Contents What is IGAAP What is IFRS IFRS application in India - PowerPoint PPT Presentation

CNK & Associates LLP  Overview of IND AS  Schedule III of Companies Act, 2013  Major Differences in Existing AS and Ind AS. CA. Pareen Shah Partner CNK & Associates LLP Chartered Accountants

Contents  What is IGAAP  What is IFRS  IFRS application in India  Some important Ind AS terminology  Presentation of FS under Ind AS-Schedule III of Companies Act, 2013  Major differences between IGAAP and Ind AS (Only Specific IND AS covered) CNK 1

What is I-GAAP?

What is I-GAAP ? I-GAAP refers to:  Notified Standards u/s 133  Clarifications by ICAI / MCA for accounting standards  AS issued by ICAI  Statements / Guidance Notes issued by ICAI  Announcements by ICAI on topical matters (AG, FAQs, Council announcements, etc.) CNK 3

Changes in AS pursuant to notification of Ind AS  MCA has issued a ‘upgraded’ set of AS: • Applicable for entities having net worth < 250 crores • Several concessions/exemptions in ‘upgraded’ set of AS • Certain difficult concepts omitted from the ‘upgraded’ AS (e.g. fair value, derivative accounting., etc.)  Companies (AS) Amendment Rules, 2016 notified on 30 th March 2016 (effective 1 st April 2016 or 2016-17 onwards) • 7 standards replaced – AS 2, 4, 10, 13, 14, 21, 29 • AS 6 omitted • ICAI also issued GN on Accounting for Derivatives (for non IndAS companies) CNK 4

Changes in IGAAP for FY 2016-17 for Phase II Companies  For Phase II companies changes already implemented for: – Reclassification of Stores & Spares to PPE ( prospectively ) – Cost of PPE to be cash price equivalent – No provision for Proposed Dividend – Provision for decommissioning liability, etc.  For Phase II companies 2 stages of changes: – Upto FY 2015-16  old IGAAP – For 2016-17  upgraded IGAAP – For 2017-18  Ind AS CNK 5

What is IFRS ?

What is IFRS? 2001 onwards 1973 International Accounting International Accounting Standards Board (IASB ) Standards Committee (IASC ) Future 2000 International Accounting IFRS series Standards (IAS) Standards IFRIC IFRS IAS SIC Interpretations Interpretations International Financial Reporting Standards (IFRS) CNK 7

What is IFRS? … IFRS-IAS issued to date (45 standards, 28 interpretations) Conceptual 8 SIC 17 IFRS 28 IAS 20 IFRIC Framework • IFRIC – IFRS Interpretations Committee • SIC – Standards Interpretations Committee CNK 8

What is IFRS? …  Principle based – rather than Rule Based • Principles encourage compliance whereas Rules can promote avoidance  Contains very few alternatives  Detailed Disclosure requirements  Extensive Judgement required – Involves subjectivity  Extensive consultative process before final issuance of any Standard CNK 9

Global application of IFRS  Currently, more than 150 countries require or permit listed entities use of IFRS.  European Union (EU) required listed companies in its member states to follow IFRS from 2006 for CFS  Most countries in Africa, America (except USA) have adopted IFRS  China, Japan have recently adopted IFRS (with minor changes)  USA is the only major country which has not yet adopted IFRS • SEC, however, permits foreign companies to follow IFRS without doing a reconciliation with US GAAP • On-going discussions between IASB-FASB for convergence into a single set of standards – likely date 2018/2019  India had initially set date of 1 st April 2011 – deferred due to industry pressure  New standards notified by MCA in Feb 2015 – phase-wise applicability CNK 10

IFRS Framework (Pillars of IFRS) Fair Value more relevant for Historical Cost measurement of assets and liabilities is not relevant Discounting to be done for future Time Value of cash flows Money Contractual Substance over Legal Substance over Form Form Balance Sheet is the focus Difference between 2 BS is Income rather than the statement statement of profit and loss CNK 11

IFRS application in India

Adoption vs. Convergence  Adoption: start applying IFRS from an announced date  Convergence: modify IFRS to suit local requirements  In India, it was decided to converge rather that adopt  India accordingly issued a new set of standards called Ind AS  These Ind AS contain certain “carve - outs” from IFRS CNK 13

IFRS Implementation in India  Converged Standards to be called Ind AS  Changes in many Ind AS as compared to IFRS  Ind AS finalized by ICAI and notified by MCA IAS / IFRS Corresponding Ind AS IAS 1 Ind AS 1 IAS 2 Ind AS 2 IFRS 1 Ind AS 101 IFRS 2 Ind AS 102  IFRIC and SIC incorporated within respective Ind AS itself CNK 14

