INDIAN ACCOUNTING STANDARDS

(Ind AS)

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 WHAT ARE INDIAN ACCOUNTING STANDARDS (IND AS)?
✔ Indian Accounting Standards (Ind-AS) are the International Financial Reporting
Standards (IFRS) converged standards issued by the Central Government of India
under the supervision and control of Accounting Standards Board (ASB) of ICAI
and in consultation with National Advisory Committee on Accounting Standards
(NACAS).

✔ Ind AS are named and numbered in the same way as the corresponding
International Financial Reporting Standards (IFRS).
IFRSs are a combination of IAS (International Accounting Standards) & IFRS
(International Financial Reporting Standards), both are together referred as IFRS.
i.e. There are at present 23 Ind AS in line with IASs (Ind AS 1 to Ind AS 41)
And 16 Ind AS in line with IFRSs (Ind AS 101 to Ind AS 116), Total 39 Ind AS.
Ind AS 117 –Insurance Contracts is yet to be notified. Existing Ind AS 104-Insurance
Contracts will be withdrawn from the date Ind AS 117 is converged and notified.
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LIST OF INDIAN ACCOUNTING STANDARDS (Ind AS)
Correspondin
Ind AS Title of Ind AS
g IAS/IFRS No.
1 Presentation of Financial Statements IAS 1
2 Inventories IAS 2
7 Statement of Cash Flows IAS 7
8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 8
10 Events after the Reporting Period IAS 10
12 Income Taxes IAS 12
16 Property, Plant and Equipment IAS 16
19 Employee Benefits IAS 19
Accounting for Government Grants and Disclosure of
20 IAS 20
Government Assistance
21 The Effects of Changes in Foreign Exchange Rates IAS 21
23 Borrowing Costs IAS 23
24 Related Party Disclosures IAS 24
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LIST OF INDIAN ACCOUNTING STANDARDS (Ind AS)
Corresponding
Ind AS Title of Ind AS
IAS/IFRS No.
2 7 Separate Financial Statements IAS 27
2 8 Investment in Associates and Joint Ventures IAS 28
2 9 Financial Reporting in Hyper inflationary Economies IAS 29
3 2 Financial Instruments: Presentation IAS 32
3 3 Earnings per Share IAS 33
3 4 Interim Financial Reporting IAS 34
3 6 Impairment of Assets IAS 36
3 7 Provisions, Contingent Liabilities and Contingent Assets IAS 37
3 8 Intangible Assets IAS 38
4 0 Investment Property IAS 40
4 1 Agriculture IAS 41

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 LIST OF INDIAN ACCOUNTING STANDARDS (Ind AS)
Ind Corresponding
Title of Ind AS
AS IAS/IFRS No.
101 First Time Adoption of Indian Accounting Standards IFRS 1
102 Share Based Payment IFRS 2
103 Business Combinations IFRS 3
104 Insurance Contracts IFRS 4
105 Non-current Assets Held for Sale and Discontinued Operations IFRS 5
106 Exploration for and Evaluation of Mineral Resources IFRS 6
107 Financial Instruments: Disclosures IFRS 7
108 Operating Segments IFRS 8
109 Financial Instruments IFRS 9
110 Consolidated Financial Statements IFRS 10
111 Joint Arrangements IFRS 11
112 Disclosure of Interests in Other Entities IFRS 12
113 Fair Value Measurement IFRS 13
114 Regulatory Deferral Accounts IFRS 14
115 Revenue from Contracts with Customers IFRS 15
116 Leases IFRS5 16
■ Total reporting standards issued under IFRS are 41. Total reporting
standards issued under Ind AS are 39. IFRS 17 Insurance Contracts and
IAS 26 Accounting and Reporting by Retirement Benefit Plans are yet not
notified in India as Ind AS

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WHAT ARE CARVE OUTS/INS IN IND AS?
✔ Indian Accounting Standards (Ind AS) are in line with the corresponding IAS/IFRS
and departures have been made where considered absolutely essential. These
changes have been made considering various factors

✔ Certain changes have been made in IFRS considering differences in application of

accounting principles and practices and economic conditions prevailing in India.
These differences are commonly known as ‘Carve-outs’.
✔ Examples:
✔ In Ind AS-1, Presentation of Financial Statements : Breach of material provision of a
long-term loan arrangement.
✔ Ind AS-10, Events after the Reporting Period : Non adjusting Event.

✔ In Ind AS 103 “Business Combination”, an additional guidance on “Accounting of

Business Combinations of Entities under Common Control” is given which is over
and above what is given in IFRS. This is termed as ‘Carve-in’.

