Ind AS
Indian Accounting Standards (Ind AS) represent a comprehensive framework for financial reporting that aligns with International Financial Reporting Standards (IFRS). These standards ensure greater transparency, comparability, and reliability in financial statements, making them more relevant for stakeholders and investors.
What We Offer?
Accounting Policy Preparation
Development of comprehensive accounting policies that fully comply with Ind AS requirements
Opening Balance Sheet Conversion
Accurate conversion of opening balance sheets to Ind AS format for seamless transition
Impact Analysis
Comprehensive assessment of Ind AS implementation impact on your financial statements
Employee Training
Specialized training programs for your team on Ind AS accounting and presentation requirements
Implementation Support
Complete implementation of Ind AS in your financial statements with expert guidance
Financial Statement Preparation
Preparation of financial statements in full compliance with Ind AS standards
Advisory Services
Expert consultation and advisory services for specific Ind AS standards and their application
Process of Ind AS Implementation
1Planning and Roadmap:
Effective planning is crucial for successful Ind AS implementation. A well-structured roadmap helps complete all tasks in a timely manner and ensures all stakeholders are well-informed for taking necessary actions. This approach also facilitates compliance with SEBI requirements by enabling timely submission of reports and results.
2Impact Analysis:
The next critical step involves identifying differences between existing accounting practices and Ind AS requirements, followed by a thorough analysis of how these differences will impact the company's financial statements. This analysis helps organizations understand the financial and operational implications of the transition.
3Implementation:
Once the impact is understood, the actual implementation process begins. This includes converting opening balances, adjusting accounting policies, training staff, and preparing financial statements in accordance with Ind AS standards.
Applicability
The Ministry of Corporate Affairs has notified the Companies (Indian Accounting Standards) Rules 2015. These rules specify the obligation to comply with Indian Accounting Standards in the following phased manner:
Important Note: Applicability will be checked on Standalone basis. Once applicable to one company it is applicable for Holding, Subsidiary, Associate company or Joint Venture
The phased implementation approach ensures a smooth transition for companies of different sizes and complexities, allowing them adequate time to prepare and implement the new standards effectively.
Comparisons
| IND AS No | IGAAP | IND AS |
|---|---|---|
| IND AS-1 | The requirements for presentation of financial statements are set out in Schedule III of Companies Act 2013. Comparative figures are presented for one year. Some items such as revaluation surplus which are treated as OCI in IND AS are directly recognised in equity |
IND AS 1 does not include any illustrative format for presentation of financial statements. The ICAI has issued an exposure draft of the IND AS-compliant Schedule III. Comparative figures are presented for one year. When a change in accounting policy has been applied retrospectively or items in financials are restated/reclassified, a balance sheet is required as at the beginning of the earliest period presented An entity is required to present all items of income and expense including components of other comprehensive income in a period in a single statement of profit and loss |
| IND AS-2 | Cash Discounts received from Creditors are shown as Discount received in P&L Subsequent upward and Downward Revaluation of Inventory Impacts Inventory. Inventories purchased on deferred settlement terms are not explicitly dealt with in AS 2 |
Trade Discounts, rebates and other similar items are to be deducted in determining Cost of Purchases. Initial downward revaluation and subsequent upward revaluation is to be reduced from Stock expense booked for the year in the year of upward revaluation. Difference between the purchase price for normal credit period and the amount paid for deferred settlement terms is recognised as interest expense |
| IND AS-8 | Prior Period items are included in determination of profit or loss of the period in which the error was discovered Does not consider Constructive Obligations |
Prior Period items are corrected by restating the comparative amounts for prior periods presented in which the error occurred Provisions for constructive obligations must be created |
| IND AS-16 | Spare Parts and Servicing: Currently spare parts are held as inventories and as and when it is consumed it is treated as Consumption. Special Tools are held as Other Current Assets Component Approach Components which increases the capacity is capitalized Fixed Assets are depreciated together with the all the major components Dismantling Cost: Treated as Expense during the year incurred Replacements: Are capitalised at cost Derecognition: Derecognized when the asset is disposed |
