevenue.
ConsequentialeffectonadoptionofIndAS
As the revenue for the year of transaction will
come down, the licence fee payable to the
regulator will be reduced for that year. However,
the revenue will be accounted for in future years
and licence fee will accordingly be deferred to
thoseyears.
Thedefermentofrevenuewillhaveanimpacton
the profit for the year of transaction as well as
futureyearsandconsequentlyonRoCE.
Revenue Recognition Multiple Deliverables in
TelecomCompanies
TreatmentunderIndAS18
In case of bundled sales involving multiple
components/services, such multiple deliverables/
components of bundled sale shall be required to
be divided into separate units for accounting and
theconsiderationistobeallocatedbasedontheir
relativefairvalueasastandaloneservice/item.

Although specific guidance is not provided under

the existing AS 9, it is possible and permitted to
unbundlethecomponentsofbundledsalesforthe
purposeofrecognitionofrevenue.Applicationof
Ind AS 18 in this regard would therefore improve
recognition of revenue on a more scientific basis.
The ICAI is also of the view that there may be an

19

impact on revenue recognition and asset/

liabilities in thisregardsinceafter unbundlingthe
TreatmentunderexistingAS9
components, different accounting treatments
There is no specific guidance under the existing needtobeappliedtovariouscomponents.
Accounting standard. Companies are recognising
revenue as a single unit and are not splitting
revenue based on the component/ service in the
bundledsales.
ImpactonaccountsonadoptionofIndAS
Therewillbenoimpactonoverallrevenueofthe
company.AsIndAS18requirestheconsideration
to be allocated on the basis of fair value of each
unit/service/item, only the classification of
revenuewillchange.
ConsequentialeffectonadoptionofIndAS
No consequential impact on revenue or
assets/liabilities. However, the classification of
such revenue will change on account of
presentationofitsbreakup.
Revenue Recognition- Customer incentives (Free
Minutes) in Telecom Companies
TreatmentunderIndAS18
Revenue recognition per minute is to be adjusted
for the impact of free talk time. In other words,
revenueperminutewillbereducedbytheamount
of bonus talk time, i.e, revenue is measured at
effectiverateperminute.

Free minutes are linked to the paid talktime, and

hencetheyhavevalue.Accordingly,theprinciples
of recognition of revenue as prescribed in Ind AS
18 would improve the accounting and reflect the
trueeconomics.

TreatmentunderexistingAS9
There is no specific guidance under the existing
AccountingStandard.Freetalktimetocustomeris
presentlyignoredforthepurposeofmeasurement
ofrevenue.Revenuerecognitionisbasedonactual
usageofchargeabletalktimebycustomers.
ImpactonaccountsonadoptionofIndAS
If the whole talk time is utilised by the customer
within the same financial year, there will be no
impactontherevenue.However,ifthisisnotthe
case, then the revenue for the financial year in

20

which the transaction takes place will be reduced

bytheunutilisedtalktime(adjustedafterfreetalk
time) but the revenue of the subsequent year/(s)
will be increased when the remaining talk time is
utilised or the validity period of use of talk time
expires.
ConsequentialeffectonadoptionofIndAS
If the whole talk time (adjusted after free talk
time) is not utilized, the revenue of the current
financial year will be reduced and consequently
licence fee payable to the regulators will also be
reduced for that year. However, the revenue and
licence fee payable to the regulator will be
deferredtosubsequentyear/(s).
This deferment will have an impact on the profit
for the year of transaction as well as for
subsequentyearsandconsequentlyonRoCE.
Gross versus net recognition of revenuesin
TelecomCompanies
It may be noted that the definition of the term
RevenueintheexistingAS9alsorecognisesthatin
case of an agency relationship, only the
commission should be considered as revenue,
although the Standard does not lay down specific
(i) Provision of thirdparty content, e.g., factors to be considered for identifying whether
there is any principaltoprincipal relationship or
ringtones,gamesandtrafficupdates.
principaltoagentrelationship.Thus,itisfeltthat
(ii) Interconnect agreements that allow telecom theaccountingforrevenueprescribedinIndAS18
companiestoterminatecallsonthenetwork would improve the accounting by providing
ofothercompanies.
guidance on identifying whether a company is
actingasaprincipalorasanagent.
Indian GAAP does not provide any specific
guidance on identifying whether a company is
acting as a principal or an agent, and therefore,
whetheritshouldrecognizegrossrevenuesornet
amount.Incontrast,IndAS18,Revenue,includes
specific guidance on this issue. It provides that a
company is acting as a principal only when it has
exposure to the significant risks and rewards
associatedwiththesaleofgoodsortherendering
of services. In addition, it delineates specific
factorsthatneedtobeconsidered.
Companies in the telecom sector enter into a
numberofarrangementsinvolvingmorethanone
party in the rendering of the services to the end
customer.Commonexamplesinclude:

21

ItisfeltthattheapplicationofIndASwillrequire
Indian telecom companies to critically evaluate
various arrangements to identify the nature of
eacharrangement.
Indefeasiblerighttouse(IRU)
It is noted that the issue raised is dealt with in
Appendix C, Determining whether an
Arrangement contains a Lease of Ind AS 17,
Leases. It may also be noted that while notifying
the Ind AS on its website, the MCA had deferred
applicationofthisAppendixofIndAS17.TheICAI
reiteratesitsviewthatthetreatmentcontainedin
the Appendix is appropriate keeping in view the
These arrangements are typically structured as substanceofthetransaction.
purchase, sale or service arrangements, rather
thanasstraightforwardleases.

Telecom, being a capitalintensive industry,

requiressignificantcoststobeincurredonsetting
up network infrastructure such as mobile towers
andfiberopticcables.Arighttousefiberoptic
cables in a network for an agreed period of time,
inreturnforapaymentoraseriesofpayments,is
verycommoninthetelecomsector.

ThecurrentIndianGAAPdonotspecificallyrequire
the identification of leases embedded in service
arrangements;however,thereisnoprohibitionas
well. By implication, there is diversity in the
accounting practice. In Ind AS regime, the
application of Ind AS 17, Leases, will require all
companiestoassesswhethersuchcontractsareor
contain a lease. Lease accounting may have a
significant impact on the financial statements of
boththeserviceproviderandthecustomer.Ifthe
agreement contains a right to use the asset, e.g.,
fibreopticcablesandisinthenatureofafinance
lease, the Standard will require the service
provider to derecognize the proportionate
underlying asset(s) from its financial statements
and correspondingly recognise profit/loss on sale
inthestatementofprofitandloss.Thesameasset
will get recognised in the financial statements of
the customer. If the lease is evaluated to be an
operating lease, the straightlining of lease
paymentmayhaveasignificantimpact.
The above issue was also raised by certain power
sectorandinfrastructurecompanies.
Accountingforfreetalktimeonontimepayment
orearlypaymentofthebill.

22

Telecomcompaniesprovideincentivesforontime
payment or early payment of bills in the form of
freetalktime.Aclarificationwassoughtastohow
thiscanbeaccountedforunderIndAS.

It is felt that the matter does not require any

changesinIndAS18oranyotherStandardsinceit
isamatterofprovidingclarification.Accordingly,
it is felt that a clarification in this regard can be
provided as an implementation guidance by the
ICAIseparately.

Difficultiesinimplementingcomponent
accountingincompaniestelecom

Telecom towers costing upto Rs. 30 lacs have

certain significant components which have
different useful lives, for example, cards. These
cards are interchangeably used on different
towers. It is felt that adopting component
accountingforthepurposeofIndAS16,Property,
PlantandEquipment,wouldpresentproblems.

It is felt that the matter does not require any

changeinIndAS16oranyotherStandardsinceit
isamatterofprovidingclarification.Accordingly,
it is felt that a clarification can be provided as an
implementationguidancebytheICAIseparately.

E: Information Technology (IT) sector

Revenue Recognition: PostCustomer Support

ServicesinInformationTechnologyCompanies
There is a significant diversity of accounting
treatment under Indian GAAP on revenue
recognition. Typically, accounting by companies
that are listed in the US market is influenced by
theUSGAAP,whichishighlyprescriptiveandrule
based with extensive industryspecific guidance.
Other technology companies may not be
influenced by US GAAP. In such cases, the
accounting practices are more driven by the legal
form given in the agreement, rather than their
true economic substance. In either case, the
application of Ind AS (and any further ICAI
guidance) may change the accounting practice
followed. An example in this regard is Post
contractCustomerSupport(PCS).

ItisfeltthattheprinciplesprescribedinIndAS18
are robust as the companies which provide post
contractservicesupportfreeofcostarenotreally
doing so free of any charges, as such charges are
ordinarily inbuilt in the original selling price.
Accordingly,itisappropriatetobifurcaterevenue
between the two components and defer the
revenue pertaining to component relating to the
PCS to the period in which the service is actually
rendered.Thiswillimprovetheaccounting.

UndertheIndASregime,theapplicationofIndAS
18,Revenue,willrequirethecompanytotreatthe
PCSasaseparatelyidentifiablecomponentofthe
sales transaction and allocate a part of the total
consideration toward this component. However,
the Ind AS does not mandate the use of relative
sellingprice method. The company is free to use
other methods as well for allocation, e.g., the

23

residualmethod.
ShareBasedPayments

Valuationmodel
As allowed under both the Guidance Note on the
subject issued by the ICAI and the relevant SEBI
guidelines, most Indian companies use intrinsic
value method for recognition of employeeshare
based payment, resulting in recognition of nil or
smallcompensationcost.IndAS102,ShareBased
Payment,mandates the use of fair value method.
Thiswillresultinasignificantincreaseinemployee
compensationcost.

ItmaybenotedthattheICAIhadearlierdiscussed
the issue with SEBI. At that time, SEBI had
indicatedthatonceAccountingStandardbasedon
Ind AS 102 is issued, it would withdraw its
guidelines as it is felt that the valuation method
prescribedinIndAS102isappropriate.

Gradedvesting
Under Indian GAAP, companies have an option
regarding expense recognition of an award that
has a graded vesting schedule. A company can
elect to recognise compensation expense either
over the requisite service period for each
separately vesting portion of the award as if the
awardwas,insubstance,multipleawards,orona
straightlinebasisovertherequisiteserviceperiod
for an entire award. Many companies have
elected the latter option primarily due to its
relativesimplicityinapplication.However,IndAS
102 requires a company to treat each instalment
of a graded vesting award as a separate grant.
This will require separately measuring and
attributing expense to every tranche of an award
at each reporting date (for example, quarterly),
thereby accelerating the overall expense
recognition.
F:DrugsandPharmaceuticalssector

With regard to accounting in the situation of

graded vesting grants, it is appropriate that the
methodologyprescribedinIndAS102needstobe
followed as this is the scientific methodology as
compared totheother methodologyofspreading
thecompensationcostoverthelifeofthegranton
straightlinebasis.

FreesamplesdistributedbyPharmaceutical
Companies
Pharmaceutical companies distribute a significant It is felt that guidance in the matter, if required,
part of their products as free samples to maybeissuedseparatelyasitinvolvesapplication
physicians and hospitals so as to increase ofprinciplesandnotachangeintheIndAS.
awarenessabouttheirproducts.Thecostofthese
samples is recognised as a marketing expense
underboththeIndianGAAPandIndAS.However,
the key issue is regarding the timing of expense

24

recognition.
AS 26 under Indian GAAP requires
advertising/marketingexpendituretobeexpensed
off as and when incurred, without providing any
guidance on the notion when it is incurred.
The Expert Advisory Committee (EAC) of the ICAI
has given an opinion, which requires the stock of
samples to be disclosed under the head current
assets.Thesearewrittenofftothestatementof
profitandlosswhenactuallydistributed.
The notion of when it is incurred has been
dealt with more clearly in Ind AS. Ind AS 38
clarifies that the advertising and promotional
expendituresarerecognisedasexpenseswhenthe
entityhastherighttoaccessthegoodsorwhenit
receivestheservices.Paragraph69AofIndAS38
has the following detailed guidance as to when
advertising and promotional expenditures should
beexpensed.
Anentityhasarighttoaccessgoodswhenit
owns them. Similarly, it has the right to
access goods when they have been provided
by a supplier in accordance with terms of a
supplycontractandtheentitycoulddemand
delivery of them in return for payment.
Services are received when they are
performed by supplier in accordance with a
contracttodeliverthemtotheentityandnot
whentheentityusesthemtodeliveranother
service, for example, to deliver an
advertisementtocustomers.
It is believed that the application of the above
guidance may require companies to recognise
product costs as a marketing expense when it is
packaged as sample product and not when it is
distributedfree.
G:Automobilessector
Securitisation
Stringentconditionsforsecuritisationofloanswill
impact the financing arms of auto companies.
Under IGAAP, an entity may derecognise its
assignments of loans and advances with credit

AccountingforsecuritizationunderIndASreflects
accounting of the underlying economics of the
transactions. Accordingly, it is felt that this will
improvetheaccountingintheindustry.

25

enhancementsasasaletransaction;i.e.,whenit
meetsthetruesalecriteriaprescribedbytheRBI.

Under Ind AS, the assessment of retention or

transferofriskandrewardsisacriticalcriterionto
determine if derecognition is appropriate. Legal
isolation/transfer is not sufficient criteria to
achievesaleaccounting.Qualitativefactorssuch
as credit enhancement facilities provided by the
originator to the special purpose trust or to a
counterpartyinthecaseofadirectassignmentwill
also have to be evaluated to assess if the de
recognitioncriteriaaremet.

As a result of reconsolidation of the securitised

receivables, debt and interest cost will increase.
The interest coverage and debt service ratios will
decline and the debttoequity ratio will increase,
resultinginanincreasedcostofdebtinfuture.
ConsolidatedFinancialStatements

UnderIndAS,consolidationisbasedonthecontrol
(both direct and indirect) over the entity rather
than ownership. This may result in consolidation
ofsomecurrentjointventuresandassociatesand
deconsolidation of certain joint ventures and
subsidiaries based on contractual arrangements.
In the auto industry, the partnerships between
Indian and foreign auto companies, where the
Indiancompanymayholdamajoritystakebuthas
shared control with the foreign company, may be
impactedunderIndAS.

Based on the above guidance, if the consolidated

entity is classified as an associate or a joint
venture, the company would not be able to
disclose the entire revenue of the investee in its
consolidated financial statements. This would
impactrevenues,marginsandreturnratios.

Ind AS provides indicators to determine whether

anentitycontrolsanSPE,includinganassessment
ofanentitysexposuretothemajorityofrisksand
rewardsofownershipoftheSPE.Therefore,ifthe
control criteria over the SPE are met, the entity
will be required to consolidate the SPE in its
financial statements, even though it may have no
legal ownership in the SPE. In the automotive

It is felt that the accounting for consolidation

prescribed in the Ind AS is more robust as the
definition of control is principlebased as
compared to the rulebased definition under AS
21. The Ind AS definition of control is robust
because it will involve consolidation of various
SPEs and subsidiaries which are defacto
controlled by the companies. In other words, it
will consolidate those structures which are at
present outside the ambit of consolidation
because based on the rulebased definition of
control they are not consolidated whereas since
they are actually controlled either through an
agreement or through some other means, the
consolidation thereof will represent the true
structureofthecompaniesformingthegroup.

26

sector, the entity operates through a wide

network of auto component manufacturers that
workonanautopilotmechanismorarefundedby
the automotive company. Such arrangements
needtobeassessedforSPEs.Ifsuchentitiesare
classified as SPEs and meet certain criteria, they
are consolidated with the entity. Thus, all the
assets and liabilities of these SPEs are recognised
in the entitys consolidated financial statements,
thereby affecting key ratios of the entity. IGAAP
doesnotprovideforsuchguidance.
H:Retailsector
Customerloyaltyprogrammes
IGAAP provides limited guidance on accounting
treatment for loyalty reward points. Accordingly,
manyretailersdonotaccountforcostofcustomer
loyalty programmes. As per Ind AS, when a
retailergrantsloyaltyrewardpoints,itwillhaveto
separate the consideration into two components:
fair value of goods and services provided and fair
valueofrewardpoints.Theretailerwilldeferthe
recognition of fair value of awards as revenues
until they have been redeemed or expire. This
wouldreducerevenue.
I:GeneralComments

Accounting for customer loyalty programmes as

laid down in Ind AS 18, Revenue, will fill the gap
existing in the current Accounting Standards.
Thus, the overall accounting in retail companies
wouldimprove.

1. The definition of control, subsidiary and

AssociatesisdifferentinthenewCompanies
Act, 2013, as compared to those contained in
the Ind AS. In the interest of effective
implementation of Ind AS, it is necessary that
the definitions should be aligned. Further, it
has been stated in the Act [explanation to
section 129 (3)] that for the purpose of
preparation of consolidated financial
statements, the term subsidiary would
includeassociateandjointventure

It is noted that the draft Rule 9.4 issued by the

MCA provides that the consolidated financial
statementsshouldbepreparedinaccordancewith
the Accounting Standards. Accordingly, it can be
interpreted that the definitions contained in the
Ind AS would be relevant for the limited purpose
of preparing consolidated financial statements,
whileforotherpurposes,thedefinitionscontained
intheActwouldberelevant.Also,forthepurpose
oftheexplanationtosection129(3),theaforesaid
Rule can be interpreted to mean that the
accountingforassociatesandjointventurewould
be in accordance with the relevant Accounting
Standards for preparing consolidated financial
statements. It may be mentioned that the
aforesaid interpretation would be in line with the
existingpositioninnotifiedAccountingStandards,
viz.,thedefinitionofrelativeisdifferentinAS18,
Related Party Disclosures, compared to the
definitioncontainedintheCompaniesAct,1956.

27


2. At present, Ind AS 39 provides the
requirementsforhedgeaccountingwherethe
hedges are considered as accounting hedges
which leave out certain hedging strategies
which result into economic hedges. As
compared to this, IFRS 9 is expected to deal
with economic hedges and simplify hedge
accounting.Accordingly,itwassuggestedthat
instead of first implementing Ind AS 39 as
presently placed on the website of MCA, the
industry should be required to shift to IFRS 9
directly.Thiswouldalsoavoidhardshiptothe
industry of shifting to two Standards within a
spanofcoupleofyears.

3. Paragraph 29A of IndAS 21, The Effects of

Changes in Foreign Exchange Rates, provides
anoptiontorecognisetheexchangegainsand
losses in equity. However, there is no
guidance in Ind AS 39 on how to account for
the derivatives which are taken as hedges
against the relevant foreign currency
monetaryitems.

4. It was pointed out that various public sector

companiesenterintovarioustransactionswith
other public sector companies. Since these
publicsectorcompaniesarecontrolledbythe
government, the transactions between the
public sector companies are considered to be
related party transactions and, accordingly,
disclosures are required to be made in
accordance with the requirements of Ind AS
24, Related Party Transactions. It was
suggested that exemption may be provided
from such disclosures where the enterprises
arestatecontrolledenterprises.

5. Paragraph 69(d) of Ind AS 1, Presentation of

Financial Statements, requires a company to
classify a liability as current when it does not
have an unconditional right to defer
settlement of the liability for atleast 12
monthsafterthereportingperiod.Paragraph

IFRS9,atpresent,isincomplete.Itisexpectedto
becompletedbytheendof2013inrespectofall
aspects, except impairment of financial assets,
whichisexpectedtobecompletedbyendof2014.
Although, some of the countries such as Australia
and New Zealand have given the option to their
companies to apply the requirements of the
incomplete IFRS 9, many other jurisdictions, for
example, Europe, have not yet endorsed IFRS 9.
Accordingly,aconsciousdecisionwastakennotto
issueIndAScorrespondingtoIFRS9untilthelatter
iscomplete.

Under the requirements of Ind AS 39, hedging of

foreign currency risk can be considered as a cash
flow hedge. Accordingly, the foreign exchange
changes in the hedged instruments would be
recognised in the cash flow hedge reserve which
would be recycled in the statement of profit and
lossfortheperiodinwhichthestatementofprofit
and loss recognises the foreign exchange changes
recognisedintheequityasperparagraph29A.If
necessary,ICAImayissuenecessaryguidance.

Paragraph 25 of Ind AS 24 already exempts

disclosures of transactions between government
related entities subject to certain other
disclosures.Itisfeltthattheextentofexemption
providedisadequate.

TheICAItentativelyagreesthatanexceptionmay
be provided in the definition of current liability
containedinparagraph69(d)torecognizethatin
routine procedural types of noncompliances, the
loanshouldnotbeconsideredasacurrentliability
where the same has been regularised after the

28

74 of Ind AS 1 further states that when an

entity breaches a provision of longterm loan
arrangement on or before the end of the
reporting period with the effect that the
liability becomes payable on demand, it
classifies the liability as current, even if the
lender agrees after the reporting period and
before the approval of the financial
statementsforissue,nottodemandpayment
as a consequence of the breach, since the
companydoesnothaveanunconditionalright
to defer its settlement at the end of the
reportingperiod.

balancesheetdateandbeforetheapprovalofthe
financialstatementsbytheBoardofDirectors.Itit
is decided to incorporate the aforesaid exception,
it will result into a carve out from the IFRS.
However,itmaybenotedthatbeforeeffectingthe
carveout,thedueprocessofissuingthestandard
will have to be carried out which would include
issuance of the Exposure Draft by the ASB,
approval by the Council of the ICAI, approval by
the National Financial Reporting Authority to be
constituted under the Companies Act, 2013.
Accordingly, processing of the revised Ind AS 1
wouldtakesometime.

