INDIAN ACCOUNTING STANDARDS (IND AS): AN OVERVIEW (REVISED 2017)

INDIAN ACCOUNTING STANDARDS (IND AS):

AN OVERVIEW
(REVISED 2017)

September/2017/P0000 (Revised)
Indian Accounting Standards
(Ind AS): An Overview
(Revised 2017)

The Institute of Chartered Accountants of India

(Set up by an Act of Parliament)
New Delhi
© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form, or by any means, electronic,
mechanical, photocopying, recording, or otherwise without prior permission, in
writing, from the publisher.

This Educational Material has been formulated in accordance with the Ind AS
notified by the Ministry of Corporate Affairs (MCA) as Companies (Indian
Accounting Standards) Rules, 2015 vide Notification dated February 16, 2015
and other amendments finalised and notified till March 2017.

Edition : September 2017

Committee/Department : Ind AS Implementation Committee

E-mail : [email protected]

Website : www.icai.org

Price : Rs. 175/-

ISBN : 978-81-8441-802-6

Published by : The Publication Department on behalf of the

Institute of Chartered Accountants of India,
ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi - 110 002.

Printed by : Sahitya Bhawan Publications, Hospital Road,

Agra - 282 003.
September/2017/1,000 copies

ii
 Foreword
ICAI is playing a paramount role in unleashing this new era of accounting
reforms in India as per the roadmap notified by the Ministry of Corporate
Affairs, wherein the companies covered under first phase of Implementation
of Ind AS have already implemented these standards. Phase II companies
will be publishing their first annual Ind AS financial statements for the year
ending March 2018. We at the ICAI are committed to a smooth
implementation of Ind AS and have been taking various initiatives for training
of our accounting professionals, creating awareness and providing
guidance. I call upon you to take benefit of our various related initiatives,
boost your skill-sets and capabilities and make this ongoing mega accounting
reform in India a big success.
I convey my heartfelt congratulations to CA. Dhinal Ashvinbhai Shah,
Chairman, CA. Sanjay Vasudeva, Vice- Chairman, and other members of the
Ind AS Implementation Committee for their untiring efforts in spreading
awareness on Ind AS throughout the country. I sincerely appreciate the
efforts put in by CA. S.B. Zaware, Chairman, CA. M P Vijay Kumar, Vice-
Chairman, Accounting Standards Board and other members of the
Accounting Standards Board for being instrumental in bringing out these Ind
AS and putting us at par with the global world.
It gives me immense pleasure to share this revised publication capturing all
the recent amendments made in Ind AS. I am confident that this revised
publication would be of great help to the members and other stakeholders for
getting an overall understanding of all Ind AS as well as updating their
knowledge base on Ind AS.
New Delhi CA. Nilesh Shivji Vikamsey
September 9, 2017 President, ICAI
 Preface
Ind AS has become a reality now as the era of Implementation of Ind AS has
already begun in the country with Phase I companies who have published
their financial statements prepared in accordance with Ind AS for financial
year 2016-17. Phase II companies have published their Q1 results prepared
in accordance with Ind AS. This paradigm shift has relatively filled the gaps
of the financial reporting framework and has made it at par with high quality
global standards of reporting.
The Ind AS Implementation Committee of the ICAI has been working
relentlessly to provide guidance to the members and other stakeholders on
these notified Ind AS. For this purpose, Educational Materials on Ind AS
covering various issues are being formulated by the Committee. For
addressing transition related queries in a timely and speedy manner, an Ind
AS Transition Facilitation Group (ITFG) of the Committee is working hard in
providing timely clarifications to members and others concerned. Queries
raised are also addressed through Support-desk for implementation of Ind
AS. Apart from this, the Committee organises Certificate Course on Ind AS,
conducts In-house training programmes on Ind AS for regulatory bodies such
as C&AG, IRDAI etc. and other corporate entities, develops e-learning
modules on Ind AS, organises seminars, awareness programmes on Ind AS
and series of webcasts on Ind AS.
Certain amendments have been made in IFRS/IAS issued by the IASB. The
Institute of Chartered Accountants of India (ICAI) to keep up the pace with
the global developments, revised the notified Ind AS in line with the
amendments made in IFRS/IAS issued by the IASB. MCA had notified the
amendments to the Ind AS vide notification dated March 17, 2017, as
Companies (Indian Accounting Standards) Amendment Rules, 2017. This
publication significantly captures all the recent amendments in Ind AS.
We would like to convey sincere gratitude to our Honourable President, CA.
Nilesh Shivji Vikamsey and Vice-President, CA. Naveen N D Gupta for
providing us the opportunity of bringing out this publication. We are also
thankful to CA. Sanjay Vasudeva, Vice-Chairman, Ind AS Implementation
Committee and CA. M P Vijay Kumar, Vice Chairman, Accounting Standards
Board for their efforts in all the endeavours of the Board/Committee. We are
also thankful to all the members of the Accounting Standards Board and Ind
AS Implementation Committee for their valuable contribution in all the
endeavours of the Board/Committee.
We sincerely appreciate the technical contribution made by CA. Geetanshu
Bansal, Secretary, Ind AS Implementation Committee and CA. Prachi Jain,
Executive Officer, Ind AS Implementation Committee in bringing out this
revised publication. I would also like to thank CA. Vidhyadhar Kulkarni,
Technical Consultant, ICAI, for his technical support and guidance.
We sincerely believe that this revised publication would help members and
other stakeholders get an overall understanding about all Ind AS as well as
update their existing knowledge on Ind AS.

CA. Dhinal Ashvinbhai Shah CA. S.B. Zaware

Chairman Chairman
Ind AS Implementation Committee Accounting Standards Board
 Contents

Approach to IFRS-converged Indian Accounting Standards 1

(Ind AS)
Roadmap for implementation of Indian Accounting 4
Standards (Ind AS) for Corporates: A Snapshot
Roadmap for implementation of Indian Accounting 5
Standards (Ind AS) for Scheduled Commercial banks,
Insurance Companies and NBFCs: A Snapshot
Summary of Ind AS 7
Major Differences between Ind AS and IFRS and reasons 105
for the differences
Major Differences between Ind AS and AS 127
Ind AS Implementation Initiatives 165
APPENDICES
A Comparative chart of IFRS and corresponding Ind AS 168
indicating, inter alia, IFRS in respect of which no
corresponding Ind AS has been formulated and
reasons therefore
B IFRICs/SICs included in the Appendices corresponding 171
to Ind AS
C Notificaton by MCA for Companies (Indian Accounting 174
Standards) Rules, 2015 and extracts of Companies
(Indian Accounting Standards) Amendment Rules,
2016
D Extracts of Roadmap for implementation of Ind AS for 185
Scheduled Commercial Banks (Excluding RRBs) and
Insurers/Insurance Companies as issued vide Press
release dated January 18, 2016
 Approach to IFRS-converged Indian
Accounting Standards (Ind AS)

First Step towards IFRS

The Institute of Chartered Accountants of India (ICAI) being the accounting
standards-setting body in India, way back in 2006, initiated the process of
moving towards the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB) with a view to
enhance acceptability and transparency of the financial information
communicated by the Indian corporates through their financial statements.
This move towards IFRS was subsequently accepted by the Government of
India.
The Government of India in consultation with the ICAI decided to converge
and not to adopt IFRS issued by the IASB. The decision of convergence
rather than adoption was taken after the detailed analysis of IFRS
requirements and extensive discussion with various stakeholders.
Accordingly, while formulating IFRS-converged Indian Accounting Standards
(Ind AS), efforts have been made to keep these Standards, as far as
possible, in line with the corresponding IAS/IFRS and departures have been
made where considered absolutely essential. These changes have been
made considering various factors, such as, various terminology related
changes have been made to make it consistent with the terminology used in
law, e.g., ‘statement of profit and loss’ in place of ‘statement of
comprehensive income’ and ‘ balance sheet’ in place of ‘statement of
financial position’. Certain changes have been made considering the
economic environment, customs and laws of the country.
Government of India commitment to IFRS-converged Ind AS
As per the original roadmap for implementation of IFRS-converged Ind AS
issued by the Government of India, initially Ind AS were expected to be
implemented from the year 2011. However, keeping in view the fact that
certain issues including tax issues were still to be addressed, the Ministry of
Corporate Affairs decided to postpone the date of implementation of Ind AS.
The Hon'ble Finance Minister of India, Shri Arun Jaitely ji, in his Budget
Speech in July 2014 stated that –

1
Ind AS: An Overview

“There is an urgent need to converge the current Indian accounting

standards with the International Financial Reporting Standards
(IFRS). I propose for adoption of the new Indian Accounting
Standards (Ind AS) by the Indian companies from the financial year
2015-16 voluntarily and from the financial year 2016-17 on a
mandatory basis. Based on the international consensus, the
regulators will separately notify the date of implementation of Ind AS
for the Banks, Insurance companies etc. Standards for the
computation of tax would be notified separately”.
Pursuant to the above announcement, various steps have been taken to
facilitate the implementation of IFRS-converged Indian Accounting Standards
(Ind AS). Moving in this direction, the Ministry of Corporate Affairs (MCA) has
issued the Companies (Indian Accounting Standards) Rules, 2015 vide
Notification dated February 16, 2015 covering the revised roadmap of
implementation of Ind AS for companies other than Banking companies,
Insurance Companies and NBFCs. As per the Notification, Indian Accounting
Standards (Ind AS) converged with International Financial Reporting
Standards (IFRS) shall be implemented on voluntary basis from 1st April,
2015 and mandatorily from 1st April, 2016. Further, the MCA on March 30,
2016, has also notified the Roadmap for implementation of Ind AS for
Scheduled Commercial Banks, Insurance companies and NBFCs from 1st
April, 2018 onwards and also amendments to Ind AS in line with the
amendments made in IFRS/IAS vide Companies (Indian Accounting
Standards) Amendment Rules, 2016. However, IRDAI vide press release
dated June 28, 2017 has deferred the implementation of Ind AS in the
Insurance Sector in India for a period of two years and the same shall now
be implemented effective from 1st April 2020.
However, the requirement of submitting Proforma Ind AS financial statements
on a quarterly basis shall continue to be governed as directed by IRDAI
One of the most significant steps in moving towards to Ind AS taken by the
ICAI is updation of the Ind AS corresponding to the latest version of IFRS as
post-finalisation of 35 Ind AS in 2011, not only significant amendments have
been made in IFRS, but various new IFRS have been issued by the IASB.
While updating Ind AS corresponding to the latest IFRS issued by the IASB,
it was decided that all Ind AS that would be applicable from the financial year
2015-16 on voluntarily basis and from financial year 2016-17 on mandatory
basis should be updated corresponding to the IFRS issued/finalised till
August 31, 2014. With a view to provide a stable platform to the Indian

2
 Approach to IFRS-converged Indian Accounting Standards (Ind AS)

entities for smoother and effective implementation of Ind AS it has been

decided to converge early by notifying Ind AS corresponding to IFRS 9,
Financial Instruments (effective from January 01, 2018) issued by the IASB.
The current status of Ind AS vis-à-vis the IFRS is given in the Appendix A.
The ICAI while updating Ind AS, also reconsidered the carve-outs made in
Ind AS finalised in 2011 and decided not to continue with certain carve -outs.
It was also decided to make certain new carve-outs/carve-in based on the
feedback received from various stakeholders.

3
 Roadmap1 for implementation of
Indian Accounting Standards
(Ind AS): A Snapshot
(For Companies other than banks, NBFCs and Insurance Companies)
Phase I 1st April 2015 or thereafter (with Comparatives): Voluntary Basis
for any company and its holding, subsidiary, JV or associate
company
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 crore
(b) Unlisted Companies having net worth > INR 500 crore
(c) Parent, Subsidiary, Associate and JV of Above
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 of INR 500 crore >
INR 250 crore
(c) Parent, Subsidiary, Associate and JV of Above
Companies listed on SME exchange are 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 Accounting Standards notified in Companies (Accounting
Standards) Rules, 2006.

1 Notification of Companies (Indian Accounting Standards) Rules, 2015 and Companies

(Indian Accounting Standards) (Amendment) Rules, 2016 issued vide notifications dated
16th February, 2015 and March 30, 2016 by the Ministry of Corporate Affairs is given in
the Appendix C.
4
 Roadmap2 for Implementation of
Indian Accounting Standards (Ind
AS): A Snapshot
(For Scheduled Commercial Banks (Excluding RRBs), Insurers/
Insurance Companies and Non-Banking Financial Companies (NBFC’s)

NBFCs
Phase I: From 1st April, 2018 (with comparatives)
 NBFCs (whether listed or unlisted) having net worth of INR 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
Phase II: 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 of INR 250 crore or
more but less 500 crore
 Holding, Subsidiary, JV and Associate companies of above
other than those already covered under corporate roadmap shall
also apply from said date
 Applicable for both Consolidated and individual Financial
Statements
 NBFC having net worth below 250 crore shall not apply Ind AS.

2 Notification of Companies (Indian Accounting Standards) Rules, 2015 and Companies

(Indian Accounting Standards) (Amendment) Rules, 2016 issued vide notifications dated
16th February, 2015 and March 30, 2016 by the Ministry of Corporate Affairs is given in
the Appendix C.
5
Ind AS: An Overview

 Adoption of Ind AS is allowed only when required as per the roadmap.

Voluntary adoption of Ind AS is not allowed.

Scheduled Commercial Banks (excluding RRB’s)

and Insurers/Insurance companies 3(please refer *)
From 1st April, 2018 (with comparatives):
 Holding, subsidiary, JV and Associates companies of scheduled
commercial banks (excluding RRB’s) shall also apply from the
said date irrespective of it being covered under corporate
roadmap
 Applicable for both Consolidated and individual Financial
Statements
 Urban Cooperative banks (UCBs) and Regional Rural banks (RRBs)
are not required to apply Ind AS.
*Insurers/ Insurance companies
 IRDAI vide press release dated June 28, 2017 has deferred the
implementation of Ind AS in the Insurance Sector in India for a period
of two years and the same shall now be implemented effective from
1st April 2020.
However, the requirement of submitting Proforma Ind AS financial statements
on a quarterly basis shall continue to be governed as directed by IRDAI .

3Extracts of Roadmap for implementation of Ind AS for Scheduled Commercial

Banks (Excluding RRBs) and Insurers/Insurance Companies as issued vide
Press release dated January 18, 2016.

6
 Summary of Ind AS

Ind AS 1, Presentation of Financial Statements

Ind AS 1 prescribes the basis for presentation of general purpose financial
statements to ensure comparability both with the entity’s financial statements
of previous periods and with the financial statements of other entities. It sets
out overall requirements for the presentation of financial statements,
guidelines for their structure and minimum requirements for their content.
Financial Statements
The Standard requires an entity to present a complete set of financial
statements at least annually, with comparative amounts for the preceding
year (including comparative amounts in the notes).
A complete set of financial statements comprises:
(a) a balance sheet as at the end of the period ;
(b) a statement of profit and loss for the period;
(c) Statement of changes in equity for the period;
(d) a statement of cash flows for the period;
(e) notes, comprising significant accounting policies and other explanatory
information; and
(f) comparative information in respect of the preceding period; and
(g) a balance sheet as at the beginning of the preceding period when an
entity applies an accounting policy retrospectively or makes a
retrospective restatement of items in its financial statements, or when
it reclassifies items in its financial statements.
The Standard requires an entity to present, in a statement of changes in
equity, all owner changes in equity. All non-owner changes in equity (i.e.,
comprehensive income) are required to be presented in single statement of
profit and loss, with profit or loss and other comprehensive income presented
in two sections. The sections shall be presented together, with the profit or
loss section presented first followed directly by the other comprehensive
income section.

7
Ind AS: An Overview

The Standard requires that an entity whose financial statements comply with
Ind AS must make an explicit and unreserved statement of such compliance
in the notes. An entity must not describe financial statements as complying
with Ind AS unless they comply with all the requirements of Ind AS. The
application of Ind AS, with additional disclosure when necessary, is
presumed to result in financial statements that achieve a presentation of true
and fair view.
The Standard also deals with going concern issues, offsetting and changes
in presentation or classification.
Structure and Content
The Standard requires that an entity shall clearly identify the financial
statements and distinguish them from other information in the same
published document. The Standard requires some line items to be presented
in the balance sheet. It also prescribes the information to be presented in
statement of profit and loss, other comprehensive income section and
statement of changes in equity.
Other Comprehensive Income
Other comprehensive income comprises items of income and expenses
(including reclassification adjustments) that are not recognised in profit or
loss as required or permitted by other Ind AS.
The Standard requires an entity to disclose reclassification adjustments and
income tax relating to each component of other comprehensive income.
Reclassification adjustments are the amounts reclassified to profit or loss in
the current period that were previously recognised in other comprehensive
income.
The other comprehensive income section shall present line items for
amounts for the period of:
(a) items of other comprehensive income (excluding amounts in
paragraph (b)), classified by nature and grouped into those that, in
accordance with other Ind AS:
(i) will not be reclassified subsequently to profit or loss; and
(ii) will be reclassified subsequently to profit or loss when specific
conditions are met.
(b) the share of the other comprehensive income of associates and joint

8
 Summary of Ind AS

ventures accounted for using the equity method, separated into the
share of items that in accordance with other Ind AS:
(a) will not be reclassified subsequently to profit or loss; and
(b) will be reclassified subsequently to profit or loss when specific
conditions are met.
Current/non-current distinction
The Standard requires that an entity shall present current and non-current
assets, and current and non-current liabilities, as separate classifications in
its balance sheet except when a presentation based on liquidity provides
information that is reliable and more relevant. When that exception applies,
an entity shall present all assets and liabilities in order of liquidity.
The Standard also requires that whichever method of presentation is
adopted, an entity shall disclose the amount expected to be recovered or
settled after more than twelve months for each asset and liability line item
that combines amounts expected to be recovered or settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.
The Standard, among other things, requires that:
(a) An entity shall disclose, along with its significant accounting policies or
other notes, the judgements, apart from those involving estimations,
that management has made in the process of applying the entity’s
accounting policies and that have the most significant effect on the
amounts recognised in the financial statements.
(b) An entity shall disclose information about the assumptions it makes
about the future, and other major sources of estimation uncertainty at
the end of the reporting period, that have a significant risk of resultin g
in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
(c) An entity shall disclose information that enables users of its financial
statements to evaluate the entity’s objectives, policies and processes
for managing capital. An entity shall also provide additional disclosures
on puttable financial instruments classified as equity instruments.

