Introduction

On February 25, 2011, the Ministry of Corporate Affairs (‘MCA’) has notified 35 Indian Accounting Standards (‘Ind AS’) converged with International Financial Reporting Standards (‘IFRS’) through a press release but the date of implementation of Ind AS is to be notified by the Ministry at a later date after various issues (including tax related issues) are resolved with the concerned departments within the government. The detailed texts of Ind AS are available at http://www.mca.gov.in/Ministry/accounting_standards.html.

Complexities in GAAP differences: IFRS, Ind AS and AS

The following table provides the list of the Ind AS, corresponding IFRS and existing accounting standards (i.e. Indian GAAP). The last two columns of the table provide reference to the comparison of Ind AS & IFRS and comparison of Ind AS & existing AS.

1. The term ‘International Financial Reporting Standards’ (‘IFRS’) comprises of:

   1. International Financial Reporting Standards (IFRS)

   2. International Accounting Standards (IAS)

   3. Interpretations from the International Financial Reporting Interpretations Committee (IFRIC)

   4. Interpretations from Standing Interpretations Committee (SIC)

2. Following IFRS pronouncements have not been issued under Ind AS:

Comparison of Ind AS and IFRS

General Differences

• Different terminology is used in Ind AS e.g. the term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of Profit and Loss’ is used instead of ‘Statement of comprehensive income’. 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.

• The transitional provisions given in IFRS have not been given in Ind AS, since all transitional provisions related to Ind ASs, wherever considered appropriate, have been included in Ind AS 101 First-time Adoption of Indian Accounting Standards.

• Under Ind AS, IFRIC and SIC have not been issued separately from Ind AS but included as an appendix to Ind AS.

Note 1 - Ind AS 101 Comparison with IFRS 1 First-time Adoption of International Accounting Standards

• Ind-AS 101 specifies that an entity’s first Ind-AS financial statements are the first annual financial statements in which the entity adopts Ind-ASs in accordance with Ind-ASs notified under the Companies Act, 1956 whereas IFRS 1 provides various examples of first IFRS financial statements.

• IFRS 1 defines transitional date as beginning of the earliest period for which an entity presents full comparative information under IFRS. It is this date which is the starting point for IFRS and it is on this date the cumulative impact of transition is recorded based on assessment of conditions at that date by applying the standards retrospectively except to the extent specifically provided in this standard as optional exemptions and mandatory exceptions.

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

Arising from this fundamental change, there are other consequential changes to Ind-AS 101. For example, disclosures required under paragraph 21 and reconciliations under paragraphs 24 to 26, Ind-AS 101 have been modified to accommodate this option available under Ind-AS 101. In addition, these have been modified to include the latest corresponding previous periods’ financial statements as per the previous GAAP when presenting its first Ind-AS financial statements. The relevant Implementation Guidance and illustrative examples have been appropriately modified to reflect the option provided to transitioning entities.

• 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.

The change makes it mandatory, except where the previous financial statements were prepared as per IFRS, for Indian entities to consider the financial statements prepared in accordance with existing notified Indian accounting standards as was applicable to them as previous GAAP when it transitions to Ind-AS.

• Paragraph 22 of IFRS 1 requires specific disclosures if the entity provides non-IFRS comparative information and historical summaries. Such disclosures are not required under Ind-AS 101.

• IFRS requires reconciliations for opening equity, total comprehensive income, cash flow statement and closing equity for the comparative period to explain the transition to IFRS from previous GAAP.

Ind-AS 101, provides an option to provide comparative period financial statements on memorandum basis. Accordingly, entities that do not provide comparatives need not provide reconciliation for total comprehensive income, cash flow statement and closing equity in the first year of transition but are expected to disclose significant differences pertaining to total comprehensive income. Entities that provide comparatives would have to provide reconciliations which are similar to IFRS.

• IFRS 1 provides for various optional exemptions that an entity can seek while an entity transitions to IFRS from its previous GAAP. Similar provisions have been retained under Ind-AS 101. However, there are few changes that have been made, which can be broadly categorized as follows:

1. Elimination of effective dates prior to transition date.

IFRS 1 provides for various dates from which a standard could have been implemented. For example:

• Paragraph B2 of IFRS 1 provides that, an entity would have had to adopt the de-recgonition requirements for transactions entered after 1 January, 2004. However, for Ind-AS 101 purposes, all these dates have been changed to coincide with the transition date elected by the entity adopting these converged standards i.e. Ind-AS.

• Paragraph D2 of IFRS 1 provides that an entity is encouraged, but not required, to apply IFRS 2 Share-based Payment to equity instruments that were granted on or before 7 November 2002 or to instruments that were granted after 7 November 2002 and vested before the later of (a) the date of transition to IFRSs and (b) 1 January 2005. However, for Ind-AS 101 purposes, all these dates have been changed to coincide with the transition date elected by the entity adopting these converged standards i.e. Ind-AS.

2. Deletion of certain exemptions not relevant for India

Certain instances of such items are as follows:

• Paragraph D10 of IFRS 1 provides an entity that adopted the corridor approach for recording actuarial gain 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.

• Paragraph D23 of IFRS 1 provides for transitional adjustment requiring companies to apply the provisions of IAS 23 to be applied prospectively after the transition date. However, this was considered as not relevant in Indian situation as Ind AS 23 AS 16 always required an entity to capitalize borrowing costs as compared to IAS 23 where it provided an option to expense out such borrowing cost. Consequently, paragraphs IG 23 and IG 24 have also been deleted.

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

• Paragraph D7A has been added to provide for transitional relief from the retrospective application of Ind AS 16: Property, Plant and Equipment. Paragraph D7A 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. Paragraph 27B has been included in Ind AS 101 which requires the disclosure that if an entity adopts for first time exemption the option provided in accordance with paragraph D7A, the fact and the accounting policy shall be disclosed by the entity until such time that significant block of such assets is fully depreciated or derecognised from the entity’s Balance Sheet.

• Paragraph D9 provides for transitional relief from retrospective application of paragraphs 6-9 of the Appendix C of Ind AS 17 (i.e. determining whether an arrangement contains a lease).

• Paragraph D11A has been added to provide the transitional relief from the retrospective application of Ind AS 19 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.

• Paragraph D13 A has been added to provide exemption as a consequence of optional treatment for certain exchange differences given in Ind AS 21.

• Paragraph D19A has been added to provide that the 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 (as defined in Ind AS 8) for an entity to apply retrospectively the effective interest method or the impairment requirements in paragraphs 58–65 and AG84–AG93 of Ind AS 39.If it is impracticable then the fair value of the financial asset at the date of transition to Ind-ASs shall be the new amortised cost of that financial asset at the date of transition to Ind-ASs.

• D19B has been added to provide that financial instruments measured at fair value shall be measured at fair value as on the date of transition to Ind-AS.

• Paragraph D-26 has been added to provide for transitional relief while applying Ind AS 105 - Non-current Assets Held for Sale and Discontinued Operations. Paragraph D26 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.

NOTE 2: Ind AS 103 - Comparison with IFRS 3 Business Combinations

• IFRS 3 excludes from its scope business combinations of entities under common control. Ind AS 103 (Appendix C) gives the guidance in this regard. Consequently, paragraph 2 has been modified in Ind AS 103. Further, paragraphs B1-B4 of IFRS 103 have been deleted in Ind AS 103.

• 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. This has some consequential changes such as change in wording of paragraphs 34 and 36, paragraphs IE47 and IE48 of illustrative examples, additional disclosure in paragraph B64(n) and addition of new paragraph 36A.

NOTE 3: Ind AS 105 - Comparison with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

• Requirements regarding presentation of discontinued operations in the separate income statement, where separate income statement is presented under paragraph 33A of IFRS 5 have been deleted. This change is consequential to the removal of option regarding two statement approach in Ind AS Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.

• Paragraph 5(d) of IFRS 5 deals with non-current assets that are accounted for in accordance with the fair value model in IAS 40 Investment Property. Since Ind AS 40 prohibits the use of fair value model, this paragraph is deleted in Ind AS 105.

NOTE 4: Ind AS 107 - Comparison with IFRS 7 Financial Instruments: Disclosures

• Requirements regarding disclosure of description of gains and losses presented in the separate income statement, where separate income statement is presented, have been deleted. This change is consequential to the removal of option regarding two statement approaches in Ind AS 1 as compared to IAS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.

NOTE 5: Ind AS 1 - Comparison with IAS 1 Presentation of Financial Statements

• With regard to 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.

• 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.

• IAS 1 gives the option to individual entities to follow different terminology for the titles of financial statements. Ind AS 1 is changed to remove alternatives by giving one terminology to be used by all entities.

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

• 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.

• IAS 1 contains Implementation Guidance. Ind AS 1 does not include the same because various enactments have prescribed formats, e.g., Schedule VI to the Companies Act, 1956.

NOTE 6: Ind AS 2 - Comparison with IAS 2 Inventories

• Paragraph 38 of IAS 2 dealing with recognition of inventories as an expense based on function-wise classification, has been deleted keeping in view the fact that option provided in IAS 1 to present an analysis of expenses recognised in profit or loss using a classification based on their function within the entity has been removed and Ind AS 1 requires only nature-wise classification of expenses.

NOTE 7: Ind AS 7 - Comparison with IAS 7, Statement of Cash Flows

• In case of 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 items to be classified as item of financing activity and investing activity; respectively 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.

NOTE 8: Ind AS 8 - Comparison with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

• In paragraph 12 of Ind AS 8, it is mentioned that in absence of an Ind AS, management may first consider the most recent pronouncements of International Accounting Standards Board.

NOTE 9: Ind AS 11 - Comparison with IAS 11 Construction Contracts, IFRIC 12 Service Concession Arrangements and SIC 29 Service Concession Arrangements: Disclosures

• 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 of Ind AS 18, Revenue.

NOTE 10: Ind AS 12 - Comparison with IAS 12 Income Taxes

• Requirements regarding presentation of tax expense (income) in the separate income statement, where separate income statement is presented, have been deleted. This change is consequential to the removal of option regarding the two statement approach in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.

NOTE 11: Ind AS 16 - Comparison with IAS 16 Property, Plant and Equipment and IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

• Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance does not permit the option of reducing the carrying amount of an item of property, plant and equipment by the amount of government grant received in respect of such an item, which is permitted in IAS 20.

NOTE 12: Ind AS 17 - Comparison with IAS 17 Leases

• Paragraphs 18 of IAS 17 dealing with measurement of the land and buildings elements when the lessee’s interest in both land and buildings is classified as an investment property in accordance with Ind AS 40 Investment Property if the fair value model is adopted and paragraph 19 of IAS 17 dealing with property interest held under an operating Lease as an investment property, if the definition of investment property is otherwise met and fair value model is applied, have been deleted, since Ind AS 40, Investment Property, prohibits the use of fair value model.

NOTE 13: Ind AS 18 – Comparison with IAS 18 Revenue

• On the basis of principles of the IAS 18, IFRIC 15 on Agreement for Construction of Real Estate prescribes that construction of real estate should be treated as sale of goods and revenue should be recognised when the entity has transferred significant risks and rewards of ownership and retained neither continuing managerial involvement nor effective control. IFRIC 15 has not been included in Ind AS 18 to scope out such agreements and to include the same in Ind AS 11, Construction Contracts.