IthasbeenpointedoutthatinIndia,thebanks
atthetimeofenteringintoaloanagreement
with the borrowers lay down various
conditionssomeofwhicharemoreprocedural
in nature, for example, submission of stock
statement periodically where the loans are
secured against stocks. In case a company
does not submit the stock statement as per
thetermsoftheconditionswhiletheloanmay
become recallable, in practice, as a matter of
routine,thebankersnormallyacceptthestock
statementssubmittedafterthedateonwhich
they are required to be submitted.
Accordingly,rarelytheloanisrecalledbecause
of noncompliance with such procedural and
technical requirements. However, an
application of the aforesaid requirements of
theIndAS1wouldrequiresuchtermloansto
be classified as current the moment a
companydoesnotsubmitthestockstatement
eventhoughthelendersubmitsthestatement
immediately thereafter. It is felt that these
requirements of Ind AS 1 would result into
unnecessary hardship for the companies as
their current ratio and other ratios would
undergochangesadversely.

6. IFRS 3, Business combinations, scopes out

common control transactions, i.e., business
combinations amongst the group entities.
However, the corresponding Ind AS 103 in
Appendix C deals with such combinations. It
was suggested that the accounting prescribed

The accounting for common control transactions

as provided in Appendix C of Ind AS 103 was
finalisedbyNACASafterdetaileddeliberations.It,
therefore,needsnochange.

29

in the said Appendix, while following the

pooling of interests method as in the existing
AS 14, Accounting for Amalgamations,
requires recognition of goodwill/capital
reservecontrarytotherequirementsofAS14.
It was suggested that in case pooling of
interestsmethodisapplieditshouldnotresult
in creation of goodwill or capital reserve as
such combinations are related party
transactions.
7. IndAS111,JointArrangements,placedonthe
ICAI website, which would replace Ind AS 31,
InterestsinJointlyControlledEntities,doesnot
permitproportionateconsolidationmethodin
respect of jointly controlled entities. It was
suggested that this option as presently
availableunderIndAS31shouldcontinueasit
results in more appropriate accounting for
jointventurescomparedtotheequitymethod
as prescribed in Ind AS 111 and it would
facilitatesegmentreportingaswell.

ItisfeltthatultimatelytheresultunderIndAS111
andunderIndAS31wouldbethesameonthenet
positionofthestatementofprofitandlossandthe
balance sheet. Accordingly, Ind AS 111 should
replaceIndAS31.

8. Ind AS 113, Fair Value Measurement, placed

on the ICAI website requires fair value to be
measured on the basis of the principle of
highest and best use for nonfinancial assets
such as land. For instance, where land of an
existing factory is to be fair valued for the
purposeofIndAS16,thefairvalue wouldbe
arrived at on the basis of the highest and the
best use of the land which may not be
constructionofafactorybutcouldbetheuse
ofthelandforconstructionofashoppingmall.
Application of this principle would provide an
unrealistic fair value of the land as the
company as a going concern would not be
contemplating disposing of the land.
Accordingly, the fair value of the land should
bedeterminedbasedonthecurrentuseofthe
landinviewofthegoingconcernprinciple.

The principles of Ind AS 113 are based on the

marketperspectiveoffairvalueratherthanentity
specific fair values. Wherever the fair values are
to be entityspecific the same have been scoped
out of Ind AS 113. In the present case, from the
market perspective, it is meaningful for the users
of financial statements to have the fair value
basedonhighestandbestuseprinciple,asthatis
theobjectiveofadoptingrevaluationmodelunder
IndAS16.Accordingly,nochangeiswarrantedin
IndAS113

Other views expressed by industry at the Workshops

16. Apart from the specific suggestions on Ind AS as narrated in the above paragraphs,
industry representatives also gave few other suggestions as discussed hereinafter.
30

Which Ind AS should be used for convergence?

17. There was an unanimous view that going forward, those Ind AS should be implemented
which correspond to the IFRS in force as on the date of implementation. Thus, for
instance, if Ind AS are enforced on one class of companies from 1st April 2015, then
those Ind AS that correspond to IFRS effective on that date should be implemented and
not those Ind AS that are placed on the MCA website which correspond to IFRS in force
in 2011, as this would be a backward step resulting in India losing its international
standing. The ICAI agrees with this view and as far as ICAI is concerned, it has
formulated Ind AS that are at par with most of the new IFRS and the revised IFRS issued
by the International Accounting Standards Board after February 2011.

Tax issues

18. While the issuance of Tax Accounting Standards may facilitate implementation of Ind
AS, yet there are many tax issues which are still to be resolved, e.g., tax implications in
case of adoption of fair value measurements under Ind AS 102, conversion of financial
statements from functional foreign currency into financial statements based on
presentation currency which is in Indian rupees resulting into exchange gains and losses
under Ind AS 21, and Minimum Alternative Tax (MAT) issues arising from fair value
measurements.
ICAIs views

The Ministry of Finance has issued Tax Accounting Standards. It is, thus, expected that many tax
issues would get addressed and resolved. With regard to the other issues such as MAT, it is
understood that the Ministry of Finance would address these issues once MCA notifies Ind AS.
Other suggestions
19. The other suggestions made by the industry and the ICAIs views thereon are as follows:
(i) Industrys suggestion: There should be as less carve outs as possible so that the
companies may take the benefit of claiming that the financial statements prepared
on the basis of Ind AS are IFRS-compliant. Some companies believe that the
31

carve outs should be made only where there are conceptual differences with the
IFRS and the same should be taken up with the IASB.
ICAIs views: The ICAI believes that there should not be any carve outs from the
IFRS unless warranted by the economic, legal and regulatory requirements
prevailing in the country. The ICAI also takes up the carve outs with the IASB.
In certain cases, e.g., IAS 41, Agriculture, IASB has started to revise its standard
on the suggestions made by the ICAI along with some other countries such as
Malaysia.
(ii) Industrys suggestion: Since in most of the countries which have converged or
adopted IFRS, the IFRS are applicable only on the consolidated financial
statements, the Government should re-examine the implementation of Ind AS to
both consolidated financial statements and separate financial statements since this
would avoid tax issues as tax can continue to be computed based on the existing
notified Accounting Standards thereby obviating even the need for Tax
Accounting Standards.

ICAIs views: This issue was examined earlier in-depth and it was felt that Ind AS
should be applied for consolidated financial statements as well as for separate
financial statements.
(iii) Industrys suggestion: IAS 27, IAS 28 and IAS 31 and the corresponding new
IFRS 10 and IFRS 11 provide exemptions to consolidated financial statements of
intermediate companies in case the ultimate parent company prepares
consolidated financial statements. Exemption has been provided as the
consolidation of intermediate subsidiary is not useful from the perspective of the
users of financial statements. It is, therefore, felt that such an exemption provided
in IFRS should continue in the Ind AS also. Although, the Companies Act, 2013,
does not provide this exemption but draft Rule 9.4 provides that the consolidated
financial statements shall be prepared in accordance with the Accounting
Standards. Thus, if the exemption is given in the Indian Accounting Standards,
the same would be applicable for the purpose of the Companies Act itself.
ICAIs view: While the ICAI appreciates the view from the technical accounting
perspective and from the perspective of industry as the exemption would remove
the hardship, it is the prerogative of the Government to decide which companies
should prepare consolidated financial statements.
32

20. Apart from the above, the industry representatives also expressed their views on the date
of implementation of Ind AS. The majority view at the Mumbai workshop was that the
Ind AS should be enforced from 1st April, 2015 with comparatives, if the Government
makes an announcement in this regard by mid-November, 2013. The majority view at
the Delhi and Chennai workshops was that the date of implementation should not be 1st
April, 2015 but should be 1st April, 2017 in view of the following:
(i)

Time should be given for stabilization of Tax Accounting Standards which are yet
to be announced by the Government. The companies will have to make their
systems ready for two sets of financial statements one for the purposes of the
Companies Act and the other for tax purposes. Ideally, the Accounting Standards
under the Companies Act should be implemented after one year of the
implementation of the Tax Accounting Standards.

(ii)

International Accounting Standards Board is expected to finalize new Standards

on Revenue, Leases and Financial Instruments, by the end of this year or by the
end of next year. These Standards may come into force from 1st April, 2017 or
later. In case, the industry is made to apply the existing Ind AS from 2015, then,
only after two years, it will have to converge with the new Ind AS corresponding
to the new IFRSs being formulated on the aforesaid subjects. It would, therefore,
be appropriate to wait for the new Standards to be implemented by 1st April, 2017
and go in for implementation of Ind AS from that date.\

21. With regard to the manner of implementation, while some companies were in favour of
phased implementation of Ind AS, as presently contemplated, others felt that as far as
listed companies are concerned, Ind AS should be implemented for all listed companies
at one go. Implementation of Ind AS at one go would also facilitate consolidation of
entities which fall in different phases. For example, NBFCs, Banks and Insurance
companies may form part of the groups of the manufacturing and trading companies
which would facilitate consolidation.
Part B

One Set of Standards vs. Two Sets of Standards

Process
22. With a view to study the pros and cons of one set of standards versus two sets of
standards, Accounting Standards Board of the ICAI constituted a Study Group
comprising experts in the areas concerned. The Study Group held two full day meetings
33

at which an analysis was made of the existing Accounting Standards, Ind AS and IFRS
with a view to understand the impact of exemptions/relaxations which may have to be
given in case one set of accounting standards are to be followed.

Arguments for one set of Accounting Standards

23. The arguments that can be advanced for one set of standards are as follows:
(a)

The present framework gives exemptions/relaxations to small and medium

companies (SMCs) from the provisions contained in various existing notified
Accounting Standards. This principle can be continued in the Indian Accounting
Standards (Ind AS).

(b) The financial statements of all companies would be comparable only if one set of
accounting standards are followed facilitating users, viz., investors, banks,
statutory authorities and others.
(c) It would be easier for companies to integrate to full Ind AS once their size becomes
large or when they get listed on a stock exchange.
(d) It would be more convenient for the professionals, namely, the auditors who will
have to study and apply only one set of accounting standards, since many of the
professionals would be involved in the audits of larger companies as well as
smaller companies.

Analysis of arguments for one set of Accounting Standards

24. On the basis of the analysis made in respect of exemptions/relaxations which may have
to be provided in a single set of Accounting Standards, the arguments for one set of
Accounting Standards were examined and the analysis in this regard is discussed
hereunder.
Practicability of incorporating exemptions/relaxations in the Indian Accounting
Standards
25. It is noted that in the existing notified Accounting Standards, the exemptions/relaxations
incorporated are not significant in number in view of the fact that the said Standards
contain simple recognition, measurement and disclosure requirements. Only in case of
Accounting Standard AS 15, Employee Benefits, and Accounting Standard 28,
34

Impairment of Assets, relaxations have been given in respect of measurement principles.

The rest of the exemptions/relaxations relate to disclosure and presentation. As
compared to the existing notified Accounting Standards, the Ind AS are complex in
nature. While granting exemptions/relaxations in respect of disclosure requirements
would present no problem if one set of Ind AS are to be made applicable, it would be
extremely difficult if exemptions/relaxations are required to be incorporated in the Ind
AS in respect of measurement principles which would in some cases affect even the
recognition and classification in view of the fact that the measurements in some of the
IFRS drive recognition and classification, e.g., in financial instruments. Such
exemptions/relaxations would have impact not only in one standard in which
exemption/relaxation is given but would also have all pervasive effect over the entire
gamut of the framework of Ind AS as most of the Ind AS are inter-related. With a view
to demonstrate whether it would be practicable to incorporate exemptions/relaxations
from the measurement principles in the Ind AS, a detailed exercise was conducted for
various Ind AS and the results of the exercise are discussed hereafter.
Fair value measurements/measurements involving use of discount rates
26. Many of the Ind AS, particularly those on financial instruments, require measurements
at fair value not only at the time of initial recognition but also at the time of subsequent
measurements. The determination of fair value is a simple exercise provided the quoted
prices of the concerned assets and liabilities are available in markets which are orderly
and have depth and breadth. In India, such observable market prices are not available
for most assets and liabilities in view of the absence of markets having necessary depth
and breadth. Accordingly, fair values are to be determined based on valuation models
which is a complex exercise requiring services of experts in the areas concerned. While
large companies are expected to have access to necessary expertise and skills, it is
extremely onerous and expensive for small companies to have access to such skills and
expertise. In the absence of such expertise and skills to small companies, if such
companies are made to determine fair values, the fair value measurements would not be
reliable.
27. In certain Ind AS, for example, in the standard on financial instruments, the
measurements require use of discount rates to arrive at the carrying amounts of relevant
assets and liabilities. A company has to select a discount rate that is appropriate keeping
in view its own business model, capital structure and operating environment. While
determination of appropriate discount rate would not be too cumbersome for larger
companies in view of the expertise available to it, such a determination would be
cumbersome for smaller entities and in case such measurements are imposed on the
smaller entities, the resulting measurements may not be reliable. Similar would be the
situation where some measurements require application of rates of interest other than
35

those stated in the contractual arrangements, for example, for the purpose of computing
amortised costs in case of certain financial instruments, effective interest rate is required
to be used.
28. Further, it is not only a question of providing relaxations/exemptions from the fair value
and other measurements as specified in the above paragraphs but the alternative
measurements that are to be used, for example, cost, would also have to be stated. Thus,
wherever in a Standard the fair value measurement is required it has to be replaced with
the alternative measurement basis, which may have consequences in other related Ind
AS.
29. With a view to study the impact of providing exemptions/relaxations in respect of fair
value measurements and other similar measurements as specified in the above
paragraphs, as a test case, the Indian Accounting Standard (Ind AS) 39, Financial
Instruments: Recognition and Measurement, was selected which is extensively fair value
based. Some of the major changes which may be required in the Standard could be as
follows:
(i)

The Standard requires classification of financial instruments in four categories, viz.,

(a) Financial assets or financial liability at fair value through profit or loss
(FVTPL), (b) Held to Maturity (HTM) investments, (c) Loans and receivables, and
(d) Available For Sale (AFS) financial assets. It may be noted that in case of
financial assets or liabilities covered in categories (a) and (d), i.e., FVTPL and
AFS, measurements at fair value would be required not only at the time of initial
recognition but also at the time of subsequent measurements. Similarly, in respect
of the other two categories, i.e., held to maturity investments and loans and
receivables, the measurements have to be initially at fair value but the subsequent
measurements would be at amortised cost requiring use of effective interest rate
method. If exemption is required to be given in any of the categories from fair
value measurements, many issues would arise. For example, whether AFS
category is required to be measured at cost instead of fair value; whether the HTM
investments and loans and receivables are to be measured at cost or at the
transaction value instead of amortised cost etc. A question would also arise as to
the need for having three categories.

(ii)

The entire Standard, i.e., the requirements relating to measurement, impairment and
hedge accounting are based on the aforesaid classification. If
exemptions/relaxations are required to be given to small companies, for example,
based on cost, then the requirements related to classification, measurement,
impairment and hedge accounting will also undergo a total change.
36

(iii) In some cases, e.g., in case of derivatives that are not held as hedging instruments,
if cost were to be used as the basis of measurement, some derivative transactions,
e.g., forward contracts, would be off balance sheet as no cost is incurred at
origination. This would not be a desirable accounting practice. In such cases, fair
values may have to be considered as the appropriate measurement basis with
simplifications.
(iv)

If changes were to be made in accordance with the IFRS for SMEs, which is also
to a large extent fair value based, the extent of changes required to be made in the
corresponding IFRS to reduce complexities is given in Annexure G.

30. In case relaxations/exemptions are to be given in respect of amortized cost determined

by the effective interest rate, this will not only impact Ind AS 39 but it will also affect
the other Ind AS, for example, Ind AS 18, Revenue and Ind AS 23 Borrowing Costs. The
latter Standard would impact indirectly the other Ind AS, namely, Ind AS 2, Inventories,
and Ind AS 16, Property, Plant and Equipment. Thus, wherever measurement of
interest expense/interest income is involved in an Ind AS, it would be necessary to
identify that Ind AS and make the necessary changes therein which in itself would be an
onerous exercise.
Reducing complexities in other measurements and presentation
31. Apart from the Ind AS involving fair value and other similar measurements as discussed
in the above paragraphs, some other Standards were also examined with a view to
understand the impact of providing relaxations and exemptions. For instance, Indian
Accounting Standard (Ind AS) 8, Accounting Policies, Changes in Accounting Estimates
and Errors, was selected to demonstrate the effect of making changes in the Standard
itself. This Standard requires re-statement of prior year comparative amounts in case an
error pertaining to a prior year is discovered in the current year and a change in
accounting policy is made with a retrospective effect. It is felt that requiring smaller
companies to re-state the prior years comparatives in the current years financial
statements would be a cumbersome task as it will involve tracking the prior years
financial statements and then attempting to relate the same in respect of those prior
years. Accordingly, if an exemption is to be given from requiring re-statement of prior
years comparatives in case of errors and changes in accounting policies and, instead, it
is to be required that the effect of such errors and changes in accounting policies is to be
given in the opening balance of reserves of the current year, it would involve changes at
as many as 34 places in the Standard besides requiring total removal of Appendix B to
the existing Ind AS 8. The Accounting Standards Board recently decided to revise
existing AS 5 based on the Ind AS 8 which attempted to make several changes including
the aforesaid changes. A marked copy of the said Standard is set out at Annexure H
37

which shows the extent of changes which have been made in Ind AS 8 to give effect to
the said relaxations. It would almost be impracticable to give effect in terms of
wordings, references to paragraph numbers etc., if relaxations/exemptions are to be
incorporated in Ind AS 8 itself. In other words, even a simple change like this would
require many references at many places to be given either at the beginning or at the end
of the Standard or within the Standard after the relevant paragraphs as presently done in
the existing notified Accounting Standards. The smaller companies would find it
difficult to keep track of all these references in different paragraphs.
32. Another Ind AS that was examined for the purpose of giving relaxations/exemptions is
Ind AS 21, The Effects of Changes in Foreign Exchange Rates, which is based on the
functional currency approach as compared to the simpler integral/non-integral
approach in the existing Accounting Standard (AS) 11, The Effects of Changes in
Foreign Exchange Rates. The determination of functional currency in Ind AS 21
requires consideration of large number of factors affecting the cash inflows and outflows
of an enterprise as the management is required to take a judgment call based on the
effect a currency has on such cash flows. While the existing AS 11 has been in
existence for more than 20 years in the country and the entities as well as the auditors
are conversant with this approach, the functional currency approach would require
various judgments to be made by the management of small companies who may not
have the necessary expertise in this regard. Further, in case a company has functional
currency which is a foreign currency, the financial statements are required to be first
prepared in that foreign currency and then converted into presentation currency as per
Ind AS 21 because, in India, for various statutory purposes, financial statements
prepared in the foreign currency would not be acceptable. Thus, the smaller companies
will have to undertake another complex exercise for which they may not be equipped. It
may also be mentioned that ultimately the results of following the functional currency
approach and integral and non-integral approach for smaller companies whose
functional currency is Indian rupees would not be different. However, providing
exemption from functional currency would mean that Ind AS 21 would have to be
replaced with the existing AS 11.
33. Another Standard in which the approach is totally different as compared to the existing
Standard is Ind AS 12, Taxes on Income, compared to AS 22, Accounting for Income
Taxes. While Ind AS 12 is based on the balance sheet approach, AS 22 is based on the
income statement approach. AS 22 has been in existence for about 12 years. While
smaller entities have now become accustomed to this Standard, bringing in a new
concept based on the balance sheet approach would be difficult to understand as the
language and structure of the Standard is complex.
This Standard requires
understanding of new concepts such as taxable temporary differences, deductible
temporary differences, tax base etc., as compared to AS 22. There would be some
38

instances where the results would be different if Ind AS 12 were to be applied compared
to AS 22. Thus, it needs to be examined whether in view of less impact of the new
Standard, i.e. Ind AS 12, as compared to the existing AS 22, it would be appropriate to
ask the smaller entities to undergo the rigour to understand a Standard which contains
complex requirements. Accordingly, if new approach is not to be imposed upon the
smaller companies, and the existing approach is required to be continued to be followed
for such companies, giving exemptions/relaxations from Ind AS 12 would not be
sufficient as it would have to be replaced with the existing AS 22.
34. Another example where complex measurement requirements would be onerous for
smaller companies would be Ind AS 18, Revenue, which operates on the presumption of
separation of multiple deliverables in case of sale of goods and services. Many smaller
entities also may be selling products bundled with certain services, for example, a small
manufacturer may give an extended warranty for its products. This Standard would
require separation of revenue from the sale of the product and the sale of the extended
warranty as it would be considered as a separate service. While the revenue from the
product would be recognized as per the present requirements, i.e., in the period in which
transfer of significant risks and rewards of ownership takes place, the revenue in respect
of extended warranty would have to be recognized in the period in which the warranty
service is availed by the customer. Similarly, a company which provides extended
credit which results into part of the transaction being considered as a financing
transaction, the interest element would have to be separated from the sale element and
would have to be recognized separately. Further, the interest revenue in case of any
loans etc., given by a company will have to be recognized not on the basis of the interest
rate as per the contractual arrangements but will have to be on the basis of the effective
interest rate. All these are some of the measurement complexities which exist in Ind AS
18. As the smaller entities are also likely to have the transactions of the aforesaid nature
many changes will have to be made in the standard by providing alternative
measurements at various places.
35. Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, is another
standard which not only contains complex rule-based requirements, first to classify noncurrent assets as held for sale or as held for distribution but also onerous requirements
involving measurements compared to the existing requirements in Accounting Standard
(AS) 10, Accounting for Fixed Assets, which provides simpler requirements for assets
retired from active use and held for sale in just two paragraphs. Accordingly, if the
simpler requirements are to be provided to smaller entities, the entire Standard needs to
be changed as the assets held for sale also has implications for accounting for
discontinued operations. Instead, it would be simpler to include the existing two
paragraphs in the Ind AS on accounting for property, plant and equipment and continue
39

with the existing AS 24, Discontinuing Operations, rather than requiring the smaller
entities to follow this standard.
36. Apart from the above Standards, certain relaxations in measurements and reduction in
complexities may have to be done in other Ind AS as well, the cumulative effect of
which would result in incorporating changes not only in the relevant standards but also
in other standards. Such possible changes are indicated in Annexure I.
37. It may be noted that keeping in view the given time frame the above-mentioned changes
in Ind AS in the measurement principles are indicative in nature as much more detailed
exercise is required to be undertaken involving analysis of each Ind AS and due
consultative process needs to be followed before changes can the finalised.
Experience of other countries
38. The IFRS are followed at present in more than 100 countries. An analysis was made
whether the full IFRS are used for all entities or these are used primarily for the public
interest entities. It has been found that almost all the countries including Argentina,
Brazil, Canada, China, France, Germany, Korea, Russia, South Africa and United
Kingdom have two sets of Accounting Standards. Even the International Accounting
Standards Board that has issued the IFRS considers that the requirements contained in
the IFRSs are complex and are meant to be followed by public interest entities.
Accordingly, the IASB itself has issued an IFRS for SMEs which is used in more than
30 countries. Thus, the international experience of many countries (see Annexure J)
also shows that two sets of accounting standards is a norm rather than an exception.
The Companies Act, 2013, recognizes two sets of accounting standards
39. On a perusal of the requirements of the new Companies Act, 2013, it is noted that
various requirements of the Act recognise that there would be two sets of Accounting
Standards. For example, the definition of financial statements contained in Section 2
(40) states that it would include a statement of changes in equity, if applicable; which
means that this statement would not be applicable for certain companies which are not
yet identified but could be smaller companies. Further, Section 52 of the Companies
Act, 2013, recognises that utilization of securities premium received on issue of shares
would be different for different classes of companies depending on which set of
accounting standards are applicable to the companies as per sub-sections 2 and 3 thereof.
Also, Schedule II to the Companies Act, which prescribes useful lives of fixed assets to
compute depreciation, recognises the rates of depreciation being prescriptive or
indicative based on the applicable Accounting Standards. Thus, the Act itself recognizes
40

tthat there would

w
be twoo sets of acccounting stanndards appliicable to diffferent classses of
c
companies.
N
Number
of companies
c
too be coveredd by Ind AS
40. A
According to
t statistics published in Business Line dateed Septembber 22, 2013, in
O
October,
201
11, there weere 11,63,1366 companiess registered in
i India withh the break-uup of
s
small
and no
on-listed com
mpanies as reeflected in thhe followingg graph:

% wise distributio
d
on of Companies on the basis of Paid-up
p Share
Capital
Paid-up Share Capital
P
P
Paid-up
Sharee Capital lesss < Rs. 5 Crorre
P
Paid-up
Sharee Capital > 5 Crore

No. of Com
mpanies Peercentage
1139547
97.97%
23589
2.03%
1163136

T
Total

1
100.00%

% wisse distrib
bution of
o
Com
mpaniess on the basis off Paidup Share
S
C
Capital
Paid-up
Shaare Capital
leess < Rs. 5
Crore
97.97%

Paid
d-up
Share Capital
> 5 Crore
C
2.003%

Total Coompanies reegistered in

n India = 11,,63, 136

% wise distributio
d
on of Com
mpanies on
n the basis of Listingg on Stock
k
E
Exchange(
(s)
Unllisted Compaanies
Listted Companiees
Tottal

No. of Coompanies
Percentaage
11561557
999.40%
69779
0
0.60%
11631336

1000.00%

41

%wisedistributionofCompanies
onthebasisofListingonStock
Exchange(s)

Listed
Companies
0.60%

Unlisted
Companies
99.40%

Total Companies registered in India = 11,63, 136

The data in respect of companies having turnover of more than Rs. 20 crore is not
available.
Another set of data that may provide an indication of applicability of Ind AS to large
number of private limited companies, most of which would be small companies, is
provided in the following chart based on data available on the MCA website:

% wise distribution of Companies and Authorised Capital

Total
Private
Public
Number of Companies
92.41%
7.59%
100
Distribution of Authorized Capital
30.69%
69.31%
100

% wise Number of
Companies

Public,
7.59 %

Private,
92.41%

Private
Public

42

% wise Distribution of
Authorised Capital

Public,
69.31%

Private,
30.69%

Private
Public

41. The above data gives an indication that there would be a large number of small
companies which do not have significant public interest as they are funded primarily
through their own sources or by banks which have access to their financial statements
and other information in any case.
Other arguments for two sets
42. Apart from the above arguments for second set of Accounting Standards for smaller
companies, the other arguments are as follows:
(i) There will be a need to amend or change the Ind AS in many aspects for Small
Companies (hereafter referred to as SCs) for following reasons:
a) SC standards have to be responsive to specific needs of SCs, i.e., address the
transactions, events and conditions typically encountered by SCs.
b) Users of SCs may have different sets of needs: Users of financial statements of SCs
may have less interest in some information in general purpose financial statements
prepared in accordance with full Ind AS than users of financial statements of
entities whose securities are registered for trading in public securities markets or
that otherwise have public accountability. For example, users of financial
statements of SCs may have greater interest in short-term cash flows, liquidity,
balance sheet strength and interest coverage, and in the historical trends of profit or
loss and interest coverage, than they have in information that is intended to assist in
making forecasts of an entitys long-term cash flows, profit or loss, and value.
However, users of financial statements of SCs may need some information that is
not ordinarily presented in the financial statements of listed entities. For example,
as an alternative to the public capital markets, SCs often obtain capital from
shareholders, directors and suppliers, and shareholders and directors often pledge
personal assets so that the SCs can obtain bank financing.
43

c) SCs Standards have to be drafted in a simplified language and structured suitably

keeping in mind the skill sets and competencies of the preparers and users.
Separate set of standards could include constraints such as consistent definitions of
elements of financial statements and focus on the needs of users of financial
statements of SCs. On balance, considering the cost-benefit considerations,
limitations in, and the cost of, the accounting expertise available to SCs, it is
necessary that a separate set of standards is appropriate for SCs.
As a result of the above stated primary reasons, there will be a large number of
changes/amendments to Ind AS. These could be divergence from recognition and
measurement principles, omission of certain topics altogether or options available,
addition of new topics and exemption from /simplification in presentation and
disclosures. While accommodating amendments on account of disclosure in the Ind
AS itself could be easier/error free but the same approach is not practical for
amendments in other areas such as divergence from recognition and measurement
principles.
(ii) Stability of SC Standards versus Frequent Changes due to changes in Ind AS: It is
recognized that Ind AS would undergo changes such as new Ind ASs, annual
improvements and new interpretations. Considering the level and type of
availablibility of human resources and accounting expertise, SCs will find it very
difficult and impractical to assimilate new requirements and implement those on
timely basis.
(iii) Need for more and frequent guidance: SCs would require more accounting guidance
and advise on a timely and frequent basis. Under the rigid and lengthy due process
for interpretation and guidance under Ind AS Framework due to alignment with Ind
AS, it will be quite difficult to meet this unique need of SCs if there is no separate
set of standard for SCs.
(iv) SCs need a user-friendly reference manual rather than the voluminous and unwieldy
book. While it is a general perception that there is not going to be much difference
in the size of material in both the approaches i.e. single set of Ind ASs with added
exemptions to SCs or two separate sets one for SC and another for larger
companies, the benefits of the latter approach can be demonstrated with the current
approach of IFRS as follows:

44

Dual Sets

Single Set Ind AS including added

section for SC carve outs
(No. of pages is based on the size of
IFRS which forms the basis of Ind ASs)

Ind AS for larger

companies

Approx.above3300pages

Approx.3000

AS for SCs (No. of pages is

based on size of IFRS for SMEs
(India has not yet decided to
converge with those Standards.
However, these can be used to
upgrade the existing Accounting
Standards)
Approx.300
pages

Does second set of Standards necessarily mean significant difference in recognition

and measurement principles?
43. The apprehension that recognition and measurement principles in the other set of
Accounting Standards would be significantly different is misplaced in view of the fact
that the second set of Standards would incorporate the recognition and measurement
principles of Ind AS to the extent it is practical for small companies by upgrading the
existing Accounting Standards. This would result in financial statements of smaller
entities being prepared in accordance with recognition and measurement principles which
are, to a large extent, similar to the Ind AS over a period of time. In other words, the
process of transition for smaller entities, if it is through a gradual and evolutionary
process, would result in greater acceptability and meaningful presentation of financial
statements for the users of smaller companies and would ultimately result into a more
meaningful transition to Ind AS.

45

What should be the second set of Accounting Standards?

44. The purpose of the above analysis was to demonstrate whether it would be appropriate to
have one set of Standards for all types of companies, with suitable
exemptions/relaxations to small companies. The ICAI is of a firm opinion that it would
be appropriate to have two sets of Accounting Standards - one set of Standards for large,
public interest companies and another set of simplified Accounting Standards for small
companies, as in many other countries, by upgrading the existing Accounting Standards,
by examining both Ind AS and IFRS for SMEs.

46

Annexures

47

Annexure A
List of Ind ASs placed on MCA website and corresponding revised Ind AS formulated by ICAI
S No.

Ind ASs Placed on MCA Website*

1.

IAS 1

Ind AS 1

Presentation of Financial
Statements

2.

IAS 2

Ind AS 2

Inventories

3.

IAS 7

Ind AS 7

Statement of Cash Flows

4.

IAS 8

Ind AS 8

Accounting Policies, Changes in

Accounting Estimates and Errors

5.

IAS 10

Ind AS 10

Events after the Reporting Period

6.

IAS 11

Ind AS 11

Construction Contracts

7.

IAS 12

Ind AS 12

Income Taxes

8.

IAS 16

Ind AS 16

Property, Plant and Equipment

9.

IAS 17

Ind AS 17

Leases

New/Revised Ind ASs (Post February, 2011) corresponding to

the new/revised IFRSs issued by the IASB after finalisation of
35 Ind ASs hosted on the MCAs website. These Ind ASs have
been finalised by the Council of the ICAI and sent to the
National Advisory Committee on Accounting Standards
(NACAS) for its consideration. These are subject to any
changes, which may be made by the Government before their
notification**
Amendments to
IAS 1

Amendments to
Ind AS 1

Presentation of Items of
Other Comprehensive
Income

Amendments to
IAS 12

Amendments to
Ind AS 12

Deferred Tax: Recovery of

Underlying Assets

48

10.

IAS 18

Ind AS 18

Revenue

11.

IAS 19

Ind AS 19

Employee Benefits

12

IAS 20

Ind AS 20

Accounting for Government

Grants and Disclosure of
Government Assistance

13

IAS 21

Ind AS 21

The Effects of Changes in Foreign

Exchange Rates

14

IAS 23

Ind AS 23

Borrowing Costs

15

IAS 24

Ind AS 24

Related Party Disclosures

16

IAS 27

Ind AS 27

Consolidated and Separate

Financial Statements

17

IAS 28

Ind AS 28

Investments in Associates

IAS 19 (as
amended)

Ind AS 19
(amended)

Employee Benefits
(amended)

i. IAS 27
(as amended)

i. Ind AS 27(as
amended)

i. Separate Financial
Statements(as
amended)

ii. IFRS 10 (new

issued

ii. Ind AS 110

ii. Consolidated
Financial Statements.
(new issued)

IAS 28 (as

Ind AS 28 (as

Investments in Associates
49

amended)

18

IAS 29

Ind AS 29

amended)

and Joint Ventures (as

amended)

Financial Reporting in
Hyperinflationary Economies

19

IAS 31

Ind AS 31

Interests in Joint Ventures

20

IAS 32

Ind AS 32

Financial Instruments:
Presentation

21

IAS 33

Ind AS 33

Earnings per Share

22

IAS 34

Ind AS 34

Interim Financial Reporting

23

IAS 36

Ind AS 36

Impairment of Assets

24

IAS 37

Ind AS 37

Provisions, Contingent Liabilities

and Contingent Assets

25

IAS 38

Ind AS 38

Intangible Assets

26

IAS 39

Ind AS 39

Financial Instruments:
Recognition and Measurement

27

IAS 40

Ind AS 40

Investment Property

28

IFRS 1

Ind AS 101

First-time Adoption of Indian

Accounting Standards

IFRS 11 (Newly Ind AS 111

issued,
it
supersedes IAS 31)

Joint
Arrangements
(newly issued)

Amendments to
IFRS 1

Severe Hyperinflation and

Removal of Fixed Dates
for First-time Adopters

Amendments
Ind AS 101

50

29

IFRS 2

Ind AS 102

Share based Payment

30

IFRS 3

Ind AS 103

Business Combinations

31

IFRS 4

Ind AS 104

Insurance Contracts

32

IFRS 5

Ind AS 105

Non-current Assets Held for Sale

and Discontinued Operations

33

IFRS 6

Ind AS 106

Exploration for and Evaluation of

Mineral Resources

34

IFRS 7

Ind AS 107

Financial Instruments:
Disclosures

35

IFRS 8

Ind AS 108

Operating Segments

Amendments to
IFRS 7

Amendments to
Ind AS 107

Disclosures- Transfers of
Financial Assets

List of Indian Accounting Standards (Ind ASs) corresponding to IFRSs not placed on MCA website at present
1.

Indian Accounting Standard corresponding to IFRS 9, Financial Instruments, is not to be notified at present as it is incomplete and
instead of this standard, Ind AS 39 is being notified.

2.

Indian Accounting Standard corresponding to IAS 26, Accounting and Reporting by Retirement Benefit Plans, is not being notified as
this Standard is not applicable to companies

3.

Indian Accounting Standard corresponding to IAS 41, Agriculture, is not to be notified as corresponding Indian Accounting Standard
is being redrafted

51

* The Downloadable version of 35 Ind ASs placed on MCA web site is available at:
http://www.mca.gov.in/Ministry/accounting_standards.html
** Drafts of these Ind ASs are placed on ICAI Website. The downloadable version of the drafts is available at:
http://www.icai.org/post.html?post_id=9258

52

Annexure B
New Ind ASs (Post February, 2011) corresponding to the new IFRSs after finalisation of 35 Ind ASs formulated by the
ICAI
These Ind ASs have been finalised by the Council of the ICAI and were sent to the National Advisory Committee on
Accounting Standards (NACAS) for its consideration. These are subject to any changes, which may be made by the
Government before their notification.

S No.

New IAS/IFRS

New Ind AS

Name of the Standard

1.

IFRS 12

Ind AS 112

Disclosure of Interests in
Other Entities

2.

IFRS 13

Ind AS 113

Fair Value Measurement

These Ind ASs are placed on the ICAI Website. The downloadable version of the drafts is available at:

http://www.icai.org/post.html?post_id=9258

53

Annexure C
Revised roadmap for Implementation of Indian Accounting Standard
(Ind AS)
For convergence of Indian Accounting Standards with International Financial Reporting
Standards (IFRSs), a Press Release (No.2/2010) laying down roadmap for application of
converged Indian Accounting Standards by companies (other than Banking companies,
Insurance companies and Non-Banking finance companies) was issued on 22nd January,
2010. Further, a Press Release (No.3/2010) related to the roadmap for the application of
the converged Indian Accounting Standards by the Banking companies, Insurance
companies and Non- Banking finance companies was issued on 31st March, 2010.
Subsequently, in response to the requests seeking clarifications on the roadmaps, a Press
Release (No. 4/2010) containing a consolidated statement on clarification of roadmap
was issued on May 04, 2010. Since the Ind ASs placed on the website of the MCA could
not be implemented due to various reasons from 1st April, 2011 as per the aforesaid
roadmaps issued, a revised roadmap for implementation of Indian Accounting Standards
(Ind ASs) has been decided as under:1.

As stated in earlier roadmaps for achieving convergence, there shall be two separate
sets of Accounting Standards notified under the Companies Act, 1956. First set
would comprise the Indian Accounting Standards (Ind AS) converged with the
IFRSs which shall be applicable to the specified class of companies. The second set
would comprise the existing notified Accounting Standards and shall be applicable
to other companies.

2.

The first set of Accounting Standards i.e. converged Indian Accounting Standards
(Ind AS) shall be applied to specified class of companies in phases:(a) Phase I: The companies with net worth more than Rs.1000 crores shall prepare
their first Indian Accounting Standards (Ind AS) financial statements for the
accounting period beginning on or after April 1, 2015, with comparatives for the
year ending 31st March 2015 or thereafter.
(b) Phase II: The companies with net worth of Rs. 1000 crores and more than Rs.
500 crores shall prepare their first Indian Accounting Standards (Ind AS)
financial statements for the accounting period beginning on or after April 1,
2016, with comparatives for the year ending 31st March 2016 or thereafter.
(c) Phase III: The listed companies not covered under the above phases (i.e., Phase
I and phase II) shall prepare their first Indian Accounting Standards (Ind AS)
54

financial statements for the accounting period beginning on or after April 1,

2017, with comparatives for the year ending 31st March 2017 or thereafter.
3.

Non-listed companies which have a net worth of Rs. 500 crores or less shall not be
required to follow the Indian Accounting Standards (Ind AS) which are converged
with the IFRS but need to follow only the existing notified Accounting Standards.

4.

Current version of Indian Accounting Standards

Companies to which Indian Accounting Standards (Ind AS) are applicable shall
prepare their first set of financial statements in accordance the Indian Accounting
Standards effective at the end of its first Ind AS reporting period unless otherwise
specified. For example, companies covered under Phase I preparing financial
statements for the accounting period beginning April 1, 2015 shall be required to
apply the Ind ASs effective for financial year ending on 31st March 2016.

5.

Calculation of net worth

For the purpose of calculation of qualifying net worth of companies, the following
rules shall apply:
(a) The net worth shall be calculated as per the audited balance sheet of the company
as at 31st March 2013 or the first balance sheet for accounting periods which end
after that date.
(b) The cut-off date for calculating the net worth for application of Indian Accounting
Standards for companies covered under Phase II and Phase III shall also be the
audited Balance Sheet as at 31st March, 2013.
(c) The net worth shall be calculated as the paid-up Share Capital plus Reserves and
Surplus less Revaluation Reserve.
(d) For companies which are not in existence on 31st March 2013 or an existing
company meets the criteria for the first time after 31st March, 2013, the net worth
shall be calculated on the basis of the first balance sheet ending after that date. The
same principle is applicable for other dates of convergence, i.e., 1st April, 2016 or
1st April, 2017.

6. Voluntary Adoption
(a) Companies which are covered in Phase II or Phase IIII shall have an option for
early application of the first set of Accounting Standards i.e. the Indian
55

Accounting Standards (Ind AS) only for the financial year commencing on 1st
April, 2015 or thereafter.
(b) Companies not falling in any of the phases (i.e., Non-listed companies which
have a net worth of Rs. 500 crores or less) shall have the option to apply the
Indian Accounting Standards (Ind AS) voluntarily provided they prepare
financial statements under the Indian Accounting Standards (Ind AS)
consistently thereafter.
(c) The option to apply the Indian Accounting Standards voluntarily, once exercised,
therefore, shall be irrevocable. Such companies would not be required to prepare
another set of financial statements in accordance with existing Accounting
Standards.
7.

8.

Applicability to subsidiaries, joint ventures or associates of companies covered

under the convergence roadmap
(a)

The criteria for applicability of Indian Accounting Standards (Ind AS) is to be

considered for each companys standalone financial statements. The companies
covered in a particular phase having subsidiaries, joint ventures or associates not
covered in those phase/phases shall prepare their consolidated financial
statements according to the first set of Accounting Standards (i.e. the Indian
Accounting Standards).

(b)

When one or more companies in a group fall in a phase other than the phase
applicable to the parent company, they shall continue to prepare standalone
financial statements according to the phase applicable to them but the parent
may need to make amendments to these accounts for the purposes of
consolidation as per the Indian Accounting Standards (Ind AS). Such
subsidiaries, joint ventures or associates have the option for early adoption of
Indian Accounting Standards (Ind AS).

Discontinuing use of the first set of Accounting Standards (i.e. the Indian
Accounting Standards)
Once a company starts following the first set of Accounting Standards, i.e., the Indian
Accounting Standards (Ind AS) on the basis of the eligibility criteria, it shall be
required to follow such Accounting standards for all the subsequent financial
statements even if any of the eligibility criteria does not subsequently apply to it.

9.