9
Ind AS: An Overview

Ind AS 2, Inventories
Inventories constitute a major portion of current assets of an entity. A primary
issue in accounting for inventories is the amount of cost to be recognised as
an asset and carried forward until the related revenues are recognised.
Ind AS 2 prescribes the accounting treatment for inventories, such as,
determination of cost and its subsequent recognition as expense, including
any write-downs of inventories to net realisable value and reversal of write-
downs.
Scope
Ind AS 2 applies to all inventories, except work in progress arising under
construction contracts, including directly related service contracts (Ind AS 11,
Construction Contracts), financial instruments (Ind AS 32, Financial
Instruments: Presentation and Ind AS 109, Financial Instruments); and
biological assets (i.e., living animals or plants) related to agricultural activity
and agricultural produce at the point of harvest (Ind AS 41, Agriculture)
The Standard prescribes that the inventories shall be measured at the lower
of cost and net realisable value. Cost of inventories comprises all costs of
purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs
necessary to make the sale. Estimates of net realisable value are based on
the most reliable evidence available at the time the estimates are made, of
the amount the inventories are expected to realise.
Cost of inventories of service provider
To the extent that service providers have inventories, they measure them at
the costs of their production. These costs consist primarily of the labour and
other costs of personnel directly engaged in providing the service, including
supervisory personnel and attributable overheads. Labour and other costs
relating to sales and general administrative personnel are not included but
are recognised as expenses in the period in which they are incurred. The
cost of inventories of a service provider does not include profit margins or
non-attributable overheads that are often factored into prices charged by
service providers.

10
 Summary of Ind AS

Cost Formulae
The cost of inventories shall be assigned by using the first-in first-out (FIFO)
or weighted average cost formula. An entity shall use the same cost formula
for all inventories having a similar nature and use to the entity.
Recognition as an Expense
When inventories are sold, the carrying amount of inventories shall be
recognised as an expense in the period in which the related revenue is
recognised. The amount of any write-down to net realisable value and all
losses of inventories shall be recognised as an expense in the period in
which the write-down or loss occurs. The amount of any reversal of any
write-down of inventories, arising from an increase in net relisable value,
shall be recognised as a reduction in the amount of inventories recognised
as an expense in the period in which the reversal occurs.

Ind AS 7, Statement of Cash Flows

Ind AS 7 prescribes principles and guidance on preparation and presentation
of cash flows of an entity from operating activities, investing activities and
financing activities for a reporting period.
The objective of Ind AS 7 is to provide information about the historical
changes in cash and cash equivalents of an entity during the reporting period
from its operating, investing and financing activities.
Cash flows are inflows and outflows of cash and cash equivalents. Cash
comprises cash on hand and demand deposits. Cash equivalents are short -
term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
Cash and cash equivalents include demand deposits, certain short-term
investments and in some cases, bank overdrafts.
Information about the cash flows of an entity is useful in providing users of
financial statements with a basis to assess the ability of the entity to
generate cash and cash equivalents and the needs of the entity to utilise
those cash flows. The economic decisions that are taken by users require an
evaluation of the ability of an entity to generate cash and cash equivalents
and the timing and certainty of their generation.

11
Ind AS: An Overview

Key Requirements of Ind AS 7

The statement of cash flows is required to report cash flows classified by
operating, investing and financing activities along with the components of
cash and cash equivalents at the beginning and end of the reporting period,
except in limited circumstances where cash flows are offset and reported on
net basis.
Operating Activities
Operating activities are the principal revenue-producing activities of the entity
and other activities that are not investing or financing activities. Cash
flows from operating activities are primarily derived from the principal
revenue-producing activities of the entity. Therefore, they generally result
from the transactions and other events that enter into the determination of
profit or loss.
The amount of cash flows arising from operating activities is a key indicator
of the extent to which the operations of the entity have generated sufficient
cash flows to repay loans, maintain the operating capability of the entity, pay
dividends and make new investments without recourse to external sources of
financing.
An entity shall report cash flows from operating activities using either the
‘direct method’ or the ‘indirect method’. Under direct method, major classes
of gross cash receipts and payments are presented. However, under indirect
method, profit or loss is adjusted for the effects of transactions of a non -cash
nature; deferrals or accruals of past or future operating cash receipts or
payments; and items of income or expenses associated with investing or
financing cash flows.
Cash flows arising from taxes on income shall be separately disclosed and
classified as cash flow from operating activities unless they can be
specifically identified with financing or investing activities.
Investing activities
Investing activities are the acquisition and disposal of long-term assets and
other investments not included in cash equivalents. The separate disclosure
of cash flows arising from investing activities is important because the cash
flows represent the extent to which expenditures have been made for
resources intended to generate future income and cash flows.

12
 Summary of Ind AS

The aggregate cash flows arising from obtaining or losing control of

subsidiaries or other businesses shall be presented separately and classified
as investing activities.
Financing activities
Financing activities are activities that result in changes in the size and
composition of the contributed equity and borrowings of the entity. The
separate disclosure of cash flows arising from financing activities is important
because it is useful in predicting claims on future cash flows by providers of
capital to the entity.
An entity shall report separately major classes of gross cash receipts and
gross cash payments arising from investing and financing activities
Non- cash transactions
Investing and financing transactions that do not require the use of cash or
cash equivalents shall be excluded from the statement of cash flows. Such
transactions shall be disclosed elsewhere in the financial statements in a way
that provides all the relevant information about these investing and financing
activities.
Foreign currency cash flows
Cash flows arising from transactions in a foreign currency shall be recorded
in an entity’s functional currency by applying to the foreign currency amount
the exchange rate between the functional currency and the foreign currency
at the date of the cash flow. The cash flows of a foreign subsidiary shall be
translated at the exchange rates between the functional currency and the
foreign currency at the dates of the cash flows.
Unrealised gains and losses arising from changes in foreign currency
exchange rates are not cash flows. However, the effect of exchange rate
changes on cash and cash equivalents held or due in a foreign currency is
reported in the statement of cash flows in order to reconcile cash and cash
equivalents at the beginning and the end of the period.
Cash and cash equivalents
An entity shall disclose the components of cash and cash equivalents and
shall present a reconciliation of the amounts in its statement of cash flows
with equivalent items reported in the balance sheet.

13
Ind AS: An Overview

An entity shall disclose, together with a commentary by management, the

amount of significant cash and cash equivalents held by the entity that are
restricted for specific purposes.
Changes in liabilities arising from financing activities
An entity shall provide disclosures that enable users of financial statements
to evaluate changes in liabilities arising from financing activities, including
both changes arising from cash flows and non-cash changes.
An entity shall disclose the following changes in liabilities arising from
financing activities:
(a) changes from financing cash flows;
(b) changes arising from obtaining or losing control of subsidiaries or
other businesses;
(c) the effect of changes in foreign exchange rates;
(d) changes in fair values; and
(e) other changes.
The above disclosures also applies to changes in financial assets (for
example, assets that hedge liabilities arising from financing activities) if cash
flows from those financial assets were, or future cash flows will be, included
in cash flows from financing activities.
An entity may provide reconciliation between the opening and closing
balances in the balance sheet for liabilities arising from financing activities,
including the changes identified as mentioned above.

Ind AS 8, Accounting Policies, Changes in

Accounting Estimates and Errors
The objective of Ind AS 8 is to prescribe the criteria for selecting and
changing accounting policies, together with the accounting treatment and
disclosure of changes in accounting policies, changes in accounting
estimates and corrections of errors. The Standard is intended to enhance the
relevance and reliability of an entity’s financial statements, and the
comparability of those financial statements over time and with the financial
statements of other entities.
It is clarified that disclosure requirements for accounting policies are laid

14
 Summary of Ind AS

down in Ind AS 1, Presentation of Financial Statements. However, the

disclosures required for changes in accounting policies are as set out in this
Accounting Standard.
Accounting Policies
Accounting policies are the specific principles, bases, conventions, rules and
practices applied by an entity in preparing and presenting financial
statements.
This Standard provides guidance in selection and application of the
accounting policies. A two-step approach is advocated.
Step 1 requires that when an Ind AS specifically applies to a transaction,
other event or condition, the accounting policy or policies applied to that item
shall be determined by applying the Ind AS.
Step 2 provides that in the absence of an Ind AS that specifically applies to a
transaction, other event or condition, management shall use its judgment in
developing and applying an accounting policy. This judgment should result in
information that is:
 relevant to the economic decision-making needs of users; and
 reliable, so that the financial statements:
 represent faithfully the financial position, financial performance
and cash flows of the entity;
 reflect the economic substance of transactions, other events
and conditions, and not merely the legal form;
 are neutral, i.e., free from bias;
 are prudent; and
 are complete in all material respects.
An entity shall select and apply the accounting policies consistently for
similar transactions, other events and conditions, unless an Ind AS
specifically requires or permits categorisation of items for which different
policies may be appropriate. If an Ind AS requires or permits such
categorisation, an appropriate accounting policy shall be selected and
applied consistently to each category.

15
Ind AS: An Overview

Changes in Accounting Policies

An entity is permitted to change an accounting policy only if the change:
(a) is required by an Ind AS; or
(b) results in the financial statements providing reliable and more relevant
information about the effects of transactions, other events or
conditions on the entity’s financial position, financial performance or
cash flows.
The Standard also specifies how changes in accounting policies is to be
applied:
 A change in accounting policy may result due to the first time
application of an Ind AS. The change shall be applied as per the
transitional provisions in that Ind AS.
 If that Ind AS does not contain any transitional provisions, it shall apply
the change retrospectively.
 A voluntary change in accounting policy is to be applied
retrospectively. An early application of an Ind AS is not a voluntary
change in accounting policy.
When it is impracticable for an entity to apply a new accounting policy
retrospectively, because it cannot determine the cumulative effect of applying
the policy to all prior periods, the entity will apply the new policy
prospectively from the start of the earliest period practicable. It therefore
disregards the portion of the cumulative adjustment to assets, liabilities and
equity arising before that date. Changing an accounting policy is permitted
even if it is impracticable to apply the policy prospectively for any prior
period.
Change in Accounting Estimates
The use of reasonable estimates is an essential part of the preparation of
financial statements and does not undermine their reliability. A change in
accounting estimate is an adjustment of the carrying amount of an asset or a
liability, or the amount of the periodic consumption of an asset, that results
from the assessment of the present status of, and expected future benefits
and obligations associated with, assets and liabilities. Changes in accounting
estimates result from new information or new developments and, accordingly,
are not corrections of errors.

16
 Summary of Ind AS

The effect of change in an accounting estimate shall be recognised

prospectively by including it in profit or loss in:
(a) the period of the change, if the change affects that period only; or
(b) the period of the change and future periods, if the change affects both.
Prior Period Errors
Prior period errors are omissions from, and misstatements in, the entity’s
financial statements for one or more prior periods arising from a failure to
use, or misuse of, reliable information that:
(a) was available when financial statements for those periods were
approved for issue; and
(b) could reasonably be expected to have been obtained and taken into
account in the preparation and presentation of those financial
statements.
Such errors include the effects of mathematical mistakes, mistakes in
applying accounting policies, oversights or misinterpretations of facts, and
fraud.
Except to the extent that it is impracticable to determine either the period-
specific effects or the cumulative effect of the error, the Standard requires to
correct material prior period errors retrospectively in the first set of financial
statements approved for issue after their discovery by:
(a) restating the comparative amounts for the prior period(s) presented in
which the error occurred; or
(b) if the error occurred before the earliest prior period presented,
restating the opening balances of assets, liabilities and equity for the
earliest prior period presented.
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. Materiality depends on the size and nature of the
omission or misstatement judged in the surrounding circumstances. The size
or nature of the item, or a combination of both, could be the determining
factor.

17
Ind AS: An Overview

Ind AS 10, Events after the Reporting Period

The objective of Ind AS 10 is to prescribe:
(a) when an entity should adjust its financial statements for events after
the reporting period; and
(b) the disclosures that an entity should give about the date when the
financial statements were approved for issue and about events after
the reporting period.
The Standard also requires that an entity should not prepare its financial
statements on a going concern basis if events after the reporting period
indicate that the going concern assumption is not appropriate.
Events after the reporting period are those events, favourable and
unfavourable, that occur between the end of the reporting period and the
date when the financial statements are approved by the Board of Directors in
case of a company, and, by the corresponding approving authority in case of
any other entity for issue. Two types of events can be identified:
(a) those that provide evidence of conditions that existed at the end of the
reporting period (adjusting events after the reporting period); and
(b) those that are indicative of conditions that arose after the reporting
period (non-adjusting events after the reporting period).
However, there is an exception to the above principle. In case of 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 for issue, to not demand payment as a
consequence of the breach, shall be considered as an adjusting event.
An entity shall adjust the amounts recognised in its financial statements to
reflect adjusting events after the reporting period.
An entity shall not adjust the amounts recognised in its financial statements
to reflect non-adjusting events after the reporting period.
However, if non-adjusting events after the reporting period are material and
their non-disclosure could influence the economic decisions that users make
on the basis of the financial statements, then it shall disclose the following for
each material category of non-adjusting event after the reporting period:
(a) the nature of the event; and

18
 Summary of Ind AS

(b) an estimate of its financial effect, or a statement that such an estimate

cannot be made.
If an entity receives information after the reporting period about conditions
that existed at the end of the reporting period, it shall update disclosures that
relate to those conditions, in the light of the new information.
Appendix A of Ind AS 10 provides guidance with regard to distribution of non -
cash assets as dividends to owners. The Appendix prescribes that liability to
pay such a dividend should be recognised when it is appropriately authorised
and is no longer at the discretion of the entity. This liability should be
measured at the fair value of assets to be distributed. Any difference
between the carrying amount of the assets distributed and the carrying
amount of the dividend payable should be recognised in profit or loss when
an entity settles the dividend payable.

Ind AS 11, Construction Contracts

Ind AS 11 prescribes the accounting treatment of revenue and costs
associated with construction contracts. Because of the nature of the activity
undertaken in construction contracts, the date at which the contract activity is
entered into and the date when the activity is completed usually fall into
different accounting periods. Therefore, the primary issue in accounting for
construction contracts is the allocation of contract revenue and contract costs
to the accounting periods in which construction work is performed.
Scope
The Standard shall be applied in accounting for construction contracts in the
financial statements of contractors. A construction contract is a contract
specifically negotiated for the construction of an asset or a combination of
assets that are closely interrelated or interdependent in terms of their design,
technology and function or their ultimate purpose or use.
The requirements of this Standard are usually applied separately to each
construction contract. However, in certain circumstances, it is necessary to
apply the Standard to the separately identifiable components of a single
contract or to a group of contracts together in order to reflect th e substance
of a contract or a group of contracts.
Contract revenue shall comprise: (a) the initial amount of revenue agreed in
the contract; and (b) variations in contract work, claims and incentive

19
Ind AS: An Overview

payments: (i) to the extent that it is probable that they will result in revenue;
and (ii) they are capable of being reliably measured. Contract revenue is
measured at the fair value of the consideration received or receivable.
Contract costs shall comprise: (a) costs that relate directly to the specific
contract; (b) costs that are attributable to contract activity in general and can
be allocated to the contract; and (c) such other costs as are specifically
chargeable to the customer under the terms of the contract.
Recognition of contract revenue and expenses
When the outcome of a construction contract can be estimated reliably,
contract revenue and contract costs associated with the construction contract
shall be recognised as revenue and expenses respectively by reference to
the stage of completion of the contract activity at the end of the reporting
period.
When the outcome of a construction contract cannot be estimated reliably:
(a) revenue shall be recognised only to the extent of contract costs incurred
that it is probable will be recoverable; and (b) contract costs shall be
recognised as an expense in the period in which they are incurred
Recognition of expected losses
When it is probable that total contract costs will exceed total contract
revenue, the expected loss shall be recognised as an expense immediately.
An entity shall disclose the amount recognised as contract revenue in the
period, the method used to determine the contract revenue recognised and
stage of completion of contracts in progress.
For the contracts in progress at the end of the period, an entity shall disclose
the aggregate costs incurred and recognised profits to date, the amounts of
retentions and advances received.
Appendix A of Ind AS 11 gives guidance on accounting by operators for
public-to-private service concession arrangements. It sets out principles for
recognition and measurement of the obligations and related rights in service
concession arrangements. The Appendix prescribes that an operator shall
not recognise the public service infrastructure (within the scope of this
appendix) as its Property, Plant and Equipment because the contractual
service arrangement does not convey the right to control the use of the
infrastructure. It only gives operator the access to operate the infrastructure
to provide public service on behalf of the grantor.

20
 Summary of Ind AS

The operator shall account for revenue and costs relating to construction or
upgrade services in accordance with Ind AS 11 and those relating to
operation services in accordance with Ind AS 18. The consideration received
or receivable shall be recognised at its fair value. The consideration may be
rights to a financial asset or an intangible asset.
The operator recognises a financial asset to the extent that it has a
unconditional contractual right to receive cash or another financial asset from
or at the direction of the grantor for the construction services. The operator
shall recognise an intangible asset to the extent that it receives a right (a
license) to charge users of the public service.

Ind AS 12, Income Taxes

Ind AS 12 prescribes the accounting treatment for income taxes. For the
purposes of this Standard, income taxes include all domestic and foreign
taxes which are based on taxable profits. Income taxes also include taxes,
such as withholding taxes, which are payable by a subsidiary, associate or
joint venture on distributions to the reporting entity.
The principal issue in accounting for income taxes is how to account for the
current and future tax consequences of:
(a) the future recovery (settlement) of the carrying amount of assets
(liabilities) that are recognised in an entity’s statement of financial
position; and
(b) transactions and other events of the current period that are recognised
in an entity’s financial statements.
Ind AS 12 also deals with the recognition of deferred tax assets arising from
unused tax losses or unused tax credits, the presentation of income taxes in
the financial statements and the disclosure of information relating to income
taxes.
Ind AS 12 is based on balance sheet approach. It requires recognition of tax
consequences of difference between the carrying amounts of assets and
liabilities and their tax base.
Recognition
Current tax for current and prior periods shall, to the extent unpaid, be
recognised as a liability. If the amount already paid in respect of current and
prior periods exceeds the amount due for those periods, the excess shall be

21
Ind AS: An Overview

recognised as an asset.
It is inherent in the recognition of an asset or liability that the reporting entity
expects to recover or settle the carrying amount of that asset or liability. If it
is probable that recovery or settlement of that carrying amount will make
future tax payments larger (smaller) than they would be if such recovery or
settlement were to have no tax consequences, this Standard requires a n
entity to recognise a deferred tax liability (deferred tax asset), with certain
limited exceptions.
A deferred tax asset shall be recognised for the carry forward of unused tax
losses and unused tax credits to the extent that it is probable that future
taxable profit will be available against which the unused tax losses and
unused tax credits can be utilised.
Measurement
Current tax liabilities (assets) for the current and prior periods shall be
measured at the amount expected to be paid to (recovered from) the taxation
authorities, using the tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities shall be measured at the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and deferred tax assets shall
reflect the tax consequences that would follow from the manner in which the
entity expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities shall not be
discounted
The carrying amount of a deferred tax asset shall be reviewed at the end of
each reporting period. An entity shall reduce the carrying amount of a
deferred tax asset to the extent that it is no longer probable that sufficient
taxable profit will be available to allow the benefit of part or all of that
deferred tax asset to be utilised. Any such reduction shall be reversed to the
extent that it becomes probable that sufficient taxable profit will be available.

