Ind AS transition. Journey of Indian corporates. July 2017

Transcription

1 Ind AS transition Journey of Indian corporates July 2017

2 Preface Financial Year will be remembered for various reasons demonetization, applicability of Income Computation and Disclosure Standards (ICDS), Goods and Services Tax (GST) bill seeing the light of the day and many more. However, one of the most significant events for Indian corporates in FY was the transition to Ind AS. The journey from erstwhile Indian Generally Accepted Accounting Principles (IGAAP) to International Financial Reporting Standard (IFRS) equivalent standards, which started about a couple of years back, finally got completed for companies with net worth of over ` 500 crore. Also, the second phase entities (all listed companies or companies with net worth over ` 250 crore) have embarked on the journey as they transition to Ind AS with effect from FY The enthusiasm and commitment shown by the corporates along with the backing of regulators and professionals ensured that the transition was a true success. The journey was challenging yet very rewarding. Indian corporates and their financials are now at par with globally acceptable reporting standards. The long-term benefits of this transitioning include significantly easy access to global markets, enhanced trust of investor community and overall increased transparency in financial statements. Several areas of Ind AS require the application of significant judgment and financial reporting is based on various management estimates. To understand the impacts of this transition, we believe this is the best time to analyze and evaluate the first-time Ind AS results of BSE top 100 companies. In this study, we have extended the area of research and are happy to share our insights.

3 Contents Overview analysis by sector Key standards that made their presence felt Key disclosures Conclusion Glossary Annexure

4 01 Overview Our publication is based on our analysis of the financial results published by all companies in BSE s top 100 list up to 31 May Out of the 100 entities, 18 companies being banks, non-banking financial companies (NBFCs) or insurance companies have been excluded as Ind AS is not yet applicable to them. Further, 7 companies close their respective financial years with different year-end dates (other than March year-end). Accordingly, these entities had not reported their financial statements as per Ind AS as at 31 March 2017 and thus have been excluded as well. Therefore, our study is based on observations of 75 standalone financial statements. In this report, we discuss the overall impact as well as sector-wise impact of the key Ind AS requirements in relation to the previous IGAAP accounting. Our analysis highlights areas that have significant impact on companies net income and net worth. The areas include revenue recognition, consolidation, financial instruments, employee benefits, business combinations, and property, plant and equipment (PPE) among others. Generally revenue recognition, business combination and PPE have a sector-specific impact, while financial instruments, employee benefits cost and consolidation have a companyspecific impact. Insights Additionally, on gross basis, adjustments in relation to Ind AS transition resulted in increase in net worth by ` 226,000 crore, which was offset by another set of adjustments, which resulted in decrease in net worth by ` 127,000 crore. Therefore, the net increase was ` 99,000 crore. The majority of the companies covered in the analysis have availed exemptions under Ind AS 101 relating to deemed cost of property, plant and equipment, fair value measurement of financial assets and liabilities, share based payments and business combinations. For many of the companies, the increase in net worth can possibly lead to reduction of return on capital employed. Overall, all the companies were able to file the Ind AS financials on time, indicating that the transition was well planned and executed. ` 1,34,400 crore Increase in the net worth of 55 companies ` 35,000 crore Decrease in the net worth of 17 companies ` 5,200 crore Increase in the profit of 39 companies ` 40,900 crore Decrease in the profit of 35 companies 4 Ind AS transition