Corporate Road Map Particulars Phase I Phase II Voluntarily Year of Adoption 2016-17 2017-18 2015-16 or thereafter Comparative year 2015-16 2016-17 2014-15 or thereafter Opening BS 1 st April, 2015 1 st April, 2016 Covered Companies a) Listed All companies with All listed companies, Any company net worth equal to and those in the could voluntarily or more than, Rs. process of getting adopt Ind AS 500 cr listed b) Unlisted Companies having a net worth of Rs. 250 cr or more c) Group Applicable to holding, subsidiaries, joint ventures, or associates of companies covered under (a) and (b) above CNK 15

Phase II 2016-17 2017-18 April March April March Comparative for Financial Opening balance 31 March 2017 Statements for the sheet 1 April 2016 year ended 31 March 2018 CNK 16

Road Map of Ind AS adoption: Banking, NBFC’s and Insurance Companies Current Banking & NBFC’s - Phase I NBFC’s - Phase II Requirements Insurance Companies * Year of FY 2018 – 19 FY 2018 – 19 FY 2019 – 20 Adoption Comparative FY 2017 – 18 FY 2017 – 18 FY 2018 – 19 Year * Deferred till FY 2021-22 CNK 17

How many Ind AS are issued?  Notification dated 16 February 2015: • Companies (Indian Accounting Standards) Rules, 2015 • 39 Ind AS notified effective from 1 st April, 2015 • Rule 4 states: ‘ The Companies and their auditors shall comply with the Indian Accounting Standards (Ind AS)…’  Notification dates 30 th March 2016: • Companies (Indian Accounting Standards)(Amendment) Rules, 2016 • Ind AS 115 omitted – Ind AS 11 and Ind AS 18 notified • Several other Ind AS amended • Total Ind AS now applicable: 40  Format for IndAS FS (notification dated 6 th April 2016): • Division II of Schedule III of Companies Act 2013  ICAI GN specific for IndAS • GN on Accounting for Real Estate Transactions • GN on Accounting for Oil and Gas • GN on Division II of Schedule III CNK 18

Some important terms in Ind AS • Financial assets and Financial Liabilities • Other Equity • Effective Interest Rate (EIR method) • Amortised cost • Expected Credit Loss (ECL method) • Other Comprehensive Income (OCI) set, any reduction for impairment 19

CNK & Associates LLP IND AS based - Schedule III

Introduction  Effective Date  Apply to All Companies following Ind AS  AS and Companies Act to prevail  New Concepts and Disclosure  Cross Referencing of Notes to Accounts  Unit of Measurement  Notes not to have too many or too little information  No Schedules, such info in the Notes to Accounts  Disclosure requirements are in additions to and not substitute to Ind As and Companies Act  Terms used are as per Ind As 21

New development • The MCA on 6 April 2016, amended Schedule III to include :-  General Instruction for preparation of FS  Additional Disclosures requirements • The amendment divides Schedule III into two parts i.e. Division I and II. Also, applicable for Consolidated Financial Statement.  Division I for AS Compliant Companies  Division II for Ind AS Compliant Companies • Balance Sheet & Profit and Loss Account : Format and Minimum disclosures on face of the Balance Sheet & Profit and Loss Account. • Newly inserted : • Statement of Changes in Equity 22

Basic Requirements  Materiality : To disclose all material items. • For Profit and Loss Account items, Higher of > 1% Operating Revenue or Rs. 10 lacs  No Extraordinary items but requires Exceptional Items  Separate disclosure of EPS of Continuing and Discontinuing Operations  Disclosure requirements are in addition to and not in substitution of the • disclosure requirements specified in Ind AS.  In case disclosure under Schedule III is in conflict with Ind AS, comply with Ind AS  No format for preparation of Cashflow. Encourages Direct method instead of Indirect Method.  No Proposed Dividend  No Fixed Assets but Tangible and Intangible Assets 23

Basic Requirements  Tangible as Property, Plant and Equipment  New Head inserted “Investment Property”  Disclosure of Goodwill from Other Intangible  New Heads • “Biological Assets other than Bearer Plants’, ‘Financial Instruments’, ‘ • Financial Liabilities”  Clubbing of Investments, Trade Receivables, Loans, Cash and Cash Equivalents, etc. under “ Financial Assets.” • Borrowings and Trade Payable as Financial Liabilities  Disclosures of Current Tax Assets / Liabilities (Net) on face of Balance Sheet.  Share Capital renamed as “Equity Share Capital”  Reserves & Surplus renamed as “Other Equity” 24