Key Differences between IFRS and Indian GAAP

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ICAI Live Webcast on IFRS Convergence
Key Differences between IFRS and Indian GAAP
CA Chintan N. Patel Naresh J. Patel
Co. Chartered Accountatns Ahmedabad chintan_at_naresh
co.com
16th November 2012
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IAS 1 Presentation of Financial Statements - Format Current/Non-Current AS 1 / Companies Act and other laws
IAS 1 Statement of Changes in Equity It is presented showing (a) the total comprehensive income for the period (b) effects of retrospective application or restatement (c) transactions with owners and (d) a reconciliation between opening and closing balances, separately disclosing each change. A separate statement is not required. Movements in share capital, retained earnings and other reserves are presented in schedules to financial statements.
IAS 10 Proposed Dividend Non-Adjusting Event Proposed dividend adjusted in the financial statements even though it is subject to approval of share holders.
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IFRS 8 Determination of segments Based on the FS evaluation by the CODM in deciding how to allocate resources and in assessing performance. Two sets of segments business and geographical
IFRS 8 Measurement Basis Same measurement basis as that used by the chief operating decision maker Segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole.
IAS 8 Changes in accounting policy Restated. Prior period items adjusted in the opening retained earnings of earliest period reported. Prospective application unless the transitional provisions of a standard require adjustments in opening retained earnings.
IAS 8 Correction of errors Restated unless exempted. Prior period items adjusted in the opening retained earnings of earliest period presented. Reported as prior period adjustment separately. Restatement of comparatives prohibited.
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IAS 27 Definition of Control Power to govern financial and operating policies to obtain benefits. Owns directly or indirectly one-half or more of the voting rights or controls composition of an entitys Board of directors so as to obtain economic benefits.
IAS 27 Reporting periods Differences between reporting dates of parent and subsidiary cannot be more than three months. Differences between reporting dates of parent and subsidiary cannot be more than six months.
IAS 27 Uniform accounting policies Prepared using uniform accounting policies for all the entities in a group. Policies may differ due to impracticability. However the fact should be disclosed together with the proportion of items to which different policies have been applied .
IAS 37 Discounting Provisions are discounted to present value where the effect of the time value of money is material. Discounting is not permitted.
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IAS 37 Contingent Assets Disclosed in the financial statements where the economic benefits are probable. Are not disclosed in the financial statements but in the report of the approving authority.
IAS 37 Constructive obligation Constructive obligation considered for provisioning. Present obligation and not constructive obligation considered for provisioning.
IAS 16 Componentisation Property plant and equipment to be componentised and depreciated separately. Componentisation is not required.
IAS 16 - Depreciation - Review of Depreciation Methods, Residual values Useful lives Depreciable amount allocated based on the useful life on a systematic basis. - At the end of each reporting period. The Companies Act 1956 prescribes minimum rates of depreciation. - No requirement for reviewing at each balance sheet date.
IAS 16 Major inspection and overhaul changes Expenditure incurred to replace a separately recognised component of asset should be capitalised. Expenditure which increases the future benefits from the existing asset should only be capitalised.
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IAS 32 39 Measurement Held to maturity, loans and receivables - carried at amortised cost. Available for sale investments carried at fair value. Any change is recognised in other comprehensive income. Long term investments - valued at cost less impairment. Short term investments Valued at lower of cost and fair value. Any change in value is recognised in the statement of profit and loss.
IAS 32 39 Financial liability classification Capital instruments classified based on the substance of issuers contractual obligation either as equity or liability. - Mandatory redeemable preference shares classified as liability. No specific guidance. Classification is based on legal form rather than substance. - Preference shares are classified as equity separately under shareholders funds.
IAS 12 Deferred income tax Balance Sheet approach Based on difference between carrying value and tax base of assets and liabilities Profit and Loss approach Based on difference between accounting income and taxable income
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IAS 12 Revaluation of PPE and intangible assets Deferred tax recognised in other comprehensive income. Deferred tax is not recognised as considered as a permanent difference.
IAS 12 Recognition of Deferred tax Assets. Recognised if it is probable (more likely than not) that sufficient taxable profit will be available in future. Recognised if a) there is virtually certainty supported by convincing evidence incase of entities with carry forward tax losses b) realization is reasonably certain in case of entities with no carry forward tax losses.
IFRS 3 Date on which consideration in a business combination is measured Acquisition date (date on which control passes) No specific guidance. Date of investment.
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Key Differences IFRS v Indian GAAP
Ref. Area IFRS Indian GAAP
IFRS 3 Allocation of the cost of the business combination. At fair value. At carrying value in case of pooling of interests method At carrying value or fair value in case of Purchase method.
IFRS 3 Excess of fair value of net assets acquired over acquisition costs Recognised as a gain from bargain purchase in profit or loss Recognised as capital reserve as part shareholders equity.
IFRS 2 Share-based payment Fair value Intrinsic or Fair value
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• RecapKey Differences

• Substance over form
• Time value of money
• Fair value option
• Restatement
• Significance of Consolidated Financial Statements
• Control
• Uniform accounting policies
• Componentisation of PPE
• Major overhaul expenses
• Constructive obligation
• Discounting of provisions
• Business combination Purchase method
• IFRIC 4 leases
• Prohibition of extra ordinary items
• Segment reporting based on CODM

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Thanks
CA Chintan N. Patel Naresh J. Patel
Co. Chartered Accountants Ahmedabad chintan_at_naresh
co.com