Ind AS
December 2014
Presented by
Shrenik Baid
shrenik.p.baid@in.pwc.com
+91-22-6669-1312
+91-98-2011-6904
Price Waterhouse & Co.
Agenda
1.
Ind AS in India
2. Ind AS 101-First-time Adoption of Ind-AS
3. Adoption of Ind-AS
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Slide 2
Ind AS in India
• Where are we?
• Adoption timelines
• Fundamental areas in which Indian GAAP and Ind-AS differ
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Slide 3
Where are we?
Roadmap - ICAI - 24 March, 14
2015-16
Comparative
period
Transition date
April 1, 2015
2016-17*
a) Equity/ debt securities are listed or in
process of listing
on any stock exchange in India or outside
India
b) Net worth# >= Rs. 500 crore
c) Holding, subsidiary, joint venture or
associate of companies covered under above
Only for consolidated financial statements
*Mandatory adoption date for specified companies as per roadmap finalized by ICAI Council as on 24 March, 2014 and
submitted to MCA for it’s consideration.
Roadmap for banks, NBFCs and Insurance Companies will be decided in consultation with RBI and IRDA.
# Net worth = Share Capital + Reserves – Revaluation as at 31 March, 2014 audited standalone financial statements
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Slide 4
Adoption timelines
Ind-AS
Equity
EGAAP*
EGAAP*
31/12/2014
31/3/2015
Transition
Date
Opening
balance sheet
Ind-AS
P&L
Ind-AS
Equity
EGAAP*
*EGAAP = Existing GAAP
Herein, the dates have been assumed and are for illustrative purpose only
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31/3/2016
Adoption
Date
31/3/2017
Reporting
Date
Closing
balance sheet
December 2014
Slide 5
Fundamental areas in which Indian GAAP and
Ind-AS differ
Indian
GAAP
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• Full compliance, qualification not
accepted
• More guidance
• Focus on substance over form
• Focus on risks and rewards
• Present value and fair value concepts
• Estimates
• Restatement of previously issued
financial statements
• Detailed disclosures
Ind-AS
December 2014
Slide 6
Ind AS 101-First-time Adoption of Ind-AS
2.1 Introduction and Overview
2.2 Exceptions and Exemptions
2.3. Disclosures
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Slide 7
Introduction and Overview
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Slide 8
Introduction and Overview
Objective
• Is transparent for users and comparable over all periods presented;
• Provides a suitable starting point for accounting under Indian
Accounting Standards (Ind-ASs); and
• Can be generated at a cost that does not exceed the benefits to
users.
Application
• To the first Ind AS financial statements ; and
• Each interim financial report under Ind-AS in the first period.
Ind AS 101 is different from transition adjustments in each standard
and also it is different from change in accounting policies.
Ind AS 101 is for first time adoption of Ind AS only
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Slide 9
Introduction and Overview
Ind AS 101 requires
• Identify the period for adoption of Ind AS.
• Prepare an opening balance sheet at the date of transition to Ind AS.
• Select accounting policies that comply with Ind AS, and apply those
policies for all periods presented in the first Ind AS financial statements.
• Consider whether to apply any of the optional exemptions from
retrospective application.
• Apply the mandatory exceptions.
• Provide disclosures to explain the transition to Ind AS from Previous
GAAP.
The first Ind AS financial statements are:
The first financial statements to contain “an explicit and unreserved
statement of compliance with Ind ASs”
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Slide 10
Exceptions and Exemptions
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Slide 11
Ind AS 101 - Mandatory exceptions summary
Noncontrolling
interests
Estimates
Hedge
accounting
Embedded
derivatives
Derecognition
of financial
assets and
financial
liabilities
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Government
loans
Classification
and
measurement
of financial
assets
Impairment of
financial assets
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Slide 12
Ind AS 101 - Mandatory exceptions summary
Estimates
Estimate
required by
previous GAAP?
No
Make estimate
reflecting conditions
at relevant date
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Yes
Evidence of error?
No
Calculation consistent
with Ind AS?
