Major differences between AS 12 and Ind AS 20

Government loans with below market rate of interest

Under AS 12, there is no specific guidance for this topic.

Under Ind AS 20, Government loans with below market rate of interest are initially recognised as the difference between the initial carrying amount of the loan and proceeds received

Forgivable loans

Under AS 12, there is no specific guidance for forgivable loans.

Under Ind AS 20, such loans are treated as government grants when there is a reasonable assurance that the entity will meet the terms of the forgiveness of the loans

Non-monetary grants

Under AS 12, if an asset is given at the discounted price by the government, the grant and asset is recognised at the discounted price. Also, if asset is given free of cost, then, it is recorded at the nominal value.

Under Ind AS 20, non-monetary grants are measured at fair value only. Option to record at the nominal value is not there under Ind AS.

Note: There is carve out in Ind AS 20 that under IAS 20, an entity has option to measure such non-monetary grants either at the fair value or at nominal value.

Under AS 12, there are two approaches: Capital approach or the income approach.

Under capital approach, grants in the nature of promoter’s contribution are credited directly to shareholders fund. Under income approach, grants are recognised in statement of profit and loss on a systematic basis to match them with the related costs.

 Under Ind AS 20, government grants are not directed credited to the shareholder’s fund.  Government grants are recognised as income to match them with corresponding expenses in statement of profit and loss. Further, grants related to assets should be presented in the balance sheet only by setting up the grant as deferred income.

Note: There is carve out in Ind AS 20 that under IAS 20, an entity can present grants related to assets either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

Major differences between AS 15 and Ind AS 19

Actuarial gains and losses

Under AS 15, all actuarial gains and losses should be recognised immediately in profit or loss.

Under Ind AS 19, actuarial gains and losses are recognised immediately in other comprehensive income. These are subsequently not reclassified to income statement.

Discount Rate

Under AS 15, Market yield on government bonds as at the balance sheet date is used as discount rates.

Under Ind AS 19 also, market yield on government bonds as at the balance sheet date is used as discount rates.

Ind AS 19 contains a curve out from the IFRS in the sense that under IFRS, discount rate is determined by reference to market yield on high quality corporate bonds.

Past service costs and Curtailments

Under AS 15, past service cost is recognised as an expense on a straight line basis over the period until the benefits becomes vested and if, benefits vested already, recognise immediate as an expense.

Entity recognises a curtailment when it occurs.

Under Ind AS 19, past service cost including curtailments is recognised as expenses at the earliest of the following dates:

•       When the plan amendment or curtailment occurs.
•       When the entity recognises related restructuring costs or termination benefits.

Actuarial Valuation

Under AS 15, detailed actuarial valuation is carried out at least once every three years and fair value of  the plan assets are determined at each balance sheet date.

Under Ind AS 19, such calculation is performed at sufficient regularity so that the amounts recognised in the financial statements do not differ materially from the amount that would have been determined at the end of the reporting period. The standard does not specify the sufficient regularity.

Major differences between AS 19 and Ind AS 17

Major differences between AS 19 and Ind AS 17 related to leases are:

Leases for Land and building

There is no specific guidance on separation of leases of land and buildings. Presently, leasehold land is recorded and classified as fixed assets.

Land and buildings elements are classified and accounted for separately (Operating or Finance) as per definition and classification criteria unless the land element is not material.

Lease Incentives

There is no specific guidance on lease incentives (such as rent-free period) under existing AS.

Under Ind AS, lease incentives (such as rent-free period) are recognised by both the lessor and the lessee as a reduction in rental income and expense, respectively, over the lease term.

Curve out from IFRS in Ind AS

Ind AS 17 contains a curve out for escalation of operating lease rentals that are in line with the expected general inflation. Hence, there should not be straight lined by the lessor as well as by the lessee. 

Whether an arrangement contains a lease

Under AS 17, there is no specific guidance on whether an arrangement contains a lease. Payments under arrangements which are not in the form of leases are generally recognised in accordance with the nature of expense incurred.

Arrangements that do not take the legal form of a lease but fulfillment of which is dependent on the use of specific assets and which convey the right to use the assets may have to be accounted for as leases.

Initial direct costs of lessor under a finance lease

Under AS 17, Initial direct costs are recognised immediately or allocated against the finance income over lease term.

Under Ind AS 19, such costs are included in the measurement of the finance lease receivable and reduce the amount of the income recognised over the lease term.

Initial direct costs of lessor under an operating lease

Under AS 17, Initial direct costs incurred by lessor are recognised immediately or allocated against the over lease term.

