Indian accounting fraternity has never seen such a radical changes in the accounting standards since the adoption of accounting standards in India. Convergence with International Financial Reporting Standards (IFRS) is going to change or rather has radically changed the way the accounting is done in India.

When it comes to moving to IFRS, countries have two major options:

Either to adopt, that is to, accept the IFRS as adopted by the International Accounting Standard Board (IASB) without making any changes. Like Australia, New Zealand, Canada, etc. Or

To converge, (to adapt to) that to accept the IFRS with some medications by carving out some options like China, Singapore etc. have done.

(I) India’s approach for IFRS

India has taken two strategic decisions for IFRS.

1. To converge with IFRS and not to adopt IFRS.

2. The conversion will take place in stages and not in one go.
   This made two things clear:

a) Indian converged standards will be different from the one issued and adopted by IASB, and

b) There will be two sets of standards operating concurrently. One set of converged standards applicable to companies covered in phases applicable and the other set of existing accounting standards (not converged) which will be applicable to companies not covered by IFRS.

(II) Evolution of convergence with IFRS – Background in brief

A meeting of the Core Group constituted by the Ministry of Corporate Affairs for convergence of Indian Accounting Standards with the International Financial Reporting Standards (IFRSs) from the year 2011 was held on 11thJanuary, 2010 and on 29thMarch, 2010 under the Chairmanship of Shri R. Bandyopadhyay, Secretary, Ministry of Corporate Affairs. These meetings were attended by the officials from Ministry of Finance, SEBI, RBI, IRDA C&AG, PFRDA, ICAI, Industry Representatives and other experts. On the basis of the deliberations taken place in the meeting on 11thJanuary, 2010, a Press Release (No. 2/2010) related to the roadmap for application of the converged Indian Accounting Standards by companies (other than Banking companies, Insurance companies and Non-Banking finance companies) was issued on 22ndJanuary, 2010. Further, on the basis of the deliberations taken place in the meeting on 29thMarch, 2010, 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 31stMarch, 2010.

Again by virtue of a press release dated 4th November, 2010, mandated that Phase-I companies would have to follow converged standards w.e.f. 1-Apr-2011.

Despite such announcement till February, 2011, converged standards were not notified. Accounting fraternity was
waiting with bated breath the announcement of converged standards.

(III)  The wait was finally over in February, 2011

Yes indeed, the much awaited converged standards finally arrived 25^th February, 2011, when by virtue of the press release, Ministry of Corporate Affairs, (MCA) announced as under.

“Reliable, consistent and uniform financial reporting is important part of good corporate governance practices worldwide in order to enhance the credibility of the businesses in the eyes of investors to take informed investment decisions. In pursuance of G-20 commitment given by India, the process of convergence of Indian Accounting Standards with IFRS has been carried out in Ministry of Corporate Affairs through wide ranging consultative exercise with all the stakeholders. Thirty five Indian Accounting Standards converged with International Financial Reporting Standards (henceforth called IND AS) are being notified by the Ministry and placed on the website. These are: IND ASs 1, 2, 7, 8, 10, 11, 12, 16, 17, 18, 19, 20, 21, 23, 24, 27, 28, 29, 31, 32, 33, 34, 36, 37, 38, 39, 40, 101, 102, 103, 104, 105, 106, 107 and 108. The Ministry of Corporate Affairs will implement the IFRS converged Indian Accounting Standards in a phased manner after various issues including tax related issues are resolved with the concerned Departments. It would be ensured that the implementation of the converged standards in a phased manner is smooth for the stakeholders. The date of implementation of the IND AS will be notified by the Ministry at a later date.”

The above referred press release put an end to speculation about implementation of IFRS in India, but simultaneously deferred the date of implementation to the later date. It has raised more questions than the questions answered, and in a way made one thing certain,. i.e., the uncertainty of implementation of standards.

This said press release confirmed one more aspect that the implementation of converged standards will be in a phased manner and that process of convergence will be smooth.

The converged standards are known as Indian Accounting Standards (Ind-AS). Till now 35 Ind-ASs have been notified.

However, the notification of these standards in Officials Gazette is still awaited.

Thus, Ind-AS will be applicable to companies covered by applicable phases and those companies not covered by any of the phases will continue to follow existing Accounting Standards (AS).

However, it would be interested to know the changes made by International Accounting Standard Board (IASB).

IFRS is defined by IAS 1 as under :

International Financial Reporting Standards (IFRSs) are Standards and

Interpretations issued by the International Accounting Standards Board (IASB).