Yes
Yes
Use previous
estimate
No
Use previous
estimate and adjust
to reflect Ind AS
December 2014
Slide 13
Ind AS 101 - Optional Exemptions summary
Business
combinations
PPE,
Investment
Properties,
Intangibles
Cumulative
translation
differences
Leases
Share-based
Leases
payments
Compound
Financial
Instruments
Assets and
liabilities of
subsidiaries,
associates and
joint ventures
Investments in
subsidiaries,
associates and
joint ventures
FV
FVmeasurement
measurement
Financial
of of
financial
assets
or financialon
Instruments
liabilities
initial at
initial
recognition
recognition
Designation of
financial
previously
assets
recognised
and
Financial
financial
instruments
Liabilities
Designation of
contracts to
buy or sell a
non-financial
item
Extinguishing
financial
liabilities with
equity
instruments
Severe
hyperinflation
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Joint
arrangement
Insurance
contracts
Compound
concessions
Instruments
arrangements
Investments in
subsidiaries,
associates
and
Revenue
joint control
entities
Stripping
cost
Non-current
assets held for
sale and
discontinued
operations
Decommissi-oning
liabilities
Service
December 2014
Slide 14
Ind AS 101 - Optional Exemptions summary
Business Combinations
Ind AS 103 need not be applied to combinations before date
of transition
• BUT, if one combination is restated, after a particular date of choice, all
subsequent combinations need to be restated
When the exemption is used
• No change in classification
• Post combination carrying amount deemed cost for assets and liabilities
measured at cost
• Assets and liabilities measured at fair value restated at date of transition –
adjust retained earnings
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Slide 15
Ind AS 101 - Optional Exemptions summary
Business Combinations
Assets and liabilities not recognised at the time of a business combination
under previous GAAP are:
• Recognized as if subsidiary adopted Ind ASs at the same date
Subsidiaries not consolidated under previous GAAP are:
• Consolidated as if subsidiary adopted Ind ASs at the same date
• Goodwill is the difference between cost of investment and net assets
recognised at date of transition
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Slide 16
Ind AS 101 - Optional Exemptions summary
Business Combinations
Goodwill is recognised at the carrying amount under previous GAAP and
adjusted for
• Intangibles that are not recognised under Ind AS
• Intangibles that must be recognised under Ind AS
• Contingent consideration not recognised; and
• Tested for impairment
Goodwill deducted from equity remains in equity
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Slide 17
Ind AS 101 - Optional Exemptions summary
Property, Plant and Equipment
For property, plant and equipment, an entity can choose to measure the
value using:
• Carrying value as per previous GAAP (para D7AA of Ind AS 101).
• Cost in accordance with Ind AS.
• Fair value at the date of transition as deemed cost.
• A revaluation carried out at a previous date (like a IPO) less accumulated
depreciation till the date of transition as deemed cost, subject to certain
conditions.
This exemption can also be applied to intangible assets that meet the
criteria for revaluation in Ind AS 38 and to investment properties where
the cost method in Ind AS 40 is applied. The exemption may not be used
for any other assets or for liabilities.
If a company elects option under para D7AA, then its Ind AS financial
statement will not qualify to be compliant with IFRS.
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December 2014
Slide 18
Ind AS 101 - Optional Exemptions summary
Other key exemptions
Exemption
Impact
Cumulative
translation
differences
The cumulative translation reserve may be reset to zero.
Leases
A company may elect to assess whether an arrangement contains
a lease at the date of transition, rather than at the inception of
the arrangement.
Share-based payment A company may choose (but is not required) to apply Ind AS 102
to any equity instruments that were granted before date of
transactions
transition to Ind ASs.
In addition, a company may choose (but is not required) to apply
Ind AS 102 to a liability relating to a cash-settled share-based
payment that was settled prior to the date of transition to Ind
AS.
Compound financial
instruments
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A compound financial instrument does not need to be bifurcated
if the liability component is not outstanding at the transition
date.