Under Ind AS 19, such costs are included in the carrying amount of leased asset and recognised as expense over the lease term on the same basis in which lease income is recognised.

Major differences between AS 22 and Ind AS 12

Timing differences vs Temporary differences

Under existing AS, deferred taxes are computed for timing differences in respect of recognition of items of profit or loss for the purposes of financial reporting and for income taxes. Whereas under Ind AS, deferred taxes are computed for temporary differences between carrying amount of an asset or liability and its tax base.

Recognition of deferred tax assets and liabilities:

Under existing AS, deferred taxes are generally recognized for all timing differences. As per Ind AS 12, deferred taxes are recognised for all temporary differences between accounting and tax base of assets and liabilities expect to the extent which arise from:

     I.                   Initial recognition of goodwill

   II.                   Asset or liability in a transaction which is not a business combination and at the time of transactions affects neither the accounting nor the tax profit.

Recognition of Deferred tax for unused tax losses etc.:

Under AS -22, deferred tax asset for unused tax losses and unabsorbed depreciation is created in books of accounts only to the extent of virtual certainty supported by convincing evidence about the sufficiency of future taxable income.

All other unused credits/timings differences are recognised only to the extent of reasonable certainty about the sufficiency of future taxable income.

   Under new standard, deferred tax assets is created in the books of accounts to the extent it is probable that    taxable profit will be available against which deductible temporary differences and unused tax losses and      
   unused tax credits carried forward can be utilised.

Investments in subsidiaries, branches and Interests in Joint Arrangements

Under AS 22, no separate adjustment is done for deferred tax in consolidation. Deferred tax is an aggregation from separate financial statements of each entity.

Under Ind AS 12, deferred tax should not be recognised for temporary differences in respect of investment in subsidiaries, branches, associates and interest in joint ventures if certain conditions are satisfied.

Deferred tax in respect of business combination

Under AS 22, there is no specific guidance for deferred tax in business combination.

Under Ind AS 12, deferred tax is provided on difference between fair value of assets and tax base of assets.

Deferred tax on unrealised intragroup profits

Under AS 22, deferred tax on unrealised intragroup profits is not recognised.

Under Ind AS 12, deferred taxes on elimination of intragroup profits and losses are calculated with reference to the tax rate of the buyer at the end of the reporting period.

Major differences between AS 5 and Ind AS 8

Change in accounting policies:

AS 5 requires prospective application of change in accounting policy together with a disclosure of the impact of the same if any. However, change in depreciation method, though considered as change in accounting policy is given retrospective effect.

 Ind AS 8 requires retrospective application of changes in accounting policy by adjusting the opening equity and comparatives unless impracticable.

Errors :

Prior period errors are included in determination of profit or loss for the period in which the error is discovered and are separately disclosed in the statement of profit and loss in a manner that the impact on current profit or loss can be perceived.

Under Ind AS 8, prior period errors are corrected by adjusting the opening equity and comparatives unless impracticable.

New accounting pronouncements :

Under AS 5, there is no requirement to disclose about the new accounting pronouncements that have been issued but not yet effective at the end of the reporting period.

Under Ind AS, non –application of new accounting pronouncements that have been issued but not yet effective at the end of the reporting period is disclosed. Information related to possible impact of new pronouncements on the financial statements is also disclosed.

Key Carve Outs in Ind AS

•          Rectification of breach in loan agreement

•          Current vs non -current classification

•          Carrying cost of Property, Plant and Equipment (PPE) and Intangible assets

•          on the date of Transition of Ind AS 101 can be carried forward

•          Long-term Foreign Currency Monetary Items

•          May continue the existing policy adopted (Para 46A of AS 11) for accounting for exchange differences.

•          as part of the cost of property, plant and equipment

•          or to defer its recognition over the period of loan

•          Gain on bargain purchase

•          Transfer gain on bargain purchase to capital reserve instead of profit and loss.