The roadmap for banks, NBFCs and Insurance Companies will be decided in
consultation with RBI and IRDA.
56

Annexure D

List of Companies invited for the Workshops

S No. Company Name

Sector

1 Bayer CropScience Ltd

2 United Phosphorus Ltd

Agro Chemicals
Agro Chemicals

3 Kingfisher Airlines Ltd

4 SpiceJet Ltd
5 Jet Airways (India) Ltd

Air Transport Service

Air Transport Service
Air Transport Service

6 United Spirits Ltd

7 United Breweries Ltd

Alcoholic Beverages
Alcoholic Beverages

8
9
10
11

Bosch Ltd
Wheels India Ltd
Amtek Auto Ltd
Exide Industries Ltd

Auto Ancillaries
Auto Ancillaries
Auto Ancillaries
Auto Ancillaries

12 SKF India Ltd

13 Motherson Sumi Systems Ltd
14 Amara Raja Batteries Ltd

Auto Ancillaries
Auto Ancillaries
Auto Ancillaries

15
16
17
18
19
20
21
22
23

Automobile
Automobile
Automobile
Automobile
Automobile
Automobile
Automobile
Automobile
Automobile

Ashok Leyland Ltd

TVS Motor Company Ltd
Tata Motors Ltd
Mahindra & Mahindra Ltd
Maruti Suzuki India Ltd
Hero MotoCorp Ltd
Escorts Ltd
Bajaj Auto Ltd
Force Motors Ltd

24 Finolex Cables Ltd

25 Sterlite Technologies Ltd

Cables
Cables

26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46

Capital Goods - Electrical Equipment

Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods - Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment
Capital Goods-Non Electrical Equipment

ABB India Ltd

Kalpataru Power Transmission Ltd
Sujana Towers Ltd
Siemens Ltd
Crompton Greaves Ltd
K E C International Ltd
ALSTOM India Ltd
Jyoti Structures Ltd
Bharat Heavy Electricals Ltd
Alstom T&D India Ltd
Havells India Ltd
Apar Industries Ltd
Electrotherm (India) Ltd
BEML Ltd
McNally Bharat Engineering Company Ltd
Greaves Cotton Ltd
Tecpro Systems Ltd
Cummins India Ltd
Thermax Ltd
Kirloskar Oil Engines Ltd
ISGEC Heavy Engineering Ltd

47 Sundram Fasteners Ltd

48 Jayaswal Neco Industries Ltd
49 Bharat Forge Ltd

Castings, Forgings & Fastners

Castings, Forgings & Fastners
Castings, Forgings & Fastners

57

50
51
52
53
54
55
56
57
58
59
60
61

Shree Cement Ltd

India Cements Ltd
Chettinad Cement Corporation Ltd
Prism Cement Ltd
Ambuja Cements Ltd
J K Cements Ltd
Birla Corporation Ltd
UltraTech Cement Ltd
ACC Ltd
Madras Cements Ltd
JK Lakshmi Cement Ltd
OCL India Ltd

Cement
Cement
Cement
Cement
Cement
Cement
Cement
Cement
Cement
Cement
Cement
Cement

62
63
64
65
66
67
68
69
70
71

GHCL Ltd
Atul Ltd
Phillips Carbon Black Ltd
BASF India Ltd
Castrol India Ltd
Castrol India Ltd
Pidilite Industries Ltd
India Glycols Ltd
Gujarat Alkalies & Chemicals Ltd
Aarti Industries Ltd

Chemicals
Chemicals
Chemicals
Chemicals
Chemicals
Chemicals
Chemicals
Chemicals
Chemicals
Chemicals

72
73
74
75
76
77
78
79
80
81

Sadbhav Engineering Ltd

Consolidated Construction Consortium Ltd
NCC Ltd
Ramky Infrastructure Ltd
Simplex Infrastructures Ltd
Hindustan Construction Company Ltd
Patel Engineering Ltd
Unity Infraprojects Ltd
Punj Lloyd Ltd
Jaiprakash Associates Ltd

Construction
Construction
Construction
Construction
Construction
Construction
Construction
Construction
Construction
Construction

82
83
84
85
86
87

Videocon Industries Ltd

Bharat Electronics Ltd
Sujana Universal Industries Ltd
Bajaj Electricals Ltd
Blue Star Ltd
Whirlpool of India Ltd

Consumer Durables
Consumer Durables
Consumer Durables
Consumer Durables
Consumer Durables
Consumer Durables

88 Oil India Ltd

89 Cairn India Ltd
90 Oil & Natural Gas Corpn Ltd

Crude Oil & Natural Gas

Crude Oil & Natural Gas
Crude Oil & Natural Gas

91
92
93
94
95
96
97
98
99
100
101

Rajesh Exports Ltd

SRS Ltd
Titan Industries Ltd
Shree Ganesh Jewellery House (I) Ltd
Gitanjali Gems Ltd
Shrenuj & Company Ltd
Asian Star Company Ltd
C Mahendra Exports Ltd
M D Overseas Ltd
PC Jeweller Ltd
Winsome Diamonds & Jewellery Ltd

Diamond, Gems and Jewellery

Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery
Diamond, Gems and Jewellery

102
103
104
105
106

Kesoram Industries Ltd

Balmer Lawrie & Company Ltd
Century Textiles & Industries Ltd
Voltas Ltd
DCM Shriram Consolidated Ltd

Diversified
Diversified
Diversified
Diversified
Diversified

58

107
108
109
110
111

N K Industries Ltd
Gujarat Ambuja Exports Ltd
Ruchi Soya Industries Ltd
Ruchi Infrastructure Ltd
JVL Agro Industries Ltd

112 Zee Entertainment Enterprises Ltd

113 Dish TV India Ltd

Edible Oil
Edible Oil
Edible Oil
Edible Oil
Edible Oil
Entertainment
Entertainment

114
115
116
117
118
119
120
121
122
123
124
125
126

Mangalore Chemicals & Fertilizers Ltd

Fertilizers
Gujarat Narmada Valley Fertilizers & ChemicaFertilizers
Southern Petrochemicals Industries Corporati Fertilizers
Madras Fertilizers Ltd
Fertilizers
Fertilizers & Chemicals Travancore Ltd
Fertilizers
Chambal Fertilisers & Chemicals Ltd
Fertilizers
Tata Chemicals Ltd
Fertilizers
Rashtriya Chemicals & Fertilizers Ltd
Fertilizers
National Fertilizer Ltd
Fertilizers
Deepak Fertilizers & Petrochemicals Corp Ltd Fertilizers
Coromandel International Ltd
Fertilizers
Gujarat State Fertilizers & Chemicals Ltd
Fertilizers
Zuari Agro Chemicals Ltd
Fertilizers

127
128
129
130
131
132
133
134
135
136
137

Hatsun Agro Product Ltd

Britannia Industries Ltd
REI Agro Ltd
Hindustan Unilever Ltd
Godrej Consumer Products Ltd
Marico Ltd
Colgate-Palmolive (India) Ltd
GlaxoSmithkline Consumer Healthcare Ltd
Nestle India Ltd
Dabur India Ltd
Kwality Dairy (India) Ltd

FMCG
FMCG
FMCG
FMCG
FMCG
FMCG
FMCG
FMCG
FMCG
FMCG
FMCG

138
139
140
141
142

Gujarat Gas Company Ltd

GAIL (India) Ltd
GAIL (India) Ltd
Petronet LNG Ltd
Indraprastha Gas Ltd

Gas Distribution
Gas Distribution
Gas Distribution
Gas Distribution
Gas Distribution

143 Hindusthan National Glass & Industries Ltd

144 Asahi India Glass Ltd

Glass & Glass Products

Glass & Glass Products

145 Apollo Hospitals Enterprise Ltd

Healthcare

146
147
148
149
150
151
152
153
154
155
156

Infrastructure Developers & Operators

Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators
Infrastructure Developers & Operators

Adani Ports & Special Economic Zone Ltd

IVRCL Ltd
IL&FS Engineering & Construction Co Ltd
Larsen & Toubro Ltd
Gammon India Ltd
IL&FS Transportation Networks Ltd
IRB Infrastructure Developers Ltd
BGR Energy Systems Ltd
Ircon International Ltd
Engineers India Ltd
Jaypee Infratech Ltd

157 Redington India Ltd

158 HCL Infosystems Ltd
159 Moser Baer (India) Ltd

IT - Hardware
IT - Hardware
IT - Hardware

160 Infosys Ltd

IT - Software

59

161
162
163
164
165
166
167
168
169

Wipro Ltd
MphasiS Ltd
Mindtree Ltd
Satyam Computer Services Ltd
Tata Consultancy Services Ltd
Tech Mahindra Ltd
Oracle Financial Services Software Ltd
HCL Technologies Ltd
IGate Computer Systems Ltd

IT - Software
IT - Software
IT - Software
IT - Software
IT - Software
IT - Software
IT - Software
IT - Software
IT - Software

170 Blue Dart Express Ltd

171 Container Corporation Of India Ltd

Logistics
Logistics

172 Shirpur Gold Refinery Ltd

173 NMDC Ltd
174 Sesa Goa Ltd

Mining & Mineral products

Mining & Mineral products
Mining & Mineral products

175 Tube Investments of India Ltd

176 Greenply Industries Ltd

Miscellaneous
Miscellaneous

177
178
179
180

Non Ferrous Metals

Non Ferrous Metals
Non Ferrous Metals
Non Ferrous Metals

National Aluminium Company Ltd

Hindalco Industries Ltd
Sterlite Industries (India) Ltd
Hindustan Zinc Ltd

181 Jindal Poly Films Ltd

182 Uflex Ltd

Packaging
Packaging

183
184
185
186

Paints/Varnish
Paints/Varnish
Paints/Varnish
Paints/Varnish

Berger Paints India Ltd

Akzo Nobel India Ltd
Asian Paints Ltd
Kansai Nerolac Paints Ltd

187 Tamil Nadu Newsprint & Papers Ltd

Paper

188 Chemplast Sanmar Ltd

189 Dhunseri Petrochem & Tea Ltd
190 Savita Oil Technologies Ltd

Petrochemicals
Petrochemicals
Petrochemicals

191
192
193
194
195
196
197
198
199
200
201
202
203
204

Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals

Cadila Healthcare Ltd

Torrent Pharmaceuticals Ltd
Jubilant Life Sciences Ltd
Dr Reddys Laboratories Ltd
Aurobindo Pharma Ltd
Divis Laboratories Ltd
Ranbaxy Laboratories Ltd
Cipla Ltd
Lupin Ltd
Ipca Laboratories Ltd
Glaxosmithkline Pharma Ltd
Wockhardt Ltd
Glenmark Pharmaceuticals Ltd
Sun Pharmaceuticals Industries Ltd

205 Tata Global Beverages Ltd

Plantation & Plantation Products

206
207
208
209

Sintex Industries Ltd

Jain Irrigation Systems Ltd
Supreme Industries Ltd
Finolex Industries Ltd

Plastic products
Plastic products
Plastic products
Plastic products

210
211
212
213

Torrent Power Ltd

Adani Power Ltd
Neyveli Lignite Corporation Ltd
NHPC Ltd

Power Generation & Distribution

Power Generation & Distribution
Power Generation & Distribution
Power Generation & Distribution

60

214
215
216
217
218
219
220
221

Lanco Infratech Ltd

Jaiprakash Power Ventures Ltd
CESC Ltd
Tata Power Company Ltd
JSW Energy Ltd
Reliance Infrastructure Ltd
NTPC Ltd
Power Grid Corporation of India Ltd

Power Generation & Distribution

Power Generation & Distribution
Power Generation & Distribution
Power Generation & Distribution
Power Generation & Distribution
Power Generation & Distribution
Power Generation & Distribution
Power Generation & Distribution

222 JMC Projects (India) Ltd

Realty
223 DLF Ltd
Realty
224 National Buildings Construction Corporation L Realty
225
226
227
228
229
230
231

Chennai Petroleum Corporation Ltd

Essar Oil Ltd
Mangalore Refinery And Petrochemicals Ltd
Indian Oil Corporation Ltd
Reliance Industries Ltd
Bharat Petroleum Corporation Ltd
Hindustan Petroleum Corporation Ltd

Refineries
Refineries
Refineries
Refineries
Refineries
Refineries
Refineries

232 Future Retail Ltd

233 Shoppers Stop Ltd

Retail
Retail

234 ABG Shipyard Ltd

235 Shipping Corporation of India Ltd

Ship Building
Shipping

236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254

Surya Roshni Ltd

PSL Ltd
Jindal Steel & Power Ltd
Jindal Stainless Ltd
Prakash Industries Ltd
Usha Martin Ltd
Welspun Corp Ltd
Jindal Saw Ltd
Tata Steel Ltd
JSW Steel Ltd
JSW ISPAT Steel Ltd
Uttam Value Steels Ltd
Uttam Galva Steels Ltd
National Steel & Agro Industries Ltd
Mukand Ltd
Steel Authority of India Ltd
Bhushan Steel Ltd
Maharashtra Seamless Ltd
Monnet Ispat & Energy Ltd

Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel
Steel

255
256
257
258

Shree Renuka Sugars Ltd

EID Parry (India) Ltd
Balrampur Chini Mills Ltd
Bajaj Hindusthan Ltd

Sugar
Sugar
Sugar
Sugar

259 Bharti Infratel Ltd

Telecomm Equipment & Infra Services

260
261
262
263
264
265
266

Telecomm-Service
Telecomm-Service
Telecomm-Service
Telecomm-Service
Telecomm-Service
Telecomm-Service
Telecomm-Service

Idea Cellular Ltd

Tata Communications Ltd
Tata Teleservices (Maharashtra) Ltd
Reliance Communications Ltd
Bharti Airtel Ltd
Tulip Telecom Ltd
Mahanagar Telephone Nigam Ltd

267 Arvind Ltd

268 RSWM Ltd

Textiles
Textiles

61

269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286

Lakshmi Machine Works Ltd

Textiles
Shri Lakshmi Cotsyn Ltd
Textiles
Welspun India Ltd
Textiles
Vardhman Textiles Ltd
Textiles
SEL Manufacturing Company Ltd
Textiles
S.Kumars Nationwide Ltd
Textiles
Bombay Rayon Fashions Ltd
Textiles
Bombay Dyeing & Manufacturing Company LtTextiles
Grasim Industries Ltd
Textiles
Indo Rama Synthetics (India) Ltd
Textiles
SRF Ltd
Textiles
Raymond Ltd
Textiles
Trident Ltd
Textiles
Alok Industries Ltd
Textiles
JBF Industries Ltd
Textiles
Garden Silk Mills Ltd
Textiles
Nakoda Ltd
Textiles
Aditya Birla Nuvo Ltd
Textiles

287 ITC Ltd

288 Godfrey Phillips India Ltd

Tobacco Products
Tobacco Products

289
290
291
292
293
294
295
296

Adani Enterprises Ltd

Amrapali Industries Ltd
Surana Corporation Ltd
Kothari Products Ltd
Ushdev International Ltd
MMTC Ltd
State Trading Corporation of India Ltd
PTC India Ltd

Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading

297
298
299
300
301

MRF Ltd
Apollo Tyres Ltd
JK Tyre & Industries Ltd
CEAT Ltd
Balkrishna Industries Ltd

Tyres
Tyres
Tyres
Tyres
Tyres

62

Annexure E
List of Associations, Regulators / Boards invited for the Workshops
S No.

Name of the Associations

1.

Associated Chambers of Commerce & Industry (ASSOCHAM)

2.

Federation of Indian Chambers of Commerce & Industry (FICCI)

3.

Confederation of Indian Industries (CII)

4.

The Standing Conference of Public Enterprises ( SCOPE)

5.

NASSCOM

6.

PHD Chamber of Commerce and Industry

7.

Indian Sugar Mills Association (ISMA)

8.

Association of Power Producers

9.

Confederation of Real Estate Developers Associations of India (CREDAI)

10.

Automotive Component Manufacturers Association of India

11.

Indian Paper Manufacturers Association

12.

Indian Stainless Steel Development Association,

13.

Society of Indian Automobile Manufacturers

14.

Alkali Manufacturers Association of India

15.

All India Biotech Association

16.

All India Glass Manufacturers Federation

17.

Automotive Tyre Manufacturers Association (ATMA)

18.

Federation of Indian Export Organisations (FIEO)

19.

Confederation of Indian Textiles Industry ( CITI)

20.

Federation of Indian Mineral Industries (FIMI)

21.

Telecom Equipment Manufacturers Association of India

63

22.

The Fertiliser Association of India

23.

Manufacturers Association For Information Technology,

24.

Cement Manufacturers Association

25.

All India Plastics Manufacturers Association

26.

Pharmaceutical Association (IPA)

27.

All India Association of Industries

28.

Builders Association of India

29.

The Textile Association (India)

30.

Indian National Shipowners' Association

31.

All India Rubber Industries Association

32.

Indian Chemicals Manufacturers Association

33.

Organisation of Pharmaceutical Producers of India

34.

Indian Merchants Chambers

35.

Indian Chamber of Commerce

36.

Association of Indian Forging Industry

37.

The United Planters' Association of Southern India

38.

Indian Tea Association

List of Regulators/Boards
S No.

Name of the Regulator/Board

1

The Telecom Regulatory Authority of India

Central Electricity Regulatory Commission

3
4
5

Tea Board
Coffee Board
Rubber Board

64

AnnexureF
List of Participantants at Workshops
S. No.

Participants Name

Organisation Name

CA. Inderjit Pathak

Hindalco Industries Ltd.

2
3
4

CA. Uday Phadke

CA. Vilas Paranjape
Shri P Y Gurav

Mahindra & Mahindra Ltd

5
6
7
8

CA Rishabh Jain
CA Sanjay Mathur
CA. Neelakantan C
CA. Shivshankaran S G

Maruti Suzuki India Ltd

9
10
11
12

CA. Anuj Agarwal

CA. Dhiraj Mehta
CA. Janmejay Sharma
Ms. Anju Bahl

Bharat Heavy Electricals Ltd

13

CA. Anoop Kumar Shukla

J K Cements Ltd

14
15
16
17

CA. Madhav H. Kale

CA. Anil D. Yadav
CA. Vikash Baingani
CA. Vaishali Koparkar

IRB Infra Developers Ltd.

18
19
20
21

CA. Gurmeet Singh

CA. Sanjay Bharti
CA. Niraj Nayan Kumar
Shri Alok Shah

Oil & Natural Gas Corpn Ltd

22
23

CA. Parag Chavda

CA. Bharat Joshi

Atul Ltd.

24
25
26
27

CA. Rakhi Jain

CA. C P Toshniwal
Shri Rahul Irani
CA. A. Boopathy

Hindustan Unilever Ltd.

Future Group

28
29

CA. Ashok Kumar Verma

CA. Pratibha Natani

National Fertilizer Ltd.

30
31
32
33
34

CA. Aparajita Sarkar

CA. R Hemalatha
Shri Ganapathay P
Shri Tharun J
CA. S. Narasimaan

Tata Consultancy Services Ltd

S & S Technology

35

CA. Pydipaty SreenivAsulu

NMDC Ltd

36

CA. Rakesh Agarwal

Reliance Industries Ltd,

37

CA. Kapil Sachdev

Kansai Nerolac Paints Ltd

38

CA. Naga Durga Sudhakar G V

Dr Reddys Laboratories Ltd

39
40
41

CA. Shraddha Agrawal

CA. Amar Sharma
CA. H. Sudarsan

JSW Energy Ltd.

42

CA. N. V. Aunachalam

Reliance Power Ltd

43
44

CA. Ritesh Suneja

CA. Akshay Deshkar

Essar Energy PLC

Tata Motors Ltd.

Ashok Leyland Ltd

Sector
Aluminium
Automobile
Automobile
Automobile
Automobile

Capital Goods - Electrical Equipment

Larsen & Toubro Ltd

Cement
Construction
Construction

Crude Oil & Natural Gas

Hatsun Agro Product Ltd

Mindtree Ltd

Dyes And Pigments - Large

FMCG
FMCG
FMCG

Fertilizer

IT - Software
IT - Software
IT - Software
Mining & Mineral products

Oil Exploration / Allied Services

Paints/Varnish
Pharmaceuticals

Power Generation & Distribution

Power Generation & Distribution

Power Generation & Distribution

65

45
46
47
48
49

Shri K. Sreekant
Shri Arvind Batra
CA. Sohan Lal Sharma
Shri R. P. Goyal
CA. ABL Srivastava

NTPC Ltd

50
51
52

Shri Ajay Singhal

CA. S. Balachandar
CA. Ashish Goyal

Hindustan Petroleum Corporation Ltd

53
54
55
56
57

CA. Virendra Kasliwal

CA. P R Ashok
CA. Sreevidhya S M
CA. Pradeep Pagariya
CA. Naga Rama Rao

Essar Oil Ltd

58

CA. M. B. Singhal

National Buldings Construction Corporation

Ltd.

59

CA. N Giridhar

Gujarat Ambuja Exports Ltd

60
61

CA. D. K. Miglani
CA. Pawan Agarwal

Steel Authority of India Ltd.