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INDIAN ACCOUNTING STANDARDS
(Ind AS)
Roadmap for the Implementation of
Indian Accounting Standards (Ind As)

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 For Companies other than Banks, NBFCs and Insurance Companies

Phase I
1st April 2015 or thereafter: Voluntary Basis for all companies (with Comparatives)
1st April 2016: Mandatory Basis

(a) Companies listed/in process of listing on Stock Exchanges in India or

Outside India having net worth > INR 500 Cr
(b) Unlisted Companies having net worth > INR 500 Cr
(c)Parent, Subsidiary, Associate and J.V. of above

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 Phase II
1st April 2017: Mandatory Basis
(a) All companies which are listed/or in process of listing inside or outside
India on Stock Exchanges not covered in Phase I (other than companies
listed on SME Exchanges)
(b) Unlisted companies having net worth between INR 250 Cr and INR 500 Cr
(c) Parent, Subsidiary, Associate and J.V. of Above.

✔ Companies listed on SME exchange not required to apply Ind AS

✔ Once Ind AS are applicable, an entity shall be required to follow the Ind
AS for all the subsequent financial statements
✔ Companies not covered by the above roadmap shall continue to apply
existing Accounting Standards notified in Companies (Accounting
Standards) Rules, 2006

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Non-Banking Financial Companies (NBFCs)

From 1st April, 2018 (with comparatives)

✔ NBFCs (whether listed or unlisted) having net worth 500 crore or more
✔ Holding, Subsidiary, JV and Associate companies of above NBFC other than
those already covered under corporate roadmap shall also apply from said
date

From 1st April, 2019 (with comparatives)

✔ NBFCs whose equity and/or debt securities are listed or are in the process of
listing on any stock exchange in India or outside India and having net worth less
than 500 crore
✔ NBFCs that are unlisted having net worth between INR 250 Cr and INR 500 Cr
✔ Holding, Subsidiary, JV and Associate companies of above other than those
already covered under corporate roadmap shall also apply from said date
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Scheduled Commercial banks SCBs (excluding Regional Rural Banks RRB’s)
Deferred the applicability of Ind AS till further notice.

Insurance companies
Deferred the applicability of Ind AS till further notice.

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■ Please Note:
■ If Ind AS become applicable to any company, then Ind AS shall
automatically be made applicable to all the subsidiaries, holding
companies, associated companies, and joint ventures of that company,
irrespective of individual qualification of such companies.
■ In case of foreign operations of an Indian Company, the preparation of
standalone financial statements may continue with its jurisdictional
requirements and need not be prepared as per the Ind AS.
■ However, these entities will still have to report their Ind AS adjusted
numbers for their Indian parent company to prepare consolidated Ind
AS accounts.

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INDIAN ACCOUNTING STANDARDS
(Ind AS)
Ind AS 1
PRESENTATION OF FINANCIAL
STATEMENTS

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Objective
Basis for presentation of general purpose financial statements to ensure
compatibility with:

✔ With the entity’s previous period financial statements

✔ With the financial statements of other entities

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Scope

The Framework provides answers to a series of Fundamental questions:

What are financial Statements?
What are they for?
Who are they for?
What makes them useful?

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Definitions
✔ General Purpose financial statements
(referred to as ‘financial statements’) are those intended to meet the needs of
users who are not in a position to require an entity to prepare reports tailored
to their particular information needs.

✔ Impracticable Applying a requirement is impracticable when the entity

cannot apply it after making every reasonable effort to do so.

✔ Indian Accounting Standards are Standards prescribed under Section 133 of

the Companies Act, 2013.

✔ Material Omissions or misstatements of items are material if they could,

individually or collectively, influence the economic decisions that users
make on the basis of the financial statements. The size or nature of the item,
or a combination of both, could be the determining factor.

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 Definitions
✔ Notes contain information in addition to that presented in the balance
sheet statement of profit and loss and statement of cash flows.
Notes provide narrative descriptions or disaggregation of items presented
in those statements and information about items that do not qualify for
recognition in those statements

✔ Owners are holders of instruments classified as equity

✔ Profit or Loss is the total of income less expenses, excluding the components
of other comprehensive income.

✔ Comprehensive Income comprises all components of ‘profit or loss’ and of

‘other comprehensive income’(OCI).
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Purpose of financial statements
To provide information about the financial position, financial performance,
and cash flows of an entity
To meet the objective, financial statements provide information about
an entity’s:
✔ Assets
✔ Liabilities
✔ Income & Expenses
✔ Equity
✔ Distribution to owners
✔ Cash Flows
✔ Information in the form of notes

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 Complete set of financial statements
✔ Balance sheet as at the end of the period

✔ Statement of Profit & loss for the period

✔ Statement of Changes in Equity for the period

✔ Statement of Cash flows for the period

✔ Significant Accounting Policies and other explanatory notes in a separate

statement.