5 01 Overview Net worth impact Negative Positive Automobiles and (107) 9,296 transportation Consumer/Industrial (2,293) 16,994 products and retail Mining and metals (25,916) 5,854 Oil and gas (386) 49,438 Pharmaceuticals and (353) 5,750 chemicals Real estate, (3,795) 3,503 Infrastructure, power and utilities Technology (IT/IES) - 15,338 Telecom, media and (2,217) 28,230 entertainment Grand total (35,067) 1,34,404 Number of companies Net profit impact Negative Positive Automobiles and (551) 1,763 transportation Consumer/Industrial (1,621) 1,036 products and retail Mining and metals (24,929) -317 Oil and gas (8,919) 1,031 Pharmaceuticals and (1,145) 117 chemicals Real estate, Infrastructure, (409) 688 power and utilities Technology (IT/IES) (3,133) 713 Telecom, media and (201) 254 entertainment Grand total (40,908) 5,285 Number of companies EBITDA impact Negative Positive Automobiles and transportation (354) 1,997 Consumer/Industrial products and retail (797) 1,169 Mining and metals (23,071) 722 Oil and gas (830) 2,105 Pharmaceuticals and chemicals (557) 163 Real estate, Infrastructure, power and utilities (512) 1,035 Technology (IT/IES) (3,177) 599 Telecom, media and entertainment (616) 303 Grand total (29,914) 8,092 Number of companies Revenue impact Negative Positive Automobiles and (1,169) 295 transportation Consumer/Industrial (5,493) 28 products and retail Mining and metals (126) 4,375* Oil and gas (7,232) 0 Pharmaceuticals and (246) 119 chemicals Real estate, (229) 4,568* Infrastructure, power and utilities Technology (IT/IES) (808) 42 Telecom, media and (59) 0 entertainment Grand total (15,362) 9,427 Number of companies *Positive impact in revenue on account of merger of entities under common control. Ind AS transition 5

6 02 analysis by sector The key apprehensions of all stakeholders about the transition to Ind AS are whether it will significantly impact key performance indicators of companies and whether it will bring significant volatility in the financial statements. Our analysis suggests that the transition impact on some of the key performance metrics has been a mixed bag. Insights Generally, the Ind AS transition has had to a positive impact on net worth (increase in net worth of 55 companies). Revenues of the majority (53 out of 75 companies) have decreased. EBIDTA and profits have been adversely impacted. Overall, all the companies were able to file the Ind AS financials on time, indicating that the transition was well planned and executed The impact of Ind AS on key performance indicators across multiple sectors is as follows: Sector Consumer/Industrial products and retail No. of Net worth Revenue EBIDTA Profit companies 21 é ê é êé Mining and metals 9 êé êé êé ê Oil and gas 8 é ê êé ê Technology (IT/IES) 6 é êé êé êé Automobiles and transportation 13 é ê é é Real estate, infrastructure, power 5 êé êé êé êé and utilities Telecom, media and entertainment 5 é ê êé é Pharmaceuticals and chemicals 8 é ê êé êé Positive é Negative ê Mixed êé 6 Ind AS transition

7 analysis by sector 02 on net worth by sector Number of companies on net worth as on 31 March 2016 Sector perspective CIPR MM OG IT AT RIPU TME PC Positive Negative One of the key metrics representing the financial soundness of a company is its net worth. Net worth is directly impacted from the accounting positions taken and options availed by the company. It appears that a number of companies were able to successfully identify and utilize the various accounting policy choices available to their advantage. The impact has generally been favourable on some sectors, such as consumer/industrial products and retail, oil and gas, automobiles and transportation, telecom, media and entertainment, pharmaceutical and chemicals, and information technology. On the other hand, sectors such as mining and metal, real estate, infrastructure, and power and utilities have shown a mixed trend. 7 1 Number of companies Less than 5% % to 10% Positive % to 20% % to 30% Negative 4 2 More than 30% Some of the primary reasons for the increase in net worth are as follows: Reversal of proposed dividend, which was earlier recognized as per IGAAP Fair valuation of PPE Fair valuation of investments, resulting in a positive impact to retained earnings On the other hand, some key factors contributing to the adverse impact on net worth include: Reclassification of financial instruments from equity classified instruments under erstwhile IGAAP to debt classified in Ind AS Recognition of impairment loss on financial assets Fair valuation of PPE, which also had a positive impact on the net worth of a few companies Change in the method of depletion of oil and gas assets for oil and gas companies Net worth increase ` 67,970 crore 3 companies fair value of investments in group companies ` 17,300 crore 7 companies fair value of PPE ` 30,000 crore 23 companies reversal of proposed dividend Consumer/Industrial products and retail Technology Telecom, media and entertainment Mining and metals Automobiles and transportation Pharmaceuticals and chemicals Oil and gas Real estate, infrastructure, power and utilities CIPR IT TME MM AT PC OG RIPU Out of the 75 companies covered in our analysis, 1 company had not reported equity reconciliation and 2 companies had reported no impact on net worth as on as on 31 March Ind AS transition 7