They comprise:

(a) International Financial Reporting Standards

(b)  International Accounting Standards and

(c) IFRIC Interpretations and

(d)  SIC Interpretations.

Following table gives the No. of IFRSs

January 1, 2011 & 2013

Major Changes in IFRS since February 2011

As of February 2011, IFRS 9 was issued but it was to be effective for annual periods beginning on or after 1st January, 2013. IFRS 9 was to replace the portion of IAS 39. In December 2011 the IASB deferred the effective date to January 2015.

New Standards issued in May 2011

Flurry of activities happened at IASB in May 2011, it issued four new IFRS few of which were to replace some IAS.

IFRS 10

The International Accounting Standards Board (IASB) issued IFRS 10 Consolidated Financial Statements to replace IAS 27.IFRS 12 Disclosure of Interests in Other Entities, also issued in May 2011, replaced the disclosurerequirements in IAS 27. IFRS 10 incorporates the guidance contained in two related Interpretations (SIC-12 Consolidation – Special Purpose Entities and SIC-33 Consolidation).

IFRS 11

The International Accounting Standards Board (IASB) issued IFRS 11 Joint Arrangements to replace IAS 31. IFRS 12 Disclosure of Interests in Other Entities, also issued in May 2011, replaced the disclosure requirements in IAS 31. IFRS 10 incorporated the guidance contained in a related Interpretation (SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers).

IFRS 12

The International Accounting Standards Board (IASB) issued IFRS 12 Disclosureof Interests in Other Entities. IFRS 12 replaced the disclosure requirements in IAS 27Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures.

IFRS 13

The International Accounting Standards Board issued IFRS 13 Fair Value Measurement. IFRS 13 defines fair value and replaces the requirement contained inindividual standards.

October 2011

In October 2011 the International Accounting Standards Board issued IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine. It was developed by the Interpretations Committee.

Few standards have been substantially revised in the light of issue of new standards

Like IAS 27 rechristened as Separate Financial Statements, (earlier name Separate & Consolidated Financial Statements) besides being amended in the light of IFRS 10 Consolidated Financial Statements.

Few Standards & SIC interpretations deleted

IAS 31 deleted and replaced by IFRS 11 Joint Arrangement. As a sequel to other changes SIC 12, 25 & 33 were also deleted.

One major change in IAS 19 Employee benefits, corridor option has been dropped by the IASB.

There are few editorial changes like

(i)change of title of the framework from “Framework for preparation & Presentation of financial statements“ to “conceptual framework for financial reporting”

(ii) Title of “Statement of Comprehensive Income for the period" to

Statement of profit or loss and other comprehensive income for the period”

One needs to wait when the effective date of implementation of IFRS is announced. As mentioned earlier, in view of the rapidly changing IFRS coupled with uncertainty of implementation of Ind-AS, no changes are made in the Ind-ASs.

(IV) How Ind-ASs are different from IFRSs ?

A. Total Nos. of standards

As of May 2011, IFRS is comprised of 38 Standards (IFRS & IAS) and 25 Interpretations (IFRIC & IIC), excluding IFRS 10, 11 & 12 announced by IASB in May, 2011, whereas MCA notified only 35 standards. This is because IFRIC & SIC are not separately numbered but made part and parcel of Ind-AS.

Before, we delve into Ind-AS, it is pertinent to understand the codification of Ind-AS.

B. Different Codification

IFRS 10, 11 and 12 will become effective from 1st January,2013.

While IASB has numbered IFRS, IAS, IFRIC & SIC separately, MCA has not classified them separately but clubbed IFRIC & SIC interpretations with relevant standards in the form of an appendix forming integral part of the standard, e.g. IFRIC is customer loyalty programmes, is made an integral part of Ind-AS – 18 in the form of Appendix “B”.

C. Exhibit 1 annexed hereto lists out all the standards

Secondly, all standards issued by IASB, having prefix of IFRS have been codified as Ind-AS 101, 102 etc. and IAS have been codified as Ind-AS 1, 2, etc.

For example, corresponding standard of IFRS 1 is Ind-AS 101 and that of IAS 1 is Ind-AS 1.

Besides appendices numbered alphabetically (like appendix A, B, etc.) at the end of each Ind-AS, there is Appendix 1, this appendix is not a part of the Ind-AS. The purpose of this appendix is only to bring out differences, if any between Ind-AS and the corresponding IAS or IFRS.

This Appendix 1, thus is very handy to understand differences quickly.