✔ Comparative information in respect of the preceding period.

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GENERAL FEATURES OF FINANCIAL STATEMENTS

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Presentation of True and Fair and compliance with Ind AS
✔ The application of Ind AS is presumed to result into true and fair view.
✔ An entity whose financial statements comply with Ind ASs shall make an
explicit and unreserved statement of such compliance in the notes.
Complete compliance is essential.
✔ An entity cannot rectify inappropriate accounting policies either by
disclosure of the accounting policies used or by notes or explanatory
material.

Departure from the Requirements of an Ind AS

✔ Only in order to ensure Financials present a true & fair view
✔ Ind AS Departure: Nature , Reason and Treatment
✔ Financial effect on each Period.

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Question
✔ An entity prepares its financial statements that contain an explicit and
unreserved statement of compliance with Ind AS.
✔ However, the auditor’s report on those financial statements contains a
qualification because of disagreement on application of one Indian
Accounting Standard.
✔ In such a case, is it acceptable for the entity to make an explicit and
unreserved statement of compliance with Ind AS?

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 Solution
Standard: Ind AS 1
Concept:
In this case the management has exclusive right to say that they have complied with
Ind AS , if they have a bonafide reason to believe that it has complied with all Ind AS.
Analysis & Conclusion:
Yes, it is possible for an entity to make an unreserved and explicit statement of
compliance with Ind AS, even though the auditor’s report contains a qualification
and the qualification is because of disagreement on application of Accounting
Standard(s)and for no other reason.
Auditor's opinion is not a factor deciding compliance.
The auditor will not cause the management to remove the statement of compliance.

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 Question
An entity has departed from a requirement of an Ind AS in a previous year. Is
there any requirement of disclosure in the current year?

Solution:
Standard: Ind AS 1
Concept : When the previous year’s departure affects the assets and
liabilities(amount recognised in the financial statements) of the current year . It
shall make the disclosures.

Analysis & Conclusion: In this case it shall make disclosures as required by the
standard in the current year.

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Going concern

✔ Fundamental Assumption

✔ To be stated if not followed

✔ If risk exists, then to be stated

✔ Analysis of going concern on all available information about the future,

which is at least, but is not limited to, twelve months from the end of the
reporting period.

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Accrual basis of accounting
✔ Fundamental Assumption

✔ Accounts to be prepared on this basis

✔ Exception - Cash flow statement

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 Materiality and Aggregation
✔ Materiality is a relative Concept.

✔ It depends on the size or nature of the item or a combination of both, to be judged

based on particular facts and in particular circumstances.

✔ Information is material if omitting, misstating or obscuring it could reasonably be

expected to influence decisions that the primary users of general purpose financial
statements make on the basis of those financial statements, which provide financial
information about a specific reporting entity.

✔ Entity shall present separately each material class of items.

If Material – Don’t Aggregate

If not Material - Aggregate

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 Questions
✔ Identify whether material or not, if yes why?

A) Entity A has done a misclassification of assets between 2 categories of plant and

machinery.

Solution:
Standard: Ind AS 1
Concept: An item is considered Material if it can influence the decision of the stakeholder.
Materiality can be assessed on the basis of nature and amount of each item.

Analysis & Conclusion: Amount if it is affected two categories of plant and machinery however
it might be material if it changed the classification between a noncurrent and a current asset
category. Also check the rate of Depreciation. If the rate is different then also it is to be
reported separately.
Misclassification in the same group would not be material, if the rate of depreciation is same.

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 Question:
Identify whether material or not, if yes why?
b) An error in inventory valuation

Solution:
Standard: Ind A S 1
Concept: An error in inventory valuation may be material in a small enterprise for which it cut
earnings in half but immaterial in an enterprise for which it might make a barely perceptible
ripple in the earnings.
Analysis & Conclusion: 1) If the error is in application of accounting policy then by nature the
error is material.
2) For a Small enterprise it is material YES. For a large enterprise it may not be material
depending on the impact. If an error in the valuation of inventory caused resultant figure as
net profit to the business and the correction of the same would result in net loss then even the
smaller amount of error would be material.
3) If the error is in of commission or omission nature then it will be material depending on the
amount of impact.
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 Offsetting
✔ An entity shall NOT offset assets and liabilities or income and expenses, unless required
or permitted by Ind AS

✔ Measuring Assets net of Valuation allowances is not offsetting

E.g. Doubtful debts allowance on receivables — is not offsetting

✔ E.g. In case of Revenue(sales) in the ordinary course of business – it should present

revenue separately and related expenses separately. So that users can analyse the
performance during the period.
But if it is directly deductible from the gross amount then it is allowed.
E.g. the amount of revenue recognised is after deducting any trade discounts
and volume rebates the entity allows

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Question

✔ Is offsetting of revenue against expenses, permissible in case of a

company acting as an agent and having sub-agents, where
commission is paid to subagents from the commission received as an
agent?