NOTE 14: Ind AS 19 - Comparison with IAS 19 Employee Benefits

• IAS 19 permits various options for treatment of actuarial gains and losses for post-employment defined benefit plans whereas 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. Changes consequent to the aforesaid have been made in the other paragraphs, including addition of a new paragraph 129A.

• 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.

• 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.

NOTE 15: Ind AS 20 - Comparison with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

• 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.

• 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.

• Requirements regarding presentation of grants related to income in the separate income statement, where separate income statement is presented under paragraph 29A of IAS 20 have been deleted. This change is consequential to the removal of option regarding two statement approaches in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.

NOTE 16: Ind AS 21 - Comparison with IAS 21 The Effects of Changes in Foreign Exchange Rates:

• 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. IAS 21 does not permit such a treatment.

• When there is a change in functional currency of either the reporting currency or a significant foreign operation, IAS 21 requires disclosure of that fact and the reason for the change in functional currency. Ind AS 21 requires an additional disclosure of the date of change in functional currency.

NOTE 17: Ind AS 23 - Comparison with IAS 23 Borrowing Costs

• IAS 23 provides no guidance as to how the adjustment prescribed in paragraph 6(e) is to be determined. Paragraph 6A is added in Ind AS 23 to provide the guidance.

• 6A With regard to exchange difference required to be treated as borrowing costs in accordance with paragraph 6(e), the manner of arriving at the adjustments stated therein shall be as follows:

• The adjustment should be of an amount which is equivalent to the extent to which the exchange loss does not exceed the difference between the costs of borrowing in rupees when compared to the cost of borrowing in a foreign currency.

• Where there is an unrealized exchange loss which is treated as an adjustment to interest and subsequently there is a realized or unrealized gain in respect of the settlement or translation of the same borrowing, the gain to the extent of the loss previously recognized as an adjustment should also be recognized as an adjustment to interest.

NOTE 18: Ind AS 24 - Comparison with IAS 24 Related Party Disclosures

• In the Ind AS 24, disclosures which conflict with confidentiality requirements of statute/regulations are not required to be made since Accounting Standards cannot override legal/regulatory requirements. (Paragraphs 4A and 4B of Ind AS 24).

• In the Ind AS 24, relatives as specified under the meaning of relative under the Companies Act, 1956 are included in the definition of the ‘close members of the family of a person.

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

NOTE 19: Ind AS 27 - Comparison with IAS 27 Consolidated and Separate Financial Statements

• As per Para 10 of IAS 27, A parent need not present consolidated financial statements if and only if:

• the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements;

• the parent’s debt or equity instruments are not traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets);

• the parent did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and

• the ultimate or any intermediate parent of the parent produces consolidated financial statements available for public use that comply with International Financial Reporting Standards.

Accordingly requirement for separate financial statements and related disclosures have been provided in Para 8 and Para 42 of IAS 27. However, these paragraphs have been deleted in the Ind AS 27 because the applicability or exemptions to the Indian Accounting Standards are governed by the Companies Act and the rules made there under.

NOTE 20: Ind AS 28 - Comparison with IAS 28 Investments in Associates

• 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. However, Ind AS 28 provides that this difference should not be more than three months, unless impracticable. Similarly, Ind AS 28 requires use of uniform accounting policies, unless impracticable, which IAS 28 does not provide. These changes have been made because 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.

• Paragraph 1(b) of IAS 28 has been deleted in Ind AS 28 as the Companies Act, 1956, is not applicable to mutual funds, unit trusts and similar entities including investment linked insurance funds and, thus, this standard would not be applicable to such entities.

• Paragraphs 5, 13(b) and 13(c) have been deleted as the applicability or exemptions to the Indian Accounting Standards are governed by the Companies Act and the Rules made there under.

• Paragraph 23 (b) has been modified on the lines of Ind AS 103 to transfer excess of the investor’s share of the net fair value of the associate’s identifiable assets and liabilities over the cost of investment in capital reserve whereas in IAS 28, it is recognised in profit or loss.

NOTE 21: Ind AS 29 - Comparison with IAS 29 Financial Reporting in Hyperinflationary Economies

• Ind AS 29 requires an additional disclosure regarding the duration of the hyperinflationary situation existing in the economy as compared to IAS 29.

NOTE 22: Ind AS 31 - Comparison with IAS 31 Interests in Joint Ventures

• Paragraph 1(b) of IAS 31 has been deleted in Ind AS 31 as the Companies Act, 1956, is not applicable to mutual funds, unit trusts and similar entities including investment linked insurance funds and, thus, this standard would not be applicable to such entities. However, paragraph number 1(b) has been retained in Ind AS 31 to maintain consistency with IAS 31

• Sub-Paragraphs 2(b) and (c) and paragraph 6 have been deleted as the applicability or exemptions to the Indian Accounting Standards are governed by the Companies Act and the Rules made there under. However, paragraph number 6 has been retained in Ind AS 31 to maintain consistency with IAS 31.

NOTE 23: Ind AS 32 - Comparison with IAS 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 if the exercise price is fixed in any currency. This exception is not provided in IAS 32.

• Requirements regarding presentation of dividends classified as an expense in the separate income statement, where separate income statement is presented, have been deleted. This change is consequential to the removal of option regarding two statement approaches in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.

NOTE 24: Ind AS 33 - Comparison with IAS 33 Earnings per Share

• 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, whereas, the Ind AS 33 requires EPS related information to be disclosed both in consolidated financial statements and separate financial statements.

• Paragraph 2 of IAS 33 requires that the entire standard applies to :

  1. the separate or individual financial statements of an entity:

1. whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) or

2. that files, or is in the process of filing, its financial statements with a Securities Regulator or other regulatory organisation for the purpose of issuing ordinary shares in a public market; and

2. the consolidated financial statements of a group with a parent:

1. whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) or

2. that files, or is in the process of filing, its financial statements with a Securities Regulator or other regulatory organisation for the purpose of issuing ordinary shares in a public market.

It also requires that an entity that discloses earnings per share shall calculate and disclose earnings per share in accordance with this Standard. The above have been deleted in the Ind AS as applicability or exemptions to the Indian Accounting Standards are governed by the Companies Act and the Rules made there under.

• Paragraph 4 has been modified in Ind AS 33 to clarify that an entity shall not present in separate financial statements, earnings per share based on the information given in consolidated financial statements, besides requiring as in IAS 33, that earnings per share based on the information given in separate financial statements shall not be presented in the consolidated financial statements.

• In Ind AS 33, a paragraph has been added after paragraph 12 on the following lines -

“Where any item of income or expense which is otherwise required to be recognized in profit or loss in accordance with accounting standards is debited or credited to securities premium account/other reserves, the amount in respect thereof shall be deducted from profit or loss from continuing operations for the purpose of calculating basic earnings per share.”

• In Ind 33 paragraph 15 has been amended by adding the phrase, ‘irrespective of whether such discount or premium is debited or credited to securities premium account’ to further clarify that such discount or premium shall also be amortised to retained earnings.

• Requirements regarding disclosure of amounts per share using a reported component, basic and diluted earnings per share and basic and diluted earnings per share for discontinued operations in the separate income statement, where separate income statement is presented under IAS 33 have been deleted. This change is consequential to the removal of option regarding the two statement approach in Ind AS 1. Ind AS 1 only requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.

NOTE 25: Ind AS 34 - Comparison with IAS 34 Interim Financial Reporting
 

• With regard to preparation of statement of profit and loss, International Accounting Standard (IAS) 34, Interim Financial Reporting, provides option either to follow single statement approach or to follow two statement approaches. But, Ind AS 34 allows only single statement approach on the lines of Ind AS 1, Presentation of Financial Statements which also allows only single statement approach.

• IAS 34 requires preparation of a Statement of Changes in Equity as a separate statement. Ind AS 34 requires the statement of changes in equity to be shown as a part of the balance sheet on the lines of Ind AS 1, Presentation of Financial Statements.

• As per Ind AS 34 the requirement to present interim financial report should be governed by the relevant law or regulation and not by way of an encouragement through an Accounting Standard.

NOTE 26: Ind AS 38 - Comparison with IAS 38 Intangible Assets and SIC Interpretation 32 Intangible Assets—Web Site Costs

• With regard to the acquisition of an intangible asset by way of a government grant, IAS 38, Intangible Assets, provides the option to an entity to recognise both asset and grant initially at fair value or at a nominal amount plus any expenditure that is directly attributable to preparing the asset for its intended use. Ind AS 38 allows only fair value for recognising the intangible asset and grant in accordance with Ind AS 20.

NOTE 27: Ind AS 39 - Comparison with IAS 39 Financial Instruments: Measurement and Recognition
 

• A proviso has been added to paragraph 48 of Ind AS 39 that 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.

• IAS 39 does not change the requirements relating to employee benefit plans that comply with IAS 26, Accounting and Reporting by Retirement Benefit Plans. Ind AS 39 does not mention so as IAS 26 is not relevant for companies.

NOTE 28: Ind AS 40 - Comparison with IAS 40 Investment Property

• IAS 40 permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind AS 40 permits only the cost model.

• IAS 40 requires disclosure of fair values of investment property when cost model is used. Since this requirement is retained in Ind AS 40, paragraphs 53, 53A, 53B, 54 and 55 and certain other paragraphs of IAS 40 have been modified. The modifications include substitution of fair value measurement with fair value determination/disclosure and deletion of reference to use of cost model when fair value determination is unreliable.

• IAS 40 permits treatment of property interest held in an operating lease as investment property, if the definition of investment property is otherwise met and fair value model is applied. In such cases, the operating lease would be accounted as if it were a finance lease. Since Ind AS 40 prohibits the use of fair value model, this treatment is prohibited in Ind AS 40. As a result, paragraph 6 of IAS 40 has been deleted in Ind AS 40. In addition, the expression ‘investment property under a finance or operating lease’ appearing in paragraph 74 of IAS 40 has been modified as ‘investment property under a finance lease’ in Ind AS 40.

Comparison of Ind AS and AS (i.e. Indian GAAP)

Note 1.1: Major Differences between the Ind AS 3 Business Combinations and existing AS 14 Accounting for Amalgamations

• Ind AS 3 defines business combination which has a wider scope whereas the existing AS 14 deals only with amalgamation.

• Under the existing AS 14 there are two methods of accounting for amalgamation- The pooling of interest method and the purchase method. The Ind AS 14 prescribes only the acquisition method for each business combination.

• Under the existing AS 14, the acquired assets and liabilities are recognised at their existing book values or at fair values under the purchase method. The Ind AS 14 requires the acquired identifiable assets liabilities and noncontrolling interest to be recognised at fair value under acquisition method.

• Ind AS 3 requires that for each business combination, the acquirer shall measure any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. On other hand, the existing AS 14 states that the minority interest is the amount of equity attributable to minorities at the date on which investment in a subsidiary is made and it is shown outside shareholders’ equity.

• Under Ind AS 3, the goodwill is not amortised but tested for impairment on annual basis in accordance with Ind AS 36.The existing AS 14 requires that the goodwill arising on amalgamation in the nature of purchase is amortised over a period not exceeding five years.

• Ind AS 3 deals with reverse acquisitions whereas the existing AS 14 does not deal with the same.

• In Ind AS 3, the consideration the acquirer transfers in exchange for the acquiree includes any asset or liability resulting from a contingent consideration arrangement. The existing AS 14 does not provide specific guidance on this aspect.