December 2014
Slide 19
Ind AS 101 - Optional Exemptions summary
Other key exemptions
Exemption
Impact
Assets and liabilities
of subsidiaries,
associates and joint
ventures
A subsidiary that adopts Ind AS later than its parent can elect to
apply Ind AS 101 or to use the carrying amounts of its assets and
liabilities included in the consolidated financial statements,
subject to eliminating any consolidation adjustments.
If a parent adopts Ind AS later than its subsidiary, the parent, in
its consolidated financial statements, must measure the assets
and liabilities of the subsidiary at the same carrying amounts as
in the Ind AS financial statements of the subsidiary, adjusting
for normal consolidation entries.
Investments in
subsidiaries, jointly
controlled entities
and Associates
In their separate financial statements, first-time adopters can
measure their investment in subsidiaries, jointly controlled
entities and associates at either:
• Cost, determined in accordance with Ind AS 27;
• fair value at the Ind AS transition date, or
• Deemed cost, defined as previous GAAP carrying amount at
the Ind AS transition date.
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Slide 20
Disclosures
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Slide 21
Ind AS 101 - Disclosures
Comparative information
• An entity is mandatorily required to provide comparative financial statements for
atleast one period. Entity can provide comparative financial statements for more than
one period.
• Opening balance sheet (related disclosures in notes) as at transition date to be presented.
• Comparative financial statement to be presented in accordance with Ind AS.
Non Ind AS comparative information and historical summaries
• Allows entities to disclose non-Ind AS information in the Ind AS financial statement.
• Any financial statement information in accordance with previous GAAP shall be labelled
as Previous GAAP information and disclose the nature of main adjustments required to
make it comply with Ind AS.
Adjustment of GAAP differences on Ind AS transition date
• GAAP differences on Ind AS transition date are adjusted directly in retained earnings (or,
December 2014
if appropriate, another category of equity).
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Slide 22
Adoption of Ind-AS
• Challenges in adopting Ind-AS
• Managing the Change
• Project Management Framework
• Model steps for Ind AS implementation
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Slide 23
Challenges in adopting Ind-AS
- Managing and communicating the change
- Data capturing
- Aligning different policies, practices and system across the group having
presence in multiple jurisdictions and having different reporting
requirements including tax and statutory reporting
- Conforming accounting with changes in business
- Aligning the business practices considering Ind AS accounting
requirements
- Training across the organization
- Lack of appropriately skilled resources in the market
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Slide 24
Managing the Change
Project Framework
Establishing an environment
to support the project
Controls and
Documentation
Ensuring the
conversion
process is
controlled and
documented
Technical
Accounting Advice
Communication Technical accounting
information along with
and
practical application advice
Knowledge
Sharing
Embedding
Monitoring the
the Change
pace and
communication of
the work
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Creating a sustainable
reporting environment
December 2014
Slide 25
Project Management Framework
A well thought out project structure on lines below ensures that an entity is able to get
appropriate management focus on project and on technical front “get it right the first
time” which is very essential for a successful project.
Steering Committee
Decision
Maker
Auditor
TRC
Technical Review
Committee
Issue
Originators
INVITEES
Expert
Work Streams
Technical
Champions
Needs
WS1
o Loans
o Income
recognition
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WS2
o Financial
Reporting
o Employee
benefits
WS3
o Investments
o Derivatives
o Consolidation
WS4
o Ind AS 107
o Segmental
Reporting
• Technical support material
• Roles & Responsibilities
• Timelines
• Nodal offices
December 2014
Slide 26
Model steps for Ind AS implementation
Diagnostic study
• Identification of key GAAP differences between IGAAP & Ind AS and
accounting policy options under Ind AS,
• Ind AS 101 – First-time adoption of Ind AS implication,
• Finalise accounting policy under Ind AS and optional exemption under
Ind AS 101 to be opted.
Ind AS conversion
• Quantification of GAAP differences,
• Preparation of Ind AS financial statement,
• Ensuring completeness of disclosures,
• Audit of Ind AS financial statement.
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December 2014
Slide 27
Thank You
Shrenik Baid
shrenik.p.baid@in.pwc.com
+91-22-6669-1312
+91-98-2011-6904
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