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 Solution
Standard: Ind A S 1
Concept: Offsetting is not allowed except when permitted by Ind AS
Analysis & Conclusion:
Net presentation in the given case would not be appropriate, as it would not reflect
substance of the transaction and would detract from the ability of users to understand the
transaction.
The commission received by the company as an agent is the gross revenue of the company.

The amount of commission paid by agent to the sub-agent should be considered as an

expense. Ind AS 115 (Revenue from Contracts with Customers) doesn’t allow offsetting
revenue against expenses. So, offsetting in the given scenario cannot be done.

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Consistency of presentation

✔ Retain the presentation and classification of items from one period to

the next
✔ Unless:
Significant change in the nature of the entity
Ind AS requires a change in presentation

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Frequency of reporting

✔ An entity shall report a complete set of financial statements (including

comparative information) at least annually.
✔ When an entity changes the end of its reporting period and presents
financial statements for a period longer or shorter than one year, an
entity shall disclose, in addition to the period covered by the financial
statements:
✔ the reason for using a longer or shorter period, and
✔ the fact that amounts presented in the financial statements are not
entirely comparable

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Question

✔ In 20x1 entity ‘Superb’ was acquired by entity ‘Happy go lucky’. To align

its reporting date with that of its parent. Superb changed the end of its
annual reporting period from 31 Dec to 31 March. Consequently, entity
Superb’s reporting period for the year ended 31 March 20x1 is 15 months.
On the basis of those facts, is there any disclosure required, If yes then
what would it be?

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 Solution:
Standard: Ind AS 1

Concept: Frequency of reporting needs to be consistently followed

If changed, disclosure needs to be given

Analysis & Conclusion:

Yes, the company has to give a disclosure:
Basis of preparation and accounting policies
✔ In 20X1, in order to align the entity’s reporting period with that of its parent
(Happy Go Luck), the entity has decided to change the end of its reporting
period from 31st Dec to 31st March.
✔ Thus the current financials presented are of 15 months instead of 12 months.

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 Comparative information

An entity shall present, as a Minimum comparative information

✔ 2 Balance sheets
✔ 2 Statement of P/L
✔ 2 Statement of Cash flows
✔ 2 Statement of changes in Equity
✔ Related Notes

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STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS
✔ Identify financial statements clearly from other information presented
✔ Components should be clearly identified
✔ Name of the reporting enterprise, changes if any from previous year
✔ Individual entity reporting or group
✔ Reporting Date and period
✔ Presentation currency and round off
✔ The presentation currency for example in India, INR is presentation currency
✔ Rounding off guidelines are prescribed in schedule III of Companies Act.
✔ This Standard does not prescribe the format in which an entity presents
items (Format given by MCA separately, in schedule III of Companies Act)

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Balance Sheet
✔ Information to be provided in the Balance Sheet or in the notes
✔ Sub classification of B/S line items
✔ Share capital details (if not given in SOCE)
✔ Reconciliation
✔ Face value
✔ Authorised, Issued, Paid up capital
✔ Reserved shares
✔ Rights & restrictions

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Statement of Profit and Loss

Components:
✔ Profit or Loss section: Items of Statement of P&L provided
✔ Other Comprehensive Income: Items of Statement of OCI provided
Allocation of both sections for the Consolidated Financial Statements:
✔ Controlling Interest
✔ Non-Controlling Interest
Co A owns 80% of Co B
Then Co B -> Subsidiary Co. A-> Holding Co.
20% owners -> Non-Controlling Interest -> Minority Interest

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 Statement of Profit and Loss
✔ Profit or Loss section:
✔ Revenue, Presenting Separately Interest Revenue
✔ Gains And Losses Arising From The Derecognition of Financial Assets
✔ Finance Costs
✔ Impairment Losses
✔ Share of The Profit or Loss of Associates And Joint Ventures Accounted
✔ Tax Expense
✔ A Single Amount For The Total Discontinued Operations
✔ Material Items: Nature & Amount. E.G. Write-off, Disposal of Assets
✔ Nature of Expense Based Classification