22
 Summary of Ind AS

Allocation
This Standard requires an entity to account for the tax consequences of
transactions and other events in the same way that it accounts for the
transactions and other events themselves. Thus, for transactions and other
events recognised in profit or loss, any related tax effects are also
recognised in profit or loss. For transactions and other events recognised
outside profit or loss (either in other comprehensive income or directly in
equity), any related tax effects are also recognised outside profit or loss
(either in other comprehensive income or directly in equity, respectively).
Similarly, the recognition of deferred tax assets and liabilities in a business
combination affects the amount of goodwill arising in that business
combination or the amount of the bargain purchase gain recognised.
Appendix A of Ind AS 12 addresses how an entity should account for the tax
consequences of a change in its tax status or that of its shareholders. The
Appendix prescribes that a change in the tax status of an entity or its
shareholders does not give rise to increases or decreases in amounts
recognised outside profit or loss. The current and deferred tax consequences
of a change in tax status shall be included in profit or loss for the period,
unless those consequences relate to transactions and events that result, in
the same or a different period, in a direct credit or charge to the recognised
amount of equity or in amounts recognised in other comprehensive income.
Those tax consequences that relate to changes in the recognised amount of
equity, in the same or a different period (not included in profit or loss), shall
be charged or credited directly to equity. Those tax consequences that relate
to amounts recognised in other comprehensive income shall be recognised in
other comprehensive income.

Ind AS 16, Property, Plant and Equipment

The objective of Ind AS 16 is to prescribe the accounting treatment for
property, plant and equipment so that users of the financial statements can
discern information about an entity’s investment in its property, plant and
equipment and the changes in such investment. The principal issues in
accounting for property, plant and equipment are the recognition of the
assets, the determination of their carrying amounts and the depreciation
charges and impairment losses to be recognised in relation to them.
Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, for

23
Ind AS: An Overview

rental to others, or for administrative purposes; and

(b) are expected to be used during more than one period.
The cost of an item of property, plant and equipment should be recognised
as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item
will flow to the entity; and
(b) the cost of the item can be measured reliably.
Entities accounting for investment property in accordance with Ind AS 40,
Investment Property are required to use the cost model in this Standard.
Items such as spare parts, stand-by equipment and servicing equipment are
recognised in accordance with this Ind AS when they meet the definition of
property, plant and equipment. Otherwise, such items are classified as
inventory.
Measurement at Recognition
An item of property, plant and equipment that qualifies for recognition as an
asset should be measured at its cost.
The cost of an item of property, plant and equipment is the cash price
equivalent at the recognition date. If payment is deferred beyond normal
credit terms, the difference between the cash price equivalent and the total
payment is recognised as interest over the period of credit unless such
interest is capitalised in accordance with Ind AS 23.
The cost of an item of property, plant and equipment should comprises:
(a) its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management.
(c) the initial estimate of the costs of dismantling and removing the item
and restoring the site on which it is located, the obligation for which an
entity incurs either when the item is acquired or as a consequence of
having used the item during a particular period for purposes other than
to produce inventories during that period.

24
 Summary of Ind AS

Measurement after Recognition

An entity should choose either the cost model or the revaluation model as its
accounting policy and apply that policy to an entire class of property, plant
and equipment.
Cost Model
After recognition as an asset, an item of property, plant and equipment
should be carried at its cost less any accumulated depreciation and any
accumulated impairment losses.
Revaluation Model
After recognition as an asset, an item of property, plant and equipment
whose fair value can be measured reliably should be carried at a revalued
amount, being its fair value at the date of the revaluation less any
subsequent accumulated depreciation and subsequent accumulated
impairment losses. Revaluations should be made with sufficient regularity to
ensure that the carrying amount does not differ materially from that which
would be determined using fair value at the end of the reporting period.
If an asset’s carrying amount is increased as a result of a revaluation, the
increase should be recognised in other comprehensive income and
accumulated in equity under the heading of revaluation surplus. However,
the increase should be recognised in profit or loss to the extent that it
reverses a revaluation decrease of the same asset previously recognised in
profit or loss.
If an asset’s carrying amount is decreased as a result of a revaluation, the
decrease should be recognised in profit or loss. However, the decrease shall
be recognised in other comprehensive income to the extent of any credit
balance existing in the revaluation surplus in respect of that asset. The
decrease recognised in other comprehensive income reduces the amount
accumulated in equity under the heading of revaluation surplus.
Depreciation
Each part of an item of property, plant and equipment with a cost that is
significant in relation to the total cost of the item should be depreciated
separately. The depreciation charge for each period should be recognised in
profit or loss unless it is included in the carrying amount of another asset.
Each part of an item of property, plant and equipment with a cost that is
significant in relation to the total cost of the item shall be depreciated

25
Ind AS: An Overview

separately.
The depreciable amount of an asset should be allocated on a systematic
basis over its useful life. The depreciable amount of an asset should be
determined after deducting its residual value. The depreciation method used
shall reflect the pattern in which the asset’s future economic benefits are
expected to be consumed by the entity.
The residual value and the useful life of an asset should be reviewed at least
at each financial year-end and, if expectations differ from previous estimates,
the change(s) should be accounted for as a change in an accounting
estimate in accordance with Ind AS 8, Accounting Policies, Changes in
Accounting Estimates and Errors.
Land and buildings are separable assets and should be accounted for
separately, even when they are acquired together. With some exceptions,
such as quarries and sites used for landfill, land has an unlimited useful life
and therefore is not depreciated. Buildings have a limited useful life and
therefore are depreciable assets. An increase in the value of the land on
which a building stands does not affect the determination of the depreciab le
amount of the building.
Impairment
To determine whether an item of property, plant and equipment is impaired,
an entity should apply Ind AS 36, Impairment of Assets.
Derecognition
The carrying amount of an item of property, plant and equipment should b e
derecognised:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or
disposal.
Appendix B to Ind AS 16 provides guidance for recognition of production
stripping costs as an asset; initial measurement of the stripping activity asset;
and subsequent measurement of the stripping activity asset. An entity shall
recognise a stripping activity asset if, and only if, (a) it is probable that the
future economic benefit (improved access to the ore body) associated with
the stripping activity will flow to the entity; (b) the entity can identify the
component of the ore body for which access has been improved; and (c) the
costs relating to the stripping activity associated with that component can be

26
 Summary of Ind AS

measured reliably. The entity shall initially measure the stripping activity
asset at cost. After initial recognition, the stripping activity asset shall be
carried at either its cost or its revalued amount less depreciation or
amortisation and less impairment losses, in the same way as the existing
asset of which it is a part.

Ind AS 17, Leases

The objective of this Standard is to prescribe, for lessees and lessors, the
appropriate accounting policies and disclosure to apply in relation to leases.
The classification of leases adopted in this Standard is based on the extent
to which risks and rewards incidental to ownership of a leased asset lie with
the lessor or the lessee.
A lease is classified as a finance lease if it transfers substantially all the risks
and rewards incidental to ownership. A lease is classified as an operating
lease if it does not transfer substantially all the risks and rewards incidental
to ownership.
Leases in the financial statements of lessees
Operating Lease
Lease payments under an operating lease shall be recognised as an
expense on a straight-line basis over the lease term unless either another
systematic basis is more representative of the time pattern of the user’s
benefit or the payments to the lessor are structured to increase in line with
expected general inflation to compensate for the lessor’s expected
inflationary cost increases.
Finance leases
At the commencement of the lease term, lessees shall recognise finance
leases as assets and liabilities in their balance sheets at amounts equal to
the fair value of the leased property or, if lower, the present value of the
minimum lease payments, each determined at the inception of the lease. The
discount rate to be used in calculating the present value of the minimum
lease payments is the interest rate implicit in the lease, if this is practicable
to determine; if not, the lessee’s incremental borrowing rate shall be used.
Any initial direct costs of the lessee are added to the amount recognised as
an asset.

27
Ind AS: An Overview

Minimum lease payments shall be apportioned between the finance charge

and the reduction of the outstanding liability. The finance charge shall be
allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability. Contingent
rents shall be charged as expenses in the periods in which they are incurred.
A finance lease gives rise to depreciation expense for depreciable assets as
well as finance expense for each accounting period. The depreciation policy
for depreciable leased assets shall be consistent with that for depreciable
assets that are owned, and the depreciation recognised shall be calculated in
accordance with Ind AS 16, Property, Plant and Equipment and Ind AS 38,
Intangible Assets. If there is no reasonable certainty that the lessee will
obtain ownership by the end of the lease term, the asset shall be fully
depreciated over the shorter of the lease term and its useful life.
Leases in the financial statements of lessors
Operating leases
Lessors shall present assets subject to operating leases in their balance
sheet according to the nature of the asset. The depreciation policy for
depreciable leased assets shall be consistent with the lessor’s normal
depreciation policy for similar assets, and depreciation shall be calculated in
accordance with Ind AS 16 and Ind AS 38. Lease income from operating
leases (excluding amounts for services such as insurance and maintenance)
shall be recognised in income on a straight-line basis over the lease term,
unless either
(a) another systematic basis is more representative of the time pattern in
which use benefit derived from the leased asset is diminished, even if
the payments to the lessors are not on that basis; or
(b) the payments to the lessor are structured to increase in line with
expected general inflation to compensate for the lessor’s expected
inflationary cost increases. If payments to the lessor vary according to
factors other than inflation, then this condition is not met.
Finance leases
Lessors shall recognise assets held under a finance lease in their balance
sheets and present them as a receivable at an amount equal to the net
investment in the lease. The recognition of finance income shall be based on
a pattern reflecting a constant periodic rate of return on the lessor’s net
investment in the finance lease.

28
 Summary of Ind AS

Manufacturer or dealer lessors shall recognise selling profit or loss in the

period, in accordance with the policy followed by the entity for outright sales.
If artificially low rates of interest are quoted, selling profit shall be restricted
to that which would apply if a market rate of interest were charged. Costs
incurred by manufacturer or dealer lessors in connection with negotiating and
arranging a lease shall be recognised as an expense when the selling profit
is recognised.
Sale and leaseback transactions
A sale and leaseback transaction involves the sale of an asset and the
leasing back of the same asset. The lease payment and the sale price are
usually interdependent because they are negotiated as a package. The
accounting treatment of a sale and leaseback transaction depends upon the
type of lease involved.
Appendix C of Ind AS 17 provides guidance (a) for determining whether the
arrangement is, or contain, leases that should be accounted for in
accordance with Ind AS 17; (b) when the assessment or a reassessment of
whether an arrangement is, or contains, a lease should be made; and (c) if
an arrangement is, or contains, a lease, how the payments for the lease
should be separated from payments for any other elements in the
arrangement.
Appendix A of Ind AS 17 provides guidance on recognition of incentives in an
operating lease in the financial statements of lessor and lessee. The
Appendix prescribes that the lessor shall recognise the aggregate cost of
incentives as a reduction of rental income over the lease term, on a straight -
line basis unless another systematic basis is representative of the time
pattern over which the benefit of the leased asset is diminished. The lessee
shall recognise the aggregate benefit of incentives as a reduction of rental
expense over the lease term, on a straight-line basis unless another
systematic basis is representative of the time pattern of the lessee’s benefit
from the use of the leased asset.

Ind AS 18, Revenue

The primary issue in accounting for revenue is determining when to
recognise revenue. Revenue is recognised when it is probable that future
economic benefits will flow to the entity and these benefits can be measured
reliably. This Standard identifies the circumstances in which these criteria will
be met and, therefore, revenue will be recognised. It also provides practical

29
Ind AS: An Overview

guidance on the application of these criteria.

Revenue is the gross inflow of economic benefits during the period arising in
the course of the ordinary activities of an entity when those inflows result in
increases in equity, other than increases relating to contributions from equity
participants.
The Standard shall be applied in accounting for revenue arising from the
following transactions and events: (a) the sale of goods; (b) the rendering of
services; and (c) the use by others of entity assets yielding interest and
royalties
The Standard deals with recognition of interest. However, measurement of
interest and recognition and measurement of dividend are dealt in
accordance with Ind AS 109, Financial Instruments.
The impairment of any contractual right to receive cash or another financial
asset arising from this Standard shall be dealt in accordance with Ind AS
109, Financial Instruments.
Identification of the transaction
The recognition criteria in this Standard are usually applied separately to
each transaction. However, in certain circumstances, it is necessary to apply
the recognition criteria to the separately identifiable components of a single
transaction in order to reflect the substance of the transaction. For example,
when the selling price of a product includes an identifiable amount for
subsequent servicing, that amount is deferred and recognised as revenue
over the period during which the service is performed. Conversely, the
recognition criteria are applied to two or more transactions together when
they are linked in such a way that the commercial effect cannot be
understood without reference to the series of transactions as a whole. For
example, an entity may sell goods and, at the same time, enter into a
separate agreement to repurchase the goods at a later date, thus negating
the substantive effect of the transaction; in such a case, the two transactions
are dealt with together.
Measurement of revenue
Revenue shall be measured at the fair value of the consideration received or
receivable. Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The amount of revenue arising on a
transaction is usually determined by agreement between the entity and the

30
 Summary of Ind AS

buyer or user of the asset. It is measured at the fair value of the

consideration received or receivable taking into account the amount of any
trade discounts and volume rebates allowed by the entity.
Sale of goods
Revenue from the sale of goods shall be recognised when all the follo wing
conditions have been satisfied: (a) the entity has transferred to the buyer the
significant risks and rewards of ownership of the goods; (b) the entity retains
neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold; (c) the amount of
revenue can be measured reliably; (d) it is probable that the economic
benefits associated with the transaction will flow to the entity; and (e) the
costs incurred or to be incurred in respect of the transaction can be
measured reliably.
Rendering of services
When the outcome of a transaction involving the rendering of services can be
estimated reliably, revenue associated with the transaction shall be
recognised by reference to the stage of completion of the transaction at the
end of the reporting period. The outcome of a transaction can be estimated
reliably when all the following conditions are satisfied: (a) the amount of
revenue can be measured reliably; (b) it is probable that the economic
benefits associated with the transaction will flow to the entity; (c) the stage of
completion of the transaction at the end of the reporting period can be
measured reliably; and (d) the costs incurred for the transaction and the
costs to complete the transaction can be measured reliably.
The recognition of revenue by reference to the stage of completion of a
transaction is often referred to as the percentage of completion method.
Under this method, revenue is recognised in the accounting periods in which
the services are rendered. The recognition of revenue on this basis provides
useful information on the extent of service activity and performance during a
period.
When the outcome of the transaction involving the rendering of services
cannot be estimated reliably, revenue shall be recognised only to the extent
of the expenses recognised that are recoverable.
Interest and Royalties
Revenue arising from the use by others of entity assets yielding interest and

31
Ind AS: An Overview

royalties shall be recognised when: (a) it is probable that the economic

benefits associated with the transaction will flow to the entity; and (b) the
amount of the revenue can be measured reliably.
Revenue shall be recognised on the following bases: (a) interest shall be
recognised using the effective interest method as set out in Ind AS 109; (b)
royalties shall be recognised on an accrual basis in accordance with the
substance of the relevant agreement.

Ind AS 19, Employee Benefits

Employee benefits are all forms of consideration given by an entity in
exchange for service rendered by employees or for the termination of
employment.
The objective of this Standard is to prescribe the accounting and disclosure
for employee benefits. The Standard requires an entity to recognise:
(a) a liability when an employee has provided service in exchange for
employee benefits to be paid in the future; and
(b) an expense when the entity consumes the economic benefit arising
from service provided by an employee in exchange for employee
benefits.
This Standard shall be applied by an employer in accounting for all employee
benefits, except those to which Ind AS 102, Share-based Payment, applies.
Short-term employee benefits
Short-term employee benefits are employee benefits (other than termination
benefits) that are expected to be settled wholly before twelve months after
the end of the annual reporting period in which the employees render the
related services.
When an employee has rendered service to an entity during an accounting
period, the entity shall recognise the undiscounted amount of short-term
employee benefits expected to be paid in exchange for that service:
(a) as a liability (accrued expense), after deducting any amount already
paid. If the amount already paid exceeds the undiscounted amount of
the benefits, an entity shall recognise that excess as an asset (prepaid
expense) to the extent that the prepayment will lead to, for example, a
reduction in future payments or a cash refund.

32
 Summary of Ind AS

(b) as an expense, unless another Ind AS requires or permits the inclusion

of the benefits in the cost of an asset (see, for example, Ind AS 2,
Inventories, and Ind AS 16, Property, Plant and Equipment).
Post-employment benefits
Post-employment benefits are employee benefits (other than termination
benefits and short-term employee benefits) that are payable after the
completion of employment. Post-employment benefit plans are formal or
informal arrangements under which an entity provides post-employment
benefits for one or more employees. Post-employment benefit plans are
classified as either defined contribution plans or defined benefit plans,
depending on the economic substance of the plan as derived from its
principal terms and conditions.
Post-employment benefits: defined contribution plans
Defined contribution plans are post-employment benefit plans under which
an entity pays fixed contributions into a separate entity (a fund) and will have
no legal or constructive obligation to pay further contributions if the fund does
not hold sufficient assets to pay all employee benefits relating to employee
service in the current and prior periods. Under defined contribution plans the
entity’s legal or constructive obligation is limited to the amount that it agrees
to contribute to the fund. Thus, the amount of the post-employment benefits
received by the employee is determined by the amount of contributions paid
by an entity (and perhaps also the employee) to a post-employment benefit
plan or to an insurance company, together with investment returns arising
from the contributions. In consequence, actuarial risk (that benefits will be
less than expected) and investment risk (that assets invested will be
insufficient to meet expected benefits) fall, in substance, on the employee.
When an employee has rendered service to an entity during a period, the
entity shall recognise the contribution payable to a defined contribution plan
in exchange for that service:
(a) as a liability (accrued expense), after deducting any contribution
already paid. If the contribution already paid exceeds the contribution
due for service before the end of the reporting period, an entity shall
recognise that excess as an asset (prepaid expense) to the extent that
the prepayment will lead to, for example, a reduction in future
payments or a cash refund.
(b) as an expense, unless another Ind AS requires or permits the inclusion

33
Ind AS: An Overview

of the contribution in the cost of an asset (see, for example, Ind AS 2

and Ind AS 16).
Post-employment benefits: defined benefit plans
Defined benefit plans are post-employment benefit plans other than defined
contribution plans. Under defined benefit plans:
(a) the entity’s obligation is to provide the agreed benefits to current and
former employees; and
(b) actuarial risk (that benefits will cost more than expected) and
investment risk fall, in substance, on the entity. If actuarial or
investment experience are worse than expected, the entity’s obligation
may be increased
Accounting by an entity for defined benefit plans involves the following steps:
(a) determining the deficit or surplus. This involves:
(i) using an actuarial technique, the projected unit credit method, to
make a reliable estimate of the ultimate cost to the entity of the
benefit that employees have earned in return for their service in
the current and prior periods. This requires an entity to
determine how much benefit is attributable to the current and
prior periods and to make estimates (actuarial assumptions)
about demographic variables (such as employee turnover and
mortality) and financial variables (such as future increases in
salaries and medical costs) that will affect the cost of the
benefit.
(ii) discounting that benefit in order to determine the present value
of the defined benefit obligation and the current service cost.
(iii) deducting the fair value of any plan assets from the present
value of the defined benefit obligation.
(b) determining the amount of the net defined benefit liability (asset) as
the amount of the deficit or surplus determined in (a), adjusted for any
effect of limiting a net defined benefit asset to the asset ceiling. (Asset
ceiling is defined as present value of any economic benefit available in
the form of refunds from the plan or reduction in future contributions to
the plan).
(c) determining amounts to be recognised in profit or loss:

34
 Summary of Ind AS

(i) current service cost.