D. Different terminology of Financial Statements

Ind-AS adopted different titles for the financial statements as compared to IFRS

Instead of Statement of Financial Position – Balance Sheet.

Instead of Statement of Comprehensive Income – Statement of Profit and Loss.

Para 8 of IAS 1 gives option to allow the entity to follow different titles of financial statements, hence this not considered as deviation.

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.

E. Reference to Companies Act and rules made there under, rather than the IFRS

Wherever reference to IFRS is made in IFRS, IAS, IFRIC or SIC, under Ind-AS reference has been made to

Indian Accounting Standards (Ind ASs) are Standards prescribed under Section 211(3C) of the Companies Act, 1956.

F. Transitional Provisions

Transitional provisions have not been dealt with Individual standards, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS101, First-time Adoption of Indian Accounting Standards

G. Paragraph numbers

Despite deletion of some paragraphs in Ind-AS, in order to maintain consistency, paragraph numbers have been kept identical.

H. IFRS by IASB are issued in two parts

IFRS are issued by IASB in two parts. Part A & Part B

Part A covers

Introduction

Numbered paragraphs of Standard

Appendices – both – the one forming an integral part of the standards and the one not forming an integral of part of the standard.

Part B covers

Basis for conclusion

Dissenting opinion

Illustrative guidance or examples.

Ind-ASs are issued in just one part and which cover :

Numbered paragraphs of the standard and both appendices the one forming an integral part of the standard and the one not forming an integral part of the standard.

Ind-AS are not issued in two parts.

I.Types of Differences

Differences between Ind-AS and IFRS can be summarised as under:

• Few standards adopted by IASB, have not been adopted or for the moment its implementation deferred.

• In few cases, options given under IFRS have been cured –optional deviation.

• Deviation from IFRS:

• In some cases, more clarification

(v)  Standard-wise analysis of major differences between Ind-AS and IFRS

1.Ind-AS 101 / IFRS 1 : First time adoption of Ind-AS

1.1Comparatives

IFRS 1 defines transitional date as beginning of the earliest period for which an entity presents full comparative information under IFRS. This date is the starting point for adoption of IFRS.

Ind-AS 101, however, provides that the date of transition is the beginning of the current period (thus, obviating the need for comparison) and in addition provides an option to present comparative financial statements in accordance with Ind-AS on a memorandum basis.

In both cases, the companies are required to present the comparative information under Indian GAAP.

However, if the company prefers to give comparative information as per Ind-AS, then it will have two transition dates.

For example, for the financial year 31st March, 2012, the transitional dates would be :

1st April, 2011 – for primary statements and,

1st April,2010 – for the comparative information – the deemed date of transition.

Sequels to this change, disclosures and reconciliations required as per IFRS have been modified to accommodate this option available under Ind-AS 101.

IFRS requires reconciliations of opening equity, total comprehensive income, the cash flow statements and closing equity for the comparative period to explain transition from previous GAAP. As per Ind-AS 101, entities that do not provides comparatives on memorandum basis need not give such reconciliations, except disclosing significant differences pertaining to total comprehensive income.

Entities that provide comparatives would have to provide reconciliations which are similar to IFRS.

1.2 Inclusion/modification of existing exemptions to make it relevant for India

1.2.1  Transitional relief from the retrospective application of Ind AS 16: Property, Plant and Equipment, Ind-AS 38 Intangible Assets and Ind-AS 40, Investment properties.

Ind-AS 101 provides an entity option to use carrying values of all such assets as on the date of transition in accordance with previous GAAP as an acceptable starting point under Ind-AS for all property, plant and equipment.

Similar option can also be availed for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Property.

1.2.2 Transitional relief from the retrospective application of Ind. AS 19

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 Ind-AS in other comprehensive income as 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.

1.2.3  Exemption from retranslation of long-term monetary assets and liabilities denominated in foreign currency

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 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.

1.2.4 Transitional relief from the retrospective application of effective interest method – Additional relief under Ind-AS 101

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 for an entity to apply retrospectively the effective interest method or the impairment requirements

If it is impracticable then the fair value of the financial instrument at the date of transition to Ind-ASs shall be the new amortised cost of that financial instrument at the date of transition to Ind-ASs.

The financial instruments measured at fair value shall be measured at fair value as on the date of transition to Ind-AS.

1.2.5 Transitional relief while applying Ind. AS 105 - Non-current Assets held for Sale and Discontinued Operations.

Ind-AS 1 provides an entity to use the transitional date circumstances to measure such assets or operations at the lower of carrying value and fair value less cost to sell.