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Information to be presented in the OCI section:
✔ Other comprehensive income comprises items of income and expense
(including reclassification adjustments) that are not recognised in profit or
loss as required or permitted by other Ind ASs.
✔ Not be confused with operating and non-operating income/expense.
✔ Not necessarily increases the revenue.
✔ Forms part of other equity.
E.g.
✔ Items will not be reclassified subsequently to profit or loss & its tax effect
✔ Remeasurement of defined benefits plan
✔ Change in value of equity instrument
✔ Items will be reclassified subsequently to profit or loss & its tax effect
✔ Remeasurements due to foreign exchange translations
✔ Change in value of debt instrument

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 Statement of Changes in Equity
✔ Item wise Reconciliation for each component of Equity
✔ Comprehensive statement showing movement between components of Reserves

Statement of Cash Flows

✔ Ind AS 7

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 Notes
✔ Structure
✔ Present information about the basis of preparation of the financial statements
✔ Disclose the information required by Ind AS that is not presented elsewhere
✔ Disclose the information essential that is not presented elsewhere

✔ Disclosure of accounting policies

✔ Measurement Basis
✔ Accounting Policies

✔ Sources of estimation uncertainty

✔ Capital (Allocation policy)
✔ Other disclosures

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 Balance Sheet
✔ Distinction between current asset & Non current asset
✔ Asset is classified as current when any one of the following criteria is satisfied:
(a) it is expected to realise the asset, or intends to sell or consume it, in its normal
operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) Cash/cash equivalents which is not restricted for more than12 months.
All other assets are classified as Non-current.

✔ Distinction between current liabilities & Non current liabilities

✔ Liability is classified as current when any one of the following criteria is satisfied:
(a) it is expected to settle the liability in its normal operating cycle;
(b)It is held primarily for the purpose of being traded;
(c) the liability is due to be settled within twelve months after the reporting period; or
(d) No Unconditional right with the entity to defer for 12 months after the reporting
period.
All other liabilities are classified as Non-current.
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Current Liabilities- Financial Liabilities

In case of Breach:
The lender agreed by the end of the reporting period to provide a grace period
ending at least twelve months after the reporting period, within which the entity can
rectify the breach and during which the lender cannot demand immediate
repayment.

Long-term Loan Arrangements:

Where there is a breach of a material provision of a long-term loan arrangement on
or before the end of the reporting period with the effect that the liability becomes
payable on demand on the reporting date, the agreement by lender before the
approval of the financial statements, to not demand payment as a consequence of
the breach, shall be considered as an adjusting event.
This is an exception to the principle that adjusting events are those that provide
evidence of conditions that existed at the end of the reporting period.
This is also a Carve out in Ind AS 10 from IAS 10.

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ABC Ltd., in order to raise funds, has privately placed debentures of 1 crore, on
1st January, 20X1, issued to PQR Ltd. As per the original terms of agreement, the
debentures are to be redeemed on 31st March, 20X9. One of the conditions of the
private placement of the debentures was that debt-equity ratio at the end of any
reporting year should not exceed 2:1. If this condition is not fulfilled, then PQR Ltd., has
a right to demand immediate redemption of the debentures. On 31st March, 20X6,
debt-equity ratio of ABC Ltd., exceeds 2:1. Therefore, PQR Ltd., decides to return the
debentures.

Thus, on 31st March, 20X6, the liability of the ABC Ltd., towards PQR Ltd., (which was
originally a long-term liability) becomes a current liability, since it is now a liability on
demand. However, ABC Ltd. enters into an agreement with PQR Ltd. on 15th April,
20X6 that PQR Ltd., will not demand the payment immediately. The financial
statements are approved by the BOD on 30th April, 20X6.

Continued on the next slide

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In this case, the agreement that PQR Ltd., will not demand the money immediately is
a subsequent event. Even though it is a subsequent event not affecting the
condition existing at the balance sheet date, yet because of the specific provisions
of Ind AS 10, it has to be given effect in the financial statements for the year
20X5-20X6. Accordingly, though as per original terms the liability would have been
otherwise reclassified as a current liability as on 31st March, 20X6, by giving effect to
the event after the reporting period due to the specific provisions of Ind AS 10, it
would continue to be classified as a non-current liability as on 31st March, 20X6. In
other words, the re-classification of debentures as current liability as at 31st March,
20X6 will be adjusted and once again classified as a non-current liability as at that
date.

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