8 analysis by sector 02 on profit by sector on profit for the year ended 31 March 2016 Sector perspective Number of companies CIPR MM OG IT AT RIPU TME PC Number of companies Positive Negative Positive Negative Less than 10% 10% to 50% More than 50% ` 5,200 crore Increase in profit of 39 companies ` 40,900 crore Decrease in profit of 35 companies Profitability under Ind AS has been impacted differently for companies. While its impact has generally been favorable on sectors such as automobiles and transportation, telecom, media and entertainment and information technology, sectors such as oil and gas and mining and metals have been impacted adversely. s on profit for most of the companies were in the range of 0% to 10%. However, in some companies the impacts were significantly higher. The primary reasons for increase in profits were: Measurement of investments at fair value through profit and loss Capitalization of spares as PPE Reclassification of government grant to profit and loss, which were earlier taken to capital reserve as per IGAAP The increase in profits was offset partially or in some cases there was a decrease in profits owing to the following factors: Recognition of cost of employee stock options at fair value Recognition of impairment loss on financial assets using the expected credit loss (ECL) model Change in the method of depletion of oil and gas assets, which had a significant negative impact on the net profit of the companies in the oil and gas sector Fair valuation of PPE on the transition date positively impacted net worth but increased the depreciation charge for subsequent years, which adversely impacted profits Consumer/Industrial products and retail Technology Telecom, media and entertainment Mining and metals Automobiles and transportation Pharmaceuticals and chemicals Oil and gas Real estate, infrastructure, power and utilities CIPR IT TME MM AT PC OG RIPU Out of the 75 companies covered in our analysis, 1 company had reported no impact on its net profit for the year ended 31 March Ind AS transition

9 analysis by sector 02 on revenue by sector on revenue (net of excise) for the year ended 31 March 2016 Sector perspective Number of companies CIPR MM OG IT AT RIPU TME PC Positive Negative Number of companies Less than 2% 2% to 5% More than 5% Positive Negative ` 2,17,600 crore Excise duty included in revenue ` 15,300 crore Decrease in revenue of 53 companies Revenue for almost for all companies across sectors has been adversely impacted (excluding the excise duty amount). The sectors experiencing the highest impact on their revenue include consumer/ industrial products and retail, automobiles and transportation and oil and gas. For nearly 50% of the companies, the transition resulted in a reduction of revenue by up to 2%. In some companies the reduction was over 5%. Potential reasons for a decrease in revenue could be: Recognition of revenue at fair value with adjustments for discounts, incentives, rebates etc. We believe that in some companies, there was a financing component in the transactions. They have now factored this under Ind AS by reporting revenue as the discounted value of future cash flows. This may have resulted in reduction of revenue. The details of this impact shall become more evident once annual reports along with detailed disclosures are published by the companies. One of the requirements of Ind AS is to include excise duty in revenues, as it is a levy on production and not sales. Accordingly, to the extent of excise duty reported, revenues are expected to increase. The above analysis has been done on revenue excluding excise duty. Inclusion of excise duty will result in decrease in gross margin percentage across sectors. Consumer/Industrial products and retail Technology Telecom, media and entertainment Mining and metals Automobiles and transportation Pharmaceuticals and chemicals Oil and gas Real estate, infrastructure, power and utilities CIPR IT TME MM AT PC OG RIPU Out of the 75 companies covered in our analysis, 8 had reported no impact on their revenue for the year ended 31 March Ind AS transition 9

10 analysis by sector 02 on EBIDTA by sector on EBIDTA for the year ended 31 March 2016 Sector perspective Number of companies Positive 10 CIPR MM OG IT AT RIPU TME PC Negative Number of companies Positive Less than 20% 20% to 50% More than 50% Negative ` 8,000 crore Increase in EBITDA of 45 companies ` 30,000 crore Decrease in EBITDA of 30 companies For 45 out of the 75 companies, EBIDTA as per Ind AS financial statements changed positively. However, for the remaining 30 companies, EBIDTA decreased. It is worth noting that the overall EBIDTA increase for 45 companies aggregated to approximately ` 8,000 crore, while the decrease for the remaining 30 companies was approximately ` 30,200 crore. The primary reasons for decline in EBIDTA are as follows: One oil and gas company recorded an impairment loss to the extent of approximately ` 20,000 crore at the time of the Ind AS transition One steel company recorded reclassification gain on equity instrument from profit and loss to other comprehensive income (OCI) to the extent of approximately ` 3,500 crore Consumer/Industrial products and retail Technology Telecom, media and entertainment Mining and metals Automobiles and transportation Pharmaceuticals and chemicals Oil and gas Real estate, infrastructure, power and utilities CIPR IT TME MM AT PC OG RIPU One IT company reversed approximately ` 3,000 crore from the profit and loss account to reserves and surplus relating to profit on transfer of business The sectors that generally witnessed an increase in EBIDTA were consumer/industrial products and retail and automobiles and transportation. 10 Ind AS transition