• Ind AS 3 requires the recognition of gain on bargain purchase, being the excess of the value of net assets acquired over the consideration for acquisition in profit or loss on acquisition date after reassessing the identification and measurement of the assets acquired. The existing AS 14 does not require the reassessment. The excess amount is treated as capital reserve.

Note 1.2: Major differences between Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations and the existing AS 24 (issued 2002)

• Ind AS 105 specifies the accounting for noncurrent assets held for sale, and the presentation and disclosure of discontinued operations. The existing AS 24 establishes principles for reporting information about discontinuing operations. It does not deal with the non-current assets held for disposal as these are dealt in existing AS 10, Accounting for Fixed Assets.

• Under Ind AS 105, a discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale. In the existing AS 24, there is no concept of discontinued operations but it deals with discontinuing operations.

• As per Ind AS 105, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification with certain exceptions. The existing AS 24 does not specify any time period in this regard as it relates to discontinuing operations.

• The existing AS 24 specifies about the initial disclosure event in respect to a discontinuing operation. Ind AS 105 does not mention so as it relates to discontinued operation.

• Under Ind AS 105, non-current assets (disposal groups) held for sale are measured at the lower of carrying amount and fair value less costs to sell, and are presented separately in the balance sheet. The existing AS 24 requires to apply the principles set out in other relevant Accounting Standards, e.g., the existing AS 10 requires that the fixed assets retired from active use and held for disposal should be stated at the lower of their net book value and net realisable value and shown separately in the financial statements.

Note 1.3: Major Differences between the Ind AS 107 Financial Instruments: Disclosures and the existing AS 32 (Issued 2008)

• The existing AS 32 does not apply to contracts for contingent consideration in a business combination in case of acquirers. The Ind AS 107 does not exempt such contracts.

• The Ind AS 107 excludes from its scope puttable instruments dealt with by Ind AS 32. AS 32 does not exclude the same from its scope.

• The Ind AS 107 specifies disclosures in case of reclassification of a financial asset out of fair value through profit or loss category or out of available-for-sale category in accordance with Ind AS 39. AS 32 does not provide for same.

• Ind AS 107, requires enhanced disclosures about fair value measurements and liquidity risk, as compared to existing AS 32.

Note 1.4: Major differences between the Ind AS 108 Operating Segments and the existing AS 17 (Issued 2000)

• Identification of segments under the Ind AS 108 is based on ‘management approach’ i.e. operating segments are identified based on the internal reports regularly reviewed by the entity’s chief operating decision maker. Existing AS 17 requires identification of two sets of segments—one based on related products and services, and the other on geographical areas based on the risks and returns approach. One set is regarded as primary segments and the other as secondary segments.

• The Ind AS 108 requires that the amounts reported for each operating segment shall be measured on the same basis as used by the chief operating decision maker for the purposes of allocating resources to the segment and assessing its performance. Existing AS 17 requires segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements. Accordingly, existing AS 17 also defines segment revenue, segment expense, segment result, segment assets and segment liabilities.

• The Ind AS 108 specifies aggregation criteria for aggregation of two or more segments. Existing AS 17 does not specify anything in this regard.

• An explanation has been given in the existing AS 17 that in case there is neither more than one business segment nor more than one geographical segment, segment information as per this standard is not required to be disclosed. However, this fact shall be disclosed by way of footnote. The Ind AS 108 requires certain disclosures even in case of entities having single reportable segment.

• An explanation has been given in the existing AS 17 that interest expense relating to overdrafts and other operating liabilities identified to a particular segment should not be included as a part of the segment expense. It also provides that in case interest is included as a part of the cost of inventories and those inventories are part of segment assets of a particular segment, such interest should be considered as a segment expense. These aspects are specifically dealt with keeping in view that the definition of ‘segment expense’ given in AS 17 excludes interest. The Ind AS 108 requires the separate disclosures about interest revenue and interest expense of each reportable segment, therefore, these aspects have not been specifically dealt with.

• The Ind AS 108 requires disclosures of revenues from external customers for each product and service. With regard to geographical information, it requires the disclosure of revenues from customers in the country of domicile and in all foreign countries, non-current assets in the country of domicile and all foreign countries. It also requires disclosure of information about major customers. Disclosures in existing AS 17 are based on the classification of the segments as primary or secondary segments. Disclosure requirements for primary segments are more detailed as compared to secondary segments.

Note 1.5: Major differences between Ind AS 1 Presentation of Financial Statements and existing AS 1 (issued 1979)

Ind AS 1 generally deals with presentation of financial statements, whereas existing AS 1 (issued 1979) deals only with the disclosure of accounting policies. The scope covered by the draft is thus much wider and line by line comparison of the difference with the present standard is not possible. However, the major requirements as laid down in the draft are as follows:

• An enterprise shall make an explicit statement in the financial statements of compliance with all the Accounting Standards. Further, the draft allows deviation from a requirement of an accounting standard in case the management concludes that compliance with ASs will be misleading and if the regulatory framework requires or does not prohibit such a departure.

• Ind AS 1 requires presentation and provides criteria for classification of Current / Non- Current assets and liabilities.

• Ind AS 1 prohibits presentation of any item as extraordinary Item in the Statement of Comprehensive Income.

• Ind AS 1 requires disclosure of judgments made by management while framing of accounting policies. Also, it requires disclosure of key assumptions about the future and other sources of measurement uncertainty that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within next financial year.

• Ind AS 1 requires presentation of statement of financial position as at the beginning of the earliest period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in the financial statements, or when it reclassifies items in its financial statements.

• In respect of reclassification of items, Ind AS 1 requires disclosure of nature, amount and reason for reclassification in the notes to financial statements.

• Ind AS 1 requires the financial statements to include a Statement of Changes in Equity which, inter alia, includes reconciliation between opening and closing balance for each component of equity.

Note 1.6: Major Differences between Ind AS 2 Inventories and existing AS 2 Valuation of Inventories

Ind AS 2 differs from the existing AS 2 in the following major respects:

• On the lines of IAS 2, Ind AS 2 deals with the subsequent recognition of cost/carrying amount of inventories as an expense, whereas the existing AS 2 does not provide the same.

• Ind AS 2 provides explanation with regard to inventories of service providers whereas the existing AS 2 does not contain such an explanation.

• The existing AS 2 explains that inventories do not include machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular; such machinery spares are accounted for in accordance with AS 10, Accounting for Fixed Assets. Ind AS 2 does not contain specific explanation in respect of such spares as this aspect is covered under Ind AS 16.

• Ind AS 2 does not apply to measurement of inventories held by commodity broker-traders, who measure their inventories at fair value less costs to sell. However, this aspect is not there in the existing AS 2. Accordingly, Ind AS 2 defines fair value and provides an explanation in respect of distinction between ‘net realisable value’ and ‘fair value’. The existing AS 2 does not contain the definition of fair value and such explanation.

• Ind AS 2 provides detailed guidance in case of subsequent assessment of net realisable value. It also deals with the reversal of the write-down of inventories to net realisable value to the extent of the amount of original write-down, and the recognition and disclosure thereof in the financial statements. The existing AS 2 does not deal with such reversal.

• Ind AS 2 excludes from its scope only the measurement of inventories held by producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products though it provides guidance on measurement of such inventories. However, the existing AS 2 excludes from its scope such types of inventories.

• The existing AS 2 specifically provides that the formula used in determining the cost of an item of inventory should reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition whereas Ind AS 2 does not specifically state so and requires the use of consistent cost formulas for all inventories having a similar nature and use to the entity. Ind AS 2 also explains this aspect.

• Ind AS 2 uses the term ‘operating segment’ in paragraph 29 thereof corresponding to IFRS 8, Operating Segments, whereas the existing AS 2 uses ‘business segment’ in its corresponding paragraph 21 in view of the term used in the existing AS 17, Segment Reporting.

Note 1.7: Major Differences between Ind AS 7 Statement of Cash Flows and the existing AS 3 Cash Flow Statements

Ind AS 3 differs from the existing AS 3 in the following major respects:

• On the lines of IAS 7, Ind AS 7 specifically includes bank overdrafts which are repayable on demand as a part of cash and cash equivalents, whereas the existing AS 3 is silent on this aspect.

• Ind AS 3 provides the treatment of cash payments to manufacture or acquire assets held for rental to others and subsequently held for sale in the ordinary course of business as cash flows from operating activities. Further, treatment of cash receipts from rent and subsequent sale of such assets as cash flow from operating activity is also provided. The existing AS 3 does not contain such requirements.

• Ind AS 3 includes the following new examples of cash flows arising from financing activities:

  • cash payments to owners to acquire or redeem the entity’s shares

  • cash proceeds from mortgages

  • cash payments by a lessee for the reduction of the outstanding liability relating to a finance lease.

• As compared to the existing AS 3, Ind AS 7 specifically mentions to adjust the profit or loss for the effects of ‘undistributed profits of associates and non-controlling interests’ while determining the net cash flow from operating activities using the indirect method.

• The existing AS 3 requires cash flows associated with extraordinary activities to be separately classified as arising from operating, investing and financing activities, whereas Ind AS 3 does not contain this requirement on the lines of IAS 7.

• As compared to the existing AS 3, Ind AS 7 requires to disclose the amount of cash and cash equivalents and other assets and liabilities in the subsidiaries or other businesses over which control is obtained or lost. Ind AS 3 also requires to report the aggregate amount of the cash paid or received as consideration for obtaining or losing control of subsidiaries or other businesses in the statement of cash flows, net of cash and cash equivalents acquired or disposed of as a part of such transactions, events or changes in circumstances. The existing AS 3 does not contain such requirements.

• Ind AS 7 requires to classify cash flows arising from changes in ownership interests in a subsidiary that do not result in a loss of control as cash flows from financing activities. The existing AS 3 does not contain such a requirement.

Note 1.8: Major differences between Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors & existing AS 5 (Revised 1997) Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

• Objective of existing AS 5 is to prescribe the classification and disclosure of certain items in the statement of profit and loss for uniform preparation and presentation of financial statements. Objective of Ind AS 8 is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. Ind AS 8 intends to enhance the relevance and reliability of an entity’s financial statements and the comparability of those financial statements over time and with the financial statements of other entities.

• Keeping in view that Ind AS 1, Presentation of Financial Statements, prohibits the presentation of any items of income or expense as extraordinary items and deals with Profit or loss for the period, and in accordance with the objective of Ind AS 8, this does not deal with the same, which at present is dealt with by existing AS 5.

• Existing AS 5 restricts the definition of accounting policies to specific accounting principles and the methods of applying those principles while Ind AS 8 broadens the definition to include bases, conventions, rules and practices (in addition to principles) applied by an entity in the preparation and presentation of financial statements.

• In addition to the situations allowed under Ind AS 8 for change in accounting policy, existing AS 5 allows the situation where change in accounting policy is required by statute.

• Ind AS 8 requires that changes in accounting policies should be accounted for with retrospective effect subject to limited exceptions viz., where it is impracticable to determine the period specific effects or the cumulative effect of applying a new accounting policy. Whereas, existing AS 5 does not specify how change in accounting policy should accounted for except that the change should be accounted for as per the transitional provisions of the Standard where change is effected consequent upon adoption of an Accounting Standard.

• Existing AS 5 defines prior period items as incomes or expenses which arise in the current period as a result of errors or omissions in the preparation of financial statements of one or more prior periods. Ind AS 8 uses the term errors and relates it to errors or omissions arising from a failure to use or misuse of reliable information (in addition to mathematical mistakes, mistakes in application of accounting policies etc.) that was available when the financial statements of the prior periods were approved for issuance and could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements. Ind AS 8 specifically states that errors include frauds, which is not covered in existing AS 5.