62
63

CA. Tajender Khurana

CA. Manoj Garg

Tata Teleservices (Maharashtra) Ltd

64

CA. Mahendra Bhandari

Aditya Birla Nuvo Ltd

65

CA. Nilay Rathi

Century Textiles & Industries Ltd

66
67
68

CA. Vaibhav Chauhan

Shri Sandeep Gupta
CA. Joydeb Chatterjee

SRF LTD

69

CA. Saradindu Dutta

ITC LTD

70
71
72
73

Dr. Sanjeev Singhal

CA. Vijay Kumar MP
CA. Ashish Taksali
CA. Sridhar A

Confederation of Indian Industries

Power Generation & Distribution

National Hydroelectric Power Corporation

Power Generation & Distribution

Bharat Petroleum Corporation Ltd

Refineries
Refineries
Refineries

Chennai Petroleum Corporation Limited

Refineries

Realty
Solvent Extraction - Large
Steel

Telecomm-Service

Textiles
Textiles
Textiles

Tobacco Products

Association
United Planters' Association of Southern
India (UPASI)

74

Shri Queenie Naire

All India Association of Industries

75

Shri S. K. Srinivasan

Alkali Manufacturers' Association of India

Association
Association
Association

66

Annexure G
List of Amendments and Changes required in Ind AS 39 based on IFRS
for SMEs
Topic & Areas requiring changes

1
2

Recognition
and
Measurement
Simplifications
Scope - Text and Terminologies have to
be changed to align those with type of
entities within SME (e.g. exception
relating to Insurance contracts) or to
exemptions/different prescriptions for
SMEs (e.g. measurement of investments
in Subsidiaries, Associates and Joint
Ventures). This would also requires
changes to paragraphs in Application
Guidance e.g. AG3A, AG3, AG4, AG4A
Classifications of FA and FL: There
will be elimination of categories like
Loans and Receivables, HTM, Fair
Value Option for Liabilities. This will
require changes in many paragraphs, e.g,
9, AG14-15 (Definitions), 43-47
(Measurement),
48
(Fair
Vaue
Measurements), 50 (Reclassifications),
55-57 (Gains and Losses), 58,63, 66, 67
(Impairment), 79 (Hedging), AG53, AG
56 (Regular way Purchase or Sale).
Further, the classifications norms and
criteria are simpler than proposed IFRS 9
as Basic Financial Instruments measured
at Amortized Cost do not require to be
tested for 'Business Model (Trading
versus collection of contractual cash
flows) condition.
Derecognition Principles: SME does
not have to undertake passthrough test,
Continuing involvement tests. This
simplification would require changes in
many paragraphs, e.g., 17, 18, 19, 20, 23,
30, 31, AG35, AG36-38

Category of change

For Rationale
we can refer to
Basis
for
Conclusions in
IFRS SMEs.
BC 98

Divergence
from BC 100-101
Measurement
Principles
and reducing complexity

Reducing complexity - BC 101

align
to
SME
type
transactions

67

5 Initial Measurement Principles - Fair

Value: Initial measurement will be at
transaction price and not at fair value.
This will require changes in Paragraph
43-48, AG64 to suit SME's measurement
approach.
6 Subsequent Measurement Principles Amortised Cost and EIR: EIR concept
in some situations like Floating Rate
interest or determination of Expected
Life etc will be complex and burdensome
for SME. Therefore, simplification to
amortise transaction costs/fees on
straightline basis instead of EIR would
be required. Providing such relief in Ind
AS itself will entail changes in
paragraphs 9, AG6-7 and examples in
Implementation Guidance would be
needed.
7 Subsequent Measurement Principles Fair Value: In view of the nature of
transactions
undertaken,
many
paragraphs (AG74-82) relating to
computation of fair values using
'Valuation Techniques' require rewriting.
8 Hedge Accounting: In view of the
nature of transactions undertaken and the
hedging practices, entire section on
hedging i.e. paragraphs 71-102 and
AG94-132
and
Section
F
of
Implementation
Guidance
require
rewriting.
9 Simple disclosures have to be added:
Since there will be no separate disclosure
standard like Ind AS 107 for SMEs, few
minimum
and
basic
disclosure
requirements have to be added in main
recognition and measurement standard
itself

Divergence
from
Measurement Principles

Divergence
from
Measurement Principles

Areas making many & large parts of

Standard Redundant to SMEs
10 Classification of Financial Assets and
Financial Liabilities : Paragraphs 9, AG
4B-4K, AG9-12, AG14,15,AG1625,
AG26 and Section B of Implementation
of Implementation Guidance
68

11 Recognition Principles: SME would not

have option to adopt Settlement Date
accounting
for
Regular
Way
Purchase/Sale of FA. This exemption
renders large part of Ind AS 39
(paragraphs 38 and AG53-56) redundant
to SMEs.
12 Embedded Derivatives: SME do not
have to evaluate and separate embedded
derivative from host contracts. This
exemption renders large part of Ind AS
39 (paragraphs 10-13 and AG27-33B)
redundant to SMEs.

Divergence
from
Recognition Principles and
Reducing complexity

Divergence
from BC 101
Measurement
principles
and Reducing complexity

69

A
Annexure
H

Maarked Copy
C
of Ind AS
A 8
form
mulated
d as Exp
posure Draft
Account
A
ing Stan
ndard (A
AS) 5 (re
evised)
Acco
ounting Policies
s, Chang
ges in Accountin
ing
E
Estimate
es and Errors
E

(Last
(
date for Com
mments: ________
_____)

Is
ssued by

Acccounting Standarrds Board

d
The In
nstitute of
o Charttered Ac
ccountants of In
ndia

7
70

Indian Accounting Standard (Ind AS) 8 5 (revised)1

Accounting Policies, Changes in Accounting
Estimates and Errors
Following is the Exposure Draft of the revised Accounting Standard (AS) 5, Accounting
Policies, Changes in Accounting Estimates and Errors, issued by the Accounting
Standards Board of the Institute of Chartered Accountants of India, for comments. The
Board invites comments on any aspect of this Exposure Draft. Comments are most
helpful if they indicate the specific paragraph or group of paragraphs to which they
relate, contain a clear rationale and, where applicable, provide a suggestion for
alternative wording.
Comments should be submitted in writing to the Secretary, Accounting Standards Board,
The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi 110 002, so as to be received not later than
__________,2013. Comments can also be sent by e-mail at asb@icai.in.
(This Accounting Standard includes paragraphs set in bold type and plain type, which
have equal authority. Paragraphs in bold type indicate the main principles. This
Standard should be read in the context of the Preface to the Statements of Accounting
Standards issued by the Institute of Chartered Accountants of India).
(This Indian Accounting Standard includes paragraphs set in bold type and plain type,
which have equal authority. Paragraphs in bold type indicate the main principles.)

Objective
1

The objective of this Standard is to prescribe the criteria for selecting and
changing accounting policies, together with the accounting treatment and
disclosure of changes in accounting policies, changes in accounting estimates
and corrections of errors. The Standard is intended to enhance the relevance
and reliability of an entityenterprises financial statements, and the comparability
of those financial statements over time and with the financial statements of other
entitiesenterprises.

Disclosure requirements for accounting policies, except those for changes in

accounting policies, are set out in Ind AS 1 (Revised) Presentation of Financial
Statements[G1].

Scope
1

Appendix I to this revised AS 5 contains the purposeobjective of the revision of and comparison
with the existing AS 5.

71

This Standard shall should be applied in selecting and applying accounting

policies, and accounting for changes in accounting policies, changes in
accounting estimates and corrections of prior period errors.

The tax effects of corrections of prior period errors and of retrospective

adjustments made to apply changes in accounting policies are accounted for and
disclosed in accordance with Ind AS 12 22. Income Taxes.

Definitions
5

The following terms are used in this Standard with the meanings specified:
Accounting policies are the specific principles, bases, conventions, rules and
practices applied by an entity enterprise in preparing and presenting
financial statements.
A change in accounting estimate is an adjustment of the carrying amount of
an asset or a liability, or the amount of the periodic consumption of an
asset, that results from the assessment of the present status of, and
expected future benefits and obligations associated with, assets and
liabilities. Changes in accounting estimates result from new information or
new developments and, accordingly, are not corrections of errors.
Indian Accounting Standards( Ind ASs) are Standards prescribed under
Section 211(3C) of the Companies Act, 1956 or the Accounting Standards
issued by the Institute of Chartered Accountants of India, whichever are
applicable to the enterprise.
Material Omissions or misstatements of items are material if they could,
individually or collectively, influence the economic decisions that users
make on the basis of the financial statements. Materiality depends on the
size and nature of the omission or misstatement judged in the surrounding
circumstances. The size or nature of the item, or a combination of both,
could be the determining factor.
Prior period errors are omissions from, and misstatements in, the entitys
financial statements of an enterprise for one or more prior periods arising
from a failure to use, or misuse of, reliable information that:
(a)

was available when financial statements for those periods were

approved for issue; and

(b)

could reasonably be expected to have been obtained and taken into

account in the preparation and presentation of those financial
statements.

Such errors include the effects of mathematical mistakes, mistakes in

applying accounting policies, oversights or misinterpretations of facts, and
fraud.

72

Retrospective application is applying a new accounting policy to

transactions, other events and conditions as if that policy had always been
applied.
Retrospective restatement is correcting the recognition, measurement and
disclosure of amounts of elements of financial statements as if a prior
period error had never occurred.
Impracticable Applying a requirement is impracticable when the entity
enterprise cannot apply it after making every reasonable effort to do so.
For a particular prior period, it is impracticable to apply a change in an
accounting policy retrospectively or to make a retrospective restatement to
correct an error if:
(a)

the effects of the retrospective application or retrospective

restatement are not determinable;

(b)

the retrospective application or retrospective restatement requires

assumptions about what managements intent would have been in
that period; or

(c)

the retrospective application or retrospective restatement requires

significant estimates of amounts and it is impossible to distinguish
objectively information about those estimates that:
(i)

provides evidence of circumstances that existed on the

date(s) as at which those amounts are to be recognised,
measured or disclosed; and

(ii)

would have been available when the financial statements for

that prior period were approved for issue from other
information.

Prospective application of a change in accounting policy and of recognising

the effect of a change in an accounting estimate, respectively, are:

(a)

applying the new accounting policy to transactions, other events

and conditions occurring after the date as at which the policy is
changed; and

(b)

recognising the effect of the change in the accounting estimate in

the current and future periods affected by the change.

Assessing whether an omission or misstatement could influence economic

decisions of users, and so be material, requires consideration of the
characteristics of those users. The Framework for the Preparation and
Presentation of Financial Statements issued by the Institute of Chartered
Accountants of India states in paragraph 26 that It is assumed that users have a
reasonable knowledge of business and economic activities and accounting and
study the information with reasonable diligence. Therefore, the assessment

73

needs to take into account how users with such attributes could reasonably be
expected to be influenced in making economic decisions.

Accounting policies
Selection and application of accounting policies
7

When an Ind AS specifically applies to a transaction, other event or

condition, the accounting policy or policies applied to that item shall
should be determined by applying the Ind AS.

Ind ASs set out accounting policies that result in financial statements containing
relevant and reliable information about the transactions, other events and
conditions to which they apply. Those policies need not be applied when the
effect of applying them is immaterial. However, it is inappropriate to make, or
leave uncorrected, immaterial departures from Ind ASs to achieve a particular
presentation of an entitys enterprises financial position, financial performance or
cash flows.

Some Ind ASs are may be accompanied by guidance to assist entities

enterprises in applying their requirements. All Where such guidance states
whether it is an integral part of Ind ASs. Guidance that it is an integral part of the
Ind ASs, that guidance is mandatory. Guidance that is not an integral part of the
Ind ASs does not contain requirements for financial statements.

10

In the absence of an Ind AS that specifically applies to a transaction, other

event or condition, management shouldshall use its judgement in
developing and applying an accounting policy that results in information
that is:

relevant to the economic decision-making needs of users; and

(a)

reliable, in that the financial statements:

(i)

are prudent, i.e., in view of the uncertainty attached to future

events, profits are not anticipated but recognised only when
realised though not necessarily in cash. Provision is made for
all known liabilities and losses even though the amount cannot
be determined with certainty and represents only a best
estimate in the light of available information.;

(ii)

reflect the economic substance of transactions, other events

and conditions, and not merely the legal form;

(iii)

are complete in all material respects,;

(i)(iv) represent faithfully the financial position, financial

performance and cash flows of the entityenterprise;

74

(ii)

reflect the economic substance of transactions, other events

and conditions, and not merely the legal form;

(iii)(v) are neutral, i.e., free from bias;

(iv)

are prudent; and

(v)

are complete in all material respects.

While reliability is a factor for using judgement in developing and applying

an accounting policy, the management should also consider that the
resulting information should be relevant to the economic decision-making
needs of users.

11

12

In making the judgement described in paragraph 10, management shall

should refer to, and consider the applicability of, the following sources in
descending order:
(a)

the requirements in Ind ASs dealing with similar and related issues;
and

(b)

the definitions, recognition criteria and measurement concepts for

assets, liabilities, income and expenses in the Framework.

In making the judgement described in paragraph 10, management may also

first consider the other pronouncements of the Institute of Chartered
Accountants of India, and then the most recent pronouncements of
International Accounting Standards Board and in absence thereof those of
the other standard-setting bodies that use a similar conceptual framework
to develop accounting standards, other accounting literature and accepted
industry practices, to the extent that these do not conflict with the sources
in paragraph 11.

Consistency of accounting policies

13

An entity enterprise shall should select and apply its accounting policies
consistently for similar transactions, other events and conditions, unless
an Ind AS specifically requires or permits categorisation of items for which
different policies may be appropriate. If an Ind AS requires or permits such
categorisation, an appropriate accounting policy shall should be selected
and applied consistently to each category.

Changes in accounting policies

14
An entity enterprise shall should change an accounting policy only if the
change:
(a)

is required by an Ind AS; or

75

(b)

results in the financial statements providing reliable and more

relevant information about the effects of transactions, other events
or conditions on the entitys enterprisess financial position,
financial performance or cash flows.

(c)

if the adoption of the different accounting policy is required by a

statute[G2]

15

Users of financial statements need to be able to compare the financial

statements of an entity enterprise over time to identify trends in its financial
position, financial performance and cash flows. Therefore, the same accounting
policies are applied within each period and from one period to the next unless a
change in accounting policy meets one of the criteria in paragraph 14.

16

The following are not changes in accounting policies:

(a) the application of an accounting policy for transactions, other events or
conditions that differ in substance from those previously occurring; and
(b) the application of a new accounting policy for transactions, other events
or conditions that did not occur previously or were immaterial.

17

[Deleted]The initial application of a policy to revalue assets in accordance

with Ind AS 16 Property, Plant and Equipment or Ind AS 38 Intangible
Assets is a change in an accounting policy to be dealt with as a revaluation
in accordance with Ind AS 16 or Ind AS 38, rather than in accordance with
this Standard.

Paragraphs 1931 do not apply to the change in accounting policy described in

paragraph 17.

Applying changes in accounting policies

179 Subject to paragraph 213:
(a) an entity enterprise shouldshall account for a change in accounting policy
resulting from the initial application of an Ind AS in accordance with the
specific transitional provisions, if any, in that Ind AS; and
(b) when an enterpriseentity changes an accounting policy upon initial
application of an Ind AS that does not include specific transitional
provisions applying to that change, or changes an accounting policy
voluntarily, it shall should apply the change retrospectively.
18

For the purpose of this Standard, early application of an Ind AS, where permitted,
is not a voluntary change in accounting policy.

19 21 In the absence of an Ind AS that specifically applies to a transaction, other event

or condition, management may, in accordance with paragraph 12, apply an
accounting policy from the other pronouncements of the Institute of Chartered
Accountants of India and then most recent pronouncements of International

76

Accounting Standards Board and in absence thereof those of the other standardsetting bodies that use a similar conceptual framework to develop accounting
standards. If, following an amendment of such a pronouncement, the entity
enterprise chooses to change an accounting policy, that change is accounted for
and disclosed as a voluntary change in accounting policy.

Retrospective application
20 22 Subject to paragraph 213, when a change in accounting policy is applied
retrospectively in accordance with paragraph 179(a) or (b), the entity
enterprise shallshould adjust the opening balance of each affected
component of equity for the current period. Usually, the adjustment is made
to reserves. However, the adjustment may be made to another component of
equity (for example, to comply with an AS).the earliest prior period
presented and the other comparative amounts disclosed for each prior
period presented as if the new accounting policy had always been applied.

Limitations on retrospective application

21 23 When retrospective application is required by paragraph 179(a) or (b), a
change in accounting policy shall should be applied retrospectively except
to the extent that it is impracticable to determine either the period-specific
effects or the cumulative effect of the change.
22 24 When it is impracticable to determine the period-specific effects of changing
an accounting policy on comparative information for one or more prior
periods presented, the entity shallenterprise should apply the new
accounting policy to the carrying amounts of assets and liabilities as at the
beginning of the earliest period for which retrospective application is
practicable, which may be the current period, and shall should make a
corresponding adjustment to the opening balance of each affected
component of equity for thatthe current period.
23 25 When it is impracticable to determine the cumulative effect, at the beginning
of the current period, of applying a new accounting policy to all prior
periods, the entity enterprise shall should adjust the comparative information
to apply the new accounting policy prospectively from the earliest date
practicable.
26

[Deleted]When an entity applies a new accounting policy retrospectively, it applies

the new accounting policy to comparative information for prior periods as far back
as is practicable. Retrospective application to a prior period is not practicable
unless it is practicable to determine the cumulative effect on the amounts in both
the opening and closing balance sheets for that period. The amount of the resulting
adjustment relating to periods before those presented in the financial statements is
made to the opening balance of each affected component of equity of the earliest
prior period presented. Usually the adjustment is made to retained earnings.
However, the adjustment may be made to another component of equity (for
example, to comply with an Ind AS). Any other information about prior periods,

77

such as historical summaries of financial data, is also adjusted as far back as is

practicable.
24 27 When it is impracticable for an entity enterprise to apply a new accounting policy
retrospectively, because it cannot determine the cumulative effect of applying the
policy to all prior periods, the entityenterprise, in accordance with paragraph 235,
applies the new policy prospectively from the start of the earliest period practicable.
It therefore disregards the portion of the cumulative adjustment to assets, liabilities
and equity arising before that date. Changing an accounting policy is permitted
even if it is impracticable to apply the policy prospectively for any prior period.
Paragraphs 5053 provide guidance on when it is impracticable to apply a new
accounting policy to one or more prior periods.

Disclosure
25 28 When initial application of an Ind AS or initial application of a new
accounting policy required by a statute has an effect on the current period or
any prior period, would have such an effect except that it is impracticable to
determine the amount of the adjustment, or might have an effect on future
periods, an entity shallenterprise should disclose:
(a)

the title of the Ind AS or the relevant requirement of the ststutestatute;

(b)

when applicable, that the change in accounting policy is made in

accordance with its transitional provisions;

(c)

the nature of the change in accounting policy;

(d)

when applicable, a description of the transitional provisions;

(e)

when applicable, the transitional provisions that might have an effect on

future periods;

(f)

for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
(i) for each financial statement line item affected; and
(ii)

Earnings per Share applies to the

if Ind AS 33AS 20
entityenterprise, for basic and diluted earnings per share;

(g)

the amount of the adjustment relating to prior periods before those

presented, to the extent practicable; and

(h)

if retrospective application required by paragraph 179(a) or (b) is

impracticable for a particular prior period, or for periods before those
presented, the circumstances that led to the existence of that condition
and a description of how and from when the change in accounting
policy has been applied.

78

Financial statements
disclosures.

of

subsequent

periods

need

not

repeat

these

26 29 When a voluntary change in accounting policy has an effect on the current

period or any prior period, would have an effect on that period except that it
is impracticable to determine the amount of the adjustment, or might have an
effect on future periods, an entity shallenterprise should disclose:
(a) the nature of the change in accounting policy;
(b) the reasons why applying the new accounting policy provides reliable and
more relevant information;
(c) for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
(i)
( ii)

for each financial statement line item affected; and

if Ind AS 33AS 20 applies to the entityenterprise, for basic and diluted
earnings per share as well as for each prior period presented;

(d) the amount of the adjustment relating to prior periods before those
presented, to the extent practicable; and
(e) if retrospective application is impracticable for a particular prior period, or
for periods before those presented, the circumstances that led to the
existence of that condition and a description of how and from when the
change in accounting policy has been applied.
Financial statements of subsequent periods need not repeat these disclosures.
30-31[Deleted] When an entity has not applied a new Ind AS that has been issued
but is not yet effective, the entity shall disclose:
(a) this fact; and
(b)
known or reasonably estimable information relevant to
assessing the possible impact that application of the new Ind AS will have on
the entitys financial statements in the period of initial application.
31

In complying with paragraph 30, an entity considers disclosing:

(a)

the title of the new Ind AS;

(b)

the nature of the impending change or changes in accounting policy;

(c)

the date by which application of the Ind AS is required;

(d)

the date as at which it plans to apply the Ind AS initially; and

(e)

either:

79

(i)

a discussion of the impact that initial application of the Ind AS is

expected to have on the entitys financial statements; or

(ii)

if that impact is not known or reasonably estimable, a statement to that

effect.

Changes in accounting estimates

3227 As a result of the uncertainties inherent in business activities, many items in
financial statements cannot be measured with precision but can only be estimated.
Estimation involves judgements based on the latest available, reliable information.
For example, estimates may be required of:
(a)

bad debts;

(b)

inventory obsolescence;

(c)

the fair value of financial assets or financial liabilities;

(d)(c) the useful lives of, or expected pattern of consumption of the future
economic benefits embodied in, depreciable assets; and
(e)(d) warranty obligations.
28

The use of reasonable estimates is an essential part of the preparation of financial

statements and does not undermine their reliability.

3429

An estimate may need revision if changes occur in the circumstances on which the
estimate was based or as a result of new information or more experience. By its
nature, the revision of an estimate does not relate to prior periods and is not the
correction of an error.