11 03 Standards that made their presence felt This section highlights the key differences between IGAAP and Ind AS and the impact of the key standards. We observed that Ind AS 109 Financial Instruments impacted almost all companies, primarily because there was no equivalent standard on financial instruments under erstwhile IGAAP. Insights Most companies were able to select the accounting policy options available under Ind AS 101 to their advantage. The majority of the companies continued with IGAAP numbers as deemed cost basis for PPE Revenue recognition standards had a negative impact on the majority of the companies across sectors. The impact of Ind AS on key performance indicators across multiple sectors is as follows: Sector Net worth EBIDTA Profit Ind AS 101 First-time Adoption of Ind AS é - - Ind AS 109 Financial Instruments é é êé Ind AS 16 Property, Plant and Equipment êé êé êé Ind AS 12 Income Taxes ê - - Ind AS 18 / 11 Revenue Recognition/Construction Contracts ê ê ê Ind AS 19 Employees Benefits êé êé êé Ind AS 10 Events after the Reporting Date é é é Positive é Negative ê Mixed êé Ind AS transition 11

12 Standards that made their presence felt 03 Ind AS 101 First-time Adoption of Ind AS Ind AS 101 prescribes the procedures that an entity is required to follow while adopting Ind AS for the first time. The underlying principle is that a first-time adopter should prepare financial statements as if it had always applied Ind AS. However, it establishes two types of departures from the principle of full retrospective application of Ind AS: It prohibits retrospective application of some aspects of other standards (mandatory exceptions). It grants a number of exemptions from some of Key policy choices available at transition date Ind AS 101 First-time Adoption of Ind AS Policy choices available under Ind AS 101 the requirements of other standards (voluntary exemptions). The following summary explains the key policy choices available to a company at the transition date and the number of companies that actually availed exemptions relating to fair value of PPE and investments and retrospective applicable of Ind AS. The rest of the companies opted to continue with previous IGAAP carrying value as deemed cost for PPE and Investments. Opted fair value as deemed cost No. of companies Opted for carrying value as deemed cost Retrospective adoption PPE Investments in subsidiaries, associates and joint ventures Business combination Foreign currency translation reserve reset to zero * * We believe that many companies may have opted for this optional exemption, but there may not be an impact on net worth as it is a reclassification within reserves. We believe that the majority of the companies have continued to avail the benefit of para 46A of AS 11 of erstwhile IGAAP as it was extended to Ind AS in relation to borrowings that existed as of 31 March 2016 (carve-out under Ind AS 101). As on the transition date, only 25 companies had presented their equity reconciliation statements. Accordingly, for the purpose of evaluation of the impact of Ind AS 101, we have considered equity reconciliation for the year ended 31 March ` 43,900 crore Increase in net worth of 3 companies due to fair value of PPE ` 68,600 crore Increase in net worth of 2 companies due to fair value of investments in group companies ` 26,600 crore Decrease in net worth of 4 companies due to fair value of PPE ` 630 crore Decrease in net worth of 1 company due to fair value of investment in group companies 12 Ind AS transition