• Ind AS 8 requires rectification of material prior period errors with retrospective effect subject to limited exceptions viz., where it is impracticable to determine the period specific effects or the cumulative effect of applying a new accounting policy. Whereas, existing AS 5 requires the rectification of prior period items with prospective effect.

Note 1.9: Major Differences between the Ind AS 10 and existing AS 4 events occurring after balance sheet date

• In the Ind AS 10, the term ‘events after the reporting period’ has been defined as those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue, and date of authorisation for issue has been adequately explained through examples. Whereas, the existing AS 4 does not use the term ‘authorised for issue’ and defines the events occurring after the balance sheet date as those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors in case of a company, and by the corresponding approving authority in case of any other entity.

• In the Ind AS 10, material non-adjusting events are required to be disclosed in the financial statements, whereas the existing AS 4 requires the same to be disclosed in the report of approving authority.

• As per the Ind AS 10 dividend proposed or declared after the reporting period, cannot be recognised as a liability in the financial statements because it does not meet the criteria of a present obligation as per Ind AS 37. Such dividend is required to be disclosed in the notes in the financial statements as per Ind AS 1, whereas as per the existing AS 4 the same is required to be adjusted in financial statements because of the requirements prescribed in the Schedule VI to the Companies Act, 1956.

• If after the reporting date, it is determined that the fundamental accounting assumption of going concern is no longer appropriate, the Ind AS 10 requires a fundamental change in the basis of accounting. Whereas existing AS 4 requires assets and liabilities to be adjusted for events occurring after the balance sheet date that indicate that the fundamental accounting assumption of going concern is not appropriate.

  • In this regard, the Ind AS 10 refers to Ind AS 1, which requires an entity to make the following disclosures:

  • the fact that the financial statements are not prepared on a going concern basis together with the basis on which the financial statements are prepared

  • the reason why the entity is not regarded as a going concern.

Existing AS 4 does not require any such disclosure, However, existing AS 1 requires the disclosure of the fact in case going concerns assumption is not followed

• Ind AS 10 requires certain additional disclosures as compared to existing AS 4, such as, the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, that fact is also required to be disclosed as per the Ind AS 10.

• Ind AS 10 gives guidance on accounting for non-cash distributions to owners. Whereas the existing AS 4 does not contain this guidance.

Note 1.10: Major Differences between Ind AS 11 Construction Contracts, and existing AS 7 (revised 2002)
 

• Existing AS 7 includes borrowing costs as per AS 16, Borrowing Costs, in the costs that may be attributable to contract activity in general and can be allocated to specific contracts, whereas Ind AS 11 does not do so on the lines of IAS 11, Construction Contracts.

• Existing AS 7 does not recognise fair value concept as contract revenue is measured at consideration received/receivable, whereas Ind AS 11 requires that contract revenue shall be measured at fair value of consideration received/receivable.

• Existing AS 7 does not deal with accounting for Service Concession Arrangements, i.e., the arrangement where private sector entity (an operator) constructs or upgrades the infrastructure to be used to provide the public service and operates and maintains that infrastructure for a specified period of time, whereas Appendix A and Appendix B of Ind AS 11 deal with accounting and disclosure aspects involved in such arrangements.

Note 1.11: Major differences between the Ind AS 12 Income Taxes, and the existing AS 22 (Issued 2001)
 

• Ind AS 12 is based on balance sheet approach. It requires recognition of tax consequences of differences between the carrying amounts of assets and liabilities and their tax base. Existing AS 22 is based on income statement approach. It requires recognition of tax consequences of differences between taxable income and accounting income. For this purpose differences between taxable income and accounting income are classified into permanent and timing differences.

• As per Ind AS 12, subject to limited exceptions, deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, The criteria for recognising deferred tax assets arising from the carry forward of unused tax losses and tax credits are the same that for recognising deferred tax assets arising from deductible temporary differences. However, the existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, when an entity has a history of recent losses, the entity recognises a deferred tax asset arising from unused tax losses or tax credits only to the extent that the entity has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the entity.

As per the existing AS 22, deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Where deferred tax asset is recognised against unabsorbed depreciation or carry forward of losses under tax laws, it is recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.

• As per Ind AS 12, current and deferred tax are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from a transaction or event which is recognised outside profit or loss, either in other comprehensive income or directly in equity, in those cases tax is also recognised in other comprehensive income or in equity, as appropriate. Existing AS 22 does not specifically deal with this aspect.

• Existing AS 22 deals with disclosure of deferred tax assets and liabilities in the balance sheet. Ind AS 12 does not deal with this aspect except that it requires that income tax relating to each component of other comprehensive income shall be disclosed as current or non-current asset/liability in accordance with the requirements of Ind AS 1.

• Ind AS 12 provides guidance that deferred tax asset/liability arising from revaluation of assets shall be measured on the basis of tax consequences from the sale of asset rather than through use. Existing AS 22 does not deal with this aspect.

• Ind AS 12 provides guidance as to how an entity should account for the tax consequences of a change in its tax status or that of its shareholders. Existing AS 22 does not deal with this aspect.

• Existing AS 22 explains virtual certainty supported by convincing evidence. Since the concept of virtual certainty does not exist in Ind AS 12, this explanation is not included.

• Existing AS 22 specifically provides guidance regarding recognition of deferred tax in the situations of Tax Holiday under Sections 80-IA and 80-IB and Tax Holiday under Sections 10A and 10B of the Income Tax Act, 1961. Similarly, existing AS 22 provides guidance regarding recognition of deferred tax asset in case of loss under the head ‘capital gains’. Ind AS 12 does not specifically deal with these situations.

• Existing AS 22 specifically provides guidance regarding tax rates to be applied in measuring deferred tax assets/liability in a situation where a company pays tax under section 115JB. Ind AS 12 does not specifically deal with this aspect.

Note 1.12: Major Differences between Ind AS 16 Property, Plant and Equipment, and existing AS 10 Accounting for Fixed Assets and AS 6 Depreciation Accounting

Ind AS 16 deals with accounting for property, plant and equipment which are covered by existing AS 10, Accounting for Fixed Assets. Ind AS 16 also deals with depreciation of property, plant and equipment which is presently covered by AS 6, Depreciation Accounting. Therefore, the major differences mentioned below are between Ind AS 16 and existing AS 10 and existing AS 6.

• Existing AS 10 specifically excludes accounting for real estate developers from its scope, whereas Ind AS 16 does not exclude such developers from its scope.

• Ind AS 16, apart from defining the term property, plant and equipment, also lays down the following criteria which should be satisfied for recognition of items of property, plant and equipment:

(a) it is probable that future economic benefits associated with the item will flow to the entity, and

(b) the cost of the item can be measured reliably.

Existing AS 10 does not lay down any specific recognition criteria for recognition of a fixed asset. As per the standard, any item which meets the definition of a fixed asset should be recognised as a fixed asset.

• As per Ind AS 16, initial costs as well as the subsequent costs are evaluated on the same recognition principles to determine whether the same should be recognised as an item of property, plant and equipment. Existing AS 10 on the other hand, prescribes separate recognition principles for subsequent expenditure. As per existing AS 10, subsequent expenditures related to an item of fixed asset are capitalised only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

• Ind AS 16 requires that major spare parts qualify as property, plant and equipment when an entity expects to use them during more than one period and when they can be used only in connection with an item of property, plant and equipment. As per existing AS 10, only those spares are required to be capitalised which can be used only in connection with a fixed asset and whose use is expected to be irregular.

• Ind AS 16 is based on the component approach. Under this approach, each major part of an item of property plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. As a corollary, cost of replacing such parts is capitalised, if recognition criteria are met with consequent derecognition of carrying amount of the replaced part. The cost of replacing those parts which have not been depreciated separately is also capitalised with the consequent derecognition of the replaced parts. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed.

• Existing AS 10, however, does not mandatorily require full adoption of the component approach. It recognises the said approach in only one paragraph by stating that accounting for a tangible fixed asset may be improved if total cost thereof is allocated to its various parts. Apart from this, neither existing AS 10 nor existing AS 6 deals with the aspects such as separate depreciation of components, capitalising the cost of replacement, etc.

• Ind AS 16 requires that the cost of major inspections should be capitalised with consequent derecognition of any remaining carrying amount of the cost of the previous inspection. Existing AS 10 does not deal with this aspect.

• In line with the requirement of Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets, for creating a provision towards the costs of dismantling and removing the item of property plant and equipment and restoring the site on which it is located at the time the item is acquired or constructed, Ind AS 16 requires that the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located should be included in the cost of the respective item of property plant and equipment. Existing AS 10 does not contain any such requirement.

• Ind AS 16 requires an entity to choose either the cost model or the revaluation model as its accounting policy and to apply that policy to an entire class of property plant and equipment. It requires that under revaluation model, revaluation be made with reference to the fair value of items of property plant and equipment. It also requires that revaluations should be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.

• Existing AS 10 recognises revaluation of fixed assets. However, the revaluation approach adopted therein is ad hoc in nature, as it does not require the adoption of fair value basis as its accounting policy or revaluation of assets with regularity. It also provides an option for selection of assets within a class for revaluation on systematic basis.

• On the lines of IAS 16, the Ind AS 16 provides that the revaluation surplus included in equity in respect of an item of property plant and equipment may be transferred to the retained earnings when the asset is derecognised. This may involve transferring the whole of the surplus when the asset is retired or disposed of. However, some of the surplus may be transferred as the asset is used by an entity. In such a case, the amount of the surplus transferred would be the difference between the depreciation based on the revalued carrying amount of the asset and depreciation based on its original cost. Transfers from revaluation surplus to the retained earnings are not made through profit or loss.

As compared to the above, neither existing AS 10 nor existing AS 6 deals with the transfers from revaluation surplus. To deal with this aspect, the Institute has issued a Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets. The Guidance Note provides that if a company has transferred the difference between the revalued figure and the book value of fixed assets to the ‘Revaluation Reserve’ and has charged the additional depreciation related thereto to its profit and loss account, it is possible to transfer an amount equivalent to accumulated additional depreciation from the revaluation reserve to the profit and loss account or to the general reserve as the circumstances may permit, provided suitable disclosure is made in the accounts. However, the said Guidance Note also recognises that it would be prudent not to charge the additional depreciation arising due to revaluation against the revaluation reserve.

• With regard to self-constructed assets, the Ind AS 16, on the lines of IAS 16, specifically states that the cost of abnormal amounts of wasted material, labour, or other resources incurred in the construction of an asset is not included in the cost of the assets. Existing AS 10 while dealing with self-constructed fixed assets does not mention the same.

• In line with IAS 16, Ind AS 16 provides that the cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognised as interest over the period of credit unless such interest is capitalised in accordance with Ind AS 23. Similarly, the concept of cash price equivalent has been followed in case of disposal of fixed assets also. As this provision amounts to adopting the present value accounting, existing AS 10 does not contain this requirement.

• Existing AS 10 specifically deals with the fixed assets owned by the entity jointly with others. Ind AS 16 does not specifically deal with this aspect as these would basically be covered by Ind AS 31 as jointly controlled assets.

• Existing AS 10 specifically deals with the situation where several assets are purchased for a consolidated price. It provided that the consideration should be apportioned to the various assets on the basis of their respective fair values. However, in line with IAS 16, Ind AS 16 does not specifically deal with this situation.

