KPMG IFRS Notes IndAS PDF
KPMG IFRS Notes IndAS PDF
KPMG IFRS Notes IndAS PDF
IFRS convergence
a reality now!
MCA notifies Ind AS
standards and
implementation roadmap
Sai Venkateshwaran
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Phase I
Phase II
Voluntary adoption
Year of adoption
FY 2016 - 17
FY 2017 - 18
Comparative year
FY 2015 - 16
FY 2016 - 17
FY 2014 - 15 or thereafter
(a) Listed
companies
(b) Unlisted
companies
(c) Group
companies
Covered companies
Exceptions
Companies whose securities are listed or in the process of
listing on the Small and Medium Enterprises (SME)
exchanges will not be required to apply Ind AS and can
continue to comply with the existing accounting standards
unless they choose otherwise.
Other significant matters
The Ind AS would apply to stand-alone and consolidated
financial statements (CFS).
The Rules clarify that an Indian company :
having an overseas subsidiary, associate, joint venture
and other similar entities, or
which is a subsidiary, associate, joint venture and
other similar entities of a foreign company
is required to prepare its financial statements, including
CFS, where applicable, in accordance with the Rules.
The net worth for implementation of Ind AS should be
calculated based on the stand-alone financial statements
of the company as on 31 March 2014 or the first audited
financial statements for accounting period ending
subsequently.
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1 April
2015
30 June
2015
31 March
2016
30
September
2015
31
December
2015
31 March
2017
30 June
2016
30
September
2016
31
December
2016
Comparative
period
Reporting date
Equity and profit reconciliations
Mandatory implementation Phase II
The above implementation timeline for phase II companies will have comparative period ending 31 March 2017 and
annual reporting period ending 31 March 2018.
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Ind AS carve-outs
IFRS requirements
Mandatory carve-outs
Law overrides accounting
standards
Previous GAAP
Optional carve-outs
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Optional exemptions
A number of exemptions are available from the general requirement for retrospective application of Ind AS accounting
policies. Some of the key optional exemptions from other Ind AS are as follows:
Business combinations
This exemption applies to all business combinations that
occurred before the date of transition, or before an earlier
date if so elected. Applies also to acquisitions of
associates and interests in joint ventures.
If a first-time adopter does not restate its previous
business combinations, then the previous acquisition
accounting remains unchanged. However, some
adjustments - e.g. to reclassify intangibles and goodwill may be required.
Deemed cost
The deemed cost exemption permits the carrying amount
of an item of property, plant and equipment to be measured
at the date of transition based on a deemed cost. If it is
elected, then the deemed cost exemption may be based on
any of the following:
Fair value
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Impact
Paradigm shift in financial reporting
The adoption of Ind AS would entail a significant change in the
financial reporting framework used by Indian companies to
report their financial results. As a consequence, the reported
earnings (net income) and financial position (net worth) reported
by all these companies would undergo a change. Impact of this
change would vary from sector to sector and company to
company, with some sectors/companies being significantly
impacted.
Benefits of the move to Ind AS
The move to Ind AS standards will significantly enhance the
quality of and transparency in financial reporting by Indian
companies. It will also enhance the international comparability
of financial statements of Indian companies and make the Indian
capital markets more attractive. It will also reduce capital costs
and facilitate international fund-raising by Indian companies.
Applying IFRS converged standards has significant benefits for
Indian multinationals operating across the world and for
multinationals operating in India.
Broad coverage of implementation roadmap
The Ind AS standards apply not only to the company which fulfils
the net worth criterion but also to its holding, subsidiary,
associate and joint ventures. An important point is in case of
corporates that have NBFC and insurance companies as
subsidiaries. Although, NBFCs and insurance companies per se
are not required to report under Ind AS for their statutory
reporting they will have to prepare Ind AS financial statements
for consolidation by the parent.
First to adopt certain global standards
With these Ind AS standards, India will be adopting some of the
latest global standards before the rest of the world does. While
India has been working on IFRS convergence, IFRS itself, as a
body of standards, continues to evolve. Recently, the
International Accounting Standards Board (IASB) issued new
standards on revenue recognition and financial instruments, and
these standards are mandatorily applicable internationally only
from 2017 and 2018 respectively.
The notified Ind AS standards are converged with these newer
standards, including those on revenue and financial instruments,
considering the timing of Indias move to IFRS. Early adoption of
these standards as compared to the global adoption timelines,
would not only ensure that our standards remain current with or
ahead of their IFRS equivalents, but also provide a stable
platform of reporting for Indian companies for a period of time
after they move to Ind AS. If these standards are not early
adopted, Indian companies would have to adopt these newer
standards a year or two after they move to Ind AS, potentially
hampering comparability and increasing cost of compliance.
Next Steps
For Indian companies, there is very limited time for this transition, with the mandatory transition date of 1 April 2015 being just under 40
days away for companies covered under phase I. This change has an organisation wide impact, and is not just an accounting change.
The devil is in the detail. Companies will, therefore, need to plan in advance and invest time.
Given the pervasive nature of the impact of these new standards, in addition to the financial reporting impacts, companies will also
have to assess impact on other stakeholders such as investors and analysts.
Companies should immediately undertake a holistic assessment, and gear up with a robust implementation plan to deal with a change
of this magnitude within the fairly short timelines.
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Do a standardby-standard
evaluation of the
impacts
Understand
As IS policies
Analyse
impact of the
Ind-AS
standards
Conduct
interviews with
process owners
and understand
current
accounting
policies and
practices
Develop a
Project Plan
Phase I
Present
Findings to
management
Review
Implementation
Based on areas
impacted, put in
place systems
and processes to
address impacts
Phase II
Ind-AS conversion is more than just an accounting exercise and has far reaching impacts on areas other than financial reporting as
well. An effective Ind-AS conversion therefore may consider the following:
Business
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