13 Standards that made their presence felt 03 Ind AS 109 Financial Instruments Under IGAAP, there was no accounting standard on financial instruments. Ind AS 109 provides comprehensive, detailed and Particulars IGAAP Ind AS Fair value of financial assets / financial liabilities ECL model Compound financial instrument No requirement of fair valuation of financial assets / financial liabilities Incurred credit loss model for provision on assets Generally instrument classified either as equity or debt broadened guidance for accounting of financial instruments under the Ind AS framework. Some key impact areas under Ind AS are as follows: Financial assets / financial liabilities required to be recorded at fair value Expect credit loss model applicable on financial assets Split accounting applicable for compound instruments Generally a positive impact on net profit and net worth Negative impact on the profits and net worth of companies Split accounting may have a positive or a negative impact on the net worth of companies ` 55,000 crore Increase in net worth of 47 companies due to fair value of financial instruments ` 4,000 crore Decrease in net worth of 13 companies due to ECL ` 3,300 crore Decrease in net worth of 9 companies due to fair value of financial instruments on net worth standalone as at 31 March 2016: on profit standalone for the year ended 31 March Positive Negative No impact Positive Negative No impact Out of 75, 74 companies had presented their equity reconciliation statement. Ind AS transition 13

14 Standards that made their presence felt 03 Ind AS 109 Financial Instruments Others areas: Implementation of Ind AS 109 in relation to the following financial instruments has impacted the profit and net worth of companies: 1. Discounting of security deposits : Under IGAAP, financial assets such as security deposits were recorded at their transaction value. Under Ind AS, such financial assets are required to be recorded at fair value. Due to fair valuation requirements, companies are required to record finance income / cost or amortization of deferred cost or revenue. Consequentially, recording of finance income or cost on effective rate of interest (EIR) basis and amortization of deferred revenue or cost on straight line basis have an impact on the profit and net worth of companies. 2. Fair value of derivatives : Under IGAAP, only MTM loss were required to be recognized. Under Ind AS, both MTM gains and losses on derivatives are required to be recognized, which impacts the profit and net worth of companies. 3. Financial guarantees: Under IGAAP, financial guarantees were disclosed as contingent liability. Under Ind AS, financial guarantees are required to be recognized at their fair value. 14 Ind AS transition

15 Standards that made their presence felt 03 Ind AS 16 Property, Plant and Equipment Particulars IGAAP Ind AS Capitalization of stores and spares Major overhaul expenses Change in depreciation / depletion method Major spares and stand-by equipment generally treated as inventory Treated as repair and maintenance expenses Change in accounting policy Recognized as PPE when they satisfy the criteria for recognition of PPE under Ind AS 16 Recognized as PPE when they satisfy the criteria for recognition of PPE under Ind AS 16 Change in accounting estimates Positive impact on net profit and net worth Positive impact on net profit and net worth due to capitalization of major overhaul expenses Positive impact on net profit and net worth of companies ` 700 crore Increase in net worth of 8 companies due to capitalization of spares ` 2,900 crore Increase in profits of 36 companies due to reduction in depreciation charge ` 4,000 crore Decrease in profits of 29 companies due to increase in depreciation charge ` 840 crore Decrease in net worth of 8 companies due to enabling assets etc. on net worth standalone as at 31 March 2016: on profit standalone for the year ended 31 March Positive Negative No impact Positive Negative No impact Out of 75, 74 companies had presented their equity reconciliation statement. Ind AS transition 15

16 Standards that made their presence felt 03 Ind AS 12 Income Taxes Particulars IGAAP Ind AS Approach Income statement approach Recognition Where an entity unabsorbed depreciation or carry forward of losses under tax laws, deferred tax assets to be recognized only when there was virtual certainty Ind AS transition adjustments Deferred tax presentation Deferred tax charge presented in profit and loss statement Balance sheet approach Reasonable certainty required by recording deferred tax assets Deferred tax required to be recognized on all Ind AS transition date adjustments Deferred tax recognized in OCI pertains to items recognized in OCI Resulted in additional deferred tax charge More companies may record deferred tax asset Deferred tax required to be recognized on all Ind AS transition date adjustments ` 5,100 crore Increase in net worth of 24 companies ` 7,400 crore Increase in net profits of 28 companies ` 18,600 crore Decrease in net worth of 34 companies ` 2,100 crore Decrease in net profits of 44 companies on net worth standalone as at 31 March 2016: on profit standalone for the year ended 31 March Positive Negative No impact Positive Negative No impact Out of 75, 74 companies had presented their equity reconciliation statement. 16 Ind AS transition