• On the lines of IAS 16, the Ind AS 16 requires that the residual value and useful life of an asset be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) should be accounted for as a change in an accounting estimate in accordance with AS 5. Under existing AS 6, such a review is not obligatory as it simply provides that useful life of an asset may be reviewed periodically.

• Ind AS 16 requires that the depreciation method applied to an asset should be reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method should be changed to reflect the changed pattern. In existing AS 6, change in depreciation method can be made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements.

• On the lines of IAS 16, the Ind AS 16 requires that change in depreciation method should be considered as a change in accounting estimate and treated accordingly. In existing AS 6, it is considered as a change in accounting policy and treated accordingly.

• On the lines of IAS 16, the Ind AS 16 requires that compensation from third parties for items of property, plant and equipment that were impaired, lost or given up should be included in the statement of profit and loss when the compensation becomes receivable. Existing AS 10 does not specifically deal with this aspect.

• On the lines of IAS 16, the Ind AS 16 specifically provides that gains arising on derecognition of an item of property, plant and equipment should not be treated as revenue as defined in AS 9. Existing AS 10 is silent on this aspect.

• In line with IAS 16, Ind AS 16 deals with the situation where entities hold the items of property, plant and equipment for rental to others and subsequently sell the same. No such provision is there in existing AS 10.

• Ind AS 16 does not deal with the assets ‘held for sale’ because the treatment of such assets is covered in the Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations.

Note 1.13: Major differences between Ind AS 17 Leases and existing AS 19 (Issued 2001)

• The existing AS 19 excludes leases of land from its scope whereas Ind AS 17 does not have such scope exclusion. Ind AS 17 has specific provisions dealing with leases of land and building. Further, Ind AS 17 does not be apply as the basis of measurement of property held by lessees/provided by lessors under operating leases but treated as investment property and biological assets held by lessees/provided by lessors under operating lease dealt with in the Accounting Standard on Agriculture. The existing standard does not contain similar provisions.

• The definition of residual value appearing in the existing standard has been deleted in Ind AS 17. Consequent upon difference between the existing standard and Ind AS 17 in respect of treatment of initial direct costs incurred by a nonmanufacturer/ non-dealer-lessor in respect of a finance lease, the term ‘initial direct costs’ has been specifically defined in Ind AS 17 and definition of the term ‘interest rate implicit in the lease’ as per the existing standard has been modified in Ind AS 17.

• Ind AS 17 makes a distinction between inception of lease and commencement of lease. In the existing standard, though both the terms are used at some places, these terms have not been defined and distinguished. Further, Ind AS 17 deals with adjustment of lease payments during the period between inception of the lease and the commencement of the lease term. This aspect is not dealt with in the existing standard. Also, as per Ind AS 17, the lessee shall recognise finance leases as assets and liabilities in balance sheet at the commencement of the lease term whereas as per the existing standard such recognition is at the inception of the lease.

• Treatment of initial direct costs under Ind AS 17 differs from the treatment prescribed under the existing standard. This is tabulated below:

Subject	Existing standard	Ind AS 17
Finance lease Lessor accounting Nonmanufacturer/ Non-dealer:	Either recognised as expense immediately or allocated against the finance income over the lease term.	Interest rate implicit in the lease is defined in such a way that the initial direct costs included automatically in the finance lease receivable; there is no need to add them separately.
Operating lease- Lessor accounting	Either deferred and allocated to income over the lease term in proportion to the recognition of rent income, or recognised as expense in the period in which incurred.	Added to the carrying amount of the leased asset and recognised as expense over the lease term on the same basis as lease income.

• Ind AS 17 requires current/non-current classification of lease liabilities if such classification is made for other liabilities. Also, it makes reference to Accounting Standard on Non-current Assets Held for Sale and Discontinued Operations. These matters are not addressed in the existing standard.

• As per the existing standard, if a sale and leaseback transaction results in a finance lease, excess, if any, of the sale proceeds over the carrying amount shall be deferred and amortised by the seller-lessee over the lease term in proportion to depreciation of the leased asset. While Ind AS 17 retains the deferral and amortisation principle, it does not specify any method of amortisation.

• Ind AS 17 provides guidance on accounting for incentives in the case of operating leases, evaluating the substance of transactions involving the legal form of a lease and determining whether an arrangement contains a lease. The existing standard does not contain such guidance.

Note 1.14: Major differences between Ind AS 18 Revenue and the existing AS 9 (Issued 1985)

• Definition of ‘revenue’ given in Ind AS 18 is broad compared to the definition of ‘revenue’ given in existing AS 9 because it covers all economic benefits that arise in the ordinary course of activities of an entity which result in increases in equity, other than increases relating to contributions from equity participants. On the other hand, as per the existing AS 9, revenue is gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends.

• Measurement of revenue is briefly covered in the definition of revenue in the existing AS 9, while Ind AS 18 deals separately in detail with measurement of revenue. As per existing AS 9, revenue is recognised at the nominal amount of consideration receivable. Ind AS 18 requires the revenue to be measured at fair value of the consideration received or receivable.

• Ind AS 18 specifically deals with the exchange of goods and services with goods and services of similar and dissimilar nature. In this regard specific guidance is given regarding barter transactions involving advertising services. This aspect is not dealt with in the existing AS 9.

• Ind AS 18 provides guidance on application of recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. Existing AS 9 does not specifically deal with the same.

• For recognition of revenue in case of rendering of services, existing AS 9 permits the use of completed service contract method. Ind AS 18 requires recognition of revenue using percentage of completion method only.

• Existing AS 9 requires the recognition of revenue from interest on time proportion basis. Ind AS 18 requires interest to be recognised using effective interest rate method.

• Ind AS 18 specifically provides guidance regarding revenue recognition in case the entity is under any obligation to provide free or discounted goods or services or award credits to its customers due to any customer loyalty programme. Existing AS 9 does not deal with this aspect.

• Ind AS 18 deals with accounting of transfer of property, plant and equipment by the customers to the entity, which is used by the entity to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. Existing AS 9 does not deal with this aspect.

• Existing AS 9 specifically deals with disclosure of excise duty as a deduction from revenue from sales transactions. Ind AS 18 does not specifically deal with the same.

Note 1.15: Major differences between Ind AS 19 Employees Benefits and existing AS 15 (revised 2005)

• In Ind AS 19 employee benefits arising from constructive obligations are also covered whereas the existing AS 15 does not deal with the same.

• As per the existing standard, the term employee includes whole-time directors whereas under Ind AS 19 the term includes directors.

• Definitions of short-term employee benefits, other long-term employee benefits, return on plan assets and past service cost as per the existing AS 15 have been changed in Ind AS 19.

• Ind AS 19 deals with situations where there is a contractual agreement between a multi-employer plan and its participants that determine how the surplus in the plan will be distributed to the participants (or the deficit funded). The existing AS 15 does not deal with it.

• As per Ind AS 19, participation in a defined benefit plan sharing risks between various entities under common control is a related party transaction for each group entity and some disclosures are required in the separate or individual financial statements of an entity whereas the existing AS 15 does not contain similar provisions.

• Cross-reference to recognition of, or disclosure of information, of contingent liabilities under the Standard on Provisions, Contingent Liabilities, Contingent Assets, in the case of multi-employer plans, appearing in the existing standard has been amended in Ind AS 19 as disclosure only, since, contingent liabilities should not be recognised as per the Standard on Provisions, Contingent Liabilities, Contingent Assets.

• Ind AS 19 encourages, but does not require, an entity to involve a qualified actuary in the measurement of all material post-employment benefit obligations whereas the existing standard, though does not require involvement of a qualified actuary, does not specifically encourage the same.

• In the existing AS 15, in respect of defined benefit plans, one of the limits for 'asset ceiling' comprises present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. In Ind AS 19, on the other hand, the said limit is the total of (i) any cumulative unrecognised past service cost and (ii) the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

• Ind AS 19 makes it clear that financial assumptions shall be based on market expectations, at the end of the reporting period, for the period over which the obligations are to be settled whereas the existing standard does not clarify the same.

• Ind AS 19 contains the following clarifications which are not there in the existing standard:

1. negative past service cost arises when an entity changes the benefits attributable to past service so that the present value of the defined benefit obligation decreases.

2. a curtailment may arise from a reduction in the extent to which future salary increases are linked to the benefits payable for past service.

3. when a plan amendment reduces benefits, only the effect of the reduction for future service is a curtailment and that the effect of any reduction for past service is a negative past service cost. Further, with reference to curtailments, as against the requirement of ‘present obligation’ in the existing standard, Ind AS 19 requires ‘demonstrable commitment in respect of reduction in the number of employees’. Also, the terms ‘material reduction in the number of employees’ and ’material element of future service’ appearing in the existing standard have been replaced by the terms ‘significant reduction in the number of employees’ and ’significant element of future service’ respectively in Ind AS 19.

• Under Ind AS 19, more guidance has been given for timing of recognition of termination benefits. Recognition criteria for termination benefits under Ind AS 19 differ from the criteria prescribed in the existing standard. Measurement criteria have also been expanded in Ind AS 19 to deal with voluntary redundancy.

• Ind AS 19 gives guidance on the interaction of ceiling of asset recognition and minimum funding requirement in the case of defined benefit obligations, whereas this guidance is not available in the existing standard.

Note 1.16: Major Differences between Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance and pre revised AS 12 Accounting for Government Grants (1991)

Ind AS 20 differs from AS 12 in the following major respects:

• On the lines of IAS 20, Ind AS 20 also deals with the other forms of government assistance which do not fall within the definition of government grants. It requires that an indication of other forms of government assistance from which the entity has directly benefited should be disclosed in the financial statements. However, AS 12 does not deal with such government assistance.

• AS 12 requires that in case the grant is in respect of non-depreciable assets, the amount of the grant should be shown as capital reserve which is a part of shareholders’ funds. It further requires that if a grant related to a non-depreciable asset requires the fulfilment of certain obligations, the grant should be credited to income over the same period over which the cost of meeting such obligations is charged to income. AS 12 also gives an alternative to treat such grants as a deduction from the cost of such asset.

As compared to the above, Ind AS 20, on the lines of IAS 20, is based on the principle that all government grants would normally have certain obligations attached to them and these grants should be recognised as income over the periods which bear the cost of meeting the obligation. It, therefore, specifically prohibits recognition of grants directly in the shareholders’ funds.

• AS 12 recognises that some government grants have the characteristics similar to those of promoters’ contribution. It requires that such grants should be credited directly to capital reserve and treated as a part of shareholders’ funds. However, Ind AS 20, on the lines of IAS 20, does not recognise government grants of the nature of promoters’ contribution. As stated at (ii) above, Ind AS 20 is based on the principle that all government grants would normally have certain obligations attached to them and it, accordingly, requires all grants to be recognised as income over the periods which bear the cost of meeting the obligation.

• AS 12 requires that government grants in the form of non-monetary assets, given at a concessional rate, should be accounted for on the basis of their acquisition cost. In case a non-monetary asset is given free of cost, it should be recorded at a nominal value. However, as compared to this, Ind AS 20, on the lines of IAS 20, provides an option to value non-monetary grants at their fair value, since it results into presentation of more relevant information and is conceptually superior as compared to valuation at a nominal amount.