(ii) any past service cost and gain or loss on settlement.
(iii) net interest on the net defined benefit liability (asset).
(d) determining the remeasurements of the net defined benefit liability
(asset), to be recognised in other comprehensive income, comprising:
(i) actuarial gains and losses;
(ii) return on plan assets, excluding amounts included in net
interest on the net defined benefit liability (asset); and
(iii) any change in the effect of the asset ceiling (see paragraph 64),
excluding amounts included in net interest on the net defined
benefit liability (asset).
Where an entity has more than one defined benefit plan, the entity applies
these procedures for each material plan separately.
Other long-term employee benefits
Other long-term employee benefits are all employee benefits other than
short-term employee benefits, post-employment benefits and termination
benefits.
The Standard does not require the measurement of other long-term
employee benefits to the same degree of uncertainty as the measurement of
post-employment benefits. The Standard requires a simplified method of
accounting for other long-term employee benefits. Unlike the accounting
required for post-employment benefits, this method does not recognise re-
measurements in other comprehensive income.
Termination benefits
Termination benefits are employee benefits provided in exchange for the
termination of an employee’s employment as a result of either:
(a) an entity’s decision to terminate an employee’s employment before the
normal retirement date; or
(b) an employee’s decision to accept an offer of benefits in exchange for
the termination of employment.
An entity shall recognise a liability and expense for termination benefits at
the earlier of the following dates:

35
Ind AS: An Overview

(a) when the entity can no longer withdraw the offer of those benefits; and
(b) when the entity recognises costs for a restructuring that is within the
scope of Ind AS 37 and involves the payment of termination benefits.

Ind AS 20, Accounting for Government Grants and

Disclosure of Government Assistance
This Standard shall be applied in accounting for, and in the disclosure of,
government grants and in the disclosure of other forms of government
assistance.
Government grants are assistance by government in the form of transfers of
resources to an entity in return for past or future compliance with certain
conditions relating to the operating activities of the entity. They exclude those
forms of government assistance which cannot reasonably have a value
placed upon them and transactions with government which cannot be
distinguished from the normal trading transactions of the entity.
Government assistance is action by government designed to provide an
economic benefit specific to an entity or range of entities qualifying under
certain criteria. Government assistance for the purpose of this Standard does
not include benefits provided only indirectly through action affecting general
trading conditions, such as the provision of infrastructure in development
areas or the imposition of trading constraints on competitors.
In this Standard, government assistance does not include the provision of
infrastructure by improvement to the general transport and communication
network and the supply of improved facilities such as irrigation or water
reticulation which is available on an ongoing indeterminate basis for the
benefit of an entire local community.
Government grants, including non-monetary grants at fair value, shall not be
recognised until there is reasonable assurance that:
(a) the entity will comply with the conditions attaching to them; and
(b) the grants will be received.
A government grant may take the form of a transfer of a non-monetary asset,
such as land or other resources, for the use of the entity. In these
circumstances, the fair value of the non-monetary asset is assessed and
both grant and asset are accounted for at that fair value.
Government grants shall be recognised in profit or loss on a systematic basis

36
 Summary of Ind AS

over the periods in which the entity recognises as expenses the related costs
for which the grants are intended to compensate.
A government grant that becomes receivable as compensation for expenses
or losses already incurred or for the purpose of giving immediate financial
support to the entity with no future related costs shall be recognised in profit
or loss of the period in which it becomes receivable.
Grants related to assets are government grants whose primary condition is
that an entity qualifying for them should purchase, construct or otherwise
acquire long-term assets. Subsidiary conditions may also be attached
restricting the type or location of the assets or the periods during which they
are to be acquired or held.
Government grants related to assets, including non-monetary grants at fair
value, shall be presented in the balance sheet by setting up the grant as
deferred income.
Grants related to income are government grants other than those related to
assets. Grants related to income are presented as part of profit or loss, either
separately or under a general heading such as ‘Other income’; alternatively,
they are deducted in reporting the related expenses.
A government grant that becomes repayable shall be accounted for as a
change in accounting estimate (Ind AS 8 Accounting Policies, Changes in
Accounting Estimates and Errors). Repayment of a grant related to income
shall be applied first against any unamortised deferred credit recognised in
respect of the grant. To the extent that the repayment exceeds any such
deferred credit, or when no deferred credit exists, the repayment shall be
recognised immediately in profit or loss. Repayment of a grant related to an
asset shall be recognised by reducing the deferred income balance by the
amount repayable.
The following matters shall be disclosed:
(a) the accounting policy adopted for government grants, including the
methods of presentation adopted in the financial statements;
(b) the nature and extent of government grants recognised in the financial
statements and an indication of other forms of government assistance
from which the entity has directly benefited; and
(c) unfulfilled conditions and other contingencies attaching to government
assistance that has been recognised.

37
Ind AS: An Overview

Appendix A of Ind AS 20 address the issue that whether government

assistance is a government grant within the scope of Ind AS 20 and,
therefore, should be accounted for in accordance within the Standard. The
Appendix prescribes that government assistance to entities meets the
definition of government grants in Ind AS 20, even if there are no conditions
specifically relating to the operating activities of the entity other than the
requirement to operate in certain regions or industry sectors. The Appendix
provides that such grants shall not be credited directly to shareholders’
interests.

Ind AS 21, The Effects of Changes in Foreign

Exchange Rates
An entity may carry on foreign activities in two ways. It may have
transactions in foreign currencies or it may have foreign operations.
In addition, an entity may present its financial statements in a foreign
currency. The objective of Ind AS 21 is to prescribe how to include foreign
currency transactions and foreign operations in the financial statements of an
entity and how to translate financial statements into a presentation currency.
The principal issues are which exchange rate(s) to use and how to report the
effects of changes in exchange rates in the financial statements.
This Standard does not apply to hedge accounting for foreign currency items,
including the hedging of a net investment in a foreign operation. Ind AS 109
applies to hedge accounting.
This Standard does not apply to the presentation in a statement of cash flows
of the cash flows arising from transactions in a foreign currency, or to the
translation of cash flows of a foreign operation (Ind AS 7, Statement of Cash
Flows).
This Standard does not also apply to long-term foreign currency monetary
items for which an entity has opted for the exemption given in paragraph
D13AA of Appendix D to Ind AS 101. Such an entity may continue to apply
the accounting policy so opted for such long-term foreign currency monetary
items.
Functional currency
Functional currency is the currency of the primary economic environment in
which the entity operates. The primary economic environment in which an
entity operates is normally the one in which it primarily generates and

38
 Summary of Ind AS

expends cash.
An entity considers the following factors in determining its functional
currency:
(a) the currency:
(i) that mainly influences sales prices for goods and services (this
will often be the currency in which sales prices for its goods and
services are denominated and settled); and
(ii) of the country whose competitive forces and regulations mainly
determine the sales prices of its goods and services.
(b) the currency that mainly influences labour, material and other costs of
providing goods or services (this will often be the currency in which
such costs are denominated and settled).
If the functional currency is the currency of a hyperinflationary economy, the
entity’s financial statements are restated in accordance with Ind AS 29,
Financial Reporting in Hyperinflationary Economies.
Reporting foreign currency transactions in the functional
currency
Foreign currency is a currency other than the functional currency of the
entity. Spot exchange rate is the exchange rate for immediate delivery.
Exchange difference is the difference resulting from translating a given
number of units of one currency into another currency at different exchange
rates.
Net investment in a foreign operation is the amount of the reporting
entity’s interest in the net assets of that operation.
A foreign currency transaction shall be recorded, on initial recognition in the
functional currency, by applying to the foreign currency amount the spot
exchange rate between the functional currency and the foreign currency at
the date of the transaction.
At the end of each reporting period:
(a) foreign currency monetary items shall be translated using the closing
rate;
(b) non-monetary items that are measured in terms of historical cost in a
foreign currency shall be translated using the exchange rate at the

39
Ind AS: An Overview

date of the transaction; and

(c) non-monetary items that are measured at fair value in a foreign
currency shall be translated using the exchange rates at the date when
the fair value was measured.
Exchange differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which they were
translated on initial recognition during the period or in previous financial
statements shall be recognised in profit or loss in the period in which they
arise.
However, Exchange differences arising on a monetary item that forms part of
a reporting entity’s net investment in a foreign operation (see paragraph 15)
shall be recognised in profit or loss in the separate financial statements of
the reporting entity or the individual financial statements of the foreign
operation, as appropriate. In the financial statements that include the foreign
operation and the reporting entity (eg consolidated financial statements when
the foreign operation is a subsidiary), such exchange differences shall be
recognised initially in other comprehensive income and reclassified from
equity to profit or loss on disposal of the net investment.
Furthermore, when a gain or loss on a non-monetary item is recognised in
other comprehensive income, any exchange component of that gain or loss
shall be recognised in other comprehensive income. Conversely, when a
gain or loss on a non-monetary item is recognised in profit or loss, any
exchange component of that gain or loss shall be recognised in profit or loss.
When there is a change in an entity’s functional currency, the entity shall
apply the translation procedures applicable to the new functional currency
prospectively from the date of the change.
Translation to the presentation currency/Translation of a
foreign operation
An entity may present its financial statements in any currency (or currencies).
For this purpose, an entity could be a stand-alone entity, a parent preparing
consolidated financial statements or a parent, an investor or a venturer
preparing separate financial statements in accordance with Ind AS 27,
Separate Financial Statements. If the presentation currency differs from the
entity’s functional currency, it translates its results and financial position into
the presentation currency. For example, when a group contains individual
entities with different functional currencies, the results and financial position

40
 Summary of Ind AS

of each entity are expressed in a common currency so that consolidated

financial statements may be presented.
The results and financial position of an entity whose functional currency is
not the currency of a hyperinflationary economy shall be translated into a
different presentation currency using the following procedures:
(a) assets and liabilities for each balance sheet presented (ie including
comparatives) shall be translated at the closing rate at the date of that
balance sheet;
(b) income and expenses for each statement of profit and loss presented
(ie including comparatives) shall be translated at exchange rates at
the dates of the transactions; and
(c) all resulting exchange differences shall be recognised in other
comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair
value adjustments to the carrying amounts of assets and liabilities arising on
the acquisition of that foreign operation shall be treated as assets and
liabilities of the foreign operation. Foreign operation is an entity that is a
subsidiary, associate, joint arrangement or branch of a reporting entity.
On the disposal of a foreign operation, the cumulative amount of the
exchange differences relating to that foreign operation, recognised in other
comprehensive income and accumulated in the separate component of
equity, shall be reclassified from equity to profit or loss (as a reclassification
adjustment) when the gain or loss on disposal is recognised (Ind AS 1,
Presentation of Financial Statements).
On the partial disposal of a subsidiary that includes a foreign operation, the
entity shall re-attribute the proportionate share of the cumulative amount of
the exchange differences recognised in other comprehensive income to the
non-controlling interests in that foreign operation. In any other partial
disposal of a foreign operation the entity shall reclassify to profit or loss only
the proportionate share of the cumulative amount of the exchange
differences recognised in other comprehensive income.

Ind AS 23, Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset form part of the cost of that asset. Other
borrowing costs are recognised as an expense.

41
Ind AS: An Overview

Borrowing costs are interest and other costs that an entity incurs in
connection with the borrowing of funds.
Recognition
An entity shall capitalise borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset as part of the
cost of that asset. An entity shall recognise other borrowing costs as an
expense in the period in which it incurs them.
A qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale.
To the extent that an entity borrows funds specifically for the purpose of
obtaining a qualifying asset, the entity shall determine the amount of
borrowing costs eligible for capitalisation as the actual borrowing costs
incurred on that borrowing during the period less any investment income on
the temporary investment of those borrowings.
To the extent that an entity borrows funds generally and uses them for the
purpose of obtaining a qualifying asset, the entity shall determine the amount
of borrowing costs eligible for capitalisation by applying a capitalisation rate
to the expenditures on that asset. The capitalisation rate shall be the
weighted average of the borrowing costs applicable to the borrowings of the
entity that are outstanding during the period, other than borrowings made
specifically for the purpose of obtaining a qualifying asset. The amount of
borrowing costs that an entity capitalises during a period shall not exceed the
amount of borrowing costs it incurred during that period.
An entity shall begin capitalising borrowing costs as part of the cost of a
qualifying asset on the commencement date. The commencement date for
capitalisation is the date when the entity first meets all of the following
conditions:
(a) it incurs expenditures for the asset;
(b) it incurs borrowing costs; and
(c) it undertakes activities that are necessary to prepare the asset for its
intended use or sale.
An entity shall suspend capitalisation of borrowing costs during extended
periods in which it suspends active development of a qualifying asset.
An entity shall cease capitalising borrowing costs when substantially all the

42
 Summary of Ind AS

activities necessary to prepare the qualifying asset for its intended use or
sale are complete.
An entity shall disclose
(a) the amount of borrowing costs capitalised during the period; and
(b) the capitalisation rate used to determine the amount of borrowing
costs eligible for capitalisation.

Ind AS 24, Related Party Disclosures

The objective of Ind AS 24 is to ensure that an entity’s financial statements
contain the disclosures necessary to draw attention to the possibility that its
financial position and profit or loss may have been affected by the existence
of related parties and by transactions and outstanding balances, including
commitments, with such parties.

Related party disclosure requirements as laid down in this Standard do not

apply in circumstances where providing such disclosures would conflict with
the reporting entity’s duties of confidentiality as specifically required in terms
of a statute or by any regulator or similar competent authority.
In case a statute or a regulator or a similar competent authority governing an
entity prohibits the entity to disclose certain information which is required to
be disclosed as per this Standard, disclosure of such information is not
warranted. For example, banks are obliged by law to maintain confidentiality
in respect of their customers’ transactions and this Standard would not
override the obligation to preserve the confidentiality of customers’ dealings.
A related party is a person or entity that is related to the entity that is
preparing its financial statements. (in the Standard referred as ‘reporting
entity’)
(a) A person or a close member of that person’s family is related to a
reporting entity if that person:
(i) has control or joint control of the reporting entity;
(ii) has significant influence over the reporting entity; or
(iii) is a member of the key management personnel of the reporting
entity or of a parent of the reporting entity.
(b) An entity is related to a reporting entity if any of the following

43
Ind AS: An Overview

conditions applies:
(i) The entity and the reporting entity are members of the same
group (which means that each parent, subsidiary and fellow
subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or
an associate or joint venture of a member of a group of which
the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity
is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of
employees of either the reporting entity or an entity related to
the reporting entity. If the reporting entity is itself such a plan,
the sponsoring employers are also related to the reporting
entity.
(vi) The entity is controlled or jointly controlled by a person identified
in (a).
(vii) A person identified in (a)(i) has significant influence over the
entity or is a member of the key management personnel of the
entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part,
provides key management personnel services to the reporting
entity or to the parent of the reporting entity.
A related party transaction is a transfer of resources, services or obligations
between a reporting entity and a related party, regardless of whether a price
is charged.
Close members of the family of a person are those family members who may
be expected to influence, or be influenced by, that person in their dealings
with the entity including:
(a) that person’s children, spouse or domestic partner, brother, sister,
father and mother;
(b) children of that person’s spouse or domestic partner; and
(c) dependants of that person or that person’s spouse or domestic
partner.

44
 Summary of Ind AS

Relationships between a parent and its subsidiaries shall be disclosed

irrespective of whether there have been transactions between them. An
entity shall disclose the name of its parent and, if different, the ultimate
controlling party. If neither the entity’s parent nor the ultimate controlling
party produces consolidated financial statements available for public use, the
name of the next most senior parent that does so shall also be disclosed.
An entity shall disclose key management personnel compensation in total
and for each of the following categories:
(a) short-term employee benefits;
(b) post-employment benefits;
(c) other long-term benefits;
(d) termination benefits; and
(e) share-based payment. (Paragraph 17 of the Standard)
If an entity has had related party transactions during the periods covered by
the financial statements, it shall disclose the nature of the related party
relationship as well as information about those transactions and outstanding
balances, including commitments, necessary for users to understand the
potential effect of the relationship on the financial statements. These
disclosure requirements are in addition to those in paragraph 17 of the
Standard. At a minimum, disclosures shall include:
(a) the amount of the transactions;
(b) the amount of outstanding balances, including commitments, and:
(i) their terms and conditions, including whether they are secured,
and the nature of the consideration to be provided in settlement;
and
(ii) details of any guarantees given or received;
(c) provisions for doubtful debts related to the amount of outstanding
balances; and
(d) the expense recognised during the period in respect of bad or doubtful
debts due from related parties. (Paragraph 18 of the Standard)
The Standard requires that the disclosures, as per paragraph 18 of the
Standard, shall be made separately for each of the following categories:

45
Ind AS: An Overview

(a) the parent;

(b) entities with joint control of, or significant influence over, the entity;
(c) subsidiaries;
(d) associates;
(e) joint ventures in which the entity is a joint venturer;
(f) key management personnel of the entity or its parent; and
(g) other related parties.
Items of a similar nature may be disclosed in aggregate except when
separate disclosure is necessary for an understanding of the effects of
related party transactions on the financial statements of the entity.
Disclosure of details of particular transactions with individual related parties
would frequently be too voluminous to be easily understood. Accordingly,
items of a similar nature may be disclosed in aggregate by type of related
party. However, this is not done in such a way as to obscure the importance
of significant transactions. Hence, purchases or sales of goods are not
aggregated with purchases or sales of fixed assets. Nor a material related
party transaction with an individual party is clubbed in an aggregated
disclosure.
A reporting entity is exempt from the disclosure requirements of paragraph
18 of the Standard in relation to related party transactions and outstanding
balances, including commitments, with:
(a) a government that has control or joint control of, or significant
influence over, the reporting entity; and
(b) another entity that is a related party because the same government
has control or joint control of, or significant influence over, both the
reporting entity and the other entity. (Paragraph 25 of the Standard)
If a reporting entity applies the exemption in paragraph 25 of the Standard, it
shall disclose the following about the transactions and related outstanding
balances referred to in paragraph 25 of the Standard:
(a) the name of the government and the nature of its relationship with the
reporting entity (ie control, joint control or significant influence);
(b) the following information in sufficient detail to enable users of the
entity’s financial statements to understand the effect of related party

46
 Summary of Ind AS

transactions on its financial statements:

(i) the nature and amount of each individually significant
transaction; and
(ii) for other transactions that are collectively, but not individually,
significant, a qualitative or quantitative indication of their extent.
Types of transactions include those listed in paragraph 21 of the
Standard.