17 Standards that made their presence felt 03 Ind AS 18 Revenue recognition Particulars IGAAP Ind AS Fair value considerations Point of revenue recognition Presentation of excise duty Revenue recorded on transaction value Revenue recognized on transfer of risk and rewards incidental to ownership of goods Revenue presented excluding excise duty Rebates, discount etc. netted off with revenue Recorded at its present value if the financing component is significant Addition criteria is entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold Revenue presented including excise duty Negative impact on revenue No significant impact observed Excise duty included in revenue aggregates to ` 2,17,600 crore ` 15,300 crore Decrease in revenue of 53 companies Positive impact on revenue on account of merger of entities under common control on revenue impact on standalone revenue for the year ended 31 March Positive Negative No impact Ind AS transition 17

18 Standards that made their presence felt 03 Ind AS 19 Employees Benefits Under IGAAP, re-measurement impact of defined benefits liability /assets was recognized in profit and loss. Under Ind AS, re-measurement impact is required to be recognized in OCI. Under Ind AS, companies have re-measured their defined benefit liability / assets, and re-measured gain or loss on defined benefits obligations have been recognized in OCI. Consequently, the re-classification of actuarial gain or loss impacted the net profit of companies positively. ` 645 crore Increase in profits of 39 companies ` 156 crore Decrease in profits of 16 companies Ind AS 19 - impact on profits for the year ended 31 March Positive Negative No impact Out of 75, 74 companies had presented their equity reconciliation statement. 18 Ind AS transition

19 Standards that made their presence felt 03 Ind AS 10 Events after the Reporting Date Under Ind AS, proposed dividends and the corresponding dividend distribution tax are required to be recognized in the year in which they are declared by companies. However, under IGAAP, proposed dividends were recognized in the year to which they pertain even if they were declared after the reporting date. Under Ind AS, at transition date and for the year ended 31 March 2016, proposed dividend recognized under IGAAP, has been reversed and recognized in the year in which it is declared. Consequently, net worth of the Companies has been increased significantly. However, we have observed that there is one company which has a negative impact on net worth owing to reversal of proposed dividend. ` 30,000 crore Increase in net worth of 23 companies at transition date ` 50,000 crore Increase in net worth of 54 companies at March 2016 on net worth standalone as at 01 April 2015: on net worth standalone for the year ended 31 March Positive Negative No impact Positive Negative No impact Out of 75, 25 companies had presented their equity reconciliation statement. Out of 75, 74 companies had presented their equity reconciliation statement. Ind AS transition 19

20 04 Key disclosures During our analysis, we observed changes in reportable segments due to Ind AS 108. Ind AS 101 requires the following reconciliation statements Equity reconciliation for transition date 53 companies reported no changes in their reportable segments 21 companies reported changes in their reportable segments Equity reconciliation for the comparative year Total comprehensive reconciliation for the comparative year Disclosure for material adjustment to cash flow statement Disclosure for recognition or reversal of any impairment loss in opening Ind AS balance sheet During our analysis, we observed that out of 74 only 25 companies had provided their equity reconciliation statements as at 01 April We have conducted our analysis on the basis of the annual results submitted by the companies to the Securities and Exchange Board of India (SEBI). In the annual results submitted by the companies, they have not given comprehensive disclosures as required under various Ind AS. 20 Ind AS transition

21 05 Conclusion The journey that started with inhibitions and fear has now been completed and, as discussed, it has been a real success for Indian corporates. Kudos! The level of preparedness and focus on the transition were two key success factors. Most of the large companies started early and recognized the importance of being ahead of the curve on this transition. Based on our discussions with some CFOs of large organization, the bulk of their time was spent on evaluating the right accounting policy choices available keeping in mind both the transition date and the long-term impact. The immediate focus for these corporates now is on enhancing the quality of disclosures, and it would be interesting to see how the regulators, bankers and analysts respond to the information disclosed and presented under Ind AS. There has been a strong need of training felt by organizations. As more and more companies embark on this journey, the industry believes that the shortages of experienced and Ind AS trained resources will be filled in soon. There exist certain gray areas in the form of tax positions and legal over-laps, but generally companies believe that they now understand the expectations better and hope to get the buy-in of regulators, bankers and investors on complex issues. Phase 2 entities, which are now entering the transition phase, have a lot to learn from the experiences of large corporates, and we hope they show the same rigor and enthusiasm as those who have already transitioned! Ind AS transition 21