Note 1.17: Major differences between Ind AS 21 the Effects of Changes in Foreign Exchange Rates and existing AS 11 (Revised 2003)

• Ind AS 21 excludes from its scope forward exchange contracts and other similar financial instruments., which are treated in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement. The existing AS 11 does not make such exclusion. This difference has, however, been removed vide limited revision issued as a consequence to issuance of AS 30, which has become recommendatory from 1.4.2009.

• The existing AS 11 is based on integral foreign operations and non-integral foreign operations approach, whereas Ind AS 21 is based on the functional currency approach. However, in Ind AS 21 the factors to be considered in determining an entity’s functional currency are similar to the indicators in existing AS 11 to determine the foreign operations as a non-integral foreign operations. As a result, despite the difference in the term, there are no substantive differences.

• As per Ind AS 21, presentation currency can be different from local currency and it gives detailed guidance on this, whereas the existing AS 11 does not explicitly states so.

Note 1.18: Major differences between Ind AS 23 Borrowing Costs and existing AS 16 (issued 2000)

• Ind AS 23 does not require an entity to apply this standard to borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset measured at fair value, for example, a biological asset whereas the existing AS 16 does not provide for such scope relaxation.

• Ind AS 23 excludes the application of this Standard to borrowing costs directly attributable to the acquisition, construction or production of inventories that are manufactured, or otherwise produced, in large quantities on a repetitive basis whereas existing AS 16 does not provide for such scope relaxation and is applicable to borrowing costs related to all inventories that require substantial period of time to bring them in saleable condition

• As per existing AS 16, Borrowing Costs, inter alia, include the following:

(a) interest and commitment charges on bank borrowings and other short-term and long-term borrowings;

(b) amortisation of discounts or premiums relating to borrowings;

(c) amortisation of ancillary costs incurred in connection with the arrangement of borrowings;

In Ind AS 23, item (a) above has been amended to calculate the interest expense using the effective interest rate method as described in Ind AS 39 Financial Instruments: Recognition and Measurement. Items (b) and (c) above have been deleted, as some of these components of borrowing costs are broadly equivalent to the components of interest expense calculated using the effective interest rate method.

• Existing AS 16 gives explanation for meaning of ‘substantial period of time’ appearing in the definition of the term ‘qualifying asset’. It also gives explanation for computation of exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. This explanation is also illustrated. Both these explanations and the illustration are not included in Ind AS 23.

• Ind AS 23 provides that when the Standard on Financial Reporting in Hyperinflationary Economies is applied, part of the borrowing costs that compensates for inflation should be expensed as required by that Standard (and not capitalised in respect of qualifying assets). The existing AS 16 standard does not contain a similar clarification because at present, in India, there is no Standard on Financial Reporting in Hyperinflationary Economies.

• Ind AS 23 specifically provides that in some circumstances, it is appropriate to include all borrowings of the parent and its subsidiaries when computing a weighted average of the borrowing costs while in other circumstances, it is appropriate for each subsidiary to use a weighted average of the borrowing costs applicable to its own borrowings. This specific provision is not found in the existing AS 16.

• Ind AS 23 requires disclosure of capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation. The existing AS 16 does not have this disclosure requirement.

Note 1.19: Major differences between Ind AS 24 Related Party Disclosures and the existing AS 18 (Issued 2000)

• Existing AS 18 uses the term “relatives of an individual”, whereas, Ind AS 24 uses the term “a close member of that person’s family”. Definition of close members of family as per Ind AS 24 includes dependants of the person or of spouse. However, the existing AS 18 covers parents and siblings irrespective of their status as to dependence of an individual and it does not cover dependents.

• Existing AS-18 defines state-controlled enterprise as “an enterprise which is under the control of the Central Government and/or any State Government(s)”. However in Ind AS 24, there would be extended coverage of Government Enterprises, as it defines a government-related entity as “an entity that is controlled, jointly controlled or significantly influenced by a government.” Further, “Government refers to government, government agencies and similar bodies whether local, national or international.”

• Existing AS 18 covered key management personnels (KMPs) of the entity only, whereas, Ind AS 24 covers KMPs of the parent as well.

• Ind AS 24 there is extended coverage in case of joint ventures. Two entities are related to each other in both their financial statements, if they are either co-ventures or one is a venture and the other is an associate. Whereas as per existing AS 18, co-ventures or co-associates are not related to each other.

• Existing AS 18 mentions that where there is an inherent difficulty for management to determine the effect of influences which do not lead to transactions, disclosure of such effects is not required whereas Ind AS 24 does not specifically mentions this.

• Existing AS 18 does not specifically cover entities that are post employment benefit plans, as related parties. However, Ind AS 24 specifically includes post employment benefit plans for the benefit of employees of an entity or its related entity as related parties.

• Ind AS 24 requires an additional disclosure as to the name of the next most senior parent which produces consolidated financial statements for public use, whereas the existing AS-18 has no such requirement.

• Ind AS 24 requires extended disclosures for compensation of KMPs under different categories, whereas the existing AS 18 does not specifically require.

• Ind AS 24 requires “the amount of the transactions” need to be disclosed, whereas existing AS 18 gives an option to disclose the “Volume of the transactions either as an amount or as an appropriate proportion

• Ind AS 24 requires disclosures of certain information by the government related entities, whereas the existing AS 18 presently exempts the disclosure of such information.

• Existing AS 18 includes clarificatory text, primarily with regard to control, substantial interest (including 20% threshold), significant influence (including 20% threshold). However, the Ind AS 24 does not include such clarificatory text and allows respective standards to deal with the same.

Note 1.20: Major Differences between Ind AS 27 Consolidated and Separate Financial Statements and existing AS 21 Consolidated Financial Statements

• Ind AS 27 makes the preparation of Consolidated Financial Statements mandatory for a parent except where parent meets certain conditions. Existing AS 21 does not mandate the preparation of Consolidated Financial Statements by a parent. As far as separate financial statements are concerned, as per existing AS 21 Consolidated Financial Statements are prepared in addition to separate financial statements. However, Ind AS 27 does not mandate preparation of separate financial statements.

• Ind AS 27 deals with investments in jointly controlled entities and associates to be presented in the separate financial statements. Existing AS 21 does not deal with the same.

• As per existing AS 21, subsidiary is excluded from consolidation when control is intended to be temporary or when subsidiary operates under severe long term restrictions. Ind AS 27 does not give any such exemption from consolidation except that if a subsidiary meets the criteria to be classified as held for sale, in that case it shall be accounted for as per Ind AS 105, Non-current Assets held for Sale and Discontinued Operations.

• Existing AS 21 explains where an entity owns majority of voting power because of ownership and all the shares are held as stock-in-trade, whether this amounts to temporary control. Existing AS 21 also explains the term ‘near future’. However, Ind AS 27 does not explain the same, as these are not relevant.

• As per the definition given in Ind AS 27, control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. However, the definition of control given in the existing AS 21 is rule-based, which requires the ownership, directly or indirectly through subsidiary(ies), of more than half of the voting power of an enterprise; or control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise so as to obtain economic benefits from its activities.

• Existing AS 21 also provides clarification regarding consolidation in case an entity is controlled by two entities. No clarification has been provided in this regard in Ind AS 27, keeping in view that as per the definition of control given in Ind AS 27, control of an entity could be with one entity only.

• For considering share ownership, potential equity shares of the investee held by investor are not taken into account as per existing AS 21. However, as per Ind AS 27, existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether an entity has control over the subsidiary.

• As per existing AS 21 minority interest should be presented in the consolidated balance sheet separately from liabilities and equity of the parent’s shareholders. However, as per Ind AS 27 minority interests shall be presented in the consolidated balance sheet within equity separately from the parent shareholders’ equity.

• Existing AS 21 permits the use of financial statements of the subsidiaries drawn upto a date different from the date of financial statements of the parent after making adjustments regarding effects of significant transactions. The difference between the reporting dates should not be more than six months. As per Ind AS 27, the length of difference in the reporting dates of the parent and the subsidiary should not be more than three months.

• Both, the existing AS 21 and Ind AS 27, require the use of uniform accounting policies. However, existing AS 21 specifically states that if it is not practicable to use uniform accounting policies in preparing the consolidated financial statements, that fact should be disclosed together with the proportions of the items in the consolidated financial statements to which the different accounting policies have been applied. However, Ind AS 27 does not recognise the situation of impracticability.

• As per the existing AS 21, any goodwill arising on acquisition of a subsidiary is to be recognised as an asset in the consolidated financial statements. Ind AS 27 requires the same to be treated in accordance with Ind AS 103, Business Combinations.

• Ind AS 27 provides detailed guidance as compared to existing AS 21 regarding accounting in case of loss of control over subsidiary.

• Existing AS 21 provides clarification regarding inclusion of notes appearing in the separate financial statements of the parent and its subsidiaries in the consolidated financial statements. However, Ind AS 27 does not provide any clarification in this regard.

• Existing AS 21 provides clarification regarding accounting for taxes on income in the consolidated financial statements. However, the same has not been dealt with in Ind AS 27, as the same is dealt with in Ind AS 12, Income taxes.

• Existing AS 21 provides clarification regarding disclosure of parent’s share in post-acquisition reserves of a subsidiary. The same has not been dealt with in Ind AS 27.

• Existing AS 21 does not provide guidance on consolidation of Special Purpose Entities (SPEs), whereas Appendix A of Ind AS 27 (i.e. SIC 12) provides guidance on the same.

Note 1.21: Major differences between Ind AS 28 Investments in Associates and existing AS 23 (issued 2001)
 

• Ind AS 28 excludes from its scope, investments in associates held by venture capital organisations, mutual funds, unit trusts and similar entities including investment-linked insurance funds, which are treated in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement. The existing AS 23 does not make such exclusion.

• As per the definition given in Ind AS 28, control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The definition of control given in the existing AS 23 is rule-based, which requires the ownership, directly or indirectly through subsidiary(ies), of more than half of the voting power of an enterprise; or control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other entity so as to obtain economic benefits from its activities.

• In the existing AS 23, ‘Significant Influence’ has been defined as ‘power to participate in the financial and/or operating policy decisions of the investee but is not control over those policies’. In Ind AS 28, the same has been defined as ‘power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies’. Ind AS 28 defines the joint control also.

• For considering share ownership for the purpose of significant influence, potential equity shares of the investee held by investor are not taken into account as per the existing AS 23. As per Ind AS 28, existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether an entity has significant influence or not.

• One of the exemptions from applying equity method in the existing AS 23 is where the associate operates under severe long-term restrictions that significantly impair its ability to transfer funds to the investee. No such exemption is provided in Ind AS 28. Ind AS 28 further provides exemption from application of the equity method where investor is a wholly owned or a partially owned subsidiary of another entity and its other owners do not object to not applying equity method, where investor’s debt or equity are not publicly traded, where the investor did not file, nor is it in the process of filing, its financial statements with a Securities Regulator or other regulatory organisation, for the purpose of issuing any class of instruments in a public market, and where ultimate or intermediate parent of investor prepares consolidated financial statements as per Accounting Standards.

• An explanation has been given in existing AS 23 regarding the term ‘near future’ used in another exemption from applying equity method, ie, where the investment is acquired and held exclusively with a view to its subsequent disposal in the near future. This explanation has not been given in Ind AS 28, as such situations are covered by Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations.

