Differences

between
IFRS, US GAAP and Indian GAAP
Presented by :
Group 11 Jaideep Singh Drall Praveen Yadav Rishi Pathak Shreyans Jain Deepraj Pathak Kuldeep Singh

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(201/2012) (248/2012) (254/2012) (257/2012) (258/2012) (259/2012)

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GAAP
Abbreviation of Generally accepted Accounting Principles
Common set of accounting principles, standards and procedures that companies use to compile their financial statements

Combination of Authoritative standards and simply the commonly accepted ways of recording and reporting accounting information
In India, GAAP standards are set by the Institute of Chartered Accountants of India(ICAI) In US, GAAP standards are set by the Financial Accounting Standards Board(FASB) IFRS standards are set by the International Accounting Standards Committee(IASC) pwc
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Why GAAP
GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements used by them
GAAP covers things as revenue recognition, balance sheet item classification and outstanding share measurements Companies are expected to follow GAAP rules when reporting their financial data via financial statements GAAP is only a set of guidelines, it cannot ensure that financial statements are fraudulent When comparing financial statements over the years, it is important to note any changes in GAAP over the intervening period If company management provides the incorrect data to auditing firm, the resulting financial statements can be GAAP pwc compliant yet incorrect

Session 1 Topics covered in the Session

Shareholders Equity

Cash Flow Statements

Foreign Currency Translations

Consolidation Accounting for Subsidiaries including consolidation of Variable Interest Entities (VIEs) under US GAAP and Special Purpose Entities (SPEs) under IFRS Accounting for Associates Accounting for Joint Ventures

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Shareholders Equity IFRS

Recognition and Classification: Equity Instrument: If the instrument does not contain an obligation to transfer economic resources Are non redeemable preference shares equity? Yes, if Non redeemable preference shares or redeemable solely at the option of issuer and where distributions are at the discretion of issuer Are derivatives on own equity shares equity? Only if they result in the delivery of a fixed amount of cash, or other financial asset for a fixed number of an entitys own equity instruments Purchase of own shares: Repurchase shown as deduction from equity Profit / loss on sale Change in equity Dividend on ordinary equity shares Presented as a deduction in the statement of changes in shareholders equity Dividends are accounted in the year when proposed.

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Shareholders Equity US GAAP

Recognition and Classification: Similar to IFRS Additionally shareholder's equity analyzed between shareholders equity and other equity Purchase of own shares: Repurchased for retiring stock, excess of cost over par value may be Charged entirely to retained earnings; or allocated between retained earnings and additional paid-in-capital (APIC); or

charged entirely to APIC

When stock repurchased for purposes other than retiring stock, the cost of acquired stock may be shown separately as a deduction from equity; or treated the same as retired stock Dividend on ordinary equity shares Presented as a deduction in the statement of changes in shareholders equity Dividends are accounted in the year when declared..
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Shareholders Equity Indian GAAP

Recognition and Classification: Equity Instrument:

If the instrument is not a preference share

A preference share is one which carries preferential right to be paid a fixed amount or an amount calculated at a fixed rate and/ or carries a preferential right to be repaid on a winding up or repayment of capital. Purchase of own shares: Entity may purchase its own shares provided it is in consonance with the complex legal requirements stipulated in the Companies Act. Also, such shares are required to be cancelled, i.e. cannot be kept in treasury. Dividend on ordinary equity shares Presented as a appropriation of profits Dividends are accounted in the year when proposed.

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Shareholders Equity Statement of changes in shareholders equity

Indian GAAP 2 years Share capital and reserves are disclosed by way of a schedule IFRS 2 years Primary statement Shows capital transactions with owners, movement in accumulated profits and reconciliation of equity Other Comprehensive Income may be shown as a part of it US GAAP 3 years May be shown as a part of notes to accounts Shows capital transactions with owners, movement in accumulated profits and reconciliation of equity

Other Comprehensive Income may be shown as a part of it

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Shareholders Equity Statement of changes in shareholders equity

Common Stock Additional Paid in Capital Retained earnings Treasury Stock Cumulative Translation Adjustment Accumulated Other Comprehensive Income Total

Balance at beginning of the year Net Income Other Comprehensive Income Dividend paid Cumulative Translation Adjustment Stock Options Balance as at end of the year

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Cash Flows Statement Major Differences