Ind AS 27, Separate Financial Statements

The objective of Ind AS 27 is to prescribe the accounting and disclosure
requirements for investments in subsidiaries, joint ventures and associates
when an entity prepares separate financial statements. The Standard shall
be applied in accounting for investments in subsidiaries, joint ventures and
associates when an entity elects, or is required by law, to present separate
financial statements.
Separate financial statements are those presented by a parent (i.e., an
investor with control of a subsidiary) or an investor with joint control of, or
significant influence over, an investee, in which the investments are
accounted for at cost or in accordance with Ind AS 109, Financial
Instruments.
When an entity prepares separate financial statements, it shall account for
investments in subsidiaries, joint ventures and associates either:
(a) at cost, or
(b) in accordance with Ind AS 109, Financial Instruments.
The entity shall apply the same accounting for each category of investments.
Investments accounted for at cost shall be accounted for in accordance with
Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations,
when they are classified as held for sale (or included in a disposal group that
is classified as held for sale). The measurement of investments accounted
for in accordance with Ind AS 109 is not changed in such circumstances.

Ind AS 28, Investments in Associates and Joint

Ventures
The objective of Ind AS 28 is to prescribe the accounting for investments in
associates and to set out the requirements for the application of the equity

47
Ind AS: An Overview

method when accounting for investments in associates and joint ventures.

The Standard shall be applied by all entities that are investors with joint
control of, or significant influence over, an investee.
An associate is an entity over which the investor has significant influence.
Significant influence is the power to participate in the financial and operating
policy decisions of the investee but is not control or joint control of those
policies.
Ind AS 111, Joint Arrangements, establishes principles for the financial
reporting of parties to joint arrangements. A joint arrangement is an
arrangement of which two or more parties have joint control. As per the
Standard, an entity shall determine the type of joint arrangement in which it is
involved. The classification of a joint arrangement as a joint operation or a
joint venture depends upon the rights and obligations of the parties to the
arrangement. A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the
arrangement. The Standard requires that a joint venturer shall recognise its
interest in a joint venture as an investment and shall account for that
investment using the equity method in accordance with Ind AS 28
Investments in Associates and Joint Ventures unless the entity is exempted
from applying the equity method as specified in the standard.
Under the equity method, on initial recognition the investment in an associate
or a joint venture is recognised at cost and the carrying amount is increased
or decreased to recognise the investor’s share of the profit or loss of the
investee after the date of acquisition. The investor’s share of the investee’s
profit or loss is recognised in the investor’s profit or loss. Distributions
received from an investee reduce the carrying amount of the investment.
Adjustments to the carrying amount may also be necessary for changes in
the investor’s proportionate interest in the investee arising from changes in
the investee are other comprehensive income. Such changes include those
arising from the revaluation of property, plant and equipment and from
foreign exchange translation differences. The investor’s share of those
changes is recognised in the investor’s other comprehensive income (Ind AS
1, Presentation of Financial Statements).
The entity’s financial statements shall be prepared using uniform accounting
policies for like transactions and events in similar circumstances unless, in
case of an associate, it is impracticable to do so. If an associate or a joint
venture uses accounting policies other than those of the entity for like
transactions and events in similar circumstances, adjustments shall be made

48
 Summary of Ind AS

to make the associate’s or joint venture’s accounting policies conform to

those of the entity when the associate’s or joint venture’s financial
statements are used by the entity in applying the equity method, except if an
entity that is not itself an investment entity has an interest in an associate or
joint venture that is an investment entity, the entity may, when applying the
equity method, retain the fair value measurement applied by that investment
entity associate or joint venture to the investment entity associate’s or joint
venture’s interests in subsidiaries’.
After application of the equity method, including recognising the associate’s
or joint venture’s losses, the entity applies the requirements of Ind AS 109,
Financial Instruments to determine whether it is necessary to recognise any
additional impairment loss with respect to its net investment in the associate
or joint venture.
The Standard provides exemptions from applying the equity method similar
to those provided in Ind AS 110, Consolidated Financial Statements to the
parent that is exempted to prepare consolidated financial statements. The
Standard also provides exemptions from applying the equity method when
the investment in an associate or a joint venture is held by, or is held
indirectly through, an entity that is a venture capital organisation, or a mutual
fund, unit trust and similar entities including investment-linked insurance
funds. Those investments may be measured at fair value through profit or
loss in accordance with Ind AS 109, Financial Instruments.

Ind AS 29, Financial Reporting in

Hyperinflationary Economies
Ind AS 29 shall be applied to the financial statements, including the
consolidated financial statements, of any entity whose functional currency is
the currency of a hyperinflationary economy.
The Standard does not establish an absolute rate at which hyperinflation is
deemed to arise. It is a matter of judgement when restatement of financial
statements in accordance with this Standard becomes necessary.
Hyperinflation is indicated by characteristics of the economic environment of
a country which include, but are not limited to, the following:
(a) the general population prefers to keep its wealth in non-monetary
assets or in a relatively stable foreign currency. Amounts of local
currency held are immediately invested to maintain purchasing power;

49
Ind AS: An Overview

(b) the general population regards monetary amounts not in terms of the
local currency but in terms of a relatively stable foreign currency.
Prices may be quoted in that currency;
(c) sales and purchases on credit take place at prices that compensate for
the expected loss of purchasing power during the credit period, even if
the period is short;
(d) interest rates, wages and prices are linked to a price index; and
(e) the cumulative inflation rate over three years is approaching, or
exceeds, 100%.
The financial statements of an entity whose functional currency is the
currency of a hyperinflationary economy, whether they are based on a
historical cost approach or a current cost approach shall be stated in terms of
the measuring unit current at the end of the reporting period.
The corresponding figures for the previous period required by Ind AS 1,
Presentation of Financial Statements, and any information in respect of
earlier periods shall also be stated in terms of the measuring unit current at
the end of the reporting period. For the purpose of presenting comparative
amounts in a different presentation currency, paragraphs 42(b) and 43 of Ind
AS 21, The Effects of Changes in Foreign Exchange Rates, apply.
The gain or loss on the net monetary position shall be included in profit or
loss and separately disclosed.
The restatement of financial statements in accordance with this Standard
requires the application of certain procedures as well as judgement. The
consistent application of these procedures and judgements from period to
period is more important than the precise accuracy of the resulting amount s
included in the restated financial statements.
The restatement of financial statements in accordance with this Standard
may give rise to differences between the carrying amount of individual assets
and liabilities in the balance sheet and their tax bases. These differences are
accounted for in accordance with Ind AS 12, Income Taxes.
The restatement of financial statements in accordance with this Standard
requires the use of a general price index that reflects changes in general
purchasing power. It is preferable that all entities that report in the currency
of the same economy use the same index.
When an economy ceases to be hyperinflationary and an entity discontinues
the preparation and presentation of financial statements prepared in

50
 Summary of Ind AS

accordance with this Standard, it shall treat the amounts expressed in the
measuring unit current at the end of the previous reporting period as the
basis for the carrying amounts in its subsequent financial statements.
Appendix A of Ind AS 29 provides guidance on how to apply the
requirements of Ind AS 29 in a reporting period in which an entity identifies
the existence of hyperinflation in the economy of its functional currency,
when that economy was not hyperinflationary in the prior period, and the
entity therefore restates its financial statements in accordance with Ind AS
29. The Appendix prescribes that in the reporting period in which an entity
identifies the existence of hyperinflation in the economy of its functional
currency, not having been hyperinflationary in the prior period, the entity
shall apply the requirements of Ind AS 29 as if the economy had always been
hyperinflationary. At the end of the reporting period, deferred tax items are
recognised and measured in accordance with Ind AS 12.

Ind AS 32, Financial Instruments: Presentation

The objective of Ind AS 32 is to establish principles for presenting financial
instruments as liabilities or equity and for offsetting financial assets and
financial liabilities. It applies to the classification of financial instruments,
from the perspective of the issuer, into financial assets, financial liabilities
and equity instruments; the classification of related interest, dividends,
losses and gains; and the circumstances in which financial assets and
financial liabilities should be offset.
The principles in this Standard complement the principles for recognising and
measuring financial assets and financial liabilities in Ind AS 109, Financial
Instruments, and for disclosing information about them in Ind AS 107,
Financial Instruments: Disclosures.
This Standard defines Financial Instrument, Financial Asset, Financial
Liability, Equity Instrument, Puttable Financial Instruments.
Presentation
This standard requires an issuer to classify the instrument, or its component
parts, on initial recognition as a financial liability, a financial asset or an
equity instrument in accordance with the substance of the contractual
arrangement and the definitions of a financial liability, a financial asset and
an equity instrument. An instrument is an equity instrument if it evidences a
residual interest in the net assets of the entity and both the following

51
Ind AS: An Overview

conditions are met:

(a) The instrument includes no contractual obligation to deliver cash or
another financial asset to another entity; or to exchange financial
assets or financial liabilities under potential unfavourable condition to
the issuer.
(b) In case of settlement by the issuer’s own equity instruments, it should
be fixed to fixed contracts (no. of equity instruments and the price per
unit of equity instruments is fixed).
Puttable Financial Instruments
As an exception, puttable instruments are classified as an equity instrument
even if they meet the definition of financial liability. A puttable instrument is a
financial instrument that gives the holder of the instrument the right to put the
instrument back to the issuer for cash or another financial asset or is
automatically put back to the issuer on the occurrence of an uncertain future
event or the death or retirement of the instrument holder.
Settlement Options
In case a derivative financial instruments provides an option to one party to
choose between various modes of settlement (settlement net in cash or by
exchanging shares for cash), such derivative instrument should be a financial
asset or a financial liability unless all of the settlement alternatives would
result in it being an equity instrument.
Compound Financial Instruments
It may be possible that a non-derivative financial instrument may contain both
component of liability and component of equity as well. Such components
shall be classified separately as financial liabilities or equity instruments.
Example, bonds with an option to convert into equity.
Treasury shares
If an entity reacquires its own equity instruments, those instruments
(‘treasury shares’) shall be deducted from equity. No gain or loss shall be
recognised in profit or loss on the purchase, sale, issue or cancellation of an
entity’s own equity instruments. Such treasury shares may be acquired and
held by the entity or by other members of the consolidated group.
Consideration paid or received shall be recognised directly in equity.

52
 Summary of Ind AS

Interest, dividends, losses and gains

An entity should recognise all interest, dividends, losses and gains related to
the financial instrument as income or expense in profit or loss. Distributions
to holders or transaction cost of an equity transaction should be recognised
by the entity directly in equity.
Offsetting a financial asset and a financial liability
An entity should offset a financial asset and a financial liability and the net
amount should be presented in the balance sheet only when it has:
(a) current legally enforceable right to set off the recognised amounts; and
(b) intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
An entity that undertakes a number of financial instrument transactions with a
single counterparty may enter into a ‘master netting arrangement’ with that
counterparty. Such an agreement provides for a single net settlement of all
financial instruments covered by the agreement in the event of default on, or
termination of, any one contract.
Consolidated financial statements
An entity in its consolidated financial statements, when classifying a financial
instrument (or a component of it) should consider all terms and conditions
agreed between members of the group and the holders of the instrument in
determining whether the group as a whole has an obligation to deliver cash
or another financial asset in respect of the instrument or to settle it in a
manner that results in liability classification.

Ind AS 33, Earnings per Share

The objective of Ind AS 33 is to prescribe principles for the determination and
presentation of earnings per share, so as to improve performance
comparisons between different entities in the same reporting period and
between different reporting periods for the same entity. The focus of this
Standard is on the denominator of the earnings per share calculation.
Ind AS 33 shall be applied to companies that have issued ordinary shares to
which Indian Accounting Standards (Ind AS) notified under the Companies
Act applies.
An ordinary share is an equity instrument that is subordinate to all other

53
Ind AS: An Overview

classes of equity instruments. A potential ordinary share is a financial

instrument or other contract that may entitle its holder to ordinary shares.
An entity shall present in the statement of profit and loss basic and diluted
earnings per share for profit or loss from continuing operations attributable to
the ordinary equity holders of the parent entity and for profit or loss
attributable to the ordinary equity holders of the parent entity for the period
for each class of ordinary shares that has a different right to share in profit
for the period. An entity shall present basic and diluted earnings per share
with equal prominence for all periods presented.
An entity that reports a discontinued operation shall disclose the basic and
diluted amounts per share for the discontinued operation either in the
statement of profit and loss or in the notes.
Basic earnings per share
Basic earnings per share shall be calculated by dividing profit or loss
attributable to ordinary equity holders of the parent entity (the numerator) by
the weighted average number of ordinary shares outstanding (the
denominator) during the period.
For the purpose of calculating basic earnings per share, the amounts
attributable to ordinary equity holders of the parent entity in respect of:
(a) profit or loss from continuing operations attributable to the parent
entity; and
(b) profit or loss attributable to the parent entity
shall be the amounts in (a) and (b) adjusted for the after-tax amounts of
preference dividends, differences arising on the settlement of preference
shares, and other similar effects of preference shares classified as equity.
Where any item of income or expense which is otherwise required to be
recognised in profit or loss in accordance with Indian Accounting Standards
is debited or credited to securities premium account/other reserves, the
amount in respect thereof shall be deducted from profit or loss from
continuing operations for the purpose of calculating basic earnings per share.
For the purpose of calculating basic earnings per share, the number of
ordinary shares shall be the weighted average number of ordinary shares
outstanding during the period. (Paragraph 19 of the Standard)
The weighted average number of ordinary shares outstanding during the
period and for all periods presented shall be adjusted for events, other than

54
 Summary of Ind AS

the conversion of potential ordinary shares that have changed the number of
ordinary shares outstanding without a corresponding change in resources .
(Paragraph 26 of the Standard)
Diluted earnings per share
Diluted earnings per share shall be calculated by an entity by adjusting profit
or loss attributable to ordinary equity holders of the parent entity, and the
weighted average number of shares outstanding, for the effects of all dilutive
potential ordinary shares.
Dilution is a reduction in earnings per share or an increase in loss per share
resulting from the assumption that convertible instruments are converted,
that options or warrants are exercised, or that ordinary shares are issued
upon the satisfaction of specified conditions.
For the purpose of calculating diluted earnings per share, the number of
ordinary shares shall be the weighted average number of ordinary shares
calculated in accordance with paragraphs 19 and 26, plus the weighted
average number of ordinary shares that would be issued on the conversion of
all the dilutive potential ordinary shares into ordinary shares.
Potential ordinary shares shall be treated as dilutive when, and only when,
their conversion to ordinary shares would decrease earnings per share or
increase loss per share from continuing operations.
An entity uses profit or loss from continuing operations attributable to the
parent entity as the control number to establish whether potential ordinary
shares are dilutive or anti-dilutive. In determining whether potential ordinary
shares are dilutive or anti-dilutive, each issue or series of potential ordinary
shares is considered separately rather than in aggregate.
Retrospective adjustments
If the number of ordinary or potential ordinary shares outstanding increases
as a result of a capitalisation, bonus issue or share split, or decreases as a
result of a reverse share split, the calculation of basic and diluted earnings
per share for all periods presented shall be adjusted retrospectively. If these
changes occur after the reporting period but before the financial statements
are approved for issue, the per share calculations for those and any prior
period financial statements presented shall be based on the new number of
shares.

55
Ind AS: An Overview

Ind AS 34, Interim Financial Reporting

The objective of Ind AS 34 is to prescribe the minimum content of an interim
financial report and to prescribe the principles for recognition and
measurement in complete or condensed financial statements for an interim
period. Timely and reliable interim financial reporting improves the ability of
investors, creditors, and others to understand an entity’s capacity to generate
earnings and cash flows and its financial condition and liquidity.
This Standard applies if an entity is required or elects to publish an interim
financial report in accordance with Indian Accounting Standards.
Interim financial report means a financial report containing either a complete
set of financial statements (as described in Ind AS 1, Presentation of
Financial Statements, or a set of condensed financial statements (as
described in this Standard) for an interim period.
In the interest of timeliness and cost considerations and to avoid repetition of
information previously reported, an entity may be required to or may elect to
provide less information at interim dates as compared with its annual
financial statements. This Standard defines the minimum content of an
interim financial report as including condensed financial statements and
selected explanatory notes. The interim financial report is intended to provide
an update on the latest complete set of annual financial statements.
Accordingly, it focuses on new activities, events, and circumstances and
does not duplicate information previously reported.
Nothing in this Standard is intended to prohibit or discourage an entity from
publishing a complete set of financial statements (as described in Ind AS 1)
in its interim financial report, rather than condensed financial statements and
selected explanatory notes. If an entity publishes a complete set of financial
statements in its interim financial report, the form and content of those
statements shall conform to the requirements of Ind AS 1 for a complete set
of financial statements.
An interim financial report shall include, at a minimum, the following
components:
(a) a condensed balance sheet ;
(b) a condensed statement of profit and loss;
(c) a condensed statement of changes in equity;
(d) a condensed statement of cash flows; and

56
 Summary of Ind AS

(e) selected explanatory notes

If an entity publishes a set of condensed financial statements in its interim
financial report, those condensed statements shall include, at a minimum,
each of the headings and subtotals that were included in its most recent
annual financial statements and the selected explanatory notes as required
by this Standard. Additional line items or notes shall be included if their
omission would make the condensed interim financial statements misleading.
In deciding how to recognise, measure, classify, or disclose an item for
interim financial reporting purposes, materiality shall be assessed in relation
to the interim period financial data. In making assessments of materiality, it
shall be recognised that interim measurements may rely on estimates to a
greater extent than measurements of annual financial data.
An entity shall apply the same accounting policies in its interim financial
statements as are applied in its annual financial statements, except for
accounting policy changes made after the date of the most recent annual
financial statements that are to be reflected in the next annual financial
statements. To achieve that objective, measurements for interim reporting
purposes shall be made on a year-to-date basis.
The measurement procedures to be followed in an interim financial report
shall be designed to ensure that the resulting information is reliable and that
all material financial information that is relevant to an understanding of the
financial position or performance of the entity is appropriately disclosed.
While measurements in both annual and interim financial reports are often
based on reasonable estimates, the preparation of interim financial reports
generally will require a greater use of estimation methods than annual
financial reports.
There is an issue that whether an entity reverse impairment losses
recognised in an interim period on goodwill if a loss would not have been
recognised, or a smaller loss would have been recognised, had an
impairment assessment been made only at the end of a subsequent reporting
period. Appendix A of Ind AS 34 prescribes that an entity shall not reverse an
impairment loss recognised in a previous interim period in respect of
goodwill. Further this Appendix also prescribes that an entity shall not extend
this accounting principle by analogy to other areas of potential conflic t
between Ind AS 34 and other Indian Accounting Standards.