Spare Parts and Servicing: Major spare part, must be recognized as Property, Plant and Equipment Component Approach: Components must be treated as a separate PPE and depreciation is charged as per the useful life of the component Dismantling Cost: Estimation of the cost of dismantling must be done and added to cost of the Asset, for which depreciation will be charged along with the Asset Replacements: Carrying amount of the existing part replaced should be derecognized New part must be recognized as per the Cost/Fair Value Derecognition: Can be derecognized on disposal Derecognized when there are no future economic benefits |
| IND AS-17 | Excluded | Land Lease: Land Lease is included. Therefore, accounting treatment is similar to that of other leasehold items (operating and finance lease) |
| IND AS-18 | Excise Duty:It is shown as a deduction from revenue | Excise Duty: This standard requires inclusion of excise duty in revenue. Excise duty will be added to cost of raw material consumed. |
| IND AS-20 | Non-monetary grants: AS 12 requires that government grants in the form of nonmonetary 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 |
Non-monetary grants: IND AS 20 requires 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. |
| IND AS-24 | Post-employment benefit plans are not included as related parties | Related Party includes post-employment benefit plans for the benefit of employees of the reporting entity or any entity that is related to the reporting entity |
| IND AS-33 | No separate disclosure for EPS from continuing and discontinued operations | Separate disclosure for EPS from continuing and discontinued operations |
| IND AS-37 | Provisions: Provisions are not recognised based on constructive obligations Contingent Asset: Contingent assets are neither recognised nor disclosed in the financial statements. |
Provisions: Provisions for constructive obligations should also be recognised A constructive obligation is an obligation that derives from an entity's actions where, by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities. Contingent Asset: Contingent assets are not recognised but disclosed in the financial statements when an inflow of economic benefits is probable. |
| IND AS-38 | Intangible Assets Measurement: Measured only at cost. Useful Life: Useful life of an intangible asset will not exceed ten years |
Intangible Assets: Measurement: Intangible assets can be measured at either cost or revalued amounts Useful Life: Useful life may be finite or indefinite |
| IND AS-40 | Investment Properties: Definition: AS 13 defines investment property as an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations. Measurement: Measured at cost less impairment |
Investment properties: Definition: Investment property is land or building (or part thereof) or both held (whether by owner or by a lessee under a finance lease) to earn rentals or for capital appreciation or both. Measurement: Measured using the cost model. Fair value model is not permitted. Detailed disclosures pertaining to fair value must be given. |
| IND AS-101 | Property, Plant and Equipment's: Entities have an option to use previous GAAP carrying values of property, plant and equipment, intangible assets and investment properties as on the date of transition as deemed cost under IND AS Non-Current Assets Held for Sale or discontinued Operations: Under IND AS 101, an entity may measure such assets or operations at the lower of carrying value and fair value less cost to sell Leases: Also, if there is any land lease newly classified as finance lease then the first-time adopter may recognize assets and liability at fair value on the transition date; any difference between those fair values is recognised in retained earnings. |
Major Changes That May Impact Financial Statements
The following are major changes that may impact the Financial Statements of most companies due to Ind AS:
IND AS 40: Investment Property
Definition: Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.
Examples of Investment Property:
- A building owned by the entity and leased out under one or more operating leases
- A building that is vacant but is held to be leased out under one or more operating leases
Examples that are not Investment property:
- Owner occupied property, which included property held for future use as owner occupied property
- Property occupied by employees
Duel Use Properties:
Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. For example, an office could be sub divided by the owner with some floors being rented to tenants while retaining others for own use.
IND AS 40 states that if the two portions could be sold separately, an entity should account for the portions separately. In the event that no separation is possible, the property is an investment property only if an insignificant proportion is used for non-investment property purposes.
IND AS 105: Discontinued Operations
Classification: A component of an entity that either has been disposed of or is classified as held for sale
Presentation:
- A single amount in the statement of profit or loss comprising the total of post-tax profit or loss of discontinued operations
- Analysis of single amount into:
- The revenue, expense and pre-tax profit or loss of discontinued operations
- The related income tax expense as
- The analysis shall be presented in the notes.