22 06 Glossary Term CFO EBIDTA ECL EIR FVTOCI GST ICDS IFRS IGAAP Ind AS MTM NBFC OCI PPE SEBI Particulars Chief finance officer Earnings before interest, depreciation and tax Expected credit loss Effective rate of interest Fair value through other comprehensive income Goods and Services tax Income Computation and Disclosure Standards International Financial Reporting Standard Indian Generally Accepted Accounting Principles Indian Accounting Standard Mark to market Non-banking financial company Other comprehensive income Property, plant and equipment Securities and Exchange Board of India 22 Ind AS transition

23 07 Annexure Companies covered by our review BSE top 100 companies 100 The following companies were excluded: Financial service sector companies not covered in phase I of Ind AS applicability (marked in X) (18) Companies with a different year end (marked in X) (7) Companies covered in the review 75 List of BSE top 100 companies as on 23 May 2017 Sr. No. Company Sector Companies excluded 1 Tata Consultancy Services Limited Technology (IT/IES) 2 Reliance Industries Limited Oil and Gas 3 HDFC Bank Limited Bank / Insurance / NBFC / Financial Institution X 4 ITC Limited Consumer/Industrial Products and Retail 5 Housing Development Finance Corporation Limited Bank / Insurance / NBFC / Financial Institution X 6 State Bank of India Bank / Insurance / NBFC / Financial Institution X 7 Oil And Natural Gas Corporation Limited Oil and Gas 8 Hindustan Unilever Limited Consumer/Industrial Products and Retail 9 Infosys Limited Technology (IT/IES) 10 Maruti Suzuki India Limited Automobiles and Transportation 11 Indian Oil Corporation Limited Oil and Gas 12 Kotak Mahindra Bank Limited Bank / Insurance / NBFC / Financial Institution X 13 ICICI Bank Limited Bank / Insurance / NBFC / Financial Institution X Ind AS transition 23

24 07 Annexure List of BSE top 100 companies as on 23 May 2017 Sr. No. Company Sector Companies excluded 14 Coal India Limited Mining and Metals 15 Larsen & Toubro Limited Real estate, Infrastructure, Power and Utilities 16 Bharti Airtel Limited Telecom, Media and Entertainment 17 Sun Pharmaceutical Industries Limited Pharmaceuticals and Chemicals 18 Tata Motors Limited Automobiles and Transportation 19 NTPC Limited Technology (IT/IES) 20 Wipro Limited Technology (IT/IES) 21 HCL Technologies Limited Technology (IT/IES) X 22 Axis Bank Limited Bank / Insurance / NBFC / Financial Institution X 23 Ultratech Cement Limited Consumer/Industrial Products and Retail 24 Power Grid Corporation of India Limited Real Estate, Infrastructure, Power and Utilities 25 Asian Paints Limited Consumer/Industrial Products and Retail 26 Hindustan Zinc Limited Mining and Metals 27 Bharat Petroleum Corporation Limited Oil and Gas 28 Vedanta Limited Mining and Metals 29 Indusind Bank Limited Bank / Insurance / NBFC / Financial Institution X 30 Mahindra & Mahindra Limited Automobiles and Transportation 31 Bajaj Auto Limited Automobiles and Transportation 32 Eicher Motors Limited Automobiles and Transportation 33 Hero Motocorp Limited Automobiles and Transportation 34 Bosch Limited Automobiles and Transportation 35 Bharti Infratel Limited Telecom, Media and Entertainment 24 Ind AS transition

