1. IFRS and Indian Accounting Standards
International Financial Reporting Standards (IFRS)
Indian Accounting Standards
a. Indian Accounting Standards converged with IFRS – with certain carve - outs (Ind AS) – Not yet implemented
b. Existing mandatory Indian Accounting standards (AS) (Formulated by ICAI and notified u/s 211 of the Companies Act)

2. Scope of the discussion
Carve-outs in converged Indian Accounting Standards (Ind AS) from IFRS
Difference between IFRS and existing Indian Accounting Standards (AS)
Recent developments / New standards
New projects in IFRS

3. Carve - outs Presentation of financial statements (IAS -1)
Classification of expenses
Complete set of financial statements
Statement of other comprehensive income
Statement of changes in equity
Treatment of foreign exchange differences on long term monetary assets & liabilities (IAS 21)
Conversion option embedded in FCCB (IAS 32-39)
Changes in fair value due to changes in own credit risk (IAS 32-39)

4. Carve – outs (contd...) Business combinations (IFRS 3)
Common control transactions
Gain on bargain purchase (negative goodwill)
Employee benefits (IAS 19)
Treatment of actuarial gains & losses
Application of discount rates
Revenue recognition – in contracts of construction in real estate (IAS 11)
Revenue from agreements for construction of real estate (IAS 11 / IAS 18 / IFRIC 15)

5. Carve – outs (contd...) First time adoption (IFRS 1)
Date of transition / deemed date of transition
Comparatives – in prior period – Relaxation in converged standards
Reconciliation to explain transition to IFRS
Exemptions
Previous GAAP carrying value of PPE as deemed cost
(similar exemptions for Intangible assets and Investment properties)
Unrealised foreign exchange difference on long term monetary assets and liabilities
Retrospective application of
Effective interest method
Impairment requirements

6. Carve – outs (contd...)
Consolidated financial statements (IAS 27) mandated by IFRS / regulations (SEBI)
Statement of cash flows (IAS 7)
Interest & dividend
Accounting policies, changes in accounting estimates and errors (IAS 8).
New Accounting Pronouncements & their impact
Absence of standard or interpretation that specifically applies to a transaction
Investment property
Cost model Vs. fair value model

7. Carve – outs (contd...)
Determining whether an arrangement contains a lease (IFRIC 4)
Government grants (AS 20)
Fair value Vs. Nominal value
Disclosure which conflict with confidentiality requirements of statues / regulations (IAS 24)
Investments in associates (IAS 28)
Excess of share acquired in fair value of asset & liability of associate over cost
in P & L or equity?
No Indian standards yet formulated
Accounting and Reporting by Retirement Benefit Plan (IAS 26)
Agriculture (IAS 41)

8. Differences between IFRS and existing Indian Accounting Standards (AS)
Conceptual differences
Varying degree of focus on / importance of :-
Fair value
Time value of money
Substance over form
Legal control / control in substance
Legal obligation / constructive obligation

9. Differences between IFRS and existing Indian Accounting Standards (AS)
Presentation of financial statements (IAS 1 / AS 1)
Components of financial statements
Presentation of income statement / comprehensive income
Statement of changes in equity
Format of financial statements (Schedule VI)
Classification of assets & liabilities
Current - non current
Classification of financial liabilities under refinancing arrangements
Classification of expenses

10. Differences between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Presentation of financial statements (IAS 1 / AS 1) (Contd…)
Extraordinary items
Reclassification in financial statements
Critical judgments
Estimation of uncertainty
Changes in accounting policies & estimates and errors (IAS 8 / AS 5)
Accounting treatment of changes in accounting policies
Accounting treatment of changes in accounting estimates
Accounting treatment of errors

11. Differences between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Accounting of construction contracts (IAS 11 / AS 7)
Percentage of completion method
Recognition of revenue by real estate developers
Service concession arrangements
Income taxes (IAS 12 / AS 22)
Timing differences / temporary differences
P & L approach / balance sheet approach
Income / expenses recognised outside P & L account
Recognition of deferred tax assets
Virtual certainty
Reasonable certainty

12. Differences between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Income taxes (IAS 12 / AS 22) (contd…)
Revaluation of fixed assets
Deferred tax liability (based upon sale rather than through use)
Reasonable certainty
Deferred tax in respect of business combinations
Deferred tax on unrealised intra-group profits (in consolidated financial statements)
Numerical / tax rate reconciliation

13. Differences between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Property plant and equipment (IAS 16 / AS 6 / AS 10)
Depreciation based on major components
Replacements costs
Cost of major inspections / overhauls
Revaluation
Treatment of revaluation reserve
Changes in method of depreciation
Decommissioning, restoration and similar liabilities