- The net cash flows attributable to the operating, investing and financing activities of discontinued operations. These disclosers may be presented in notes or in Financial Statements
If the Land and Building is held for the sale then it must be classified as Non-Current Assets held for Sale. Depreciation for the same must not be provided after it is decided that it is held for Sale. The value of Non-Current Asset held Sale shall be the carrying value or the fair value less cost of sales whichever is lower.
Liabilities associate with the above Asset will be also be disclosed separately on the face of Balance sheet.
IND AS 32: Financial Instruments
Financial Assets: A financial asset is any asset that is:
- cash
- an equity instrument of another entity
- a contractual right to receive cash or another financial asset from another entity
Financial Liabilities: A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity.
IND AS 109: Expected Credit Loss
As per IND AS the concept of provision for IND AS is changed and is computed as Expected Credit Loss. The below mentioned example illustrates the same:
Expected Credit Loss
An entity must frame a provision matrix (risk matrix) to estimate the Expected Credit Loss (ECL).
For example: ABC Ltd a manufacturer has a portfolio of trade receivables of Rs 6 Crores. ABC Ltd uses a provision matrix to estimate the ECL. The matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. Every year, the historically observed default rates are observed and changes in the estimates are analysed. ABC Ltd has the following provision matrix and calculated the ECL on its Trade receivables of Rs 6 Crores as follows:
| Default Rate | Gross carrying amount | Lifetime expected Credit Loss (Gross carrying amount X Default Rate) | |
|---|---|---|---|
| Current | 0.3% | 3,00,00,000 | 90,000 |
| 1-30 days past due | 1.6% | 1,50,00,000 | 2,40,000 |
| 31-60 days past due | 3.6% | 80,00,000 | 2,88,000 |
| 61-90 days past due | 6.6% | 50,00,000 | 3,30,000 |
| More than 90 days past due | 10.6% | 20,00,000 | 2,12,000 |
| Total | 6,00,00,000 | 11,60,000 |
Preference Share Capital: As per IND AS 109 Preference Share Capital shall be classified either as Share Capital or as Financial Liability as per its nature. Ex: Convertible Preference Share is classified as Share Capital as after the expiry of the said period the shares are converted as equity shares which is part of Share Capital. If the Preference share capital is in the nature of finance like non-convertible redeemable preference share it will be classified as Financial Liability and disclosed separately in the face of Balance Sheet.
Preference Share Capital with below market rate of dividend: If Preference Share are issued with below market rate of dividends then the Equity portion and Financial Liability portion will be classified separately. The difference between the Fair Value of the Preference Share Capital and the carrying value will be the Equity Component. The Equity Component will be amortised over the period of the Preference Share Capital
IFRS Advisory Services
International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB). These standards are becoming the global benchmark for the preparation of public company financial statements.
Every corporate entity needs to take necessary steps in understanding these new standards, training its staff, and ensuring a smooth transition to IFRS compliance.
The cost of convergence or first-time adoption of IFRS depends on several factors:
- Time and efforts involved in the transition process
- Associated risks and complexities
- Type of industry and business operations
Our dedicated and diverse team of professionals, which possesses extensive experience, will provide you with the following services:
- Frame accounting policies in accordance with IFRS
- Convergence and first-time adoption of IFRS
- Transaction accounting under IFRS framework
- IFRS impact analysis and comprehensive study
- Training on IFRS concepts and applications
- Preparation of IFRS Accounting manual
Why Choose RSCA For Ind AS Services?
At RSCA, we understand the complexities involved in transitioning to Ind AS. Our team of experienced chartered accountants in Bangalore provides comprehensive support throughout your Ind AS implementation journey.
We help organizations navigate the transition smoothly, ensuring compliance with all regulatory requirements while minimizing disruption to business operations. Our expertise in Ind AS and IFRS standards makes us your ideal partner for accounting standards implementation.
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