Basis of Difference Exemptions IFRS No exemptions US GAAP IGAAP Limited exemptions Unlisted enterprises, for certain enterprises with a turnover investment entities less than Rs.500 Million and those with borrowings less than Rs.100 Million. Both allowed. Both allowed. Listed Companies Indirect method Insurance Companies Direct method Bank borrowings treated as financing activities unless used as a cash management techniques 2 Years
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Direct / Indirect Method Cash and cash equivalents

Both allowed

Includes OD repayable on demand but not short term bank borrowings 2 Years

OD treated as financing cash flow rather than cash and cash equivalents 3 Years

Periods to be presented

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Cash Flows Statement Classification of specific items

Basis of Difference Interest Paid IFRS Operating or financing activity US GAAP IGAAP Operating activity (to Financing. In the case of a be disclosed by way of financial enterprise, a note) operating activities Operating activity Investing. In the case of a financial enterprise, operating activity Financing Operating

Interest Received

Operating or investing activity

Dividends paid Operating or financing Tax payments Operating

Financing Operating (to be disclosed by way of a note)

Dividends received

Operating or Investing

Operating

Investing. In the case of a financial enterprise, operating activity.

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Foreign Currency Translation Translation of transactions The individual entity

Foreign Currency Item
Foreign Currency Transactions

Treatment
Exchange rate in operation on the date of the transaction

Foreign Currency Monetary assets Closing (year-end) rate and liabilities

Non-monetary foreign currency assets and liabilities

Appropriate historical rate

Fair Valued Non-monetary items Exchange rate that existed when the fair value denominated in a foreign currency was determined (IFRS and Indian GAAP only) Income statement amounts Historical rates of exchange at the transaction date or a weighted average rate as a practical alternative

Exchange gains and losses on own Reported in Profit and Loss Account for the foreign-currency transactions year from ordinary activities (except in case of imported fixed assets under Indian GAAP )

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Foreign Currency Translation Other Differences

Item
Integral Operations in consolidated financial statements
Non Integral operations in consolidated financial statements

Treatment
Use principles applicable for individual entity

Equity Balances Historical rate Other Balance Sheet Items Closing rate Income Statement Items Average rate Translation Differences Accounted in equity (OCI) Transfer to Income Statement on sale Translate at closing rates

Translation differences on disposal of entity Translation of goodwill and fair value adjustments on acquisition of foreign entity

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Consolidation Definitions - Subsidiaries

Indian GAAP Based on controlling interest, control directly or indirectly through subsidiary (ies), by the virtue of holding the majority of voting shares or control over the board of directors.

IFRS Based on voting control or power to govern. The existence of currently exercisable potential voting rights is also taken into consideration. SPEs also need to be consolidated.

US GAAP Controlling interest through majority ownership of voting shares or by contract. Consolidate variable interest entities (VIEs) in which a parent does not have voting control but absorbs the majority of losses or returns.

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Consolidation Exclusions from Consolidation - Subsidiaries

Indian GAAP If there are severe long-term restrictions on transfer of funds to the parent; or the subsidiary is acquired and held for re-sale i.e. temporary control. US GAAP A majority owned subsidiary shall not be consolidated if control does not rest with the majority owner, for example if the subsidiary is in legal reorganization or in bankruptcy or operates under foreign exchange restrictions, controls, or other governmentally imposed uncertainties so severe that they cast significant doubt on the parent's ability to control the subsidiary.

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Consolidation Exclusions from Consolidation Subsidiaries - IFRS

# DISPOSAL # LONG TERM RESTRICTION MATERIALITY DISSIMILAR ACTIVITIES

No exclusion
S was bought and is being held solely for the purpose of resale.

No exclusion Severe long term restrictions apply to the Subsidiary, which significantly impair Ss ability to transfer funds to P (i.e. liquidation)

No exclusion applies (but IAS apply only to material items) Do not exclude 2 or more subsidiaries who together are material

No exclusion because Ss business activities are dissimilar from those of the rest of the group

# Excluded from consolidation only for annual periods ending up to December 31, 2004

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Consolidation Exclusions from Consolidation Subsidiaries - IFRS

Under IFRS, a parent may avoid consolidation if

the parent is a wholly owned subsidiary or a partially owned subsidiary of another entity and its other owners, including those not entitled to vote, have been informed about and do not object to the parent not preparing consolidated financial statements
the parent is neither listed nor it is in the process of listing the ultimate or any intermediate parent of the parent produces IFRS compliant consolidated financial statements