• As per the existing AS 23, where investment in an associate is not accounted for as per the equity method, the same is accounted for in accordance with existing AS 13, Accounting for investments. As per Ind AS 28, where investment in an associate is not accounted for as per equity method, the same is to be accounted for in accordance with Ind AS 39 Financial Instruments; Recognition and Measurement. This difference has, however, been removed vide limited revision issued as a consequence to issuance of AS 30, which has become recommendatory from 1.4.2009.

• As per the existing AS 23, on acquisition of the investment in an associate, any difference between the cost of acquisition and investor’s share of equity of the associate is described as goodwill/Capital reserve, and the same is included in the carrying amount of investment in the associate but disclosed separately. For calculating goodwill/capital reserve, equity of the associate is determined on the basis of carrying amounts of assets and liabilities on the date of acquisition.

• As per Ind AS 28, on acquisition of the investment in associate, any difference between the cost of acquisition and investor’s share of the net fair value of the associate’s identifiable assets and liabilities is accounted for as follows:

1. Goodwill relating to an associate is included in the carrying amount of the investment.

2. 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.

• The existing AS 23 permits the use of financial statements of the associate drawn upto a date different from the date of financial statements of the investor when it is impracticable to draw the financial statements of the associate upto the date of the financial statements of the investor. There is no limit on the length of difference in the reporting dates of the investor and the associate. As per Ind AS 28, length of difference in the reporting dates of the investor and the associate should not be more than three months unless it is impracticable.

• Both the existing AS 23 and Ind AS 28 require that similar accounting policies should be used for preparation of investor’s financial statements and in case an associate uses different accounting policies for like transactions, appropriate adjustments shall be made to the accounting policies of the associate. The existing AS 23 provides exemption to this that if it is not possible to make adjustments to the accounting policies of the associate, the fact shall be disclosed along with a brief description of the differences between the accounting policies. This exemption is not available under Ind AS 28.

• As per existing AS 23, investor’s share of losses in the associate is recognised to the extent of carrying amount of investment in the associate. As per Ind AS 28, carrying amount of investment in the associate as well as its other long term interests in the associate that, in substance form part of the investor’s net investment in the associate shall be considered for recognising investor’s share of losses in the associate.

• With regard to impairment, the existing AS 23 requires that the carrying amount of investment in an associate should be reduced to recognise a decline, other than temporary, in the value of the investment. Ind AS 28 requires that after application of equity method, including recognising the associate’s losses, the requirements of Ind AS 39 shall be applied to determine whether it is necessary to recognise any additional impairment loss.

Note 1.22: Major differences between Ind AS 31 Interests in Joint Ventures and existing AS 27 (issued 2002)

• The scope of Ind AS 31 specifically excludes joint venture investments made by venture capital organization, mutual funds, unit trusts and similar entities including investment- linked insurance funds which are treated in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement. The existing AS 27 does not make such exclusion.

• Existing AS 27 provides that in some exceptional cases, an enterprise by a contractual arrangement establishes joint control over an entity which is a subsidiary of that enterprise within the meaning of AS 21, Consolidated Financial Statements. In those cases, the entity is consolidated under AS 21 by the said enterprise, and is not treated as a joint venture. Ind AS 31 does not recognise such cases keeping in view the definition of control given in Ind AS 27.

• Ind AS 31 provides that a venturer can recognise its interest in jointly controlled entity using either proportionate consolidation method or equity method. Existing AS 27 prescribes the use of proportionate consolidation method only.

• Existing AS 27 requires application of the proportionate consolidation method only when the entity has subsidiaries and prepares Consolidated Financial Statements. Ind AS 31 requires consolidation of jointly controlled entities subject to a few exemptions, even if the venturer does not have any subsidiary in the financial statements.

• In case of separate financial statements under existing AS 27, interest in jointly controlled entity is accounted for as per AS 13, Accounting for Investments, i.e., at cost less provision for other than temporary decline in the value of investment. Ind AS 31 refers to Ind AS 27 in this regard, which requires it to be recognised at cost or in accordance with Ind AS 39. This difference has, however, been removed vide limited revision issued as a consequence to issuance of AS 30, which has become recommendatory from 1.4.2009.

• An explanation has been given in existing AS 27 regarding the term ‘near future’ used in an exemption given from applying proportionate consolidation method, ie, disposal in the near future. This explanation has not been given in Ind AS 31, as such situations are now covered by Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations.

• Existing AS 21 provides clarification regarding disclosure of venturer’s share in postacquisition reserves of a jointly controlled entity. The same has not been dealt with in Ind AS 31.

• Ind AS 31 specifically deals with the venturer’s accounting for non-monetary contributions to a jointly controlled entity. Existing AS 27 does not deal with this aspect.

Note 1.23: Major differences between Ind AS 32 Financial Instruments: Presentation and existing AS 31

• The existing AS 31 does not apply to contracts for contingent consideration in a business combination in case of acquirers. Ind AS 32 does not exempt such contracts.

• Ind AS 32 includes the definition of puttable instruments and deals with the same. The existing AS 31 does not deal with the same.

• Ind AS 32 specifies conditions for offsetting a financial liability or financial asset. The existing AS 31 does not specify the same.

• Ind AS 32 requires that in some circumstances, because of the differences between interest and dividends with respect to matters such as tax deductibility, it is desirable to disclose them separately in the statement of profit and loss. Disclosures of the tax effects are made in accordance with Ind AS 12. The existing AS 31 does not mention this aspect.

• The existing AS 31 does not mention about classifications as financial assets in case of t he issuer of a non-derivative financial instrument who is required to evaluate the terms of the financial instrument to determine whether it contains both a liability and an equity component. Ind AS 32 mentions about the same.

• Ind AS 32 specifically mentions that the related amount of income taxes recognised directly in equity is included in the aggregate amount of current and deferred income tax credited or charged to equity that is disclosed under Ind AS 12 Income Taxes. The existing AS 31 does not mention so.

Note 1.24: Major Differences between Ind AS 33 Earnings per Share, and existing AS 20 Earnings per Share

• Existing AS 20 does not specifically deal with options held by the entity on its shares, e.g., purchased options, written put option etc. Ind AS 33 deals with the same.

• Ind AS 33 requires presentation of basic and diluted EPS from continuing and discontinued operations separately. However, existing AS 20 does not require any such disclosure.

• Existing AS 20 requires the disclosure of EPS with and without extraordinary items. Since as per Ind AS 1, Presentation of Financial Statements, no item can be presented as extraordinary item, Ind AS 33 does not require the aforesaid disclosure.

Note 1.25: Major differences between Ind AS 34 Interim Financial Reporting, and existing AS 25 (Issued 2002)

• Under the existing AS 25, if an entity is required or elects to prepare and present an interim financial report, it should comply with that standard. Ind AS 34 applies only if an entity is required or elects to prepare and present an interim financial report in accordance with Accounting Standards. Consequently, it is specifically stated in Ind AS 34 that the fact that an entity may not have provided interim financial reports during a particular financial year or may have provided interim financial reports that do not comply with Ind AS 34 does not prevent the entity’s annual financial statements from conforming to Accounting Standards if they otherwise do so.

• In Ind AS 34, the term ‘complete set of financial statements’ appearing in the definition of interim financial report has been expanded as complete set of financial statements (as described in Ind AS 1 The Presentation of Financial Statements). Accordingly, the said term includes a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.

• As per the existing standard, the contents of an interim financial report include, at a minimum, a condensed balance sheet, a condensed statement of comprehensive income, presented as either (i) a condensed single statement or (ii) a condensed separate income statement and a condensed statement of comprehensive income, a condensed cash flow statement and selected explanatory notes. Ind AS 34 requires, in addition to the above, a condensed statement of changes in equity.

• Ind AS 34 prohibits reversal of impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. There is no such specific prohibition in the existing standard.

• Under the existing standard, if an entity’s annual financial report included the consolidated financial statements in addition to the separate financial statements, the interim financial report should include both the consolidated financial statements and separate financial statements, complete or condensed. Ind AS 34 states that it neither requires nor prohibits the inclusion of the parent's separate statements in the entity's interim report prepared on a consolidated basis.

• The existing standard requires the Notes to interim financial statements, (if material and not disclosed elsewhere in the interim financial report), to contain a statement that the same accounting policies are followed in the interim financial statements as those followed in the most recent annual financial statements or, in case of change in those policies, a description of the nature and effect of the change. Ind AS 34 additionally requires the above information in respect of methods of computation followed.

• The existing standard requires furnishing information, in interim financial report, of dividends, aggregate or per share (in absolute or percentage terms), for equity and other shares. Ind AS 34 requires furnishing of information, in interim financial report, on dividends paid, aggregate or per share separately for equity and other shares.

• While the existing standard requires furnishing of information on contingent liabilities only, Ind AS 34 requires furnishing of information on both contingent liabilities and contingent assets.

• Ind AS 34 requires that, where an interim financial report has been prepared in accordance with the requirements of Ind AS 34, that fact should be disclosed. Further, an interim financial report should not be described as complying with Accounting Standards unless it complies with all of the requirements of Accounting Standards. (The latter statement is applicable when interim financial statements are prepared on complete basis instead of ‘condensed basis’). The existing standard does not contain these requirements.

• Under the existing standard, a change in accounting policy, other than one for which the transitional provisions are specified by a new Standard, should be reflected by restating the financial statements of prior interim periods of the current financial year. Ind AS 34 additionally requires restatement of the comparable interim periods of prior financial years that will be restated in annual financial statements in accordance with the Ind AS 8, subject to special provisions when such restatement is impracticable.

• Convergence of all other standards with IFRSs also has impact on interim financial reporting. For example, treatment of constructive obligation in Ind AS 37, treatment of foreign exchange differences in Ind AS 21 etc. will have impact in interim financial reporting which could be different in the context of relevant existing standards. There are other consequential impacts also. For example, the existing standard requires disclosure of Earnings Per Share (EPS) - basic and diluted- in accordance with Ind AS 33. The existing AS 20 requires EPS with and without extraordinary items. Since the concept of extraordinary items is no longer valid in the context of Ind AS 1 the question of EPS with and without extraordinary items does not arise in the context of Ind AS 33. This changed requirement of Ind AS 33 is equally applicable to interim financial reporting under the Ind AS 34.

• Illustration B to Ind AS 34 (not an integral part of the standard), inter alia, gives example of application of Accounting Standard on Financial Reporting in Hyperinflationary Economies to interim periods. Similar example was not given in the existing standard, there being no Indian standard on accounting in hyperinflationary economies. [In addition, Examples of applying the recognition and measurement principles and examples of the use of estimates given in Illustrations have been increased in Ind AS 34].

• Under the existing standard, when an interim financial report is presented for the first time in accordance with that Standard, an entity need not present, in respect of all the interim periods of the current financial year, comparative statements of profit and loss for the comparable interim periods (current and year-to-date) of the immediately preceding financial year and comparative cash flow statement for the comparable year-to-date period of the immediately preceding financial year. Ind AS 34 removes this transitional provision.

Note 1.26: Major differences between Ind AS 36 Impairment of Assets, and existing AS 28 (issued 2002)

• Ind AS 28 requires annual impairment testing for an intangible asset with an indefinite useful life or not yet available for use and goodwill acquired in a business combination. The existing AS 28 does not require the annual impairment testing for the goodwill unless there is an indication of impairments.

• Ind AS 28 gives additional guidance on, inter alia, the following aspect compared to the existing AS 28:

1. estimating the value in use of an asset;

2. for managements to assess the reasonableness of the assumptions on which cash flows are based; and

3. using present value techniques in measuring an asset’s value in use.