57
Ind AS: An Overview

Ind AS 36, Impairment of Assets

The objective of Ind AS 36 is to prescribe the procedures that an entity
applies to ensure that its assets are carried at no more than their recoverable
amount. An asset is carried at more than its recoverable amount if its
carrying amount exceeds the amount to be recovered through use or sale of
the asset. If this is the case, the asset is described as impaired and the
Standard requires the entity to recognise an impairment loss. The Standard
also specifies when an entity should reverse an impairment loss and
prescribes disclosures.
An entity shall assess at the end of each reporting period whether there is
any indication that an asset may be impaired. If any such indication exists,
the entity shall estimate the recoverable amount of the asset. However,
irrespective of whether there is any indication of impairment, an entity shall
also:
(a) test an intangible asset with an indefinite useful life or an intangible
asset not yet available for use for impairment annually by comparing
its carrying amount with its recoverable amount. This impairment test
may be performed at any time during an annual period, provided it is
performed at the same time every year. Different intangible assets
may be tested for impairment at different times. However, if such an
intangible asset was initially recognised during the current annual
period, that intangible asset shall be tested for impairment before the
end of the current annual period.
(b) test goodwill acquired in a business combination for impairment
annually in accordance with paragraphs 80–99 of the Standard.
If there is an indication that an asset may be impaired, recoverable amount
shall be estimated for individual asset. If it is not possible to estimate the
recoverable amount of the individual asset, the entity shall determine the
recoverable amount of the cash generating unit to which the asset belongs
(the asset’s cash generating unit).
A cash-generating unit is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets.
Measuring cash generating unit
The recoverable amount of an asset or a cash-generating unit is the higher of

58
 Summary of Ind AS

its fair value less costs of disposal and its value in use.
It is not always necessary to determine both an asset’s fair value less costs
of disposal and its value in use. If either of these amounts exceeds the
asset’s carrying amount, the asset is not impaired and it is not necessary to
estimate the other amount.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date.
Costs of disposal are incremental costs directly attributable to the disposal of
an asset or cash-generating unit, excluding finance costs and income tax
expense.
Value in use is the present value of the future cash flows expected to be
derived from an asset or cash-generating unit.
The following elements shall be reflected in the calculation of an asset’s
value in use:
(a) an estimate of the future cash flows the entity expects to derive from
the asset;
(b) expectations about possible variations in the amount or timing of those
future cash flows;
(c) the time value of money, represented by the current market risk-free
rate of interest;
(d) the price for bearing the uncertainty inherent in the asset; and
(e) other factors, such as illiquidity, that market participants would reflect
in pricing the future cash flows the entity expects to derive from the
asset.
Estimates of future cash flows shall include:
(a) projections of cash inflows from the continuing use of the asset;
(b) projections of cash outflows that are necessarily incurred to generate
the cash inflows from continuing use of the asset (including cash
outflows to prepare the asset for use) and can be directly attributed, or
allocated on a reasonable and consistent basis, to the asset; and
(c) net cash flows, if any, to be received (or paid) for the dis posal of the
asset at the end of its useful life.

59
Ind AS: An Overview

Future cash flows shall be estimated for the asset in its current condition.
Estimates of future cash flows shall not include estimated future cash inflows
or outflows that are expected to arise from:
(a) a future restructuring to which an entity is not yet committed; or
(b) improving or enhancing the asset’s performance.
Estimates of future cash flows shall not include:
(a) cash inflows or outflows from financing activities; or
(b) income tax receipts or payments.
Recognising and measuring an impairment loss
If, and only if, the recoverable amount of an asset is less than its carrying
amount, the carrying amount of the asset shall be reduced to its
recoverable amount. That reduction is an impairment loss.
An impairment loss shall be recognised immediately in profit or loss, unless
the asset is carried at revalued amount in accordance with another Standard
(for example, in accordance with the revaluation model in Ind AS 16). Any
impairment loss of a revalued asset shall be treated as a revaluation
decrease in accordance with that other Standard.
An impairment loss shall be recognised for a cash-generating unit (the
smallest group of cash-generating units to which goodwill or a corporate
asset has been allocated) if, and only if, the recoverable amount of the unit
(group of units) is less than the carrying amount of the unit (group of units).
The impairment loss shall be allocated to reduce the carrying amount of the
assets of the unit (group of units) in the following order:
(a) first, to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (group of units); and
(b) then, to the other assets of the unit (group of units) pro rata on the
basis of the carrying amount of each asset in the unit (group of units).
However, an entity shall not reduce the carrying amount of an asset below
the highest of:
(a) its fair value less costs of disposal (if measurable);
(b) its value in use (if determinable); and
(c) zero.
The amount of the impairment loss that would otherwise have been allocated

60
 Summary of Ind AS

to the asset shall be allocated pro rata to the other assets of the unit (group
of units).
Goodwill
For the purpose of impairment testing, goodwill acquired in a business
combination shall, from the acquisition date, be allocated to each of the
acquirer’s cash-generating units, or groups of cash-generating units, that is
expected to benefit from the synergies of the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units
or groups of units.
The annual impairment test for a cash-generating unit to which goodwill has
been allocated may be performed at any time during an annual period,
provided the test is performed at the same time every year. Different cash -
generating units may be tested for impairment at different times. However, if
some or all of the goodwill allocated to a cash-generating unit was acquired
in a business combination during the current annual period, that unit shall be
tested for impairment before the end of the current annual period.
The Standard permits the most recent detailed calculation made in a
preceding period of the recoverable amount of a cash-generating unit to
which goodwill has been allocated to be used in the impairment test of that
unit in the current period provided specified criteria are met
Reversing an impairment loss
An entity shall assess at the end of each reporting period whether there is
any indication that an impairment loss recognised in prior periods for an
asset other than goodwill may no longer exist or may have decreased. If any
such indication exists, the entity shall estimate the recoverable amount of
that asset.
An impairment loss recognised in prior periods for an asset other than
goodwill shall be reversed if, and only if, there has been a change in the
estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. A reversal of an impairment loss for a cash-
generating unit shall be allocated to the assets of the unit, except for
goodwill, pro rata with the carrying amounts of those assets.
A reversal of an impairment loss for an asset other than goodwill shall be
recognised immediately in profit or loss, unless the asset is carried at
revalued amount in accordance with another Indian Accounting Standard (for
example, the revaluation model in Ind AS 16). Any reversal of an impairment
loss of a revalued asset shall be treated as a revaluation increase in

61
Ind AS: An Overview

accordance with that other Indian Accounting Standard.

An impairment loss recognised for goodwill shall not be reversed in a
subsequent period.

Ind AS 37, Provisions, Contingent Liabilities and

Contingent Assets
The objective of Ind AS 37 is to ensure that appropriate recognition criteria
and measurement bases are applied to provisions, contingent liabilities and
contingent assets and that sufficient information is disclosed in the notes to
enable users to understand their nature, timing and amount.
Ind AS 37 prescribes the accounting and disclosures for provisions,
contingent liabilities and contingent assets, except:
(a) those resulting from executory contracts, except where the contract is
onerous; and
(b) those covered by another Standard.
Ind AS 37 also do not apply to financial instruments (including guarantees)
that are within the scope of Ind AS 109, Financial Instruments.
Some amounts treated as provisions may relate to the recognition of
revenue, for example, where an entity gives guarantees in exchange for fee.
Ind AS 37 does not address the recognition of revenue. Ind AS 18, Revenue,
identifies the circumstances in which revenue is recognised and provides
practical guidance on the application of the recognition criteria. Ind AS 37
does not change the requirements of Ind AS 18.
Provisions
A provision is a liability of uncertain timing and amount.
A provision shall be recognised when:
(a) an entity has a present obligation (legal or constructive) that is a result
of a past event;
(b) it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and
(c) a reliable estimate can be made of the amount of the obligation.
If these conditions are not met, no provision shall be recognised.
Provisions shall be reviewed at the end of each reporting period and adjusted

62
 Summary of Ind AS

to reflect the current best estimate. If it is no longer probable that an outflow

of resources embodying economic benefits will be required to settle the
obligation, the provision shall be reversed.
Present Obligation
In rare cases, it is not clear whether there is a present obligation. In these
cases, a past event is deemed to give rise to a present obligation if, taking
account of all available evidence, it is more likely than not that a present
obligation exists at the end of the reporting period.
Measurement
The amount recognised as a provision shall be the best estimate of the
expenditure required to settle the present obligation at the end of the
reporting period. The best estimate of the expenditure required to settle the
present obligation is the amount that an entity would rationally pay to settle
the obligation at the end of the reporting period or to transfer it to a third
party at that time.
Where the provision being measured involves a large population of items, the
obligation is estimated by weighting all possible outcomes by their associated
probabilities. Where a single obligation is being measured, the individual
most likely outcome may be the best estimate of the liability. However, even
in such a case, the entity considers other possible outcomes.
Risks and uncertainties
The risks and uncertainties that inevitably surround many events and
circumstances shall be taken into account in reaching the best estimate of a
provision.
Present value
Where the effect of the time value of money is material, the amount of a
provision shall be the present value of the expenditures expected to be
required to settle the obligation.
Future events
Future events that may affect the amount required to settle an obligation
shall be reflected in the amount of a provision where there is sufficient
objective evidence that they will occur.

63
Ind AS: An Overview

Expected disposals of assets

Gains from the expected disposals of assets shall not be taken into account
in measuring a provision. These are not recognised even if the expected
disposal is closely linked to the event giving rise to the provision.
Reimbursements
When some or all of the expenditure required to settle a provision is
expected to be reimbursed by another party, the reimbursement shall be
recognised when, and only when, it is virtually certain that reimbursement will
be received if the entity settles the obligation. The reimbursement shall be
treated as a separate asset. The amount recognised for the reimbursement
shall not exceed the amount of the provision. In the statement of profit and
loss, the expense relating to a provision may be presented net of the amount
recognised for a reimbursement.
Onerous contracts
If an entity has a contract that is onerous, the present obligation under the
contract shall be recognised and measured as a provision. This Standard
defines an onerous contract as a contract in which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits
expected to be received under it. The unavoidable costs under a contract
reflect the least net cost of exiting from the contract, which is the lower of the
cost of fulfilling it and any compensation or penalties arising from failure to
fulfill it.
Restructuring obligations
A provision for restructuring costs is recognised only when the general
recognition criteria for provisions are met.
With respect to restructuring obligation, the Standard provides guidance for
application of general recognition conditions that need to be complied with
for recognition of restructuring provision and identification of expenses that
are in the nature of restructuring cost.
Appendix A of Ind AS 37 provides guidance on (a) how a contributor account
for its interest in a fund and (b) when a contributor has an obligation to make
additional contributions, for example, in the event of the bankruptcy of
another contributor or if the value of the investment assets held by the fund
decreases to an extent that they are insufficient to fulfil the fund’s
reimbursement obligations, how that obligation be accounted for. The

64
 Summary of Ind AS

Appendix prescribes that the contributor shall recognise its obligati on to pay
decommissioning costs as a liability and recognise its interest in the fund
separately unless the contributor is not liable to pay decommissioning costs
even if the fund fails to pay. When a contributor has an obligation to make
potential additional contributions, this obligation is a contingent liability that is
within the scope of Ind AS 37. The contributor shall recognise a liability only
if it is probable that additional contributions will be made.
Appendix B of Ind AS 37 provides guidance on the recognition, in the
financial statements of producers, of liabilities for waste management under
the European Union’s Directive on Waste Electrical and Electronic
Equipment (WE&EE), in respect of sales of historical household equipment.
This Appendix addresses neither new waste nor historical waste from
sources other than private households. The liability for such waste
management is adequately covered in Ind AS 37. However, if, in national
legislation, new waste from private households is treated in a similar manner
to historical waste from private households, the principles of this Appendix
apply by reference to the hierarchy in paragraphs 10-12 of Ind AS 8. The Ind
AS 8 hierarchy is also relevant for other regulations that impose obligations
in a way that is similar to the cost attribution model specified in the EU
Directive.
Appendix C to Ind AS 16 addresses the accounting for a liability to pay a levy
if that liability is within the scope of Ind AS 37. It also addresses the
accounting for a liability to pay a levy whose timing and amount is certain.
The Appendix prescribes that obligating event that gives rise to a liability to
pay a levy is the activity that triggers the payment of the levy, as identified by
the legislation. An entity does not have a constructive obligation to pay a levy
that will be triggered by operating in a future period as a result of the entity
being economically compelled to continue to operate in that future period.
The liability to pay a levy is recognised progressively if the obligating event
occurs over a period of time

Ind AS 38, Intangible Assets

The objective of Ind AS 38 is to prescribe the accounting treatment for
intangible assets that are not dealt with specifically in another Standard. This
Standard requires an entity to recognise an intangible asset if, and only if,
specified criteria are met. The Standard also specifies how to measure the
carrying amount of intangible assets and requires specified disclosures about
intangible assets.

65
Ind AS: An Overview

Intangible Asset is as an identifiable non-monetary asset without physical

substance.
Recognition and Measurement
An intangible asset should be recognised in the financial statements as an
intangible asset if it meets the definition of intangible asset and it meets both
the recognition criteria mentioned below.
An intangible asset should be recognised if, and only if:
(a) it is probable that the expected future economic benefits that are
attributable to the asset will flow to the entity; and
(b) the cost of the asset can be measured reliably.
An intangible asset should be measured initially at cost.
An entity should assess the probability of expected future economic benefits
using reasonable and supportable assumptions that represent management’s
best estimate of the set of economic conditions that will exist over the useful
life of the asset.
Separate Acquisition
The cost of a separately acquired intangible asset would comprise:
(a) its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates; and
(b) any directly attributable cost of preparing the asset for its intended
use.
Acquisition as Part of a Business Combination
In accordance with Ind AS 103, Business Combinations, if an intangible
asset is acquired in a business combination, the cost of that intangible asset
is its fair value at the acquisition date. If an asset acquired in a business
combination is separable or arises from contractual or other legal rights,
sufficient information would exist to measure reliably the fair value of the
asset.
In accordance with this Standard and Ind AS 103, an acquirer should
recognise at the acquisition date, separately from goodwill, an intangible
asset of the acquiree, if it meets the definition and recognition criteria for an
intangible asset irrespective of whether the asset had been recognised by
the acquiree before the business combination. This means that the acquirer

66
 Summary of Ind AS

recognises as an asset separately from goodwill an in-process research and

development project of the acquiree if the project meets the definition of an
intangible asset.
Internally Generated Intangible Assets
Internally generated goodwill shall not be recognised as an asset.
No intangible asset arising from research should be recognised. Expenditure
on research (or on the research phase of an internal project) should be
recognised as an expense when it is incurred.
An intangible asset arising from development shall be recognised if, and only
if, an entity can demonstrate all of the following:
(a) the technical feasibility of completing the intangible asset so that it will
be available for use or sale.
(b) its intention to complete the intangible asset and use or sell it.
(c) its ability to use or sell the intangible asset.
(d) how the intangible asset will generate probable future economic
benefits.
(e) the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset.
(f) its ability to measure reliably the expenditure attributable to the
intangible asset during its development.
Internally generated brands, mastheads, publishing titles, customer lists and
items similar in substance should not be recognised as intangible assets.
The cost of an internally generated intangible asset is the sum of expenditure
incurred from the date when the intangible asset first meets the recognition
criteria and the condition relating to development phase. Ind AS 38 prohibits
reinstatement of expenditure previously recognised as an expense.
Recognition of an Expense
Expenditure on an intangible item should be recognised as an expense when
it is incurred unless:
(a) it forms part of the cost of an intangible asset that meets the
recognition criteria; or
(b) the item is acquired in a business combination and cannot be

67
Ind AS: An Overview

recognised as an intangible asset. If this is the case, it forms part of

the amount recognised as goodwill at the acquisition date (see Ind AS
103).
Measurement after recognition
An entity should choose either the cost model or the revaluation model as its
accounting policy. If an intangible asset is accounted for using the
revaluation model, all the other assets in its class should also be accounted
for using the same model, unless there is no active market for those assets.
Cost Model- After initial recognition, an intangible asset should be carried
at its cost less any accumulated amortisation and any accumulated
impairment losses.
Revaluation Model- After initial recognition, an intangible asset shall be
carried at a revalued amount, being its fair value at the date of the
revaluation less any subsequent accumulated amortisation and any
subsequent accumulated impairment losses. For the purpose of revaluations
under this Standard, fair value shall be measured by reference to an active
market. Revaluations shall be made with such regularity that at the end of the
reporting period the carrying amount of the asset does not differ materially
from its fair value
The revaluation model is applied after an asset has been initially recognised
at cost. However, if only part of the cost of an intangible asset is recognised
as an asset because the asset did not meet the criteria for recognition until
part of the way through the process, the revaluation model may be applied to
the whole of that asset.
Treatment of Revaluation Gains and Losses
If an intangible asset’s carrying amount is increased as a result of a
revaluation, the increase should be recognised in other comprehensive
income and accumulated in equity under the heading of revaluation surplus.
However, the increase should be recognised in profit or loss to the extent
that it reverses a revaluation decrease of the same asset previously
recognised in profit or loss.
If an intangible asset’s carrying amount is decreased as a result of a
revaluation, the decrease should be recognised in profit or loss. However,
the decrease should be recognised in other comprehensive income to the
extent of any credit balance in the revaluation surplus in respect of that

68
 Summary of Ind AS

asset.
Useful Life
Useful life is:
(a) the period over which an asset is expected to be available for use by
an entity; or
(b) the number of production or similar units expected to be obtained from
the asset by an entity.
The accounting for an intangible asset is based on its useful life. An
intangible asset with a finite useful life is amortised, and an intangible asset
with an indefinite useful life is not.
Many factors are considered in determining the useful life of an intangible
asset.
Review of Useful Life Assessment
The useful life of an intangible asset that is not being amortised should be
reviewed each period to determine whether events and circumstances
continue to support an indefinite useful life assessment for that asset. If they
do not, the change in the useful life assessment from indefinite to finite
should be accounted for as a change in an accounting estimate in
accordance with Ind AS 8.
Appendix A of Ind AS 38 provides guidance on whether the web site is an
internally generated intangible asset that is subject to the requirements of Ind
AS 38; and the appropriate accounting treatment of such expenditure. The
Appendix prescribes that an entity’s own web site that arises from
development and is for internal or external access is an internally generated
intangible asset that is subject to the requirements of Ind AS 38. Any internal
expenditure on the development and operation of an entity’s own web site
shall be accounted for in accordance with Ind AS 38. The nature of each
activity for which expenditure is incurred (eg training employees and
maintaining the web site) and the web site’s stage of development or post-
development shall be evaluated to determine the appropriate accounting
treatment. A web site that is recognised as an intangible asset under this
Appendix shall be measured after initial recognition by applying the
requirements of paragraphs 72-87 of Ind AS 38. The best estimate of a web
site’s useful life should be short.

69
Ind AS: An Overview

Ind AS 40, Investment Property

The objective of Ind AS 40 is to prescribe the accounting treatment for
investment property and related disclosure requirements.
Investment property is property (land or a building—or part of a building—or
both) held (by the owner or by the lessee under a finance lease) to earn
rentals or for capital appreciation or both, rather than for:
(a) use in the production or supply of goods or services or for
administrative purposes; or
(b) sale in the ordinary course of business.
Recognition
Investment property shall be recognised as an asset when, and only when:
(a) it is probable that the future economic benefits that are associated
with the investment property will flow to the entity; and
(b) the cost of the investment property can be measured reliably.

Measurement at recognition
An investment property shall be measured initially at its cost. Transaction
costs shall be included in the initial measurement.
The initial cost of a property interest held under a lease and classified as an
investment property shall be as prescribed for a finance lease by paragraph
20 of Ind AS 17, i.e., the asset shall be recognised at the lower of the fair
value of the property and the present value of the minimum lease payments.
An equivalent amount shall be recognised as a liability in accordance with
that same paragraph.
Measurement after recognition
The Standard permits an entity to adopt as its accounting policy the cost
model prescribed in paragraph 56 of the Standard to all of its investment
property. However, the Standard requires all entities to measure the fair
value of investment property, for the purpose of disclosure.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the

70
 Summary of Ind AS

measurement date. (See Ind AS 113, Fair Value Measurement).