3530 A change in the measurement basis applied is a change in an accounting policy,

and is not a change in an accounting estimate. When it is difficult to distinguish a
change in an accounting policy from a change in an accounting estimate, the
change is treated as a change in an accounting estimate.
31

The effect of change in an accounting estimate, other than a change to which

paragraph 37 32 applies, shall should be recognised prospectively by
including it in the statement of profit or and loss in:
(a)

the period of the change, if the change affects that period only; or

(b)

the period of the change and future periods, if the change affects both.

3732 To the extent that a change in an accounting estimate gives rise to changes
in assets and liabilities, or relates to an item of equity, it shall should be
recognised by adjusting the carrying amount of the related asset, liability or
equity item in the period of the change.

80

3833 Prospective recognition of the effect of a change in an accounting estimate means

that the change is applied to transactions, other events and conditions from the
date of the change in estimate. A change in an accounting estimate may affect only
the current periods profit or loss, or the profit or loss of both the current period and
future periods. For example, a change in the estimate of the amount of bad debts
affects only the current periods profit or loss and therefore is recognised in the
current period. However, a change in the estimated useful life of, or the expected
pattern of consumption of the future economic benefits embodied in, a depreciable
asset affects depreciation expense for the current period and for each future period
during the assets remaining useful life. In both this cases, the effect of the change
relating to the current period is recognised as income or expense in the current
period. The effect, if any, on future periods is recognised as income or expense in
those future periods

Disclosure
3934 An entity enterprise shall should disclose the nature and amount of a change
in an accounting estimate that has an effect in the current period or is
expected to have an effect in future periods, except for the disclosure of the
effect on future periods when it is impracticable to estimate that effect.
3540 If the amount of the effect in future periods is not disclosed because
estimating it is impracticable, an entity enterprise shallshould disclose that
fact.

Errors
3641 Errors can arise in respect of the recognition, measurement, presentation or
disclosure of elements of financial statements. Financial statements do not comply
with Ind ASs if they contain either material errors or immaterial errors made
intentionally to achieve a particular presentation of an entitys enterprises financial
position, financial performance or cash flows. Potential current period errors
discovered in that period are corrected before the financial statements are
approved for issue. However, material errors are sometimes not discovered until a
subsequent period., and these prior period errors are corrected in the comparative
information presented in the financial statements for that subsequent period (see
paragraphs 4247).
4237 Subject to paragraph 43, aAn entity enterprise shall should correct material
prior period errors retrospectively in the first set of financial statements
approved for issue after their discovery by:
restating the comparative amounts for the prior period(s) presented in which the
error occurred;
(a) or

81

(b)

if the error occurred before the earliest prior period presented, restating
adjusting the opening balances of assets, liabilities and equity for the
earliest priorcurrent period presented.

Limitations on correcting errors retrospectively restatement

43-44 [Deleted]
A prior period error shall be corrected by retrospective
restatement except to the extent that it is impracticable to determine either the
period-specific effects or the cumulative effect of the error.
44

When it is impracticable to determine the period-specific effects of an error

on comparative information for one or more prior periods presented, the entity
shall restate the opening balances of assets, liabilities and equity for the
earliest period for which retrospective restatement is practicable (which may
be the current period).

38 When it is impracticable to determine the cumulative effect, at the beginning

of the current period, of an error on all prior periods, the entity shallenterprise
should restate the comparative information to correct the error prospectively
from the earliest date practicable.
4639 The correction of a prior period error is excluded from profit or loss for the period in
which the error is discovered. Any information presented about prior periods,
including any historical summaries of financial data, is restated as far back as is
practicable.
4740 When it is impracticable to determine the amount of an error (eg a mistake in
applying an accounting policy) for all prior periods, the entityenterprise, in
accordance with paragraph 45, restates the comparative information prospectively
from the earliest date practicable. It therefore disregards the portion of the
cumulative restatement of assets, liabilities and equity arising before that date.
Paragraphs 505343-46 provide guidance on when it is impracticable to correct an
error for one or more prior periods.
4148 Corrections of errors are distinguished from changes in accounting estimates.
Accounting estimates by their nature are approximations that may need revision as
additional information becomes known. For example, the gain or loss recognised
on the outcome of a contingency is not the correction of an error.

Disclosure of prior period errors

4942 In applying paragraph 4237, an entityenterprise shall should disclose the
following:
(a)

the nature of the prior period error;

(b)

for each prior period presentedthe current period , to the extent

practicable, the amount of the correction:
(i) for each financial statement line item affected; and

82

(ii)

if Ind AS 33AS 20 applies to the entityenterprise, for basic and

diluted earnings per share as well as for each prior period
presented;

(c)

the amount of the correction at the beginning of the earliest prior

current period presented; and

(d)

if retrospective restatement is impracticable for a particular prior

period, the circumstances that led to the existence of that condition and
a description of how and from when the error has been corrected.

Financial statements
disclosures.

of

subsequent

periods

need

not

repeat

these

Impracticability in respect of retrospective application

and retrospective restatement
5043 In some circumstances, it is impracticable to adjust comparativeapply
retrospectively a change in accounting policy or correct a prior period error.
information for one or more prior periods to achieve comparability with the current
period. For example, data may not have been collected in the prior period(s) in a
way that allows either retrospective application of a new accounting policy
(including, for the purpose of paragraphs 515344-46, its prospective application to
prior periods) or retrospective restatement to correct a prior period error, and it may
be impracticable to recreate the information.
5144 It is frequently necessary to make estimates in applying an accounting policy to
elements of financial statements recognised or disclosed in respect of transactions,
other events or conditions. Estimation is inherently subjective, and estimates may
be developed after the reporting period. Developing estimates is potentially more
difficult when retrospectively applying an accounting policy or making a
retrospective restatement to correct a prior period error, because of the longer
period of time that might have passed since the affected transaction, other event or
condition occurred. However, the objective of estimates related to prior periods
remains the same as for estimates made in the current period, namely, for the
estimate to reflect the circumstances that existed when the transaction, other event
or condition occurred.
5245 Therefore, retrospectively applying a new accounting policy or correcting a prior
period error requires distinguishing information that
(a) provides evidence of circumstances that existed on the date(s) as at which the
transaction, other event or condition occurred, and
(b) would have been available when the financial statements for that prior period
were approved for issue

83

from other information. For some types of estimates (eg an estimate of fair value not
based on an observable price or observable inputs), it is impracticable to distinguish
these types of information. When retrospective application or retrospective
restatement would require making a significant estimate for which it is impossible to
distinguish these two types of information, it is impracticable to apply the new
accounting policy or correct the prior period error retrospectively.
5346 Hindsight should not be used when applying a new accounting policy to, or
correcting amounts for, a prior period, either in making assumptions about what
managements intentions would have been in a prior period or estimating the
amounts recognised, measured or disclosed in a prior period. For example, when an
entity enterprise corrects a prior period error in measuring financial assets
previously classified as held-to-maturity investments in accordance with Ind AS 39
Financial Instruments: Recognition and Measurement, it does not change their basis
of measurement for that period if management decided later not to hold them to
maturity. In addition, when an entity corrects a prior period error in calculating its
liability for employees accumulated sick leave in accordance with Ind AS 19 15
Employee Benefits, it disregards information about an unusually severe influenza
season during the next period that became available after the financial statements
for the prior period were approved for issue. The fact that significant estimates are
frequently required when amending comparative information presented for prior
periods does not prevent reliable adjustment or correction of the comparative
informationerror in the current period.

84

Appendix A
References to matters contained in other Indian
Accounting Standards
This Appendix is an integral part of Indian Accounting Standard (Ind AS) 8.
Appendix B, Liabilities arising from Participating in a Specific Market Waste
Electrical and Electronic Equipment contained in Ind AS 37 Provisions, Contingent
Liabilities and Contingent Assets makes reference to (Ind AS) 8

85

Appendix B
Guidance on implementing
Ind AS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
(This guidance accompanies, but is not part of, Ind AS 8.)

Example 1 Retrospective restatement of errors

1.1 During 20X2, Beta Co discovered that some products that had been sold during
20X1 were incorrectly included in inventory at 31 December 20X1 at Rs. 6,500.
1.2 Betas accounting records for 20X2 show sales of Rs.104,000, cost of goods sold of
Rs. 86,500 (including Rs. 6,500 for the error in opening inventory), and income
taxes of Rs. 5,250.
1.3

In 20X1, Beta reported:

Rs.
73,500
(53,500)
_______
Profit before income taxes
20,000
Income taxes
(6,000)
_______
Profit
14,000
_______
20X1 opening retained earnings was Rs. 20,000 and closing retained earnings
was Rs. 34,000.
Sales
Cost of goods sold

1.4

1.5

Betas income tax rate was 30 per cent for 20X2 and 20X1. It had no other
income or expenses.

1.6

Beta had Rs.5,000 of share capital throughout, and no other components of

equity except for retained earnings. Its shares are not publicly traded and it does
not disclose earnings per share.

Beta Co Extract from the statement of profit and loss

Sales
Cost of goods sold
Profit before income taxes
Income taxes
Profit

20X2
Rs.
104,000
(80,000)
24,000
(7,200)
16,800

(restated)
20X1
Rs.
73,500
(60,000)
13,500
(4,050)
9,450

86

Beta Co Statement of changes in equity

Share capital
Rs.
Balance at 31 December 20X0
Profit for the year ended
31 December 20X1 as restated
Balance at 31 December 20X1
Profit for the year ended
31 December 20X2
Balance at 31 December 20X2

Total
Rs.

5,000
_____

Retained
earnings
Rs.
20,000
9,450

5,000
______

29,450
16,800

34,450
16,800

5,000

46,250

51,250

25,000
9,450

Extracts from the notes

1
Some products that had been sold in 20X1 were incorrectly included in inventory
at 31 December 20X1 at Rs. 6,500. The financial statements of 20X1 have been
restated to correct this error. The effect of the restatement on those financial
statements is summarised below. There is no effect in 20X2.

Example 2 Prospective application of a change in

accounting policy when retrospective application is not
practicable
2.1.
During 20X2, Delta Co changed its accounting policy for depreciating
property, plant and equipment, so as to apply much more fully a components
approach, whilst at the same time adopting the revaluation model.
2.2.
In years before 20X2, Deltas asset records were not sufficiently detailed to
apply a components approach fully. At the end of 20X1, management commissioned
an engineering survey, which provided information on the components held and their
fair values, useful lives, estimated residual values and depreciable amounts at the
beginning of 20X2. However, the survey did not provide a sufficient basis for reliably
estimating the cost of those components that had not previously been accounted for
separately, and the existing records before the survey did not permit this information
to be reconstructed.
3.3

2.3.

Deltas management considered how to account for each of the two aspects of
the accounting change. They determined that it was not practicable to account
for the change to a fuller components approach retrospectively, or to account for
that change prospectively from any earlier date than the start of 20X2. Also, the
change from a cost model to a revaluation model is required to be accounted for
prospectively. Therefore, management concluded that it should apply Deltas
new policy prospectively from the start of 20X2.
Additional information:

87

Deltas tax rate is 30 per cent

Rs.
Property, plant and equipment at the end of 20X1:
Cost
Depreciation
Net book value
Prospective depreciation expense for 20X2 (old basis)
Some results of the engineering survey:
Valuation
Estimated residual value
Average remaining asset life (years)
Depreciation expense on existing property, plant and
equipment for 20X2 (new basis)

25,000
(14,000)
11,000
1,500
17,000
3,000
7
2,000

Extract from the notes

a. From the start of 20X2, Delta changed its accounting policy for
depreciating property, plant and equipment, so as to apply much
more fully a components approach, whilst at the same time
adopting the revaluation model. Management takes the view that
this policy provides reliable and more relevant information
because it deals more accurately with the components of property,
plant and equipment and is based on up-to-date values. The
policy has been applied prospectively from the start of 20X2
because it was not practicable to estimate the effects of applying
the policy either retrospectively, or prospectively from any earlier
date. Accordingly, the adoption of the new policy has no effect on
prior years. The effect on the current year is to increase the
carrying amount of property, plant and equipment at the start of
the year by Rs. 6,000; increase the opening deferred tax provision
by Rs. 1,800; create a revaluation surplus at the start of the year
of Rs. 4,200; increase depreciation expense by Rs. 500; and
reduce tax expense by Rs.150.

88

Appendix 1
Note: This Appendix is not a part of the Indian Accounting Standard. The
purpose of this Appendix is only to bring out the differences, if any, between
Indian Accounting Standard (Ind AS) 8 and the corresponding International
Accounting Standard (IAS) 8, Accounting Policies, Changes in Accounting
Estimates and Errors.

Comparison with IAS 8, Accounting Policies, Changes in Accounting

Estimates and Errors
1.

Different terminology is used in this standard, e.g., the term balance sheet is
used instead of Statement of financial position and Statement of profit and loss is used
instead of Statement of comprehensive income. The words approval of the financial
statements for issue have been used instead of authorisation of the financial
statements for issue in the context of financial statements considered for the purpose of
events after the reporting period.
. 2 In paragraph 12 of Ind AS 8, it is mentioned that in absence of an Ind AS,
management may first consider the most recent pronouncements of International
Accounting Standards Board .

89

Appendix I

The objective of revision of and comparison with the existing AS

5 (Revised 1997) Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies
The objective of revision of the existing AS 5
The Institute of Chartered Accountants of India had revised Accounting Standard (AS)
5, Net Profit or Loss for the Period, Prior Items and Changes in Accounting Policies, in
1997. Since then significant developments in accounting have taken place including the
revisions in the International Accounting Standard (IAS) 8, Accounting Policies, Changes
in Accounting Estimates and Errors. Recognising the aforesaid developments, the
objective of the revision of the existing AS 5 is to bring about changes in the Standard
commensurate with the requirements of the existing law and the existing notified
Accounting Standards. Thus, while the Indian Accounting Standard (Ind AS) 8,
Accounting Policies, Changes in Accounting Estimates and Errors, on the lines of IAS 8,
which was placed by the Ministry of Corporate Affairs on its website in 2011, is based on
the framework of the Indian Accounting Standards and the expected changes in the
relevant provisions of law, revisions to the existing AS 5 do not contain various
requirements included in Ind AS 8 such as the restatement of comparative information in
respect of changes in accounting policies and correction of errors.

Comparison with the existing AS 5

(i)

The objective of the existing AS 5 is to prescribe the classification and disclosure of

certain items in the statement of profit and loss for uniform preparation and
presentation of financial statements. The objective of AS 5 (Revised) is to prescribe
the criteria for selecting and changing accounting policies, together with the
accounting treatment and disclosure of changes in accounting policies, changes in
accounting estimates and corrections of errors.

(ii)

Keeping in view that AS 1, Presentation of Financial Statements (Revised), is silent

about the presentation of any items of income or expense as extraordinary items,
this standard does not deal with the same, which at present is dealt with by the
existing AS 5.

(iii)

The existing AS 5 restricts the definition of accounting policies to specific accounting

principles and the methods of applying those principles while AS 5 (Revised)
broadens the definition to include bases, conventions, rules and practices (in addition

90

to principles) applied by an entity in the preparation and presentation of financial

statements.

(iv)

AS 5 (revised) specifically states that an entity shall select and apply its accounting
policies consistently for similar transactions, other events and conditions, unless an
AS specifically requires or permits categorisation of items for which different policies
may be appropriate. Neither existing AS 5 nor any other existing Standard
specifically requires accounting policies to be consistent for similar transactions,
other events and conditions.

(v)

AS 5 (Revised) requires that changes in accounting policies should be accounted for

with retrospective effect subject to limited exceptions, viz., where it is impracticable
to determine the period specific effects or the cumulative effect of applying a new
accounting policy. On the other hand, the existing AS 5 does not specify how change
in accounting policy should be accounted for.

(vi)

The existing AS 5 defines prior period items as incomes or expenses which arise in
the current period as a result of errors or omissions in the preparation of financial
statements of one or more prior periods. AS 5 (Revised) uses the term prior period
errors and relates it to errors or omissions arising from a failure to use or misuse of
reliable information (in addition to mathematical mistakes, mistakes in application of
accounting policies etc.) that was available when the financial statements of the prior
periods were approved for issuance and could reasonably be expected to have been
obtained and taken into account in the preparation and presentation of those
financial statements. AS 5 (Revised) specifically states that errors include frauds,
which is not covered in existing AS 5.

(vii)

AS 5(Revised) requires rectification of material prior period errors with retrospective

effect subject to limited exceptions viz., where it is impracticable to determine the
period specific effects or the cumulative effect of applying a new accounting policy.
On the other hand, existing AS 5 requires the rectification of prior period items with
prospective effect.

(viii)

Disclosure requirements given in AS 5 (Revised) are more detailed as compared to

the disclosure requirements given in the existing AS 5.

91

AnnexureI
Tableshowingmajordifferencesbetweenexisting
AccountingStandards(AS)andIndianAccountingStandards(IndAS)
Sr.
No.

Existing
Accounting
Standard

IndAS

AS1

IndAS1

AS1

IndAS1

AS1

IndAS1

AS1

IndAS1

AS1

IndAS1

AS1

IndAS1

AS1

IndAS1

AS2

IndAS2

Issue

Existing AS 1 deals only with the disclosure of accounting policies

whereas Ind AS 1 deals with presentation of financial statements.
The scope of Ind AS 1 is thus much wider and line by line
comparison of the difference with the present standard is not
practicable.
Ind AS 1 requires an explicit statement of compliance with all the
Accounting Standards in the notes to the financial statements
whereasunderexistingAS,thereisnosuchrequirement
Ind AS 1 requires presentation and provides criteria for classification
of current / noncurrent assets / liabilities wheras AS 1 does not
containtheserequirements.
Ind AS 1 requires disclosure of judgements made by management
while framing of accounting policies. Also it requires disclosure of
key assumptions about the future and other sources of
measurement uncertainty that have significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities
within next financial year whereas AS 1 does not contain these
requirements
Ind AS 1 requires classification of expenses to be presented in the
statement of profit and loss based on nature of expenses whereas
AS1doesnotcontaintheserequirements

In respect of reclassification of items, Ind AS 1 besides requiring

disclosure of reclassification adjustments in the statement of profit
and loss also requires disclosure of nature, amount and reason for
reclassification in the notes to financial statements whereas Ind AS
1doesnotcontaintheserequirements
Ind AS 1 requires the financial statements to include movements in
equity to be shown as a part of the balance sheet which, inter alia,
includes reconciliation between opening and closing balance for
each component of equity wheres AS 1 does not contain these
requirements
Ind AS 2 provides explanation with regard to inventories of service
providers.AS2doesnotcontainsuchanexplanation.

92

AS2

IndAS2

10

AS2

IndAS2

11

AS2

IndAS2

12

AS2

IndAS2

13

AS2

IndAS2

14

AS4

15

AS5

16

AS5

Ind AS 2 provides detailed guidance in case of subsequent

assessment of net realisable value. It also deals with the reversal of
the writedown of inventories to net realisable value to the extent
of the amount of original writedown, and the recognition and
disclosure thereof in the financial statements. No specific guidance
isavailableinAS2
Ind AS 2 does not apply to measurement of inventories held by
commodity brokertraders, who measure their inventories at fair
value less costs to sell. AS 2 does not contain the definition of fair
valueandsuchexplanation.
Ind AS 2 excludes from its scope only the measurement of
inventories held by producers of agricultural and forest products,
agricultural produce after harvest, and minerals and mineral
products though it provides guidance on measurement of such
inventories.AS2excludesfromitsscopesuchtypesofinventories.
The existing AS 2 specifically provides that the formula used in
determining the cost of an item of inventory should reflect the
fairest possible approximation to the cost incurred in bringing the
items of inventory to their present location and condition whereas
Ind AS 2 does not specifically state so and requires the use of
consistent cost formulas for all inventories having a similar nature
andusetotheentity.

Ind AS 2 does not contain specific explanation in respect of

machinery spares as this aspect is covered under Ind AS 16. AS 2
explains that inventories does not include machinery spares which
can be used only in connection with an item of fixed asset and
whose use is expected to be irregular; such machinery spares are
accounted for in accordance with AS 10, Accounting for Fixed
Assets.
IndAS10 If after the reporting date, it is determined that the fundamental
accounting assumption of going concern is no longer appropriate,
Ind AS 10 requires a fundamental change in the basis of accounting.
Whereas existing AS 4 requires assets and liabilities to be adjusted
for events occurring after the balance sheet date that indicate that
the fundamental accounting assumption of going concern is not
appropriate
IndAS8

IndAS8

The objective of the existing AS 5 is to prescribe the classification

and disclosure of certain items in the statement of profit and loss
for uniform preparation and presentation of financial statements.
The objective of Ind AS 8 is to prescribe the criteria for selecting and
changing accounting policies, together with the accounting
treatment and disclosure of changes in accounting policies, changes
inaccountingestimatesandcorrectionsoferrors
AS 5 deals with presentation of items of income and expenses as
extraordinaryitemswhereasIndAS8doesnot
93

17

AS5

IndAS8

18

AS5

IndAS8

19

AS5

IndAS8

20

AS5

IndAS8

21

AS5

IndAS8

22

AS6

AS 5 restricts the definition of accounting policies to specific

accounting principles and the methods of applying those principles
while Ind AS 5 broadens the definition to include bases,
conventions, rules and practices (in addition to princriples) applied
by an entity in the preparation and presentation of financial
statements.
Ind AS 8 specifically states that an entity shall select and apply its
accounting policies consistently for similar transactions, other
events and conditions, unless an AS specifically requires or permits
categorisation of items for which different policies may be
appropriate. neither existing AS 5 nor any other existing Standard
specifically requires accounting policies to be consistent for similar
transactions,othereventsandconditions.
Ind AS 8 requires the changes in accounting policies should be
accounted for retrospectively with restatement of comparatives
subject to the limited exception where it is impracticable to
determine the periodspecific effects or the cumulative effect of
applying an new accounting policy. On the other hand, the existing
AS 5 does not specify how change in accounting policy should be
accountedfor
The existing AS 5 defines prior period items as incomes or expense
which arise in the current period as a result of errors or omissions in
the preparation of financial statements of one or more prior
periods. Ind AS 8 uses the term prior period errors and relates it to
errors or omissions arising from a failure to use or misuse of reliable
informations (in addition to mathematical mistakes, mistakes in
application of accounting policies, etc.) that was available when the
financial statements of the prior periods were approved for
issuance and could reasonably be expected to have been obtained
and taken into account in the preparation and presentation of those
financial statements. Ind AS 8 specifically states tha errors include
frauds,whichisnotcoveredinexistingAS5

Ind AS 8 requires rectification of material prior period errors with

retrospective effect and restatement of comparatives subject to
limited exceptions viz., where it is impracticable to determine the
period specific effect or the cumulative effect. On the other hand,
the existing AS 5 requires the rectification of prior period items with
prospectiveeffect
IndAS16 Ind AS 16 requires that change in depreciation method should be
considered as a change in accounting estimate and treated
accordingly. As per AS 6, it is considered as a change in accounting
policyandtreatedaccordingly.

