Presentation on theme: "Ind AS December 2014 Presented by Price Waterhouse & Co. Shrenik Baid"— Presentation transcript:
1 Ind AS December 2014 Presented by Price Waterhouse & Co. Shrenik Baid Price Waterhouse & Co.
2 Agenda Ind AS in India Ind AS 101-First-time Adoption of Ind-AS December 2014
3 1 Ind AS in India Where are we? Adoption timelines Fundamental areas in which Indian GAAP and Ind-AS differ1December 2014
4 Where are we? Roadmap - ICAI - 24 March, 14 *Comparative perioda) Equity/ debt securities are listed or in process of listingon any stock exchange in India or outside Indiab) Net worth# >= Rs. 500 crorec) Holding, subsidiary, joint venture or associate of companies covered under aboveTransition date April 1, 2015Only for consolidated financial statements*Mandatory adoption date for specified companies as per roadmap finalized by ICAI Council as on 24 March, 2014 and submitted to MCA for it’s consideration.Roadmap for banks, NBFCs and Insurance Companies will be decided in consultation with RBI and IRDA.# Net worth = Share Capital + Reserves – Revaluation as at 31 March, 2014 audited standalone financial statementsDecember 2014Price Waterhouse & Co.
5 First Ind-AS Reporting period Adoption timelinesEquityP&LInd-AS Ind-AS Ind-ASEGAAP* EGAAP* EGAAP*First Ind-AS Reporting period31/12/201431/3/2015Transition DateOpening balance sheet31/3/2016AdoptionDate31/3/2017Reporting DateClosing balance sheet*EGAAP = Existing GAAPHerein, the dates have been assumed and are for illustrative purpose onlyDecember 2014Price Waterhouse & Co.
6 Fundamental areas in which Indian GAAP and Ind-AS differ Full compliance, qualification not acceptedMore guidanceFocus on substance over formFocus on risks and rewardsPresent value and fair value conceptsEstimatesRestatement of previously issued financial statementsDetailed disclosuresDecember 2014
7 Ind AS 101-First-time Adoption of Ind-AS 2.1 Introduction and Overview2.2 Exceptions and Exemptions2.3. Disclosures2December 2014
9 Introduction and Overview ObjectiveIs transparent for users and comparable over all periods presented;Provides a suitable starting point for accounting under Indian Accounting Standards (Ind-ASs); andCan be generated at a cost that does not exceed the benefits to users.ApplicationTo the first Ind AS financial statements ; andEach interim financial report under Ind-AS in the first period.Ind AS 101 is different from transition adjustments in each standard and also it is different from change in accounting policies.Ind AS 101 is for first time adoption of Ind AS onlyDecember 2014
10 Introduction and Overview Ind AS 101 requiresIdentify the period for adoption of Ind AS.Prepare an opening balance sheet at the date of transition to Ind AS.Select accounting policies that comply with Ind AS, and apply those policies for all periods presented in the first Ind AS financial statements.Consider whether to apply any of the optional exemptions from retrospective application.Apply the mandatory exceptions.Provide disclosures to explain the transition to Ind AS from Previous GAAP.The first Ind AS financial statements are:The first financial statements to contain “an explicit and unreserved statement of compliance with Ind ASs”December 2014
12 Ind AS 101 - Mandatory exceptions summary EstimatesNon-controlling interestsGovernment loansEmbedded derivativesHedge accountingDerecognition of financial assets and financial liabilitiesClassification and measurement of financial assetsImpairment of financial assetsDecember 2014Price Waterhouse & Co.
13 Ind AS 101 - Mandatory exceptions summary Estimates required byprevious GAAP?Evidence of error?Calculation consistentwith Ind AS?YesNoNoYesYesNoMake estimatereflecting conditionsat relevant dateUse previous estimateUse previousestimate and adjustto reflect Ind ASDecember 2014Price Waterhouse & Co.
14 Ind AS 101 - Optional Exemptions summary Business combinationsPPE,Investment Properties, IntangiblesCumulative translation differencesLeasesLeasesShare-based paymentsCompound Financial InstrumentsAssets and liabilities of subsidiaries, associates and joint venturesInvestments in subsidiaries, associates and joint venturesFV measurement of FinancialInstruments on initial recognitionFV measurement of financial assets or financial liabilities atinitial recognitionDesignation of financial assets andFinancial LiabilitiesDesignation of previously recognised financial instrumentsDesignation of contracts to buy or sell a non-financial itemExtinguishing financial liabilities with equity instrumentsInsurance contractsInsurance contractsCompound InstrumentsService concessions arrangementsInvestments in subsidiaries, associates and joint control entitiesRevenueSevere hyperinflationJoint arrangementStripping costNon-current assets held for sale and discontinued operationsDecommissi--oning liabilitiesDecember 2014Price Waterhouse & Co.
15 Ind AS 101 - Optional Exemptions summary Business Combinations Ind AS 103 need not be applied to combinations before date of transitionBUT, if one combination is restated, after a particular date of choice, all subsequent combinations need to be restatedWhen the exemption is usedNo change in classificationPost combination carrying amount deemed cost for assets and liabilities measured at costAssets and liabilities measured at fair value restated at date of transition – adjust retained earningsDecember 2014Price Waterhouse & Co.
16 Ind AS 101 - Optional Exemptions summary Business Combinations Assets and liabilities not recognised at the time of a business combination under previous GAAP are:Recognized as if subsidiary adopted Ind ASs at the same dateSubsidiaries not consolidated under previous GAAP are:Consolidated as if subsidiary adopted Ind ASs at the same dateGoodwill is the difference between cost of investment and net assets recognised at date of transitionDecember 2014Price Waterhouse & Co.