Recent Changes Temporary control (unless the intended period of holding is less than12 months) is not a justification for non consolidation. Severe long term restrictions to transfer funds to the parent are not a justification for non consolidation. Equity compensation plans need to be consolidated for annual periods beginning on or after January1, 2005.
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Consolidation Employee Benefit Funds

IFRS Consolidate

Employee Benefit Funds Indian GAAP DO NOT consolidate

US GAAP Consolidate

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Consolidation Variable Interest Entities - US GAAP

Consolidation Question?

VIE?

Yes

Primary Beneficiary?

Yes

Consolidate

No Majority voting rights owned? No No consolidation Yes

Traditional Control Model

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Consolidation Variable Interest Entities - US GAAP

Variable Interest Model Applies to VIEs Traditional Voting Interest Model Applies to legal entities including VIE.

Enterprise will absorb the majority of Unilateral control expected losses, receive a majority of expected residual returns, or both

Decision-making ability is an indicator Decision-making authority that permits that the party may be the primary control over beneficiary On-going, major or central operations of an entity Selection, hiring and firing of management

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Consolidation Associates - Definition

Associate: An enterprise in which the investor has significant influence and which is neither a subsidiary nor a joint venture of the investor. Significant Influence:

The power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
Significant influence is presumed to exist If an investor holds, directly or indirectly (eg. through subsidiaries), 20 per cent or more of the voting power of the investee unless it can be clearly demonstrated that this is not the case. Should Potential equity shares be taken into consideration for determining the 20% threshold? Under IFRS (IAS 28) Yes. US GAAP (APB18) and Indian GAAP (ASI 18) - No .

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Consolidation Accounting for Investments in Associates

IFRS - IAS 27 (revised) Investment is held exclusively with a view to disposal in next 12 months Apply IAS 39 Account for investments as Financial assets

Use equity method in consolidated accounts except when

Associate operates under severe long term restrictions #

# Applicable only till December 31, 2004 under IAS.

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Consolidation Accounting for Investments in Associates

US GAAP Equity Method
Discontinue using equity method only 3 possible circumstances

The associate has to be consolidated

The percentage of voting stock in the investee falls below 20%

Investor loses its ability to exercise significant influence

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Consolidation Exceptions to use of Equity Method Indian GAAP

The investment is acquired and held exclusively with a view to its subsequent disposal in the near future

Exceptions to using Equity Method under Indian GAAP

The associate operates under severe long-term restrictions that significantly impair its ability to transfer funds to the investor

In case the associate is not consolidated, it should be accounted for as an investment under AS 13. Near Future means a period not exceeding 12 months unless a longer period can be justified on the basis of facts and circumstances.

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Consolidation Joint Ventures - Definition

US GAAP defines a Joint Venture as: an arrangement whereby two or more parties (the venturers) jointly control a specific business undertaking and contribute resources towards its accomplishment. life of the joint venture is limited to that of the undertaking which may be of short or long-term duration depending on the circumstances. relationship between the venturers is governed by an agreement (usually in writing) which establishes joint control none of the individual venturers is in a position to unilaterally control the venture This feature of joint control distinguishes investments in joint ventures from investments in other enterprises where control of decisions is related to the proportion of voting interest held.

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Consolidation Joint Ventures - Definition

IAS 31 (Revised) under IFRS and AS 27 under Indian GAAP: A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

Joint Control Contractually agreed Ensures no single venture is in a position to exert unilateral control

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Consolidation Joint Ventures Accounting US GAAP

Cost method:

when control of the investment is likely to be temporary; or when control does not rest with the investor.

Prescribed Method Equity Method Record Initially at cost and subsequently adjust for share of profit / loss

Proportionate Consolidation: If the venture is not subject to joint control and the venturers are individually responsible for their proportionate share of the venture's obligations.