Cost model
After initial recognition, an entity shall measure all of its investment
properties in accordance with Ind AS 16’s requirements for cost model, other
than those that meet the criteria to be classified as held for sale (or are
included in a disposal group that is classified as held for sale) in accordance
with Ind AS 105, Non-current Assets Held for Sale and Discontinued
Operations. Investment properties that meet the criteria to be classified as
held for sale (or are included in a disposal group that is classified as held for
sale) shall be measured in accordance with Ind AS 105.
Disposals
An investment property shall be derecognised (eliminated from the balance
sheet) on disposal or when the investment property is permanently withdrawn
from use and no future economic benefits are expected from its disposal.
Gains or losses arising from the retirement or disposal of investment property
shall be determined as the difference between the net disposal proceeds and
the carrying amount of the asset and shall be recognised in profit or loss
(unless Ind AS 17 requires otherwise on a sale and leaseback) in the period
of the retirement or disposal.
The consideration receivable on disposal of an investment property is
recognised initially at fair value. In particular, if payment for an investment
property is deferred, the consideration received is recognised initially at the
cash price equivalent. The difference between the nominal amount of the
consideration and the cash price equivalent is recognised as interest revenue
in accordance with Ind AS 18 using the effective interest method.

Ind AS 41, Agriculture

The objective of Ind AS 41 is to prescribe the accounting treatment and
disclosures related to agricultural activity.
Agricultural activity is the management by an entity of the biological
transformation and harvest of biological assets for sale or for conversion into
agricultural produce or into additional biological assets. Biological
transformation comprises the processes of growth, degeneration, production,
and procreation that cause qualitative or quantitative changes in a biological
asset. A biological asset is a living animal or plant. Agricultural produce is the

71
Ind AS: An Overview

harvested product of the entity’s biological assets. Harvest is the detachment

of produce from a biological asset or the cessation of a biological asset’s life
processes.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date. (See Ind AS 113, Fair Value Measurement.) Costs to sell
are the incremental costs directly attributable to the disposal of an asset,
excluding finance costs and income taxes. Costs to sell exclude transport
and other costs necessary to get the asset to a market.
A biological asset shall be measured on initial recognition and at the end of
each reporting period at its fair value less costs to sell, except for the case
described in paragraph 30 where the fair value cannot be measured reliably.
Agricultural produce harvested from an entity’s biological assets shall be
measured at its fair value less costs to sell at the point of harvest. Such
measurement is the cost at that date when applying Ind AS 2 Inventories or
another applicable Standard.
A gain or loss arising on initial recognition of a biological asset at fair value
less costs to sell and from a change in fair value less costs to sell of a
biological asset shall be included in profit or loss for the period in which it
arises.
A gain or loss arising on initial recognition of agricultural produce at fair value
less costs to sell shall be included in profit or loss for the period in which it
arises.
Ind AS 41 requires that an unconditional government grant related to a
biological asset measured at its fair value less costs to sell shall be
recognised in profit or loss when, and only when, the government grant
becomes receivable.
If a government grant related to a biological asset measured at its fair value
less costs to sell is conditional, including when a government grant requires
an entity not to engage in specified agricultural activity, an entity shall
recognise the government grant in profit or loss when, and only when, the
conditions attaching to the government grant are met.

Ind AS 101, First Time Adoption of Indian

Accounting Standards
The objective of Ind AS 101 is to ensure that an entity’s first Ind AS financial

72
 Summary of Ind AS

statements, and its interim financial reports for part of the period covered by
those financial statements, contain high quality information that:
(a) is transparent for users and comparable over all periods presented;
(b) provides a suitable starting point for accounting in accordance with Ind
AS; and
(c) can be generated at a cost that does not exceed the benefits.
An entity shall apply the Standard in its first Ind AS financial statements and
each interim financial report, if any, that it presents in accordance with Ind
AS 34 for part of the period covered by its first Ind AS financial statements.
An entity shall prepare and present an opening Ind AS Balance Sheet at the
date of transition to Ind AS. This is the starting point for its accounting in
accordance with Ind AS.
Accounting policies
An entity shall use the same accounting policies in its opening Ind AS
Balance Sheet and throughout all periods presented in its first Ind AS
financial statements. Those accounting policies shall comply with each Ind
AS effective at the end of its first Ind AS reporting period, except as specified
in Ind AS 101.
An entity shall, in its opening Ind AS Balance Sheet:
(a) recognise all assets and liabilities whose recognition is required by Ind
AS;
(b) not recognise items as assets or liabilities if Ind AS do not permit such
recognition;
(c) reclassify items that it recognised in accordance with previous GAAP
as one type of asset, liability or component of equity, but are a
different type of asset, liability or component of equity in accordance
with Ind AS; and
(d) apply Ind AS in measuring all recognised assets and liabilities.
The accounting policies in opening Ind AS Balance Sheet may differ from
those that it used for the same date using previous GAAP. The resulting
adjustments arise from events and transactions before the date of transition
to Ind AS shall be recognised directly in retained earnings.
This Ind AS establishes two categories of exceptions to the principle that an

73
Ind AS: An Overview

entity’s opening Ind AS Balance Sheet shall comply with each Ind AS:
(a) Ind AS 101 prohibit retrospective application of some specific aspects
of other Ind AS.
(b) Ind AS 101 grant exemptions from some specific requirements of other
Ind AS.
Presentation and Disclosure
The Standard does not provide exemptions from the presentation and
disclosure requirements in other Ind AS. The Standard requires that an
entity’s first Ind AS financial statements shall include at least three Balance
Sheets, two Statements of profit and loss, two Statements of cash flows and
two Statements of changes in equity and related notes, including
comparative information for all statements presented.
Explanation of transition to Ind AS
The Standard requires that an entity shall explain how the transition from
previous GAAP to Ind AS affected its reported Balance sheet, financial
performance and cash flows.
Exceptions to the retrospective application of other Ind
AS
The Standard prohibits retrospective application of some aspects of other Ind
AS. For example, application of derecognition requirements in Ind AS 109,
some aspects of classification and measurement of financial assets,
impairment of financial assets, provisions related to embedded derivatives,
classification of government loans etc.

Ind AS 102, Share-Based Payment

The objective of Ind AS 102 is to specify the financial reporting by an entity
when it undertakes a share-based payment transaction. In particular, it
requires an entity to reflect in its profit or loss and financial position the
effects of share-based payment transactions, including expenses associated
with transactions in which share options are granted to employees.
Recognition
An entity shall recognise the goods or services received or acquired in a
share-based payment transaction when it obtains the goods or as the
services are received. The entity shall recognise a corresponding increase in

74
 Summary of Ind AS

equity if the goods or services were received in an equity-settled share-

based payment transaction, or a liability if the goods or services were
acquired in a cash-settled share-based payment transaction.
When the goods or services received or acquired in a share-based payment
transaction do not qualify for recognition as assets, they shall be recognised
as expenses.
The Standard sets out measurement and specific requirements for following
types of share-based payment transactions:
(a) equity-settled share-based payment transactions, in which the entity
(a) receives goods or services as consideration for its own equity
instruments (including shares or share options), or (b) receives goods
or services but has no obligation to settle the transaction with the
supplier.
(b) cash-settled share-based payment transactions, in which the entity
acquires goods or services by incurring a liability to transfer cash or
other assets to the supplier of those goods or services for amounts
that are based on the price (or value) of equity instruments (including
shares or share options) of the entity or another group entity
For equity-settled share-based payment transactions, the entity shall
measure the goods or services received, and the corresponding increase in
equity, directly, at the fair value of the goods or services received, unless
that fair value cannot be estimated reliably. If the entity cannot estimate
reliably the fair value of the goods or services received, the entity shall
measure their value, and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted.
Furthermore:
(a) for transactions with employees and others providing similar services,
the entity is required to measure the fair value of the services received
by reference to the fair value of the equity instruments granted,
because typically it is not possible to estimate reliably the fair value of
the services received. The fair value of those equity instruments shall
be measured at grant date.
(b) for transactions with parties other than employees, there shall be a
rebuttable presumption that the fair value of the goods or services
received can be estimated reliably. That fair value shall be measured
at the date the entity obtains the goods or the counterparty renders

75
Ind AS: An Overview

service. In rare cases, if the entity rebuts this presumption because it

cannot estimate reliably the fair value of the goods or services
received, the entity shall measure the goods or services received, and
the corresponding increase in equity, indirectly, by reference to the fair
value of the equity instruments granted, measured at the date the
entity obtains the goods or the counterparty renders service.
(c) for goods or services measured by reference to the fair value of the
equity instruments granted, the Standard specifies that vesting
conditions, other than market conditions, are not taken into account
when estimating the fair value of the shares or share options at the
measurement date. Instead, vesting conditions shall be taken into
account by adjusting the number of equity instruments included in the
measurement of the transaction amount so that, ultimately, the amount
recognised for goods or services received as consideration for the
equity instruments granted shall be based on the number of equity
instruments that eventually vest. Hence, on a cumulative basis, no
amount is recognised for goods or services received if the equity
instruments granted do not vest because of failure to satisfy a vesting
condition
(d) the fair value of the equity instruments granted, an entity shall
measure the fair value of equity instruments granted at the
measurement date, based on market prices if available, taking into
account the terms and conditions upon which those equity instruments
were granted (subject to the requirements of paragraphs 19–22). If
market prices are not available, the entity shall estimate the fair value
of the equity instruments granted using a valuation technique to
estimate what the price of those equity instruments would have been
on the measurement date in an arm’s length transaction between
knowledgeable, willing parties.
For cash-settled share-based payment transactions, the entity shall measure
the goods or services acquired and the liability incurred at the fair value of
the liability, subject to the requirements of paragraphs 31–33D. Until the
liability is settled, the entity shall remeasure the fair value of the liability at
the end of each reporting period and at the date of settlement, with any
changes in fair value recognised in profit or loss for the period.
For share-based payment transactions in which the terms of the arrangement
provide either the entity or the counterparty with the choice of whether the
entity settles the transaction in cash (or other assets) or by issuing equity

76
 Summary of Ind AS

instruments, the entity shall account for that transaction, or the components
of that transaction, as a cash-settled share-based payment transaction if, and
to the extent that, the entity has incurred a liability to settle in cash or other
assets, or as an equity-settled share-based payment transaction if, and to the
extent that, no such liability has been incurred.
The terms of a share-based payment arrangement may permit or require the
entity to withhold the number of equity instruments equal to the monetary
value of the employee’s tax obligation from the total number of equity
instruments that otherwise would have been issued to the employee upon
exercise (or vesting) of the share-based payment, i.e. the share-based
payment arrangement has a ‘net settlement feature’. As an exception, such
transactions shall be classified in its entirety as an equity-settled share-
based payment transaction if it would have been so classified in the absence
of the net settlement feature.
The payment made shall be accounted for as a deduction from equity for the
shares withheld, except to the extent that the payment exceeds the fair value
at the net settlement date of the equity instruments withheld.
The exception does not apply to:
o a share-based payment arrangement with a net settlement feature for
which there is no obligation on the entity under tax laws or regulations
to withhold an amount for an employee’s tax obligation associated with
that share-based payment; or
o any equity instruments that the entity withholds in excess of the
employee’s tax obligation associated with the share-based payment
(i.e. the entity withheld an amount of shares that exceeds the
monetary value of the employee’s tax obligation). Such excess shares
withheld shall be accounted for as a cash-settled share-based
payment when this amount is paid in cash (or other assets) to the
employee.

Ind AS 103, Business Combinations

A business combination is a transaction or other event in which a reporting
entity (the acquirer) obtains control of one or more businesses (the
acquiree).
Ind AS 103 does not apply to the following:
(a) the formation of a joint arrangement

77
Ind AS: An Overview

(b) the acquisition of an asset or group of assets that is not a business as

defined acquisition by an investment entity
(Though IFRS 3, Business Combination scopes out the accounting for
combination of entities or business under common control but Ind AS 103
has included this in Appendix C).
Acquisition Method
(a) Business combinations are accounted for using the acquisition
method, i.e., identifying the acquirer; (the acquirer is the entity that
obtains control of another entity);
(b) determining the acquisition date;(the date on which the acquirer
obtains control);
(c) recognise and measure the identifiable assets acquired and the
liabilities assumed and any non-controlling interest; and
(d) recognise and measure any goodwill or bargain purchase.
Recognition and Measurement Principle
To qualify for recognition, the identifiable assets acquired and liabilities
assumed by the acquirer must meet the definitions of assets and liabilities in
the Framework for the Preparation and Presentation of Financial Statements
in accordance with Indian Accounting Standard at the acquisition date.
The acquirer shall measure the identifiable assets acquired and the liabilities
assumed at their acquisition-date fair values.
Exceptions to the Recognition Principles
(a) Contingent Liabilities
 the acquirer shall recognise if it is a present obligation that
arises from past events and its fair value can be measured
reliably
(b) Exceptions to the Recognition and Measurement Principles
 Income taxes
 deferred tax assets or liabilities arising from acquired
assets or liabilities accounted in accordance with Ind AS
12
 Employee benefits

78
 Summary of Ind AS

 accounted in accordance with Ind AS 19

 Indemnification assets
 Shall be measured and recognized on the basis of the
indemnified item
(c) Exceptions to the Measurement Principles
 Reacquired rights
 measured at fair value based on remaining contractual
term ignoring the fair value effect of renewal
 Share-based payment transactions
 measured in accordance with Ind AS 102(Market Based
Measure)
 Assets held for sale
 measured in accordance with Ind AS 105 (i.e., fair value
less costs to sell)
Recognition and measurement of Goodwill or Bargain
Purchase
Goodwill is measured as the difference between the consideration
transferred in exchange for the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed.
In extremely rare circumstances, an acquirer will make a bargain purchase in
a business combination, where the value of acquired identifiable assets and
liabilities exceeds the consideration transferred; the acquirer shall recognize
a gain (bargain purchase). The gain shall be recognized by the acqu irer in
Other Comprehensive Income on the acquisition date and accumulate the
same in equity as capital reserve, if there exists a clear evidence of the
underlying reasons for classifying the business combination as a bargain
purchase.
If there does not exist clear evidence of the underlying reasons for classifying
the business combination as a bargain purchase, then the gain shall be
recognised directly in equity as capital reserve.
Reverse Acquisitions
A reverse acquisition occurs when the entity that issues securities (the legal

79
Ind AS: An Overview

acquirer) is identified as the acquiree for accounting. The entity whose equity
interests are acquired (the legal acquiree) must be the acquirer for
accounting purposes for the transaction to be considered a reverse
acquisition.
Measurement Period
If the initial accounting for a business combination is incomplete by the end
of the reporting period in which the combination occurs, the acquirer shall
report in its financial statements provisional amounts for the items for which
the accounting is incomplete.
During the measurement period, the acquirer shall retrospectively adjust the
provisional amounts recognized and additional assets and liabilities that
existed at the acquisition date to reflect new information obtained.
The measurement period ends as soon as the acquirer receives the
information it was seeking or learns that more information is not obtainable.
The measurement period shall not exceed one year from the acquisition
date.
Subsequent measurement and accounting
In general, an acquirer shall subsequently measure and account for assets
acquired, liabilities assumed or incurred and equity instruments issued in a
business combination in accordance with other applicable Ind AS for those
items, depending on their nature. However, Ind AS 103 provides guidance on
subsequently measuring and accounting for the following assets acquired,
liabilities assumed or incurred and equity instruments issued in a business
combination:
(a) reacquired rights;
(b) contingent liabilities recognised as of the acquisition date;
(c) indemnification assets; and
(d) contingent consideration.
Business combinations of entities under common
control
Common control business combination means a business combination
involving entities or businesses in which all the combining entities or
businesses are ultimately controlled by the same party or parties both before

80
 Summary of Ind AS

and after the business combination, and that control is not transitory.
Business combinations involving entities or businesses under common
control shall be accounted for using the pooling of interests method.
The pooling of interest method is considered to involve the following:
(a) The assets and liabilities of the combining entities are reflected at their
carrying amounts.
(b) No adjustments are made to reflect fair values, or recognise any new
assets or liabilities. The only adjustments that are made are to
harmonise accounting policies.
(c) The financial information in the financial statements in respect of prior
periods should be restated as if the business combination had
occurred from the beginning of the preceding period in the financial
statements, irrespective of the actual date of the combination.
However, if business combination had occurred after that date, the
prior period information shall be restated only from that date.
(d) The balance of the retained earnings appearing in the financial
statements of the transferor is aggregated with the corresponding
balance appearing in the financial statements of the transferee.
Alternatively, it is transferred to General Reserve, if any.
(e) The identity of the reserves shall be preserved and shall appear in the
financial statements of the transferee in the same form in which they
appeared in the financial statements of the transferor.
(f) The difference, if any, between the amounts recorded as share capital
issued plus any additional consideration in the form of cash or other
assets and the amount of share capital of the transferor shall be
transferred to capital reserve and should be presented separately from
other capital reserves with disclosure of its nature and purpose in the
notes.

Ind AS 104, Insurance Contracts

The objective of Ind AS 104 is to specify the financial reporting for insurance
contracts by any entity that issues such contracts (described as an insurer).
In particular, this Ind AS requires:
(a) limited improvements to accounting by insurers for insurance
contracts.

81
Ind AS: An Overview

(b) disclosure that identifies and explains the amounts in an insurer’s

financial statements arising from insurance contracts and helps users
of those financial statements understand the amount, timing and
uncertainty of future cash flows from insurance contracts.
An insurance contract is a contract under which one party (the insurer)
accepts significant insurance risk from another party (the policyholder) by
agreeing to compensate the policyholder if a specified uncertain future event
(the insured event) adversely affects the policyholder.
The Standard applies to all insurance contracts (including reinsurance
contracts) that the entity issues and reinsurance contracts that it holds and
financial instruments that it issues with a discretionary participation feature
and Ind AS 107, Financial Instruments: Disclosures, requires disclosure
about financial instruments, including financial instruments that contain such
features.
The Ind AS exempts an insurer from some requirements of other Ind AS.
However, the Ind AS:
(a) prohibits provisions for possible claims under contracts that are not in
existence at the end of the reporting period (such as catastrophe and
equalisation provisions).
(b) requires a test for the adequacy of recognised insurance liabilities and
an impairment test for reinsurance assets.
(c) requires an insurer to keep insurance liabilities in its statement of
financial position until they are discharged or cancelled, or expire, and
to present insurance liabilities without offsetting them against related
reinsurance assets.
The Ind AS permits an insurer to change its accounting policies for insurance
contracts only if the change makes the financial statements more relevant
and no less reliable, or more reliable and no less relevant. In particular, an
insurer may continue any of the following practices, although it may continue
using accounting policies that involve them:
(a) measuring insurance liabilities on an undiscounted basis.
(b) measuring contractual rights to future investment management fees at
an amount that exceeds their fair value as implied by a comparison
with current fees charged by other market participants for similar
services.