17 Ind AS 101 - Optional Exemptions summary Business Combinations Goodwill is recognised at the carrying amount under previous GAAP and adjusted forIntangibles that are not recognised under Ind ASIntangibles that must be recognised under Ind ASContingent consideration not recognised; andTested for impairmentGoodwill deducted from equity remains in equityDecember 2014Price Waterhouse & Co.
18 Ind AS 101 - Optional Exemptions summary Property, Plant and Equipment For property, plant and equipment, an entity can choose to measure the value using:• Carrying value as per previous GAAP (para D7AA of Ind AS 101).Cost in accordance with Ind AS.• Fair value at the date of transition as deemed cost.• A revaluation carried out at a previous date (like a IPO) less accumulated depreciation till the date of transition as deemed cost, subject to certain conditions.This exemption can also be applied to intangible assets that meet thecriteria for revaluation in Ind AS 38 and to investment properties wherethe cost method in Ind AS 40 is applied. The exemption may not be usedfor any other assets or for liabilities.If a company elects option under para D7AA, then its Ind AS financial statement will not qualify to be compliant with IFRS.December 2014Price Waterhouse & Co.
19 Ind AS 101 - Optional Exemptions summary Other key exemptions ImpactCumulative translation differencesThe cumulative translation reserve may be reset to zero.LeasesA company may elect to assess whether an arrangement contains a lease at the date of transition, rather than at the inception of the arrangement.Share-based paymenttransactionsA company may choose (but is not required) to apply Ind AS 102 to any equity instruments that were granted before date oftransition to Ind ASs.In addition, a company may choose (but is not required) to applyInd AS 102 to a liability relating to a cash-settled share-based payment that was settled prior to the date of transition to Ind AS.Compound financialinstrumentsA compound financial instrument does not need to be bifurcated if the liability component is not outstanding at the transition date.December 2014Price Waterhouse & Co.
20 Ind AS 101 - Optional Exemptions summary Other key exemptions ImpactAssets and liabilities of subsidiaries,associates and joint venturesA subsidiary that adopts Ind AS later than its parent can elect to apply Ind AS 101 or to use the carrying amounts of its assets and liabilities included in the consolidated financial statements, subject to eliminating any consolidation adjustments.If a parent adopts Ind AS later than its subsidiary, the parent, in its consolidated financial statements, must measure the assets and liabilities of the subsidiary at the same carrying amounts as in the Ind AS financial statements of the subsidiary, adjusting for normal consolidation entries.Investments insubsidiaries, jointlycontrolled entities and AssociatesIn their separate financial statements, first-time adopters can measure their investment in subsidiaries, jointly controlled entities and associates at either:• Cost, determined in accordance with Ind AS 27;• fair value at the Ind AS transition date, or• Deemed cost, defined as previous GAAP carrying amount at the Ind AS transition date.December 2014Price Waterhouse & Co.
22 Ind AS 101 - Disclosures Comparative information An entity is mandatorily required to provide comparative financial statements for atleast one period. Entity can provide comparative financial statements for more than one period.Opening balance sheet (related disclosures in notes) as at transition date to be presented.Comparative financial statement to be presented in accordance with Ind AS.Non Ind AS comparative information and historical summariesAllows entities to disclose non-Ind AS information in the Ind AS financial statement.Any financial statement information in accordance with previous GAAP shall be labelled as Previous GAAP information and disclose the nature of main adjustments required to make it comply with Ind AS.Adjustment of GAAP differences on Ind AS transition dateGAAP differences on Ind AS transition date are adjusted directly in retained earnings (or, if appropriate, another category of equity).December 2014Price Waterhouse & Co.
23 3 Adoption of Ind-AS Challenges in adopting Ind-AS Managing the Change Project Management FrameworkModel steps for Ind AS implementation3December 2014
24 Challenges in adopting Ind-AS Managing and communicating the changeData capturingAligning different policies, practices and system across the group having presence in multiple jurisdictions and having different reporting requirements including tax and statutory reportingConforming accounting with changes in businessAligning the business practices considering Ind AS accounting requirementsTraining across the organizationLack of appropriately skilled resources in the marketDecember 2014
25 Establishing an environment to support the project DateManaging the ChangeProject FrameworkEstablishing an environment to support the projectControls and DocumentationEnsuring the conversion process is controlled and documentedTechnical Accounting AdviceEmbedding the ChangeCreating a sustainable reporting environmentTechnical accounting information along with practical application adviceCommunication and Knowledge SharingMonitoring the pace and communication of the workDecember 2014Price Waterhouse & Co.
26 Project Management Framework DateProject Management FrameworkA well thought out project structure on lines below ensures that an entity is able to get appropriate management focus on project and on technical front “get it right the first time” which is very essential for a successful project.Steering CommitteeDecision MakerAuditorTRCTechnical Review CommitteeINVITEESIssue OriginatorsExpertWork StreamsTechnical support materialRoles & ResponsibilitiesTimelinesNodal officesNeedsTechnical ChampionsWS1WS2WS3WS4LoansIncome recognitionFinancial ReportingEmployee benefitsInvestmentsDerivativesConsolidationInd AS 107Segmental ReportingDecember 2014
27 Model steps for Ind AS implementation DateModel steps for Ind AS implementationDiagnostic studyIdentification of key GAAP differences between IGAAP & Ind AS and accounting policy options under Ind AS,Ind AS 101 – First-time adoption of Ind AS implication,Finalise accounting policy under Ind AS and optional exemption under Ind AS 101 to be opted.Ind AS conversionQuantification of GAAP differences,Preparation of Ind AS financial statement,Ensuring completeness of disclosures,Audit of Ind AS financial statement.December 2014