KEY DIFFERENCES- AS VS. IND AS

Transcription

1 1 KEY DIFFERENCES- AS VS. IND AS

2 AGENDA Operating segments Related party transactions Provisions, Contingent Liabilities and Contingent Assets Revenue Construction contracts

3 IND-AS 108 OPERATING SEGMENTS

4 AS 17 VS. IND AS 108 Identification of Segments AS 17 AS 17 requires identification of two sets of segments one based on related products and services, 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. Because of ambiguity, many entities claim that they have only one segment. Ind AS 108 Ind AS 108 segment identification is based on management approach. Operating segments are identified based on the internal reports regularly reviewed by the entity s chief operating decision maker. Will result in incomparable information for similar companies. Generally popular with management as more aligned with internal reporting.

5 AS 17 VS. IND AS 108 Restatement If new segment is identified, corresponding data for comparative purpose is also required. Ind-AS If any entity changes the structure of its internal organization that causes the composition of reportable segment to change, corresponding information for earlier periods, including interim periods will be restated.

6 IND-AS 24 RELATED PARTY DISCLOSURES

7 AS 18 VS. IND AS 24 Related parties Ind AS 24 Definition of related parties is entirely different compared to AS 18. There may be several new related parties as per Ind AS 24 due to the new definition.

8 AS 18 VS. IND AS 24 Definition of close members of the family AS 18, covers Relatives who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise. Ind-AS Ind AS 24, covers Close members of the family of KMP.

9 AS 18 VS. IND AS 24 Key Management Personnel/ post employment benefit plans Ind-AS 24 covers KMP of the entity as well those of its parent as related parent Ind AS 24 includes any director whether executive or otherwise Post employment benefit plans are treated as related parties

10 IND-AS 37 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS 10

11 AS 29 VS. IND AS 37 Discounting of provisions AS 29- prohibits discounting the amounts of provision Ind AS 37 Ind AS 37- provisions to be at present value if time value of money is material The increase in liability is treated as borrowing cost.

12 AS 29 VS. IND AS 37 Recognition of Provisions As per AS 29 provisions are recognized based on legal obligation. Ind-AS 37 Provisions are recognized based on Constructive Obligation

13 IND-AS 18 & 11 REVENUE AND CONSTRUCTION CONTRACTS

14 BACKGROUND MCA issued IFRS converged standards (Ind AS) included Ind AS 115 (equivalent of IFRS 115) Revenue from contracts with customer IFRS 15 is Joint project of FASB and IASB Representation from stakeholders as to impact of this and time required IASB confirmed deferral of IFRS 15 After deferral, MCA also deferred Ind AS 115 Post deferment, MCA notified Ind AS 11 Ind AS 18

15 AS 9/ AS 7 VS. IND AS 18/11 Measurement of revenue recognized at the contractual amount of consideration Ind-AS measured at the fair value of the consideration

16 AS 9 VS. IND AS 18 Customer Loyalty programmes (CLP) Technical guide on retail sector Recognize Deferment Model and Provision Model Per guide, deferment model is preferred Ind-AS As per IND AS 18, award credits to the customers are treated as different component of sales transaction. Fair value of the award credits/ points is estimated separately at the time of sales transactions and recorded separately.

17 AS 9 VS. IND AS 18 Multiple element arrangements ICAI issued technical guide on Accounting issues in retail sector Deferment model is preferred model Ind-AS Requires separation of different components and book revenue when revenue recognition criteria is met

18 AS 9 VS. IND AS 18 Discounts, rebates and schemes Cash discount and certain schemes are reported as expenditure in financial statements. Ind-AS Under IND AS 18, rebates, discounts, schemes cost will be reduced from revenue when sales is recognized.

19 AS 9 VS. IND AS 18 Recognition of revenue from interest AS 9 requires the recognition from interest on time proportion basis as per contractual terms Ind-AS IND AS 18 requires interest to be recognised using the effective interest method as set out in Ind AS 109.

20 AS 9 VS. IND AS 18 Revenue from rendering of services As per AS 9 revenue is recognised using either by completed services or proportionate completion method. Ind-AS As per IND AS 18 revenue is recognised in the period in which services would be rendered, generally under percentage completion method.

21 AS 9 VS. IND AS 18 Revenue from Barter transactions Ind-AS IND AS 18 specifically deals with the exchange of goods and services of similar and dissimilar nature. For dissimilar goods and services, accounting will generally be on the fair value of goods and services received. For similar goods and services, no revenues and costs are to be separately recognized

22 AS 9 VS. IND AS 18 Disclosure of excise duty As per AS 9, excise duty is reduced from the gross revenue and reported on net basis. Ind-AS As per IND AS 18, only gross inflows of economic benefits received by the Company on it s own account. However, excise duty collected is duty on manufacture and is considered as revenue and excise duty payment as expenditure.

23 AS 9 VS. IND AS 18 Transfer of assets from customers No specific guidance to acquire such assets. Varied practices. Ind-AS Customer contribution that meet definition of asset, would be recognized as an asset. On initial recognition, the cost of asset is measured at fair value. Revenue will be recognized when related performance obligations are satisfied.

24 AS 9 VS. IND AS 18 Revenue from agreement of real estate development Current guidance note requires POCM for recognizing revenue on transactions and activities that have same economic substance as Construction Contracts. Ind-AS Revenue would be recognized as per Guidance Note issued by ICAI. Guidance note allows percentage of completion with specific threshold/ guidelines. Will remain as Major carve out from IFRS till Ind AS 115 is notified.

25 AS 7 VS. IND AS 11 Service concession Arrangements In 2008 and 2014, ICAI issued one exposure draft on this but final version was never issued or notified. Varied practices with some enterprises reporting infrastructure as PPE. Ind-AS Ind-AS 11 provides specific guidance for Public to Private arrangements in which The public sector entity controls/ regulates the services provided and prices Public entity controls any significant residual interest in the infrastructure. Operator would not recognize Infrastructure as PPE. It would recognize either a Financial Asset or an Intangible Asset or both.

26 JUST TO RECAP... It is clear the consequences are far wider than financial reporting issues and extend to various significant business and regulatory matters including : CFS Entities will also need to communicate the impact of IND-AS convergence to their investors to ensure they understand the shift from to IND- AS.

27 Thank you