•          Different Terminology: Balance Sheet vs statement of financial position

•          Different Terminology: Statement of profit and Loss vs Statement of profit or loss and other comprehensive income

•          Analysis/Classification of Expenses: Nature-wise classification vs either of nature wise and function wise classification

•          Non-Monetary Grant: Fair Value vs either fair value or at nominal value

•          Investment Property: Cost model vs either of cost model and fair value model

Comparison of Accounting Standards

AS	Ind AS	IFRS
AS 1-29 Guidance Notes EAC Opinion	IND AS 101-114 Ind AS 1-41 (Interpretation included as appendix to relevant standard) Bulletin of Ind AS Transition Facilitation Group (ITFG)	IFRS 1-16 IAS 1-41 IFRIC and SIC

List of Indian Accounting Standards ( Ind ASs)

Ind AS 101	First-time Adoption of Indian Accounting Standards
Ind AS 102	Share-based Payment
Ind AS 103	Business Combinations
Ind AS 104	Insurance Contracts
Ind AS 105	Non-current Assets Held for Sale and Discontinued Operations
Ind AS 106	Exploration for and Evaluation of Mineral Resources
Ind AS 107	Financial Instruments: Disclosures
Ind AS 108	Operating Segments
Ind AS 109	Financial Instruments
Ind AS 110	Consolidated Financial Statements
Ind AS 111	Joint Arrangements
Ind AS 112	Disclosure of Interests in Other Entities
Ind AS 113	Fair Value Measurement
Ind AS 114	Regulatory Deferral Accounts

Ind AS 1 Presentation of Financial Statements Ind AS 2 Inventories Ind AS 7 Statement of Cash Flows Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors Ind AS 10 Events after the Reporting Period Ind AS 11 Construction Contracts Ind AS 12 Income Taxes Ind AS 16 Property, Plant and Equipment Ind AS 17 Leases Ind AS 18 Revenue Ind AS 19 Employee Benefits Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance Ind AS 21 The Effects of Changes in Foreign Exchange Rates Ind AS 23 Borrowing Costs Ind AS 24 Related Party Disclosures Ind AS 27 Separate Financial Statements Ind AS 28 Investments in Associates and Joint Ventures Ind AS 29 Financial Reporting in Hyperinflationary Economies Ind AS 32 Financial Instruments: Presentation Ind AS 33 Earnings per Share Ind AS 34 Interim Financial Reporting Ind AS 36 Impairment of Assets Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets Ind AS 38 Intangible Assets Ind AS 40 Investment Property Ind AS 41 Agriculture

MCQ on Ind AS_Introduction

1. Adoption means application of IFRS issued by IASB as it is in entirety. Convergence means using IFRS issued by IASB with some carve in and carve outs.

                        a) True

                        b) False

                        2. Companies covered in Phase I should have net worth 

                        a) Equal to 500 crores

                        b) Equal and more than 500 crores

                        c) Less than 500 crores

                        d) more than 250 crores but less than 500 crores

                        3. Ind AS will apply to 

                        a) both consolidated as well as standalone financials of the company.

                        b) Only consolidated financials

                        c) Only standalone financials 

                        d) Optional 

   4. Ind AS once adopted either voluntarily or mandatorily can not be revoked in prospective years  even in case of net worth goes down from specified limit or any other criteria given in roadmap.

                        a) True

                        b) False

                        5. As part of Ind AS transition process, companies covered in first phase will have to prepare:

                        a) Opening Ind AS Balance sheet as at 1 April 2015.

                        b) Equity reconciliation b/w Ind AS and Indian GAAP on 1 April 2015 & 31 Mar 2016.

                        c) Income Reconciliation b/w Ind AS and Indian GAAP for the year ending 31 Mar 2016.

                        d) All of the above

                        6. As part of Ind AS transition process, companies covered in first phase will have to prepare:

                        a) Ind AS financial statements as at and for the year ending 31 Mar 2016 for comparative.

                        b) Ind AS Financial statements as at and for year ending 31 Mar 2017.

                        c) Equity reconciliation b/w Ind AS and Indian GAAP on 1 April 2015 & 31 Mar 2016.

                        d) All of the above

                        7. The net worth shall be calculated in accordance with the………………………………. of the                      company as on……………………… or the first audited financial statements for accounting period                which ends after that date;

  

                        a) stand-alone financial statements,31st March, 2014

                        b) consolidated financial statements,31st March, 2014

                        c) consolidated financial statements,1st April, 2015

                        d) consolidated financial statements,1st April, 2014

                        8. Total Number of Ind AS which are notified as of date?

                        a) 39

                        b) 40

                        c) 69

                        d) 66

                        9. For companies covered in phase I, the transition date would be: 

                        a) 1 April 2015

                        b) 31 March 2014

                        c) 31 March 2015

                        d) 1 Apr 2016

                        10. For companies covered in phase I , the company would be required to prepare opening balance sheet at which date:

                        a) 1 April 2015

                        b) 31 March 2014

                        c) 31 March 2015

                        d) 1 April 2016