14. Differences between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Leases (IAS 17 / AS 19)
Interest in leasehold land
Initial direct costs / lease incentives
Determination of whether an arrangement contains a lease (IFRIC 4)
Revenue (IAS 18 / AS 9)
Measurement of revenue
(When inflow receivable deferred - discounted by imputed rate of interest)
Interest income
Recognised using the effective interest method
Revenue from services rendered
Completed service contract method / Proportionate completion method

15. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Employee benefits (IAS 19 / AS 15)
Treatment of actuarial gains & losses
Income statement
Other comprehensive income
Corridor approach
Discount rates
Government bonds / high quality corporate bonds

16. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
The effects of changes in foreign exchange rates (IAS 21 / AS 11)
Functional and presentation currency
Treatment of exchange differences
Financing cost
Schedule VI
Para 46 of AS 11
Integral / Non – integral operations
Income statement / Reserves (recycled to Income statement on disposal)
Other comprehensive income (recycled to Income statement when control is lost)

17. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Consolidated financial statements (IAS 27 / AS 21)
Requirement for preparation
By standard or by statute ?
When not required (Intermediate subsidiary)
Legal control / control in substance
Dual control
Potential voting rights
Uniform accounting policies
Time lag of 3 months
Presentation of Non-controlling interest
Partial disposal of investment in subsidiary
When control retained
When control lost
Special Purpose Entities

18. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Interest in Joint Ventures (IAS 31 / AS 27)
Proportionate consolidation Vs. Equity method
Issues involved
Financial Instruments
Presentation (IAS 32 / AS 31)
Recognition and Measurement (IAS 39 / AS 30)
Disclosures (IFRS 7 / AS 32)
AS 30, 31, not yet notified
Relevance of AS 30, 31, 32 ?
Ind AS 32, 39, Prepared as converged standards
AS 11 and AS 13 – Present mandatory standards

19. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Financial Instruments (Contd …)
Presentation (IAS 32 / AS 31)
Liability Vs. Equity
Form Vs. Substance
Redeemable preference capital / convertible debentures
Presentation of Treasury shares
Conversion option
Embedded in FCCB
Embedded in entity’s functional currency
Disclosures (IFRS 7 / AS 32)
Detailed requirements of disclosures in IFRS 7 to evaluate
The significance of financial instruments to an entity
The nature and extent of their risks
How the entity manages those risks

20. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Financial Instruments (Contd …)
Recognition and Measurement (IAS 39 / AS 30)
Classification and Measurement
Fair value through Profit & Loss (FVTPL)
Held to Maturity (HTM)
Available for Sale (AFS)
Loans & Receivables
Loans and receivables impairment
Provisioning norms of RBI
Subjective Vs. Objective approach
New IFRS 9 for Financial Assets ( )
Impairment
Recognition
Reversal

21. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Financial Instruments (Contd …)
Recognition and Measurement
Derivative and embedded derivatives
Derivatives and hedge accounting
Fair value hedge
Cash flow hedge
Hedge of a net investment in a foreign entity
De-recognition of financial assets and securitisation
De-recognition of financial liabilities
Recognition & measurement of financial guarantee contracts

22. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Provisions, Contingent liabilities and Contingent assets (IAS 37 / AS 29)
Legal obligation Vs. Constructive obligation
Discounting of liabilities to the present value
Intangible Assets (IAS 38 / AS 26)
Useful life may be finite or indefinite
Amortisation or Impairment or both

23. Difference between IFRS and existing Indian Accounting Standards (AS) (Contd…)
Business Combinations (IFRS 3 / AS 14)
Amalgamation in the nature of acquisition or pooling of interest
Amalgamation between entities under common control
Measurement of Goodwill
Fair valuation of other assets and liabilities ?
Negative Goodwill
Bargain purchase (accounting treatment ?)
Business combination achieved in stages

24. Recent Developments / New Standards
IFRS 9 Financial Instruments (w.e.f )
Limited to financial assets
Requirements for financial liabilities are under finalization
Second and third phase related to Impairment of financial assets and Hedge accounting – when completed, IAS 39 will be replaced
Impairment of financial assets
Incurred loss model Vs. Expected loss model

25. Recent Developments / New Standards (Contd.)
Financial Assets (Under IFRS 9)
Two measurement category approach
Fair value / Amortised cost
Classification based on assessment of the way in which the instrument is managed (the entity’s business model)
Hybrid contracts are classified in accordance with the classification criteria in their entirety
Strategic equity investments
Option to record all fair value changes in OCI (No recycling between P&L and OCI permitted)
All Equity investments measured at fair value
Cost exception for unquoted equity investments not available