25 07 Annexure List of BSE top 100 companies as on 23 May 2017 Sr. No. Company Sector Companies excluded 36 Adani Ports And Special Economic Zone Limited Real Estate, Infrastructure, Power and Utilities 37 Bajaj Finance Limited Bank / Insurance / NBFC / Financial Institution X 38 Yes Bank Limited Bank / Insurance / NBFC / Financial Institution X 39 Nestle India Limited Consumer/Industrial Products and Retail X 40 Bajaj Finserv Limited Bank / Insurance / NBFC / Financial Institution X 41 Shree Cement Limited Consumer/Industrial Products and Retail 42 Godrej Consumer Products Limited Consumer/Industrial Products and Retail 43 Motherson Sumi Systems Limited Automobiles and Transportation 44 ICICI Prudential Life Insurance Company Limited Bank / Insurance / NBFC / Financial Institution X 45 Lupin Limited Pharmaceuticals and Chemicals 46 Grasim Industries Limited Consumer/Industrial Products and Retail 47 Hindustan Petroleum Corporation Limited Oil and Gas 48 Zee Entertainment Enterprises Limited Telecom, Media and Entertainment 49 Siemens Limited Consumer/Industrial Products and Retail X 50 Dabur India Limited Consumer/Industrial Products and Retail 51 Ambuja Cements Limited Consumer/Industrial Products and Retail X 52 Tata Steel Limited Mining and Metals 53 Piramal Enterprises Limited Pharmaceuticals and Chemicals 54 JSW Steel Limited Mining and Metals 55 Cadila Healthcare Limited Pharmaceuticals and Chemicals 56 Indiabulls Housing Finance Limited Bank / Insurance / NBFC / Financial Institution X 57 Avenue Supermarts Limited Consumer/Industrial Products and Retail Ind AS transition 25

26 07 Annexure List of BSE top 100 companies as on 23 May 2017 Sr. No. Company Sector Companies excluded 58 Britannia Industries Limited Consumer/Industrial Products and Retail 59 Hindalco Industries Limited Mining and Metals 60 Cipla Limited Pharmaceuticals and Chemicals 61 Dr.Reddy's Laboratories Limited Pharmaceuticals and Chemicals 62 Titan Company Limited Consumer/Industrial Products and Retail 63 Rural Electrification Corporation Limited Bank / Insurance / NBFC / Financial Institution X 64 Bank of Baroda Bank / Insurance / NBFC / Financial Institution X 65 Tech Mahindra Limited Technology (IT/IES) 66 Marico Limited Consumer/Industrial Products and Retail 67 UPL Limited Pharmaceuticals and Chemicals 68 Power Finance Corporation Limited Bank / Insurance / NBFC / Financial Institution X 69 Bharat Electronics Limited Mining and Metals 70 Bharat Heavy Electricals Limited Consumer/Industrial Products and Retail 71 Interglobe Aviation Limited Automobiles and Transportation 72 Pidilite Industries Limited Consumer/Industrial Products and Retail 73 NMDC Limited Mining and Metals 74 NHPC Limited Real estate, Infrastructure, Power and Utilities 75 DLF Limited Real estate, Infrastructure, Power and Utilities 76 LIC Housing Finance Limited Bank / Insurance / NBFC / Financial Institution X 77 Gail (India) Limited Oil and Gas 78 Sun Tv Network Limited Telecom, Media and Entertainment 79 Petronet LNG Limited Oil and Gas 26 Ind AS transition

27 07 Annexure List of BSE top 100 companies as on 23 May 2017 Sr. No. Company Sector Companies excluded 80 Punjab National Bank Bank / Insurance / NBFC / Financial Institution/ X Pharmaceuticals and chemicals 81 Aurobindo Pharma Limited Technology (IT/IES) 82 ABB India Limited Consumer/Industrial Products and Retail X 83 ACC Limited Consumer/Industrial Products and Retail X 84 Idea Cellular Limited Telecom, Media and Entertainment 85 Container Corporation of India Limited Automobiles and Transportation 86 United Spirits Limited Consumer/Industrial Products and Retail 87 Havells India Limited Consumer/Industrial Products and Retail 88 MRF Limited Automobiles and Transportation 89 Colgate-Palmolive (India) Limited Consumer/Industrial Products and Retail 90 Cummins India Limited Consumer/Industrial Products and Retail 91 Oil India Limited Oil and Gas 92 TVS Motor Company Limited Automobiles and Transportation 93 Emami Limited Consumer/Industrial Products and Retail 94 Steel Authority of India Limited Mining and Metals 95 Bharat Forge Limited Consumer/Industrial Products and Retail 96 Procter & Gamble Hygiene & Health Care Limited Consumer/Industrial Products and Retail X 97 Ashok Leyland Limited Automobiles and Transportation 98 Berger Paints India Limited Consumer/Industrial Products and Retail 99 L&T Finance Holdings Limited Bank / Insurance / NBFC / Financial Institution X 100 Punjab National Bank Bank / Insurance / NBFC / Financial Institution X Ind AS transition 27

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