1.3.1  Deletion of certain exemptions not relevant for India. Certain instances of such items are as follows:

1.3.1.1. Employee Benefits

In process of convergence, requirements of certain standards have been modified, like Ind-AS 19 Employee benefits, corridor approach has been deleted, consequently provisions related to exemption of such clauses have been deleted from Ind-As 101.

Corridor approach recording actuarial gains and losses arising from accounting for employee obligations with an option to recognize the entire such gain or loss to retained earnings, at the date of transition, rather than requiring them to split such gains and losses as recognized and unrecognized gains and losses. In India, since corridor approach is not elected, the resultant first time transition provision has been deleted.

1.3.1.2 Borrowing Cost

Transitional adjustment requiring companies to apply the provisions of IAS 23 to be applied prospectively after the transition date also found to be not relevant in view of the fact AS 16 always provided for capitalisation of borrowing costs.

1.4 Elimination of effective dates prior to transition date

IFRS 1 provides for various dates from which a standard could have been implemented. These dates are not being relevant in the Indian context and have, either been eliminated or modified to suit the date of transition to Ind-AS.

These changes are inconsequential.

1.5Minor Difference

IFRS 1 defines previous GAAP as the basis of accounting that a first-time adopter used immediately before adopting IFRS.

Ind-AS 101, however, 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.

2.Ind-AS 103 Business Combinations – IFRS 3

2.1 Scope Exclusion

IFRS 3 excludes from its scope business combinations of entities under common control.

Ind. AS 103 (Appendix C) gives the guidance in this regard, which prescribes pooling of interest method for entities under common control.

2.2. Gain from bargain purchase (negative goodwill)

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

As a result of this change, one more item should be added to the components of Other Comprehensive Income, (OCI) as against present 5, there should now be 6 components of OCI – referred to in Ind-AS 1.

3.Ind-AS 1 – Presentation of Financial Statement – IAS 1

Besides the change in titles, other changes are as under:

3.1 Statement of Profit and Loss

As regards preparation of Statement of profit and loss, International Accounting Standard (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.

3.2 Complete set of Financial Statements

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.

3.3 Minor Changes

3.3.1  Periodicity of Financial Statements

IAS 1 permits the periodicity, for example, of 52 weeks for preparation of financial statements. As Ind. AS 1 does not permit it

3.3.2  Only natural Classification

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.

4.Ind-AS 18 Revenue, Ind-AS 11 – IAS 18 and
IAS 11

4.1 Real Estate transactions

IFRIC 15 Agreement for construction of Real estate has not been adopted by Ind-AS. In accordance with IFRIC 15, real estate entity is required to recognise the revenue only on the completion of project.

Ind-AS 18 has scoped out IFRIC 15.

IAS 11 does not deal with accounting for construction contracts in respect of real estate developers. However, this has been dealt with under Ind. AS 11, since it has been kept out of the scope t of Ind. AS 18, Revenue.

This implies that, the real estate developers will be required to recognise revenue from on percentage completion method, which is as per the prevailing practice and in the same manner as applied to construction project.

This is a major deviation from IFRS.

4.2 Rate Regulated Entities

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 issued by the Institute of Chartered Accountants of
India.

5.Ind-AS Employee Benefits – IAS 19

5.1 Treatment of actuarial gains and losses for post-employment plans

IAS 19 permits various options for treatment of actuarial gains and losses for post-employment defined benefit plans, like

a)Recognise in other comprehensive income

b)Recognise in income statement

c)Amortise to profit or loss through “corridor approach”

Ind. AS 19 requires recognition of the same in other comprehensive income, both for post-employment defined benefit plans and other long-term employment benefit plans.

The actuarial gains 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.

5.2 Discount rate

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.

5.3 Frequency of Actuarial Valuation

The Ind. AS 19 unlike IAS 19 gives guidance that detailed actuarial valuation of defined benefit obligations may be made at intervals not exceeding three years.

6.Ind-AS 21, Effects of changes in foreign exchange rates – IAS 21

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 transferred to profit or loss in an appropriate manner.

This option is irrevocable and applied to all long-term monetary items.

IAS 21 does not permit such a treatment.

7.Ind-AS 32 Financial Instruments: Presentation

As an exception to the definition of ‘financial liability’ in paragraph 11(b) (ii), Ind. AS 32 considers the equity conversion option embedded in a convertible bond denominated in foreign currency to acquire a fixed number of entity’s own equity instruments is considered an equity instrument (not liability) if the exercise price is fixed in any currency.