26. Recent Developments / New Standards (Contd.)
IFRS 10 Consolidated Financial Statements (w.e.f. – )
Changes the criteria for determination of control
Earlier – Power to govern operating and financial policies
Now – Whether the investor is exposed or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee
Prescribes
The criteria for preparation of consolidated financial statements
Consolidation procedures
Presentation of Non-controlling interests
Treatment for changes in ownership interests

27. Recent Developments / New Standards (Contd.)
IFRS 11 Joint Arrangements (w.e.f. – )
Joint arrangement has two characteristics
A contractual arrangement
2 or more parties have joint control
Joint arrangement is either a
Joint Operation
Joint Venture
The parties that have a Joint Control have rights to the assets and obligations for the liabilities relating to the arrangement
The parties that have Joint Control have rights to the Net Assets of the arrangement

28. Recent Developments / New Standards (Contd.)
IFRS 11 Joint Arrangements (Contd…)
Existence of a separate vehicle - Joint operation / Joint venture ?
A joint arrangement that is not structured through a separate vehicle is a Joint Operation
If assets and liabilities held in a separate vehicle, it can be either a Joint Venture or Joint Operation
Accounting treatment under Joint operation / Joint venture

29. Recent Developments / New Standards (Contd.)
IFRS 12 Disclosure of Interests in Other Entities (w.e.f. – )
Disclosure of interest in any of the following
Subsidiaries
Joint arrangements (Joint operations or Joint ventures)
Associates
Unconsolidated structured entities
Disclosure requirements excluded from IFRS 10 and IFRS combined in this standard

30. Recent Developments / New Standards (Contd.)
IFRS 12 Disclosure of Interests in Other Entities (w.e.f. – ) (Contd…)
Significant judgments and assumptions made in determining
Control
Joint Control or Significant Influence
The type of joint arrangement (i.e. Joint operation or Joint venture) when arrangement has been structured through a separate vehicle
Prescribes separate lists of requirements of disclosure in case of
Interest in Subsidiaries
Interest in Joint arrangements & Associates
Interest in unconsolidated structured entities

31. Recent Developments / New Standards (Contd.)
IFRS 13 Fair Value Measurements
IFRS 13
Defines Fair Value
Sets out in a single IFRS a framework for measuring fair value
Requires disclosures about fair value measurement
Definition of Fair Value
Exit price
To sell asset or paid to transfer a liability
An orderly transaction
At the measurement date

32. Recent Developments / New Standards (Contd.)
IFRS 13 Fair Value Measurements (Contd…)
Objective of IFRS 13
To increase consistency and comparability through “Fair Value hierarchy”
Fair Value hierarchy categorizes and describes the inputs used in valuation techniques in 3 levels - Level 1 Input, Level 2 Input and Level 3 Input
Overview of Fair Value measurement approach
Guidance on Measurement
Valuation techniques
Market approach
Cost approach
Income approach
Elaborate disclosure requirements

33. New Projects in IFRS
Revenue from Contracts with customers (Joint Proposal under consideration)
Uniform revenue recognition in complex transactions such as long term service contracts and multiple element arrangements
A company should recognise revenue when it satisfies a performance obligation by transferring a good or service to a customer. A good or service is transferred to a customer when the customer obtains control of that good or service.

34. New Projects in IFRS (Contd…)
Revenue from Contracts with customers (Contd…) (Joint Proposal under consideration)
When multiple elements / contracts are bundled together, apply the following steps
Identify the contract(s) with the customer
Identify the separate performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the separate performance obligations
Recognise revenue when (or as) the entity satisfies each performance obligation

35. New Projects in IFRS (Contd…)
Leases (Joint Proposal under consideration)
According to the World Leasing Yearbook 2010, leasing activity in 2008 amounted to US$ 640 billion. However, the assets and liabilities arising from many of those contracts are not shown in a lessee’s Statement of Financial Position (Balance sheet)
In the books of Lessee
New project envisages that a lessee would recognise a liability to make lease payments and a corresponding right to use asset upon lease commencement

36. New Projects in IFRS (Contd…)
Leases (Joint Proposal under consideration) (Contd…)
In the books of Lessor
There was a proposal to adopt “the receivable and residual approach” (i.e. to allocate the carrying value of underlying asset being leased between the right of use granted to the lessee and the residual asset. However, at present the consensus is against this approach in the books of lessor.

37. Thank you 37