94

23

AS6

24

AS6

25

AS7

26

AS9

27

AS10

28

AS10

IndAS16 As per AS 6, periodic review of useful life is not mandatory. Ind AS

16 requires that the residual value and useful life of an asset be
reviewed at least at each financial yearend and, if expectations
differ from previous estimates, the change(s) should be accounted
for as a change in an accounting estimate in accordance with Ind AS
8.
IndAS16
As per AS 6, change in depreciation method can be made only if the
adoption of the new method is required by statute or for
compliance with an accounting standard or if it is considered that
the change would result in a more appropriate preparation or
presentation of the financial statements. Ind AS 16 requires that the
depreciation method applied to an asset should be reviewed at
least at each financial yearend and, if there has been a significant
change in the expected pattern of consumption of the future
economic benefits embodied in the asset, the method should be
changedtoreflectthechangedpattern.
IndAS11
Existing AS 7 does not recognise fair value concept as contract
revenue is measured at consideration received / receivable,
whereas Ind AS 11 requires that contract revenue shall be
measuredatfairvalueofconsiderationreceived/receivable
IndAS18
As per existing AS 9, revenue is measured at the charges made to
customer whereas Ind AS 18 requires to the revenue to be
measuredatfairvalueoftheconsiderationreceivedorreceivable
IndAs16 Ind AS 16 requires that major spare parts qualify as PPE when an
entity expects to use them during more than one period and when
they can be used only in connection with an item of PPE. As per AS
10, only those spares are required to be capitalised which can be
used only in connection with a fixed asset and whose use is
expectedtobeirregular.
IndAS16 AS 10 does not lay down any specific recognition criteria for
recognition of a fixed asset. As per the standard, any item which
meets the definition of a fixed asset should be recognised as a fixed
asset. Ind AS 16, apart from defining the term property, plant and
equipment, also lays down the following additional criteria which
should be satisfied for recognition of items of property, plant and
equipment:
(a) it is probable that future economic benefits associated with the
itemwillflowtotheentity,and
(b)thecostoftheitemcanbemeasuredreliably.

95

29

AS10

IndAS16 AS 10 does not provide guidance on recognition of asset purchased

on deferred payment basis. Ind AS 16 provides that the cost of an
item of property, plant and equipment is the cash price equivalent
at the recognition date. If payment is deferred beyond normal
credit terms, the difference between the cash price equivalent and
the total payment is recognised as interest over the period of credit
unlesssuchinterestiscapitalisedinaccordancewithIndAS23.

30

AS11

31

AS11

32

AS12

33

AS13

34

AS14

35

AS15

IndAS21 Ind AS 21 excludes from its scope forward exchange contracts and
other similar financial instruments, which are treated in accordance
with Ind AS 39, "Financial Instruments: Recognition and
Measurement". The existing AS 11 does not exclude accounting for
suchcontracts
IndAS21 Ind AS 21 is based on functional currency approach whereas existing
AS 11 is based on integral and nonintegral foreign operations
approach
IndAS20 There are two broad options under Ind AS 20: the capital approach
and the income approach. Accounting and presentation could
therefore be different. Revenue is not recognised until there is a
reasonableassurancethat:
The entity complies with the conditions attached to the grants;
and
Thegrantsarereceivable.
Government grants are recognised in the statement of
comprehensive income over the periods necessary to match them
with the related costs that they are intended to compensate, on a
systematic basis. They are not credited directly to shareholders
interest.
IndAS32,
There is no standard on financial instruments. AS 13 deals only with
IndAS39
accountingforinvestmentsandnotallfinancialinstruments
andInd
No standard on business combinations under existing AS. Ind AS 103
IndAS
captures accounting at the time of acquisition which is the first step
103
whereas AS 14 captures accounting at the time of merger which is
thesecondstep.
IndAS19
Ind AS 19 requires recognition of the actuarial gains and losses in
other comprehensive income, both for postemployment defined
benefit plans and other longterm employment benefit plans. The
actuarial gains and losses recognised in other comprehensive
income should be recognised immediately in retained earnings and
should not be reclassified to profit or loss in a subsequent period.
Existing AS 15 requires recognition of the actuarial gains and losses
immediately in the statement of profit and loss as income or
expense

96

36

AS17

IndAS
108

Identification of segments under Ind AS 108 is based on

'management approach' i.e. operating segments are identified
based on the internal reports regularly reviewed by the entity's
chief operating decision maker. Existing AS 17 requires
identification of two set of segment one based on related products
and services and the other on geographical areas based on the risks
and returns approach. one set is regarded as primary segments and
theotherassecondarysegments.

37

AS17

IndAS
108

Ind AS 108 requires that the amounts reported for each operating
segment shall be measured on the same basis as used by the chief
operating decision makes for the purposes of allocation resources
to the segment and assessing its performance. Existing AS 17
requires segment information to be prepared in conformity with
the accounting policies adopted for preparing and presenting the
financialstatements

38

AS18

IndAS24 Ind AS 24 defines relative of Key Management Personnel as close

members of the family and does not specify any boundaries
whereasAS18providesspecifiestheboundaries

39

AS19

IndAS17
The existing standard AS 19 excludes leases of land from its scope.
Ind AS 17 does not have such scope exclusion. It has specific
provisions dealing with lease of land and building applicable.
Further Ind AS 17 is not applicable as the basis of measurement for
property held by lessees / provided by lessors under operating
leases but treated as investment property and biological assets held
by lessees / provided by lessors under operating leases within the
standard on Agriculture. The existing standard does not contain
suchprovisions.

40

AS19

IndAS17
In case of finance leases in the books of the lessor who is not a
manufacturer or dealer lessor, under the existing AS 19, initial direct
costs are either recognised as expense immediately or allocated
against the finance income over the lease term. Under Ind AS 17,
interest rate implicit in the lease is defined in such a way that the
initial direct costs gets included automatically in the finance lease
receivable;thereisnoneedtoaddthemseparately.

41

AS19

IndAS17
In case of operating lease, in the books of the lessor, under existing
AS 19, initial direct costs are either deferred and allocated to
income over the lease term in proportion to the recognition of rent
income, or recognised as expense in the period in which incurred.
Under Ind AS 17, initial direct costs are added to the carrying
amount of the leased asset and recognised as expense over the
lease term on the same basis as lease income in the books of the
lessorincaseofoperatinglease
97

42

AS21

43

AS22

44

AS22

Ind AS 110 provides principle based definition of 'control' whereas

IndAS
AS21providesrulebaseddefinition
110
IndAS12 Ind AS 12 is based on balance sheet approach. It requires
recognition of tax consequences of differences between the
carrying amounts of assets and liabilities and their tax base. Existing
AS 22 is based on income statement approach. It requires
recognition of tax consequences of differences between taxable
income and accounting income. For this purpose, differences
between taxable income and accounting income are classified into
permanentandtimingdifferences
IndAS12 As per Ind AS 12, subject to limited exceptions, deferred tax asset is
recognised for all deductible temporary differences to the extent
that it is probable that taxable profit will be available against which
the deductible temporary difference can be utilised, the criteria for
recognising deferred tax assets arising from the carry forward of
unused tax losses and tax credits are the same that for recognising
deferred tax assets arising from deductible temporary differences.
however, the existence of unused tax losses is strong evidence that
future taxable profit may not be available. Therefore, when an
entity has a history of recent losses, the entity recognises a
deferred tax asset arising from unused tax losses or tax credits only
to the extent that the entity has sufficient taxable temporary
differences or there is convincing other evidence that sufficient
taxable profit will be available against which the unused tax losses
orunusedtaxcreditscanbeutilisedbytheentity

As per existing AS 22, deferred tax assets are recognised and carried
forwards only to the extent that there is a resonable certainty that
sufficient future taxable income will be available against which such
deferred tax asets can be realised. Where deferred tax asset is
recognised against unabsorbed depreciation or carry forward of
lossed under tax laws, it is recognised only to the extent that there
is virtual certainty supported by convincing evidence that sufficient
future taxable income will be available against which such deferred
taxassetscanberealised.
45

AS24

IndAS
105

As per Ind AS 105, a discontinued operation is a component of an

entity that represents a separate major line of business or
geographical area, or is a subsidiary acquired exclusively with a view
to resale. Under the existing AS 24, a discontinuing operation is a
component of an entity that represents the major line of business
or geographical area of operations and that can be distinguished
operationallyandforfinancialreportingpurposes

98

46

AS26

IndAS38 AS 26, refers only to intangible assets acquired in an amalgamation

in the nature of purchase and does not refer to business
combinations as a whole. The existing standard is silent regarding
the treatment of subsequent expenditure on an inprocess research
and development project acquired in a business combination. Ind
AS 38 deals in detail in respect of intangible assets acquired in a
business combination. Further it also provides detailed guidance on
treatment of expenditure on an inprocess research and
developmentprojectacquiredinabusinesscombination.

47

AS26

IndAS38
AS 26 defines an intangible asset as an identifiable nonmonetary
asset without physical substance held for use in the production or
supply of goods or services, for rental to others, or for
administrative purposes. Ind AS 38 defines Intangible assets as an
identifiable nonmonetary asset without physical substance. It does
not include the requirement for the asset to be held for use in the
production or supply of goods or services, for rental to others, or
foradministrativepurposes.

48

AS26

49

AS26

50

AS26

IndAS38
As per AS 26, intangible assets acquired free of charge or for
nominal consideration by way of government grant is recognised at
nominal value or at acquisition cost, as appropriate plus any
expenditure that is attributable to making the asset ready for
intended use. As per Ind AS 38, when intangible assets are acquired
free of charge or for nominal consideration by way of government
grant, an entity should, in accordance with Ind AS 20, record both
thegrantandtheintangibleassetatfairvalue.
IndAS38 AS 26 is based on the assumption that the useful life of an
intangible asset is always finite, and includes a rebuttable
presumption that the useful life cannot exceed ten years from the
date the asset is available for use. Ind AS 38 recognizes that the
useful life of an intangible asset can even be indefinite subject to
fulfillment of certain conditions, in which case it should not be
amortisedbutshouldbetestedforimpairment.
IndAS38
AS 26 specifically requires that the residual value is not
subsequently increased for changes in prices or value. Under Ind AS
38,Residualvalueisreviewedatleastateachfinancialyearend.

51

AS26

If it increases to an amount equal to or greater than the assets

carrying amount, amortisation charge is zero unless the residual
value subsequently decreases to an amount below the assets
carryingamount.
IndAS38 Ind AS 38 permits an entity to choose either the cost model or the
revaluation model as its accounting policy. AS 26 does not permit
revaluationmodel.
99

52

AS27

53

AS28

54

AS28

IndAS31
Ind AS 31 provides both equity method and proportionate
consolidation method as option for jointly controlled entities
whereasAS27providesonlyproportionateconsolidationmethod
IndAS38 AS 28 does not require the annual impairment testing for the
goodwill unless there is an indication of impairment. Ind AS 38
requires annual impairment testing for an intangible asset with an
indefinite useful life or not yet available for use and goodwill
acquiredinabusinesscombination.
IndAS36
Under AS 28, when all or a portion of goodwill cannot be allocated
reasonably and consistently to the CGU being tested for
impairment, two levels of impairment tests are carried out, viz.,
bottomup test and topdown test. In Ind AS 36, goodwill is
allocated to cashgenerating units (CGUs) or groups of CGUs that
are expected to benefit from the synergies of the business
combination from which it arose. There is no bottomup or top
downapproachforallocationofgoodwill.

55

AS28

IndAS36
AS 28 requires that the impairment loss recognised for goodwill
should be reversed in a subsequent period when it was caused by a
specific external event of an exceptional nature that is not expected
to recur and subsequent external events that have occurred that
reverse the effect of that event. Ind AS 28 prohibits the recognition
ofreversalsofimpairmentlossforgoodwill.

56

57

AS29

IndAS37

IndAS
101

Ind AS 37 requires long term provisions to be discounted whereas

AS29doesnotrequirediscountingoflongtermprovisions
NostandardunderexistingAS

100

Annexure J

Summary of Accounting Standards Frameworks for Private Sector September 30, 2013
Standards for Public Interest Entities
Country

Title of Standards and the basis

Argentina

Australia

All companies (except Banks and

Insurance
Companies)
whose
securities are publicly traded that are
regulated by the CNV, the National
Securities
Commission,
must
prepare their financial statements
using IFRSs as issued by the IASB
Tier 1 Entities (PIEs and
Governments): Australian equivalent
of IFRSs titled AASB.123

Brazil

a)Listed companies- IFRS for CFS

mandatory and Brazilian GAAP
fully converged with IFRS) for
Separate F/S
b)Banks (Listed & with Audit
Committee)- IFRS based CFS as
supplemental information. Statutory
accounts required as per Central
Bank rules
c)Insurance IFRS for Listed ones

Standards for Non-PIEs

IFRS Transition date Title of Standards and the

basis
January 1, 2012
IFRS for SMEs (permitted
subject to individual provincial
governments)
OR
Argentinian Standards
OR
Full IFRSs
January 1, 2005
Tier 2 : Non-PIEs, all not-forprofit private sector follow
Reduced
Disclosure
Requirement (RDR) versions
of Australian Standards (
AASB 123). These are not
based on IFRS for SMEs
December 31, 2010
SMEs can apply Brazilian
equivalent of IFRS for SMEs
or Full IFRSs for CFS or
Brazilian GAAP

Source of
information
Note1
http://www.facpce.org.ar/
web2011/

http://www.aasb.gov.au

Note 1
http://www.cpc.org.br/inde
x.php
http://www.cvm.gov.br/

101

Summary of Accounting Standards Frameworks for Private Sector September 30, 2013
Standards for Public Interest Entities
Country

Title of Standards and the basis

Canada

and Brazilian GAAP for others

IFRSs included as Canadian GAAP January 1, 2011
in CICA Handbook Part I

China

The Chinese Accounting Standards

for Business Enterprises (ASBEs)
issued in
February 2006 were
substantially converged with IFRSs

Denmark

France

1)Companies
listed
on
EU January 1, 2005
Regulated Market- IFRS as adopted
by EU for CFS
2)Separate F/S IFRS Permitted
except for Banks
1)Companies
listed
on
EU January 1, 2005
Regulated Market -IFRS as adopted
by EU for CFS.
2)Separate/Statutory F/S- French
GAAP mandatory

Germany

Standards for Non-PIEs

Source of
information

IFRS Transition date Title of Standards and the

basis

1)Companies
listed
on
EU January 1, 2005
Regulated Market -IFRS as adopted
by EU for CFS.
2)Separate F/S- German GAAP
(German
Commercial
Code)
mandatory

Private Enterprises & Not-for

Profit entities: Standards laid
down in CICA Handbook Part
II and Part III, respectively.
The
Chinese
Accounting
Standard for Small Entities
was published by the Ministry
of Finance in October 2011

http://www.frascanada.ca/

Adoption of Full IFRS

permitted

Note 1 & EU
Commission Report
September 2011
www.fsr.dk

No separate standards. General

French GAAP (as applicable
for Separate/Statutory F/S)
applies which has some
presentation simplification to
Small Entities
German
GAAP
(German
Commercial Code)
IFRS permitted for CFS of
SMEs

Note 1 & EU
Commission Report o
September 2011

Note 1
http://kjs.mof.gov.cn/zhua
ntilanmu/kuaijizhuanzeshi
shi/

Note 1 & EU

Commission Report
September 2011
http://www.drsc.de/service
/index_en.php

102

Summary of Accounting Standards Frameworks for Private Sector September 30, 2013
Standards for Public Interest Entities
Country

Title of Standards and the basis

Hong Kong

HK equivalent of IFRSs titled January 1, 2005

HKFRS
Required for both CFS and Separate
F/S

10

Israel

January 1, 2008

11

Japan

12

Korea

13

Malaysia

IFRSs issued by the IASB are

immediately effective as and when
issued. (There are some variations
for Banks)
Japanese Standards issued by ASB
Japan (a private sector organization).
However, IFRSs are allowed for
CFS of some domestic companies
and foreign issuers
Korean equivalent of IFRSs titled
K-IFRS. Required for both CFS
and Separate F/S
Malaysian equivalent of IFRSs titled
MFRS

14

Mexico

1)Listed entities IFRSs as/when

issued by IASB.

January 1, 2012

Standards for Non-PIEs

Source of
information

IFRS Transition date Title of Standards and the

basis
1) HKFRS for Private Entities http://www.hkicpa.org.hk/
(similar to IFRS for SMEs)
en/
2)SME
Financial
Reporting
Framework
and
Financial
Reporting Standard (SME-FRF
& FRS) (toned down version of #1
above)

Not Applicable

January 1, 2011

January 1, 2012

1)IFRS for SMEs or

2)Full IFRSs or
3)Israeli GAAP or
4)US GAAP
Japanese Standards. ASB
Japan has established in 2010 a
Council to consider accounting
standards
for
Unlisted
Companies
K-GAAP

Note 1
http://www.iasb.org.il/

https://www.asb.or.jp/asb/t
op_e.do

http://www.kasb.or.kr

ED of Malaysian Private http://www.masb.org.my/

Entities Financial Reporting
Standard (MPERS) issued in
August 2013. MPERS will be
applicable from Jan 1, 2016
and are closely aligned to IFRS
for SMEs
SMEs can use IFRS for SMEs Note 1
or Full IFRSs or US GAAP
103

Summary of Accounting Standards Frameworks for Private Sector September 30, 2013
Standards for Public Interest Entities
Country

15

Netherlands

Title of Standards and the basis

2)Banks & Insurance EntitiesMexican

Financial
Reporting
Standards (MFRS) plus Sectoral
Regulations
1)Companies
listed
on
EU January 1, 2005
Regulated Market -IFRS as adopted
by EU for CFS mandatory
2)Separate F/S- IFRS permitted

New Zealand

Tier 1 Entities: New Zealand January 1, 2007

equivalent of IFRSs titled NZIFRS. Required for both CFS and
Separate F/S

17

Norway

1)Companies
listed
on
EU January 1, 2005
Regulated Market -IFRS as adopted
by EU for CFS mandatory.
2)Separate F/S- IFRS premitted

Russia

IFRS mandatory for all CFSs.