• The existing AS 28 requires that the impairment loss recognised for goodwill should be reversed in a subsequent period when it was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events that have occurred that reverse the effect of that event whereas the Ind AS 28 prohibits the recognition of reversals of impairment loss for goodwill.

• In the existing AS 28, goodwill is allocated to CGUs only when the allocation can be done on a reasonable and consistent basis. If that requirement is not met for a specific CGU under review, the smallest CGU to which the carrying amount of goodwill can be allocated on a reasonable and consistent basis must be identified and the impairment test carried out at this level. Thus, when all or a portion of goodwill cannot be allocated reasonably and consistently to the CGU being tested for impairment, two levels of impairment tests are carried out, viz., bottom-up test and top-down test. In Ind AS 28, goodwill is allocated to cash-generating units (CGUs) or groups of CGUs that are expected to benefit from the synergies of the business combination from which it arose. There is no bottom-up or top down approach for allocation of goodwill.

Note 1.27: Major Differences between Ind AS 37 Provisions, contingent Liabilities and Contingent Assets, and Existing AS 29 (issued 2003)
 

• Unlike the existing AS 29, Ind AS 37 requires creation of provisions in respect of constructive obligations also. [However, the existing standard requires creation of provision arising out of normal business practices, custom and a desire to maintain good business relations or to act in an equitable manner]. This has resulted in some consequential changes also. For example, definition of provision and obligating event have been revised in Ind AS 37, while the terms ‘legal obligation’ and ‘constructive obligation’ have been inserted and defined in Ind AS 37. Similarly, the portion of existing AS 29 pertaining to restructuring provisions has been revised in Ind AS 37. Additional examples have also been included in Appendices F and G of Ind AS 37.

• The existing AS 29 prohibits discounting the amounts of provisions. Ind AS 37 requires discounting the amounts of provisions, if effect of the time value of money is material.

• The existing AS 29 notes the practice of disclosure of contingent assets in the report of the approving authority but prohibits disclosure of the same in the financial statements. Ind AS 37 requires disclosure of contingent assets in the financial statements when the inflow of economic benefits is probable. The disclosure, however, should avoid misleading indications of the likelihood of income arising.

• Ind AS 37 makes it clear that before a separate provision for an onerous contract is established, an entity should recognise any impairment loss that has occurred on assets dedicated to that contract in accordance with Ind AS 36. There is no such specific provision in the existing standard.

• The existing AS 29 states that identifiable future operating losses up to the date of restructuring are not included in a provision. Ind AS 37 gives an exception to this principle viz. such losses related to an onerous contract.

• Ind AS 37 gives guidance on (i) Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds and (ii) Liabilities arising from Participating in a Specific Market— Waste Electrical and Electronic Equipment.

Note 1.28: Major differences between Ind AS 38 Intangible Assets, and the existing AS 26 (Issued 2002)

• As per the existing standard, accounting issues of specialized nature also arise in respect of accounting for discount or premium relating to borrowings and ancillary costs incurred in connection with the arrangement of borrowings, share issue expenses and discount allowed on the issue of shares. Accordingly, this Statement does not apply to such items also. Ind AS 28 does not include any such exclusion specifically as these aspects are covered by other accounting standards.

• The existing standard defines an intangible asset as an identifiable non-monetary asset without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes whereas in Ind AS 28, the requirement for the asset to be held for use in the production or supply of goods or services, for rental to others, or for administrative purposes has been removed from the definition of an intangible asset.

• The existing standard does not define ‘identifiability’, but states that an intangible asset could be distinguished clearly from goodwill if the asset was separable, but that separability was not a necessary condition for identifiability. Ind AS 38 provides detailed guidance in respect of identifiability.

• As per Ind AS 38, in the case of separately acquired intangibles, the criterion of probable inflow of expected future economic benefits is always considered satisfied, even if there is uncertainty about the timing or the amount of the inflow. However, there is no such provision in the existing standard.

• Under Ind AS 38, if payment for an intangible asset is deferred beyond normal credit terms, the difference between this amount and the total payments is recognised as interest expense over the period of credit unless it is capitalised as per AS 16. However, there is no such provision in the existing standard.

• Ind AS 38 deals in detail in respect of intangible assets acquired in a business combination. On the other hand, the existing standard refers only to intangible assets acquired in an amalgamation in the nature of purchase and does not refer to business combinations as a whole. The existing standard is silent regarding the treatment of subsequent expenditure on an in-process research and development project acquired in a business combination whereas Ind AS 38 gives guidance for the treatment of such expenditure.

• Ind AS 38 requires that if an intangible asset is acquired in exchange of a non-monetary asset, it should be recognised at the fair value of the asset given up unless the fair value of the asset received is more clearly evident. However, the existing standard requires the principles of existing AS 10 to be followed which includes an alternative accounting treatment.

• As per Ind AS 38, when intangible assets are acquired free of charge or for nominal consideration by way of government grant, an entity should, in accordance with AS 12, record both the grant and the intangible asset at fair value. As per the existing standard, intangible assets acquired free of charge or for nominal consideration by way of government grant is recognised at nominal value or at acquisition cost, as appropriate plus any expenditure that is attributable to making the asset ready for intended use.

• The existing standard is based on the assumption that the useful life of an intangible asset is always finite, and includes a rebuttable presumption that the useful life cannot exceed ten years from the date the asset is available for use. That rebuttable presumption has been removed from Ind AS 38. Ind AS 38 recognizes that the useful life of an intangible asset can even be indefinite subject to fulfillment of certain conditions, in which case it should not be amortised but should be tested for impairment.

• In Ind AS 38, guidance is available on cessation of capitalisation of expenditure, derecognition of a part of an intangible asset and useful life of a reacquired right in a business combination. There is no such guidance in the existing standard on these aspects.

• Ind AS 38 permits an entity to choose either the cost model or the revaluation model as its accounting policy, whereas in existing standard revaluation model is not permitted.

• Ind AS 38 provides more guidance on recognition of intangible items recognised as expense. Ind AS 38 clarifies that in respect of prepaid expenses, recognition of an asset would be permitted only upto the point at which the entity has the right to access the goods or upto the receipt of services. Further, unlike the existing standard, mail order catalogues have been specifically identified as a form of advertising and promotional activities which are required to be expensed.

• Paragraph 94 of Ind AS 38 acknowledges that the useful life of an intangible asset arising from contractual or legal rights may be shorter than the legal life. The existing standard does not include such a provision.

• As per the existing standard, there will rarely, if ever, be persuasive evidence to support an amortisation method for intangible assets that results in a lower amount of accumulated amortisation than under straight-line method. Ind AS 38 does not contain any such provision.

• Under Ind AS 38, the residual value is reviewed at least at each financial year-end. If it increases to an amount equal to or greater than the asset’s carrying amount, amortisation charge is zero unless the residual value subsequently decreases to an amount below the asset’s carrying amount. However, the existing standard specifically requires that the residual value is not subsequently increased for changes in prices or value.

• As per the existing standard, change in the method of amortisation is a change in accounting policy whereas as per Ind AS 38, this would be a change in accounting estimate.

• The existing standard also requires annual impairment testing of asset not yet available for use. There is no such requirement in Ind AS 38.

• As per Ind AS 38, if payment of consideration on disposal of an intangible asset is deferred, the consideration is recognised initially at the cost is cash price equivalent. There is no such provision in the existing standard.

• Intangible assets retired from use and held for sale are covered by the existing standard. However, Ind AS 38 does not include such intangible assets since they would be covered by Ind AS 105.

Note 1.29 Major Differences between Ind AS 39, Financial Instruments: Recognition and Measurement and the existing AS 30 (Issued 2007)

• The financial instruments to which Ind AS 39 does not apply include financial instruments issued by the entity that meet the definition of an equity instrument in AS 31 (Revised 20XX) (including options and warrants) or that are required to be classified as an equity instrument in accordance with paragraphs 16A and 16B or paragraphs 16C and 16D of AS 31 (Revised 20XX). The existing standard does not refer to the same.

• Ind AS 39 does not exempt contracts for contingent consideration in a business combination from its scope while the existing standard provides an exemption. In the existing standard, the exemption applies only to the acquirer.

• Paragraph 8.2(a)(ii) of the existing standard states that a financial asset or financial liability at fair value through profit or loss is classified as held for trading if ‘it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short –term profit-taking’. Ind AS 39 states that a financial asset or financial liability at fair value through profit or loss is classified as held for trading if ‘on initial recognition it is part of a portfolio of identified financial instruments………..’ The existing standard does not use the words ‘on initial recognition’.

• Ind AS 39 (application guidance on effective interest rate) specifically states that ‘if a financial asset is reclassified in accordance with paragraph 50B, 50D or 50E, and the entity subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase shall be recognised as an adjustment to the effective interest rate from the date of the change in estimate rather than as an adjustment to the carrying amount of the asset at the d ate of the change in estimate.’ The existing AS 30 does not specify so.

• Ind AS 39 states that ‘an entity shall not reclassify any financial instrument out of the fair value through profit or loss category if upon n initial recognition it was designated by the entity as at fair value through profit or loss; and may, if a financial asset is no longer held for the purpose of selling or repurchasing it in the near term (notwithstanding that the financial asset may have been acquired or incurred principally for the purpose of selling or repurchasing it in the near term), reclassify that financial asset out of the fair value through profit or loss category if the requirements in paragraph 50B or 50D are met’. The existing standard does not include this paragraph.

• The existing standard states that ‘an entity should not reclassify a FINANCIAL INSTRUMENT INTO OR out of the fair value through profit or loss category while it is held or issued’ while Ind AS 39 states that ‘an entity shall not reclassify a DERIVATIVE out of the fair value through profit or loss category while it is held or Issued.’ The existing AS 30 does not specify so.

• The following paragraph has been added in Ind AS 39 that ‘if an entity is unable to measure separately the embedded derivative that would have to be separated on reclassification of a hybrid (combined) contract out of the fair value through profit or loss category, that reclassification is prohibited. In such circumstances the hybrid (combined) contract remains classified as at fair value through profit or loss in its entirety.’

• Ind AS 39 modifies paragraph 2(g) of the existing standard as any forward contracts between an acquirer and a selling shareholder to buy or sell an acquiree that will result in a business combination at a future acquisition date. The term of the forward contract should not exceed a reasonable period normally necessary to obtain any required approvals and to complete the transaction.’

• Paragraph 80 of Ind AS 39 states that ‘for hedge accounting purposes, only assets, liabilities, firm commitments or highly probable forecast transactions that involve a party external to the entity can be designated as hedged items. It follows that hedge accounting can be applied to transactions between entities or segments in the same group only in the individual or separate financial statements of those entities or segments and not in the consolidated financial statements of the group.’ The words ‘or segments’ have been deleted in Ind AS 39.

• Paragraph 97 of Ind AS 39 modifies paragraph 108 of the existing standard to state ‘if a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associate d gains or losses that were recognised in other comprehensive income in accordance with paragraph 95 shall be reclassified from equity to profit or loss as a reclassification adjustment (see IAS 1 (as revised in 2007)) in the same period or periods during which the hedged forecast cash flows asset acquired or liability assumed affects profit or loss (such as in the periods that interest income or interest expense is recognised). However, if an entity expects that all or a portion of a loss recognised in other comprehensive income will not be recovered in one or more future periods, it shall reclassify into profit or loss as a reclassification adjustment the amount that is not expected to be recovered.’