Proportionate consolidation is rarely used unless it is established industry practice

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Consolidation Joint Ventures - Accounting

IFRS and Indian GAAP
Accounting driven by form of the Joint Venture

Jointly Controlled Entities

Jointly Controlled Operations

Jointly Controlled Assets

An entity is created and jointly controlled

Each venturer bears own costs and takes a share of the proceeds

An asset that is shared and jointly controlled

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No legal entity formed

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Consolidation Jointly Controlled Entities - Accounting

IFRS Either
Proportionate Consolidation; or Equity Method

Indian GAAP
Proportionate Consolidation

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Consolidation Jointly Controlled Entities - Exceptions

Indian GAAP: Exception to using proportionate consolidation: an interest in a jointly controlled entity which is acquired and held exclusively with a view to its subsequent disposal in the near future; and an interest in a jointly controlled entity which operates under severe long-term restrictions that significantly impair its ability to transfer funds to the venturer

Investment to be accounted for under AS 13 Investments in case of exceptions

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Consolidation Fair Value Vs. Book Value Accounting

Consolidation Goodwill

IFRS

1st time consolidation

mandatorly at Fair Value

Cannot be amortized

US GAAP

1st time consolidation mandatorly at Fair Value

Cannot be amortized

Indian GAAP

Generally
at Book Value

Can be amortized

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Session 2 Topics in this Session

Business Combinations

Intangible Assets

Capitalization of borrowing costs

Impairment of asset

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Business Combinations Types of Business Combinations

Acquisition or purchase
The shareholders combining entities substantially arrangements to control. of the join in equal share Combining entity obtains control over the other. The acquirer is easily identified.

It is not possible to identify the acquirer.

Types of Business Combinations

Group reorganization can arise from transactions among entities that operate under common control

Uniting / Pooling of Interests

Group Reorganization

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Business Combinations Scope and definitions

Definition of a business combination US GAAP: Acquisition of net assets that constitute a business or controlling equity interests of entities. Prohibits Pooling of Interest. IFRS: Bringing together of separate entities or operations into one reporting entity.
Prohibits Pooling of Interest.

Scope Exceptions US GAAP: Common control transactions and Joint Ventures Not for profit organizations IFRS: Common control transactions and formation of joint ventures Acquisition of minority interest Entities brought contract together by

Indian GAAP: If the combination satisfies the specified conditions, it is an amalgamation in the form of a merger (Pooling of Interest Method), else an amalgamation in the nature or purchase.

Indian GAAP: Purchase by one company of the whole of the shares or assets of one company by other company, without the acquired company being dissolved
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Business Combinations Purchase Consideration

Issue Customer relationships In process research and development Restructuring costs IFRS No specific guidance Recognised as an asset and amortised US GAAP Guidance in EITF 02-17 Recognised and charged in income statement I GAAP No specific guidance Recognize as intangible if meet the criterion in AS 26, else a part of goodwill. Recognized only when it is a present obligation and can be estimated reliably Include if payment is probable and can be reasonable estimated. Else, recognize in income statement when determined.
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Never included in Included in purchase price purchase price allocation allocation when strict criteria met Included in purchase price allocation at fair value Included in purchase price allocation only when settled

Contingent liabilities

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Business Combinations Purchase Consideration

Issue
Treatment of Goodwill Negative goodwill Adjustments to initial accounting Contingent consideration

IFRS
Capitalize and test for impairment Recognised in the income statement Within one year of acquisition Recognised at fair value

US GAAP

I GAAP

Capitalize and test Estimate the useful life for impairment and amortize accordingly Reduce fair value of non-monetary assets Disclose as capital reserve

Pre-acquisition Any subsequent contingencies only adjustments are recorded in Income Statement.. Recognised when resolved Include if payment is probable and can be reasonable estimated. Else, recognize in income statement when determined
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Business Combinations Purchase Consideration

Issue Adjustments to deferred tax Step acquisitions IFRS US GAAP I GAAP Similar to IFRS Recognised in income Adjustment first statement, with adjustment against goodwill to goodwill Option to revalue previous No change in basis steps when control for previous steps obtained No basis in IAS Required in certain circumstances When assets received or equity issued / convenience exemption

No change in basis for previous steps

Push down accounting Date of acquisition

No concept of push down accounting Date specified by the court or the purchase agreement

When control transferred

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Intangible Assets Initial Recognition and Measurement

What is an intangible asset? Non monetary asset Without physical substance Controlled by the entity and held for use either in the production or supply of goods or services; or for rental to others; or

for administration purposes

May be purchased or internally generated When to initially recognize? future economic benefits attributable to the asset are probable

the cost of the asset can be measured reliably

Initial Measurement at Fair Value

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Intangible Assets Internally Generated Intangible Assets