However, Ind-AS 32 FinancialInstruments: Presentationhas been modified in a manner that the derivative component will be treated as a fixed equity component, if the exercise price is fixed in any currency. Hence, such FCCBs under Ind-AS will not be subject to fair value accounting through profit or loss at each reporting date.

This, coupled with option under Ind-AS 21, will help reduce volatility in income statement.

This exception is not provided in IAS 32, which rather prescribes split accounting treatment for such FCCB, liability and conversion feature. While companies measure liability at amortized cost, the derivative component is measured as fair value through profit or loss at each reporting date.

This is a significant departure from IFRS.

8.Ind-AS 39, Financial Instruments Recognition and Measurement

Treatment of Financial Liability through profit or loss account

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 entity’s own credit risk shall be ignored.

IAS 39 requires all changes in fair values in such liabilities to be recognised in profit or loss.

9.Ind-AS 20 Accounting for Government Grants

9.1 Measurement at Fair Value or Cost

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.

9.2 Option to Present Government Grant.

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.

Consequential changes made in Ind-AS 16 and Ind-AS 38.

10.Related Party Disclosure

10.1 Elimination of Disclosure requirements

Unlike IAS 24, Ind-AS 24Related Party Disclosuresexempts companies from making disclosures required in the standard if making such disclosures will conflict with the company’s duties of confidentiality prescribed in a law. Accounting standards cannot override statutes.

This exemption may particularly help banking companies whose governing law prohibits certain disclosures.

10.2 Change in the definition of close family members

IAS 24 contains a substance based definition of the term “close members of the family”. As per the standard, “close members of the family”of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity. They may include (i) the individual’s domestic partner and children, (b) children of the individual’s domestic partner, and (c) dependants of the individual or the individual’s domestic partner.

However, Ind-AS 24 restricts the definition of the term “close members of the family” to the persons specified within meaning of “relative” under the Companies Act, 1956.

10.3 Additional guidance for aggregation of transactions

Ind-AS 24 provides additional clarificatory guidance regarding aggregation of transactions for disclosure.

It says the aggregation should not be 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.

11.Ind-AS 28 Investments in Associates – IAS 28

11.1 Exemption on the grounds of impracticability

a)Where the financial statements of an associate used in applying equity method are prepared as of a date different from that of the investor, IAS 28 requires that this difference should not be more than three months.

 Ind-AS provides an exemption if it is “impracticable”, in which cases such differences can be more than three months.

b)IAS 28 requires use of uniform accounting policies, even for the associates. Ind-AS provides an exemption from following uniform accounting policies if it “Impracticable”.

 Logic behind above deviations is that 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.

11.2 Consequential Changes

11.2.1 Accounting treatment of excess of Investor’s shares

IAS 28 provides that an investment in an associate is accounted for using the equity method from the date on which it becomes an associate. On acquisition of the investment:

“any excess of the investor’s share of the net fair value of the associate’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the investor’s share of the associate’s profit or loss in the period in which the investment is acquired.”

However, keeping in line with the changes made in Ind-AS 103 (concerning recognition of “gain from bargain purchase”), changes have been made in Ind-AS 28 also, requiring the recognition of above-mentioned excess in capital reserve and NOT in income.

(Refer to para 2.2 also)

12.Ind-As 27 Consolidated and Separate Financial Statements – IAS 27

Form of Consolidated Financial Statement

Ind-AS 27 prescribes the form for presentation of consolidated financial statements, where parent is a company. It also sets out minimum requirement of presentation on the face of balance sheet (including statement of changes in equit), statement of profit and loss and notes to accounts.

13.Scope exclusion in Ind-AS 27, Ind-AS 28 and Ind-AS 31

IAS 27Consolidated and Separate Financial Statements, IAS 28Investments in Associatesand IAS 31Interests in Joint Venturesprovide companies an exemption from consolidated financial statements (CFS), application of equity method or proportionate consolidation, if certain criteria are met. They also require certain disclosures to be made in such cases.

However, these aspects are not included in Ind-AS 27, Ind-AS 28 and Ind-AS 31 since the Companies Act and rules framed thereunder will govern the preparation of CFS.