Russian GAAP mandatory

Source of
information

IFRS Transition date Title of Standards and the

basis

16

18

Standards for Non-PIEs

January 1, 2012
for

Dutch Accounting Standards

for
(1)Small entities (2)Medium &
Large entities
Above entities are permitted to
use (a) IFRS as adopted by EU
combined with a part of Dutch
GAAP (b)IFRS for SMEs
1)Tier 2 entities- Reduced
Disclosure Regime (NZ IFRS
RDR)
2)Tier 3 entities- Differential
Reporting
concessions (NZ IFRS Diff
Rep)
3) Tier 4 entities- Old GAAP
Norwegian GAAP

1
&
EU
Commission
Report
September 2011
Note

http://www.rjnet.nl/Site/E
nglish/

Approved
Accounting
Standards
Standards
Framework (March 2012)
http://www.xrb.govt.nz/

Note

&

Commission
September 2011
Russian GAAP

EU
Report

http://www.regnskapsstifte
lsen.no/a9084301/english
Note 1

http://minfin.ru
104

Summary of Accounting Standards Frameworks for Private Sector September 30, 2013
Standards for Public Interest Entities
Country

19

Saudi Arabia

20

Singapore

21

South Africa

22

Sri Lanka

23

Sweden

Title of Standards and the basis

Standards for Non-PIEs

Source of
information

IFRS Transition date Title of Standards and the

basis

separate F/S
1)Banks & Insurance CompaniesIFRS mandatory
2)Other companies-Standards issued
by Saudi Organization for Certified
Public Accountants (SOCPA)
Singapore equivalent of IFRSs titled Not Applicable
SFRS. There are number of
deviations from IFRSs and timelines
for full convergence not yet
publihsed
IFRSs are immediately effective as
January 1, 2005
and when issued by the IASB
Sri Lankan equivalent of IFRSs
January 1, 2012
titled SLFRS and SLAS

1)Companies
listed
on
EU January 1, 2005
Regulated Market -IFRS as adopted
by EU for CFS.
2)Separate F/S (Tier K4)- Standards
approved by BFN (The Swedish
Accounting Standards Board) & for
Financial
companies-Standards
approved by The Swedish Financial
Supervisory Authority

Standards issued by SOCPA

Note 1

SFRS for SME from January http://www.asc.gov.sg/

1, 2011 which is based on
IFRS for SME

IFRS for SMEs

https://www.saica.co.za/D
efault.aspx

Sri
Lanka
Accounting http://www.casrilanka.c
Standards for SMEs (SLFRS om
for SMEs) based on IFRS for
SMEs
Tiers set by BFN
&
EU
Note
1
1)K3- BFN standards based on Commission
Report
IFRS for SME
September 2011
2)K2-BFN special standards
3)K1-BFN special standards

105

Summary of Accounting Standards Frameworks for Private Sector September 30, 2013
Standards for Public Interest Entities
Country
24

Switzerland

25

Turkey

26

UK

27

US

Standards for Non-PIEs

IFRS Transition date Title of Standards and the

basis
1)General Purpose F/S: IFRS as Not Applicable
Same norms as PIEs
issued by IASB or US GAAP
IPSASs and Swiss GAAP FER are
accepted
2)Statutory Separate F/S: SWISS
GAAP
IFRSs as issued by IASB for CFS.
1)IFRS for SMEs or
(Norms will change once Turkey
2)Turkish National GAAP
becomes member of EU)
1)Companies
listed
on
EU January 1, 2005
Effective January 1, 2015
Regulated Market -IFRS as adopted
1)FRS
102Financial
by EU for CFS.
Reporting Standard for Smaller
2)Separate F/S IFRS permitted
Entities (FRSSE) OR
2)FRS 101 Reduced
Disclosure Framework OR
3)EU adopted IFRS
US GAAP i.e. standards issued by
There is no central authority to
FASB
prescribe such requirements

Source of
information

Title of Standards and the basis

Note 1

Note 1
http://www.kgk.gov.tr/en/

www.frc.org.uk

Note 1: Primary source of Information is http://www.ifrs.org/Use-around-the-world/Pages/Jurisdiction-profiles.aspx

Note 2: Public Interest Entities (PIEs) = Listed entities, Banks & Insurance entities; Non-PIEs i.e. SMEs, NFPs: CFS = Consolidated
Financial Statements; SME=Small and Medium-sized Entity; NFP=Not-for-Profit Entity

106

Annex IV: Roadmap proposed by the ICAI in March 2014

New Roadmap for the implementation of Indian Accounting Standards

converged with IFRS
For convergence of Indian Accounting Standards with International Financial Reporting Standards
(IFRSs), a Press Release (No.2/2010) laying down roadmap for application of converged Indian Accounting Standards (Ind-AS) by companies (other than Banking companies, Insurance companies and NonBanking Finance Companies) was issued on 22nd January, 2010. Further, a Press Release (No.3/2010)
related to the roadmap for the application of the converged Indian Accounting Standards (Ind-AS) by the
Banking Companies, Insurance companies and Non- Banking Finance Companies was issued on 31st
March, 2010. Subsequently, in response to the requests seeking clarifications on the roadmaps, a Press
Release (No. 4/2010) containing a consolidated statement on clarification of roadmap was issued on May
04, 2010. However, the Ind-AS placed on the website of the MCA could not be implemented due to various
reasons from 1st April, 2011 as per the aforesaid roadmaps issued.
A revised roadmap for implementation of Indian Accounting Standards (Ind-AS) finalised by the Council
of the ICAI, at its last meeting, held on March 20-22, 2014, as follows, has been submitted to the Ministry
of Corporate Affairs for its consideration:
1. As stated in earlier roadmaps for achieving convergence, there shall be two separate sets of Accounting
Standards notified under the Companies Act, 1956. First set would comprise the Indian Accounting Standards (Ind-AS) converged with the IFRSs which shall be applicable for preparation of consolidated financial
statements as defined in the Companies Act, 2013, of the specified class of companies. The second set
would comprise the existing notified Accounting Standards (AS) and shall be applicable for preparation of
individual financial statements of the companies preparing consolidated financial statements as per IndAS and for financial statements of other companies.
2. The first set of Accounting Standards i.e. converged Indian Accounting Standards (Ind-AS) shall be
applied to the following specified class of companies for preparing their first Indian Accounting Standards
(Ind-AS) consolidated financial statements for the accounting period beginning on or after April 1, 2016,
with comparatives for the year ending 31st March 2016 or thereafter:
(a) Whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in
India or outside India; or (b) Companies other than those covered in (a) above, having net worth of Rs.
500 crore or more (c) Holding, subsidiary, joint venture or associate companies of companies covered
under (a) or (b) above.
3. Companies to which Indian Accounting Standards (Ind-AS) are applicable shall prepare their first set of
consolidated financial statements in accordance with the Indian Accounting Standards (Ind-AS) effective
at the end of its first Ind-AS reporting period unless otherwise specified, i.e., companies preparing consolidated financial statements for the accounting period beginning on or after April 1, 2016 shall be required
to apply the Ind-AS effective for financial year ending on 31st March 2017.
4. Calculation of net worth
For the purpose of calculation of qualifying net worth of companies, the following rules shall apply:
(a) The net worth shall be calculated as per the stand alone audited balance sheet of the company falling
under any of the categories covered under 2 above as at 31st March 2014 or the first balance sheet for accounting periods which end after that date.
(b) The net worth shall be calculated as the paid-up Share Capital plus Reserves and Surplus less Revaluation Reserve.

25

(c) For companies which are not in existence on 31st March 2014 or an existing company meets the criteria
for the first time after 31st March, 2014, the net worth shall be calculated on the basis of the first balance
sheet ending after that date.
5. Voluntary Adoption
(a) Companies not mandatorily required to follow Indian Accounting Standards (Ind-AS) shall have the
option to apply the Indian Accounting Standards (Ind-AS) voluntarily for their consolidated financial
statements provided they prepare consolidated financial statements under the Indian Accounting Standards (Ind-AS) consistently thereafter.
(b) The option to apply the Indian Accounting Standards (Ind-AS) voluntarily, once exercised, therefore,
shall be irrevocable. Such companies would not be required to prepare another consolidated financial
statements in accordance with existing Accounting Standards (AS).
6. Discontinuing use of the first set of Accounting Standards (i.e. the Indian Accounting Standards)
Once a company starts following the first set of Accounting Standards for consolidated financial statements, i.e., the Indian Accounting Standards (Ind-AS) on the basis of the eligibility criteria, it shall be required to follow such Accounting standards for all the subsequent Consolidated Financial Statements even
if any of the eligibility criteria does not subsequently apply to it.
7. The roadmap for banks, NBFCs and Insurance Companies will be decided in consultation with RBI and
IRDA.

26

Annex V: IFRS Jurisdictional Profile India, June 2013

IFRS APPLICATION AROUND THE WORLD

JURISDICTIONAL PROFILE: India
Disclaimer: The information in this Profile is for general guidance only and may change from time to time. You should not act
on the information in this Profile, and you should obtain specific professional advice to help you in making any decisions or in
taking any action. If you believe that the information has changed or is incorrect, please contact us at ifrsapplication@ifrs.org.
This Profile has been prepared by the IFRS Foundation based on information from various sources. The starting point was the
answers provided by standard-setting and other relevant bodies in response to a survey that the Foundation conducted on the
application of IFRSs around the world between August and December 2012. The Foundation drafted the profile and invited the
respondents to the survey and others (including regulators and international audit firms) to review the drafts, and their
comments are reflected.
Profile last updated

5 June 2013

PARTICIPANT IN THE IFRS FOUNDATION SURVEY ON APPLICATION OF IFRSs

Organisation

The Institute Of Chartered Accountants of India (ICAI)

Role of the organisation

In India, Accounting Standards are formulated by the Council of the ICAI

through its Accounting Standards Board. Thereafter, those Accounting
Standards are considered by the National Advisory Committee on Accounting
Standards (NACAS) of the Ministry of Corporate Affairs constituted under the
Indian Companies Act, 1956, which recommends the Standards to the Central
Government for notifying under the Act. The Government, on accepting the
recommendation of the Committee, notifies the Standards under the Act by
publishing them in the Official Gazette.
At present, 28 Accounting Standards, which are based on old IASs, with certain
differences therefrom, have been notified under the Companies Act, 1956.
In a move towards convergence with IFRSs, in 2007 the ICAI commenced the
process of developing a complete set of Accounting Standards that are
converged with IFRSs to be known as Indian Accounting Standards or Ind
ASs. India has decided to converge its accounting standards with IFRSs issued
by IASB instead of adoption of IFRSs.
Thirty-five Ind ASs corresponding to IFRS in force on 1 April, 2011 (with the
exception of IFRS 9 Financial Instruments, IAS 26 Accounting and Reporting by
Retirement Benefit Plans, and IAS 41 Agriculture) were placed on the website of
the Ministry of Corporate Affairs. However, they have not been notified under
the Companies Act, 1956.
Ind ASs have certain modifications to IFRSs to reflect Indian conditions.
The ICAI and the Government had initially decided to implement the converged
Ind ASs from 1 April 2011. However, that date has been deferred pending
resolution of certain issues including tax issues. In the meantime, the ICAI has
continued its endeavours to formulate/revise Ind ASs based on IFRSs issued or
revised after 1 April, 2011. Those standards will be required to be followed by
all listed and large unlisted companies. The Government is expected to
announce the revised roadmap for implementation of Ind ASs shortly. The
existing Accounting Standards would continue to be followed by small and

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medium-sized entities that are not required to follow the Ind ASs. Those
entities will be permitted to follow the Ind ASs if they wish.
Website

www.icai.org

Email contact

president@icai.in
asb@icai.in

COMMITMENT TO GLOBAL FINANCIAL REPORTING STANDARDS

Has the jurisdiction made a public
commitment in support of moving towards a
single set of high quality global accounting
standards?

Yes.

Has the jurisdiction made a public

commitment towards IFRSs as that single set
of high quality global accounting standards?

Yes.

What is the jurisdiction's status of adoption?

India has not adopted IFRSs.

Additional comments provided on the

adoption status?

The existing Companies Act, 1956, requires all companies to prepare separate
company financial statements in conformity with Accounting Standards
approved by the Central Government. It does not require consolidated
financial statements. The separate company financial statements are filed with
the Ministry of Corporate Affairs.
The Securities and Exchange Board of India (SEBI) requires all companies with
subsidiaries whose securities trade in a public market to file consolidated
financial statements with stock exchanges. SEBI requires those financial
statements to be prepared in conformity with the Accounting Standards
approved by the Central Government. However, SEBI has given the option to
listed entities to prepare and file consolidated financial statements in
conformity with IFRSs issued by IASB. Approximately 11 companies (mainly
ones with foreign listings) have taken advantage of the IFRS option. The SEBI
option to prepare consolidated financial statements in accordance with IFRSs
issued by IASB is generally regarded as a temporary measure until a
comprehensive revision of the Companies Act is completed and new Indian
Accounting Standards converged with IFRSs (Ind ASs) are officially adopted.
The Indian Parliament is currently considering a comprehensive revision to the
Companies Act. That revision passed the House of the People (Lok Sabha, the
lower house of Parliament) in December 2012 and is currently being debated
by the Rajya Sabha (the upper house of Parliament). The revised Companies
Act will require consolidated financial statements and will establish a two-tier
system of accounting standards, Ind ASs converged with IFRSs for listed and
large companies and the existing Accounting Standards for smaller companies.

If the jurisdiction has NOT made a public

statement supporting the move towards a
single set of accounting standards and/or
towards IFRSs as that set of standards,
explainthe jurisdiction's general position
towards the adoption of IFRSs in your
jurisdiction.

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Not applicable.

EXTENT OF IFRS APPLICATION

For DOMESTIC companies whose debt or equity securities trade in a public market in the jurisdiction:
Are all or some domestic companies whose
securities trade in a public market either
required or permitted to use IFRSs in their
consolidated financial statements?

Yes, but very few do so. Click for details.

If YES, are IFRSs REQUIRED or PERMITTED?

Permitted.

Does that apply to ALL domestic companies

whose securities trade in a public market, or
only SOME? If some, which ones?

All domestic companies with subsidiaries. However, very few companies use
the option to prepare consolidated financial statements in conformity with
IFRSs. Most companies use the existing Accounting Standards notified under
the Indian Companies Act.

Are IFRSs also required or permitted for

more than the consolidated financial
statements of companies whose securities
trade in a public market?

No.

For instance, are IFRSs required or

permitted in separate company financial
statements of companies whose securities
trade in a public market?

No. Separate company financial statements must be prepared using the

existing Accounting Standards notified under the Indian Companies Act, 1956.

For instance, are IFRSs required or

permitted for companies whose securities
do not trade in a public market?

No.

If the jurisdiction currently does NOT require

or permit the use of IFRSs for domestic
companies whose securities trade in a public
market, are there any plans to permit or
require IFRSs for such companies in the
future?

Please see the discussion under Commitment to Global Financial Reporting

Standards regarding revisions to the Companies Act currently under
consideration.

For FOREIGN companies whose debt or equity securities trade in a public market in the jurisdiction:
Are all or some foreign companies whose
securities trade in a public market either
REQUIRED or PERMITTED to use IFRSs in
their consolidated financial statements?

Yes.

If YES, are IFRSs REQUIRED or PERMITTED in

such cases?

Permitted.

Does that apply to ALL foreign companies

whose securities trade in a public market, or
only SOME? If some, which ones?

All.

IFRS ENDORSEMENT
Which IFRSs are required or permitted for
domestic companies?

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As explained above under the discussion on Adoption Status, the Securities and
Exchange Board of India (SEBI) currently permits consolidated financial
statements filed with stock exchanges to be prepared in conformity with either
the existing Accounting Standards or IFRSs. Only a few companies have taken
advantage of the IFRS option, and the option is generally regarded as
temporary.

The auditor's report and/or the basis of

presentation footnotes states that financial
statements have been prepared in
conformity with:

The existing Accounting Standards notified under the Indian Companies Act,
except for the few companies that use the IFRS option, in which case their
consolidated financial statements refer to IFRSs.

Does the auditor's report and/or the basis of

preparation footnote allow for dual
reporting (conformity with both IFRSs and
thejurisdictions GAAP)?

No.

Are IFRSs incorporated into law or

regulations?

No.

If yes, how does that process work?

Not applicable.

If no, how do IFRSs become a requirement in

the jurisdiction?

While the IFRSs are not incorporated into law or regulations, SEBI has given an
option to listed entities to prepare consolidated financial statements in
conformity with IFRSs as issued by IASB.

Does the jurisdiction have a formal process

for the 'endorsement' or 'adoption' of new
or amended IFRSs (including Interpretations)
in place

As indicated earlier, in India, the process is neither endorsement nor adoption

of IFRSs. The IFRSs are used as the base for issuing corresponding Ind ASs with
changes in IFRSs wherever necessary. The Ind ASs will become part of the law.

If yes, what is the process?

The drafts of the Ind ASs prepared on the basis of IFRSs are exposed for public
comments and discussed with the necessary interest groups wherever
necessary. Thereafter, considering the comments the Accounting Standards
Board of the ICAI finalises the Ind AS, which is then approved by the Council of
the ICAI. The Ind AS so approved by the Council is reviewed by NACAS which
recommends the Ind AS to the Government. The Government thereafter
notifies the Ind AS in the Official Gazette as part of law.

If no, how do new or amended IFRSs

become a requirement in the jurisdiction?

Please see above.

Has the jurisdiction eliminated any

accounting policy options permitted by IFRSs
and/or made any modifications to any
IFRSs?

In the formulation of Ind ASs, some IFRSs have been deferred, some
modifications have been made, and certain options have been removed.

If yes, what are the changes?

The following IFRSs have been deferred in the current formulation of Ind ASs:

IFRS 6 Exploration for and Evaluation of Mineral Resources

IAS 26 Accounting and Reporting by Retirement Benefit Plans
SIC Interpretation 29 Service Concession Arrangements: Disclosures
IFRIC Interpretation 2 Members Shares in Co-operative Entities and Similar
Instruments
IFRIC Interpretation 12 Service Concession Arrangements
IFRIC Interpretation 4 Determining Whether an Arrangement contains a
Lease

The following modifications have been made in the current formulation of Ind
ASs:

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Ind AS 21 (corresponding to IAS 21 The Effects of Changes in Foreign

Exchange Rates) permits an option to recognise exchange differences
arising on translation of certain long-term monetary items from foreign
currency to functional currency directly in equity.

IAS 28 Investments in Associates requires that difference between the

reporting period of an associate and that of the investor should not be
more than three months, in any case. The phrase unless it is

impracticable has been added paragraph 25 of Ind AS 28.

A proviso has been added to paragraph 48 of Ind AS 39 (corresponding to

IAS 39 Financial Instruments: Recognition and Measurement) that in
determining the fair value of the financial liabilities which upon initial
recognition are designated at fair value through profit or loss, any change
in fair value consequent to changes in the entitys own credit risk shall be
ignored.

An exception has been included to the definition of financial liability in

paragraph 11(b)(ii), Ind AS 32 (corresponding to IAS 32 Financial
Instruments: Presentation) to consider the equity conversion option
embedded in a convertible bond denominated in foreign currency to
acquire a fixed number of entitys own equity instruments as an equity
instrument if the exercise price is fixed in any currency.

IFRS 3 requires bargain purchase gain arising on business combination to

be recognised in profit or loss. Ind AS 103 (corresponding to IFRS 3
Business Combinations) requires the same to be recognised in other
comprehensive income and accumulated in equity as capital reserve,
unless there is no clear evidence for the underlying reason for
classification of the business combination as a bargain purchase, in which
case, it shall be recognised directly in equity as capital reserve.

Ind AS 101 First-time Adoption of Indian Accounting Standards does not

require presentation of comparative financial statements under Ind AS for
the year preceding adoption. Presentation of comparatives under the
former Accounting Standards on a memorandum basis would be
required, without the reconciliations required by IFRS 1 First-time
Adoption of International Financial Reporting Standards. In addition, Ind
AS reflects a number of other modifications to the corresponding IFRS 1.

Ind AS 101 First-time Adoption of Indian Accounting Standards, provides an

entity an option to use carrying values of all items of property, plant and
equipment as on the date of transition in accordance with previous GAAP
as an acceptable starting point under Ind AS.

IFRIC 15 Agreements for Construction of Real Estate has not been adopted
in Ind ASs.

IAS 41 Agriculture has not been adopted. ICAI expects to adopt a version
of IAS 41 that reflects bearer biological assets using the cost method
rather than fair value through profit or loss. This issue is the subject of a
current IASB agenda project.

The following options have been removed in Ind ASs:

1.

IAS 1 Presentation of Financial Statements

- Option to follow different terminology for the titles of financial
statements has been removed; only one terminology for the titles is
required uniformly.
-

2.

IAS 7 Statement of Cash Flows

- Option to classify interest paid and interest and dividends received as
items of operating cash flows is removed for entities other than
financial entities; these items are required to be classified as financing
activity and investing activity, respectively.
-

3.

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Option to present analysis of expenses function-wise is removed; only

nature-wise classification of expenses permitted. Investments in
Associates and Joint Ventures (2011).

Option to classify dividend paid as an item of operating activity

removed; it has to be classified as financing activity only.

IAS 20 Accounting for Government Grants and Disclosure of Government

Assistance
- Option to measure non-monetary government grants at nominal
5

value removed; such grants are required to be measured at fair value

only.
-

Other comments regarding the use of IFRSs

in the jurisdiction?

Option to present the grants related to assets by deducting the

amount of grants in arriving at the carrying amount of the asset is
removed; such grants are only required to be presented by setting up
the grants as deferred income.

4.

IAS 38 Intangible Assets

- The option to measure intangible asset acquired by way of
government grant at nominal amount plus any expenditure that is
directly attributable to prepare the asset has been removed; only fair
value measure is required for recognising such intangible assets.

5.

IAS 40 Investment Property

- The option to measure investment at fair value has been removed;
only cost model is permitted.

Not applicable.

TRANSLATION OF IFRSs
Are IFRSs translated into the local language?

No. However, Ind ASs are translated into Hindi for the purpose of Notification
in the Official Gazette.

If they are translated, what is the translation

process? In particular, does this process
ensure an ongoing translation of the latest
updates to IFRSs?

Not applicable.

APPLICATION OF THE IFRS FOR SMEs

Has the jurisdiction adopted the IFRSs for
SMEs for at least some SMEs?

No.

If no, is the adoption of the IFRS for SMEs

under consideration?

No.

Did the jurisdiction make any modifications

to the IFRS for SMEs?

Not applicable.

If the jurisdiction has made any

modifications, what are those
modifications?

Not applicable.

Which SMEs use the IFRS for SMEs in the

jurisdiction, and are they required or
permitted to do so?

Not applicable.

For those SMEs that are not required to use

the IFRS for SMEs, what other accounting
framework do they use?

The existing Accounting Standards notified under the Indian Companies Act,
with certain exemptions/relaxations for SMEs. These will continue to be
applicable to such entities even after Ind ASs come into force, or a new,
separate set of standards for smaller companies will be developed.

Other comments regarding use of the IFRS

for SMEs?

None.

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