US GAAP Research Cost Charge Off Development Cost Charge Off

IFRS Research Cost Charge Off

Internally Generated Intangible Assets

I GAAP Research Cost Charge Off Development Cost Capitalize if criterion met
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Development Cost Capitalize if criterion met

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Intangible Assets Revaluation, Amortization and Impairment

Revaluation Amortization and Impairment

US GAAP / IFRS IFRS US GAAP / IGAAP Amortize if asset has a finite life If indefinite life, annual test for impairment

IGAAP

Presumption of 10 year life If life exceeds 10 years, annual review for impairment

Although allowed, but rare

Not allowed

No Presumed Maximum Life Reversal of Impairment Losses permitted in some circumstances in IFRS Not permitted in US GAAP

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Borrowing Costs Accounting Treatment

Accounting Treatment under IFRS
Benchmark Allowed alternative

Expense

Capitalise where directly attributable to cost of qualifying asset

Capitalisation should match timing of acquisition, construction or production of asset

IGAAP Capitalization mandatory

Start

Suspension

Cessation

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Borrowing Costs Measurement

Specific Funds General Funds Notional Funds

Use actual costs

Use weighted average cost of borrowings

US GAAP -

No capitalisation

Can include income on investment of funds

Foreign Exchange fluctuation cannot be treated as a part of borrowing cost

IFRS and Indian GAAP

Foreign Exchange fluctuation can be treated as a part of borrowing cost, although under tightly defined conditions
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Impairment of Assets Differences

Difference Criterion Timing of impairment review IFRS and IGAAP Annually US GAAP whenever events or changes in circumstances indicate that the carrying amount may not be recoverable Fair value < Carrying amount Fair Value is the amount at which an asset or liability could be bought or settled in a current transaction between willing parties Use undiscounted cash flows for calculating the fair value Prohibited

Asset is Impaired if Recoverable Amount / Fair Value

Recoverable amount < Carrying amount Recoverable amount is higher of Net Selling Price Value in use Use discounted cash flows for calculating the value in use Whenever there is a change in the economic conditions

Cash Flows for calculating value in use / fair value Reversal of impairment loss

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Session 3 Topics in this Session

Earnings Per Share

Deferred Taxes

Discontinued Operations

Provisions and contingencies

Operating and Financial Review

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Earnings Per Share Basic EPS

Profit after minority interests and preference dividends

Basic EPS calculation

Net profit or loss attributable to ordinary shareholders Weighted average number of ordinary shares outstanding

Deduct Treasury Shares from total shares issued

Include partly paid shares if entitled to dividend

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Earnings Per Share Basic EPS Change in the number of shares

Change in number of ordinary shares e.g. rights issue

Adjust shares outstanding as if event occurred at beginning of earliest period presented

No

Change in resources?

YES

Multiply shares outstanding for all periods prior to rights issue by:

Fair value per share immediately prior to exercise of rights e.g. capitalisation or bonus issue/share split Theoretical ex-rights fair value per share

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Earnings Per Share Diluted EPS

Dividends of convertible preference shares Interest of convertible debt Income and expenses resulting from conversions

Basic EPS numerator adjusted for post tax effect of dilutive potential ordinary shares Diluted EPS

=
Basic EPS numerator plus weighted average of ordinary shares which would be issued on conversion of dilutive potential ordinary shares

Assume conversion at beginning of period or date of issue of potential share during period

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Earnings Per Share Dilutive / Anti - Dilutive

Net profit from ordinary operations after: deducting preference dividends excluding discontinuing operations, extraordinary items effect of changes on accounting policies and correction of fundamental errors

Effect on net profit per share from continuing ordinary operations?

Decrease

Increase

Dilutive

Anti - dilutive

Consider in sequence from most to least dilutive

Ignore

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Deferred Tax General Consideration

Basis of Difference IFRS US GAAP IGAAP
Timing differences between taxable income and accounting income

Basis of Deferred Temporary Temporary Tax Differences, diff Differences between carrying amount and tax base

Exceptions

Goodwill / Negative Goodwill Goodwill and initial Negative recognition of an Goodwill asset

/ Goodwill / Negative Goodwill

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Deferred Tax Specific Application

Basis of Difference IFRS US GAAP IGAAP

Exchange Recognize difference on tax translation of an integral foreign operation Subsidiaries Undistributed profits

deferred No deferred tax Not addressed recognized specifically No Impact

Recognize except Similar to IFRS when the parent is with some able to control the differences. reversal of timing difference or if not reversible in foreseeable future

Aggregation of deferred tax from standalone financials. No deferred tax adjustment required for consolidation.