14.Scope exclusion in Ind-AS Ind-AS 28 and Ind-AS 31

IAS 28 and IAS 31 contain scope exclusion with regard to investments in associates/ joint ventures held by mutual funds, unit trusts and similar entities including investment-linked insurance funds, if the such investments, on initial recognition, are either designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with IAS 39. However, this scope exclusion has been deleted from Ind-AS 28 and Ind-AS 31 since the Companies Act, 1956, is not applicable to mutual funds, unit trusts and similar entities including investment linked insurance funds.

15.Ind-AS 33 Earnings Per Share – IAS 33

15.1 EPS to be presented also for standalone financial statements

Unlike IAS 33, Ind-AS 33Earnings Per Sharedoes not give an option to present EPS only in CFS. It requires EPS to be presented both in the standalone financial statements (SFS) and CFS.

Also, no exemption from presentation of EPS is given to unlisted companies.

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.

15.2 Additional adjustment to profit for EPS

Ind-AS 33 recognizes that due to legal override, certain items of income and expense may be charged directly to equity, which, as per the requirements of Ind-AS, should have been recognized in profit or loss for the period. It requires that for the purpose of calculation of basic and diluted EPS, these amounts should be included in profit or loss for the period, irrespective of whether these amounts are debited or credited to equity.

16.Ind-As 40 – Investment Property – IAS 40

16.1 Removal of option for subsequent measurement

IAS 40Investment Propertiespermits both the cost model and fair value model for subsequent measurement of investment properties. In a fair value model, a company recognizes any gain/loss arising on the fair valuation in the profit or loss for the period.

Ind-AS 40 does not permit the use of fair value model

However, Ind-As 40 mandates the fair value disclosures for investment property.

16.2 Removal of accounting treatment of “property interest held by lessee under an operating lease”

As per IAS 40, a property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property if, and only if, the property would otherwise meet the definition of an investment property and the lessee uses the fair value model for the asset recognized.

This classification alternative is available on a property-by-property basis.

Since Ind-AS 40 prohibits the use of the fair value model this option has also been deleted from Ind-AS 40.

17.Ind-AS 7 Cash Flow Statements – IAS 7

1.For 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 item to be classified as item of financing activity and investing activity, respectively (refer to the paragraph 33).

2.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.

(VI) Challenges

1.Will companies be considered as IFRS compliant ?

The most frequently asked question is, after adoption of Ind-AS will Indian companies be allowed to list their securities with International stock exchanges? the Answer is NO. As the requirement is to prepare financial statements as per the IFRS as issued and adopted by IASB.

However, the task of conversion would not be as onerous.

2.IASB is still in process of updating – modifying IFRS

IFRS as they are now are not final or the ultimate. IFRS is still considering changing standards concerning Revenue, Lease, Impairment, Hedge Accounting.

Recently in May 2011, IASB issued following standards

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements, and

IFRS 12 Disclosures of Interests in Other Entities ,

these standards will be effective from 1st January, 2013.

There will be need to constantly update and upgrade Ind-AS.

By virtue of its annual improvements projects IASB constantly keep on making changes, from minor to significant, in the standards. This will keep Indian standard setter and accounting fraternity on toes to be in tandem with IASB.

3. Synchronisation with other statutes and regulatory requirements

The only indication about the probable date of implementation of IFRS in India is :-

“The Ministry of Corporate Affairs will implement the IFRS converged Indian Accounting Standards in a phased manner after various issues including tax related issues are resolved with the concerned Departments.”

No date is prescribed !!!

Clearly the implementation will take place only after those issues with the “concerned Departments”

Implementation of Ind-AS will not see the light of the day till consequential changes are carried out in other statutes like, Income Tax, GST, Companies Act, Regulatory Requirements of SEBI, Reserve Bank of India, Insurance companies.

Appendix A : LIST OF IND-AS

This Exhibit A gives the list of Ind-AS corresponding to IFRS-IAS IFRIC and SIC,
as also the existing Accounting Standard (AS)

Ind-AS not issued for following standards.

IFRS 9 Financial Instruments : Recognition & Measurement. Early adoption of IFRS 9 is not permitted.

IAS 26 Accounting and Reporting by Retirement Benefits Plans.

IAS 41 Agriculture

IFRIC 2 Member’s share in Co-operative Entities and similar instruments.

IFRIC 15 Agreement for Construction of real estate.

*  In the potential delay in notification of these standards, companies may formulate accounting policies for relevant transactions that are consistent with the principles in other standards or otherwise in accordance with the Ind-AS 8 hierarchy.

** Companies may early adopt these appendices under Ind-AS 8 hierarchy when selecting accounting policies. Once selected, accounting policies should be applied consistently.

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