Joint Ventures Same treatment as for Same treatment Same treatment as for Undistributed investment in as for investment investment in Profits subsidiaries in subsidiaries subsidiaries

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Deferred Tax Specific Application

Basis of Difference IFRS US GAAP IGAAP Associates Same treatment as for Deferred tax is always Same treatment as for Undistributed subsidiaries and joint recognised on temporary subsidiaries and joint profits ventures differences relating to ventures investment in associates Share based Account in equity or Windfall tax benefit / Not Specified compensation income depending on loss accounting whether tax deduction exceeds the cumulative share based payment or not Unrealized intra-group transactions Deferred tax Deferred tax recognized Only aggregation of recognized at buyers by the seller deferred tax on rate consolidation

Revaluation of Deferred tax Not applicable Revaluation treated as PPE recognized in equity Revaluations prohibited a permanent difference

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Deferred Tax Recognition, Measurement and Presentation

Basis of Difference IFRS US GAAP IGAAP
to Recognition of Recognize DTA if DTA sufficient taxable income will be available to set off the DTA Tax rate Recognize full DTA and Similar reduce it by valuation IFRS. allowance, if it is more likely than not and to the extent DTA is not recoverable

Enacted or substantially Enacted enacted Prohibited Prohibited

Enacted or substantially enacted Prohibited

Discounting

Offset of DTA Only if the entity has a Similar to IFRS and DTL legal right to set off and the balance relates to the same tax authority
Presentation Non Current

Similar IFRS

to

Current / Non Current Disclose as depending on the item to a separate which it relates line item
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Deferred Tax Business Combination

Basis of Difference IFRS US GAAP IGAAP Permanent difference no deferred tax

Step up of acquired Deferred tax provided Similar to IFRS assets/liabilities to unless the tax base of fair value asset is also stepped up. Previously unrecognised losses of acquirer Recognized if tax recognition criterion is the met. Offsetting credit recorded in income Reduce goodwill, then reduce tax expense. No time limit for recognition.

Similar to IFRS No guidance except that offsetting credit is against goodwill Reduce goodwill, then intangibles, then tax expense. No time limit for recognition. Similar to IFRS, if recognized after one year of combination, route through P&L Account. Similar to IFRS

Post acquisition recognition of tax losses of acquiree that existed at the date of acquisition

Tax losses of the Same as above except Similar to IFRS acquire that offsetting is against goodwill

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Discontinued Operations Definitions

IFRS: Component that the entity, pursuant to a single plan, is: disposing of substantially in its entirety; disposing of piecemeal; or terminating through abandonment; represents a separate major line of business or geographical area of operations; and can be distinguished operationally and for financial reporting purposes US GAAP: Component that is clearly distinguishable operationally and for financial reporting can be a: reporting segment, operating segment, reporting unit, subsidiary or asset grouping. Indian GAAP: Separate major component that represents a single major line of business or geographical area of operations; and that can be distinguished operationally and for financial reporting purposes

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Discontinued Operations Differences

Basis of difference IFRS US GAAP I GAAP

How discontinued

Asset (disposal group) is Similar to available for immediate sale in its IFRS present condition subject only to terms that are usual and customary for sales of such assets (disposal groups) and its sale is highly probable.
From the date on which a component has been disposed of or, if earlier, is classified as held for sale. Until completion of the discontinuance. Completed within a year, with limited exceptions Similar to IFRS.

Either substantially in its entirety or piecemeal or through abandonment.

Starting date for disclosure

From the date on which a formal plan of disposal has been announced. Similar to IFRS Over several months or longer, but pursuant to a single plan.
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Ending date of disclosure Envisaged timescale

Similar to IFRS Similar to IFRS

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Discontinued Operations Differences

Basis of difference IFRS US GAAP I GAAP Follow other standards, for example, on provisions and impairment. Continue to consolidate as normal until discontinuance completed, with additional disclosures on face of the income statement or in notes Measurement Lower of carrying amount or fair value Similar less cost to sell. to IFRS

Presentation

The results of discontinued operations, Similar less applicable income taxes (benefit), to - on the face of the income statement. IFRS The assets and liabilities of a disposal group classified as held for sale present separately. Those assets and liabilities are not offset and presented as a single amount. The major classes of assets and liabilities classified as held for sale disclose separately.

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Provision and Contingencies Provisions

IFRS and IGAAP: Recognize provisions only when US GAAP: The entity has a present obligation to transfer economic benefits as a result of past events; It is probable that such a transfer will be required to settle the obligation; and A reliable estimate of the amount of the obligation can be made.

Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

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Provision and Contingencies Measurement of Provisions

Measurement

IFRS and IGAAP

US GAAP Best estimate of the minimum expenditure required to settle the present obligation Discount the anticipated cash flows at a pre-tax, risk-free rate only if the timing of cash flows is fixed If a range of estimates is predicted, and no amount is more than likely, use the minimum to measure the liability
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Best estimate of the minimum expenditure required to settle the present obligation Discount the anticipated cash flows at a pre-tax, risk-free rate (not required under IGAAP) If a range of estimates is predicted, and no amount is more than likely, use the mid-point to measure the liability

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Provision and Contingencies Restructuring Provisions

IFRS Programme which materially changes scope of business Following two conditions need to be met to be recorded as provision Detailed plan identifying key features of programme and its implementation must exist at balance sheet Must be valid expectation that business will undergo restructuring Can only include direct expenses associated with restructuring programme; cannot relate to ongoing operation of business
IGAAP
Provision to be made only if the general recognition criterion is met as against the constructive obligation criterion under IFRS.

US GAAP Similar to IFRS Measurement at the fair value Recognition in the period in which it is incurred Reassessment Every reporting date Use interest allocation approach to measure subsequent changes in fair value
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Provision and Contingencies Contingent Assets and Liabilities

Contingent Assets IFRS Not recognized unless the income is virtually certain -

Contingent Liabilities
Not recognized unless the outflow is virtually certain Disclosed probability is remote unless the of outflow

US GAAP -

Similar to IFRS, but the threshold for insurance recoveries is lower. Recovery to be probable as against virtually certain in IFRS Similar to IFRS

Requires accrual for loss contingency if it is probable that there is a present obligation resulting from a past event and an outflow of resources is probable.

IGAAP

Similar to IFRS
Present covered. obligations not
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Less disclosures

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Operating and Financial Review IFRS

IFRS encourages but does not mandate the inclusion of an operating and financial review (OFR) outside the financial statements of public and large private companies.

By contrast, an entity filing with the SEC is required to include a management discussion and analysis section in addition to the financial statements.
An Indian entity is also required to make certain disclosures under the Companies Act and SEBI requirements IFRS Encourages the following to be included The main features of operating performance for the current period of review;

The dynamics of the businesschanges in the business environment, the reaction of the business to them and their effect on performance;
The policy for investment in the current period to maintain and enhance performance in future periods; and The sources of funding, gearing policy and strategies for managing risks

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Operating and Financial Review US GAAP

The MD&A focuses mainly on liquidity, capital resources and results of operations addressing the three-year period covered by the financial statements and includes among other things: An explanation of material changes in the financial statement balances, focusing on each relevant reportable segment if the revenues, profits and cash needs of these are disproportionate; The general economic and industry conditions, including known prospective information; Infrequent events or transactions; and The likely impact in future periods of recently issued accounting standards not yet implemented by the entity. Foreign companies listed in the USA must also discuss pertinent governmental, fiscal, monetary or political policies that may affect them or their US investors. They must also provide an explanation of the main differences between local accounting and US GAAP.

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Operating and Financial Review Indian GAAP

The Companies Act requires the Board of Directors report to be included. Contents have been specifically prescribed under the Act and generally include:
The state of companys affairs The amount proposed to be carried to reserves The amount recommended to be paid by way of dividend Material changes and commitments affecting the financial position of the company, which occurred between the balance sheet date and the date of report Conservation of energy, technology absorption, foreign-exchange earnings and outgo The changes that have occurred in the nature of the companys business, its subsidiaries or in the classes of business in which the company has an interest. The MD&A report forming part of annual reports of listed companies should include discussion on topics like industry structure and developments, opportunities and threats, internal control, segment-wise or productwise performance and risks and concerns.

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