82
 Summary of Ind AS

(c) using non-uniform accounting policies for the insurance contracts of

subsidiaries.
The Ind AS permits an insurer to change its accounting policies so that it re -
measures designated insurance liabilities to reflect current market interest
rates and recognises changes in those liabilities in profit or loss. Without this
permission, an insurer would have been required to apply the change in
accounting policies consistently to all similar liabilities.
The Ind AS requires disclosure to help users understand:
(a) the amounts in the insurer’s financial statements that arise from
insurance contracts.
(b) the nature and extent of risks arising from insurance contracts.

Ind AS 105, Non-current Assets Held for Sale and

Discontinued Operations
The objective of Ind AS 105 is to specify the accounting for assets held for
sale, and the presentation and disclosure of discontinued operations.
In particular, the Ind AS requires:
(a) assets that meet the criteria to be classified as held for sale to be
measured at the lower of carrying amount and fair value less costs to
sell, and depreciation on such assets to cease;
(b) assets that meet the criteria to be classified as held for sale to be
presented separately in the balance sheet; and
(c) the results of discontinued operations to be presented separately in
the statement of profit and loss.
The Ind AS:
(a) adopts the classification ‘held for sale’.
(b) introduces the concept of a disposal group, being a group of assets to
be disposed of, by sale or otherwise, together as a group in a single
transaction, and liabilities directly associated with those assets that will
be transferred in the transaction.
(c) classifies an operation as discontinued at the date the operation meets
the criteria to be classified as held for sale or when the entity has
disposed of the operation.

83
Ind AS: An Overview

An entity shall classify a non-current asset (or disposal group) as held for
sale if its carrying amount will be recovered principally through a sale
transaction rather than through continuing use.
For this to be the case, the asset (or disposal group) must be available for
immediate sale in its present condition subject only to terms that are usual
and customary for sales of such assets (or disposal groups) and its sale must
be highly probable. Thus, an asset (or disposal group) cannot be classified
as a non-current asset (or disposal group) held for sale, if the entity intends
to sell it in a distant future.
For the sale to be highly probable, the appropriate level of management must
be committed to a plan to sell the asset (or disposal group), and an active
programme to locate a buyer and complete the plan must have been
initiated. Further, the asset (or disposal group) must be actively marketed for
sale at a price that is reasonable in relation to its current fair value.
In addition, the sale should be expected to qualify for recognition as a
completed sale within one year from the date of classification, except as
permitted by paragraph 9 of the Standard, and actions required to complete
the plan should indicate that it is unlikely that significant changes to the plan
will be made or that the plan will be withdrawn.
A discontinued operation is a component of an entity that either has been
disposed of or is classified as held for sale and:
(a) represents a separate major line of business or geographical area of
operations;
(b) is part of a single co-ordinated plan to dispose of a separate major line
of business or geographical area of operations; or
(c) is a subsidiary acquired exclusively with a view to resale.
A component of an entity comprises operations and cash flows that can be
clearly distinguished, operationally and for financial reporting purposes, from
the rest of the entity. In other words, a component of an entity will have been
a cash-generating unit or a group of cash-generating units while being held
for use.
An entity shall not classify as held for sale a non-current asset (or disposal
group) that is to be abandoned.

84
 Summary of Ind AS

Ind AS 106, Exploration for and Evaluation of

Mineral Resources
The objective of the Ind AS 106 is to specify the financial reporting for the
exploration for and evaluation of mineral resources.
The exploration and evaluation expenditures are expenditures incurred by an
entity in connection with the exploration for and evaluation of mineral
resources before the technical feasibility and commercial viability of
extracting a mineral resource are demonstrable. Exploration for and
evaluation of mineral resources is the search for mineral resources, including
minerals, oil, natural gas and similar non-regenerative resources after the
entity has obtained legal rights to explore in a specific area, as well as the
determination of the technical feasibility and commercial viability of extracting
the mineral resource.
Exploration and evaluation assets are exploration and evaluation
expenditures recognised as assets as per entity’s accounting policy.
The Ind AS:
(a) permits an entity recognising exploration and evaluation assets to
apply paragraph 10 of Ind AS 8 to develop an accounting policy for
exploration and evaluation assets.
(b) requires entities recognising exploration and evaluation assets to
perform an impairment test on those assets when facts and
circumstances suggest that the carrying amount of the assets may
exceed their recoverable amount.
When facts and circumstances suggest that the carrying amount
exceeds the recoverable amount, an entity shall measure, present and
disclose any resulting impairment loss in accordance with Ind AS 36.
(c) varies the recognition of impairment from that in Ind AS 36 but
measures the impairment in accordance with that Standard once the
impairment is identified.
An entity shall determine an accounting policy for allocating exploration and
evaluation assets to cash-generating units or groups of cash-generating units
for the purpose of assessing such assets for impairment. Each cash-
generating unit or group of units to which an exploration and evaluation asset
is allocated shall not be larger than an operating segment determined in
accordance with Ind AS 108, Operating Segments.

85
Ind AS: An Overview

One or more of the following facts and circumstances indicate that an entity
should test exploration and evaluation assets for impairment (the list is not
exhaustive):
(a) the period for which the entity has the right to explore in the specific
area has expired during the period or will expire in the near future, and
is not expected to be renewed.
(b) substantive expenditure on further exploration for and evaluation of
mineral resources in the specific area is neither budgeted nor planned.
(c) exploration for and evaluation of mineral resources in the specific area
have not led to the discovery of commercially viable quantities of
mineral resources and the entity has decided to discontinue such
activities in the specific area.
(d) sufficient data exist to indicate that, although a development in the
specific area is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from
successful development or by sale.

An entity shall disclose information that identifies and explains the amounts
recognised in its financial statements arising from the exploration for and
evaluation of mineral resources.

Ind AS 107, Financial Instruments: Disclosures

The objective of the Ind AS 107 is to require entities to provide disclosures in
their financial statements that enable users to evaluate:
(a) the significance of financial instruments for the entity’s financial
position and performance; and
(b) the nature and extent of risks arising from financial instruments to
which the entity is exposed during the period and at the end of the
reporting period, and how the entity manages those risks.
The qualitative disclosures describe management’s objectives, policies and
processes for managing those risks. The quantitative disclosures provide
information about the extent to which the entity is exposed to risk, based on
information provided internally to the entity’s key management personnel.
Together, these disclosures provide an overview of the entity’s use of
financial instruments and the exposures to risks they create.

86
 Summary of Ind AS

The Ind AS applies to all entities, including entities that have few financial
instruments (e.g., a manufacturer whose only financial instruments are
accounts receivable and accounts payable) and those that have many
financial instruments (e.g., a financial institution most of whose assets and
liabilities are financial instruments).
When this Ind AS requires disclosures by class of financial instrument, an
entity shall group financial instruments into classes that are appropriate to
the nature of the information disclosed and that take into account the
characteristics of those financial instruments. An entity shall provide
sufficient information to permit reconciliation to the line items presented in
the statement of financial position.
The principles in this Ind AS complement the principles for recognising,
measuring and presenting financial assets and financial liabilities in Ind AS
32, Financial Instruments: Presentation and Ind AS 109, Financial
Instruments.

Ind AS 108, Operating Segments

An entity shall disclose information to enable users of its financial statements
to evaluate the nature and financial effects of the business activities in which
it engages and the economic environments in which it operates.
The Standard requires an entity to report financial and descriptive
information about its reportable segments. Reportable segments are
operating segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and
in assessing performance. Generally, financial information is required to be
reported on the same basis as is used internally for evaluating operating
segment performance and deciding how to allocate resources to operating
segments.
The Standard requires an entity to report a measure of operating segment
profit or loss and of segment assets. It also requires an entity to report a
measure of segment liabilities and particular income and expense items if
such measures are regularly provided to the chief operating decision maker.
It requires reconciliations of total reportable segment revenues, total profit or
loss, total assets, liabilities and other amounts disclosed for reportable
segments to corresponding amounts in the entity’s financial statements.

87
Ind AS: An Overview

The Standard requires an entity to report information about the revenues

derived from its products or services (or groups of similar products and
services), about the countries in which it earns revenues and holds assets,
and about major customers, regardless of whether that information is used by
management in making operating decisions. However, the Standard does not
require an entity to report information that is not prepared for internal use if
the necessary information is not available and the cost to develop it would be
excessive.
The Standard also requires an entity to give descriptive information about the
way the operating segments were determined, the products and services
provided by the segments, differences between the measurements used in
reporting segment information and those used in the entity’s financial
statements, and changes in the measurement of segment amounts from
period to period.

Ind AS 109, Financial Instruments

The objective of Ind AS 109 is to establish principles for the financial
reporting of financial assets and financial liabilities that will present relevant
and useful information to users of financial statements for their assessment
of the amounts, timing and uncertainty of an entity’s future cash flows.
Scope
This Standard should be applied by all entities to all types of financial
instruments except:
(a) interests in subsidiaries, associates and joint ventures other than
those that are accounted for as per this standard in accordance with
the permission given by Ind AS 110, Ind AS 27 or Ind AS 28
(b) rights and obligations under leases to which Ind AS 17 Leases applies.
However, lease receivables/ lease payables under finance lease are
subject to the derecognition requirements of this Standard
(c) employers’ rights and obligations under employee benefit plans, to
which Ind AS 19, Employee Benefits applies.
(d) financial instruments issued by the entity that meet the definition of an
equity instrument.
(e) rights and obligations arising under (i) an insurance contract or (ii) a
contract that is within the scope of Ind AS 104 contains a discretionary

88
 Summary of Ind AS

participation feature.
(f) any forward contract to buy or sell an acquiree that will result in a
business combination within the scope of Ind AS 103.
(g) loan commitments other than those which entity designates as
financial liabilities at fair value through profit or loss, loan commitments
that can be settled net in cash or by delivering or issuing another
financial instrument and commitments to provide a loan at a below-
market interest rate.
(h) financial instruments, contracts and obligations under share-based
payment transactions to which Ind AS 102, Share-based Payment
applies except contract to buy/sell non-financial assets which are
within the scope of this standard.
(i) rights to payments to reimburse the entity for expenditure that it is
required to make to settle a liability that it recognises as a provision in
accordance with Ind AS 37.
(j) rights and obligations within the scope of Ind AS 11, Construction
Contracts, and Ind AS 18, Revenue, that are financial instruments,
except for those that Ind AS 11 and Ind AS 18 specify are accounted
for in accordance with this Standard.
(k) Contracts to buy or sell a non-financial item which cannot be settled
net in cash or another financial instrument, or by exchanging financial
instruments.
Recognition
An entity shall recognise a financial asset or a financial liability in its balance
sheet when, and only when, the entity becomes party to the contractual
provisions of the instrument.
Derecognition: Financial Assets
A financial asset shall be derecognised when, and only when:
(a) the contractual rights to the cash flows from the financial asset expire,
or
(b) it transfers the financial asset and the transfer qualifies for
derecognition.
On derecognition of a financial asset in its entirety, the difference between

89
Ind AS: An Overview

the carrying amount (measured at the date of derecognition) and the

consideration received (including any new asset obtained less any new
liability assumed) shall be recognised in profit or loss.
In case of partial derecognition of a financial asset, the previous carrying
amount of the whole asset shall be allocated between the part that continues
to be recognised and the part that is derecognised, on the basis of the
relative fair values of those parts on the date of the transfer.
Derecognition: Financial Liabilities
A financial liability (or a part of a financial liability) shall be derecognised
when, and only when, it is extinguished (obligation specified in the contract is
discharged or cancelled or expires).
An entity shall account for a substantial modification of the terms of contracts
as an extinguishment of the original financial liability and the recognition of a
new financial liability. Any difference between the carrying amount of a
financial liability extinguished or transferred and the consideration paid
should be recognised in profit or loss.
Classification: Financial Assets
A financial asset shall be classified and measured at amortised cost, fair
value through other comprehensive income or fair value through profit or loss
on the basis of both:
(a) the entity’s business model for managing the financial assets and
(b) the contractual cash flow characteristics of the financial asset.
A financial asset shall be measured at amortised cost if both of the following
conditions are met:
(a) business model objective is to hold financial assets in order to collect
contractual cash flows and
(b) the contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
A financial asset shall be measured at fair value through other
comprehensive income (FVTOCI) if both of the following conditions are met:
(a) business model objective is achieved by both collecting contractual
cash flows and selling financial assets and

90
 Summary of Ind AS

(b) the contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets other than those measured at FVTOCI and at amortised
cost shall be measured at fair value through profit or loss (FVTPL). However,
an entity may, at initial recognition, irrevocably designate a financial asset as
measured at FVTPL, if doing so eliminates or significantly reduces
‘accounting mismatch’. An entity may also make an irrevocable election at
initial recognition for particular investments in equity instruments that would
otherwise be measured at fair value through profit or loss to present
subsequent changes in fair value in other comprehensive income.
Classification: Financial Liabilities
An entity shall classify all financial liabilities as subsequently measured at
amortised cost, except for:
(a) financial liabilities at fair value through profit or loss.
(b) financial liabilities that arise when a transfer of a financial asset does
not qualify for derecognition or when the continuing involvement
approach applies.
(c) financial guarantee contracts.
(d) commitments to provide a loan at a below-market interest rate.
(e) contingent consideration recognised by an acquirer in a business
combination to which Ind AS 103 applies.
An entity may, at initial recognition, irrevocably designate a financial liabi lity
as measured at fair value through profit or loss.
Embedded derivatives
An embedded derivative is a component of a hybrid contract that also
includes a non-derivative host—with the effect that some of the cash flows of
the combined instrument vary in a way similar to a stand-alone derivative.
Reclassification
When, and only when, an entity changes its business model for managing
financial assets, it shall reclassify all affected financial assets.

91
Ind AS: An Overview

Measurement
At initial recognition, an entity shall measure a financial asset or financial
liability at its fair value plus or minus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transaction costs that
are directly attributable to the acquisition or issue of the financial asset or
financial liability.
After initial recognition, an entity shall measure a financial asset and financial
liabilities in accordance with its classification.
An entity shall recognise a loss allowance for expected credit losses on a
financial asset that is measured at FVTOCI and FV at amortised cost, a lease
receivable, a loan commitment and a financial guarantee contract to which
the impairment requirements of this standard applies.
An entity shall measure expected credit losses of a financial instrument in a
way that reflects an unbiased and probability-weighted amount that is
determined by evaluating a range of possible outcomes; the time value of
money; and reasonable and supportable information that is available without
undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
A gain or loss on a financial asset or financial liability that is measured at fair
value shall be recognised in profit or loss unless it is part of a hedging
relationship or it is an investment in an equity instrument for which option to
present gains and losses in other comprehensive income has been opted or
it is a financial liability designated as at fair value through profit or loss o r it is
a financial asset measured at fair value through other comprehensive
income.
Hedge accounting
The objective of hedge accounting is to represent, in the financial
statements, the effect of an entity’s risk management activities that use
financial instruments to manage exposures arising from particular risks that
could affect profit or loss (or other comprehensive income, in the case of
investments in equity instruments for which an entity has elected to present
changes in fair value in other comprehensive income).
(a) Hedging instruments: A derivative measured at fair value through
profit or loss may be designated as a hedging instrument
A non-derivative financial asset or a non-derivative financial liability

92
 Summary of Ind AS

measured at fair value through profit or loss may be designated as a

hedging instrument unless it is a financial liability designated as at fair
value through profit or loss for which the amount of its change in fair
value that is attributable to changes in the credit risk of that liability is
presented in other comprehensive income.
Only contracts entered into by the entity with party external to the
reporting entity can be designated as hedging instruments.
(b) Hedged items: A hedged item can be a recognised asset or liability,
an unrecognised firm commitment, a forecast transaction or a net
investment in a foreign operation. The hedged item can be a single
item or a group of items. A hedge item should be reliably measurable.
Types of Hedging Relationship-There are three types of hedging
relationships:
(a) fair value hedge: a hedge of the exposure to changes in fair value of
a recognised asset or liability or an unrecognised firm commitment, or
a component of any such item, that is attributable to a particular risk
and could affect profit or loss.
(b) cash flow hedge: a hedge of the exposure to variability in cash flows
that is attributable to a particular risk associated with all, or a
component of, a recognised asset or liability or a highly probable
forecast transaction, and could affect profit or loss.
(c) hedge of a net investment in a foreign operation as defined in Ind
AS 21.
Qualifying criteria for hedge accounting
A hedging relationship qualifies for hedge accounting, only if, all of the
following criteria are met:
(a) the hedging relationship consists only of eligible hedging instruments
and eligible hedged items.
(b) at the inception of the hedging relationship there is formal designation
and documentation of the hedging relationship and the entity’s risk
management objective and strategy for undertaking the hedge.
(c) the hedging relationship meets all of the following hedge effectiveness
requirements:
(i) there is an economic relationship between the hedged item and

93
Ind AS: An Overview

the hedging instrument;

(ii) the effect of credit risk does not dominate the value changes
that result from that economic relationship; and
(iii) the hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the entity
actually hedges and the quantity of the hedging instrument that
the entity actually uses to hedge that quantity of hedged item.
In case a hedging relationship ceases to meet the hedge effectiveness
requirement relating to the hedge ratio but the risk management objective for
that designated hedging relationship remains the same, an entity shall adjust
the hedge ratio of the hedging relationship so that it meets the qualifying
criteria again called as ‘rebalancing’.
An entity shall discontinue hedge accounting prospectively only when the
hedging relationship (or a part of a hedging relationship) ceases to meet the
qualifying criteria (after taking into account any rebalancing of the hedging
relationship, if applicable).
Ind AS 109 prescribes principles for hedge accounting and also requires
detailed disclosures. These disclosures explain both the effect that hedge
accounting has had on the financial statements and an entity’s risk
management strategy, as well as providing details about derivatives that
have been entered into and their effect on the entity’s future cash flows.

Ind AS 110, Consolidated Financial Statements

The objective of Ind AS 110, is to establish principles for the presentation
and preparation of consolidated financial statements when an entity controls
one or more other entities.
Consolidated Financial Statements are the financial statements of a group in
which the assets, liabilities, equity, income, expenses and cash flows of the
parent and its subsidiaries are presented as those of a single economic
entity.
The Standard requires an entity that is a parent to present Consolidated
Financial Statements (CFS). A limited exemption is available to some
entities. The Standard defines the principle of control and establishes control
as the basis for determining which entities are consolidated in the
consolidated financial statements.

94
 Summary of Ind AS

An investor controls an investee when the investor is exposed, or has rights,

to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
An investor controls an investee, if and only if, the investor has all the
following:
(a) Power over an investee - when the investor has existing rights that
give it the current ability to direct the relevant activities, i.e., the
activities that significantly affect the investee’s returns.
(b) Exposure, or rights, to variable returns from its involvement with
the investee - An investor is exposed, or has rights, to variable
returns from its involvement with the investee when the investor’s
returns from its involvement have the potential to vary as a result of
the investee’s performance. The investor’s returns can be only
positive, only negative or both positive and negative.
(c) The ability to use power over the investee to affect the amount of
the investor’s returns - An investor controls an investee if the
investor not only has power over the investee and exposure or rights
to variable returns from its involvement with the investee, but also has
the ability to use its power to affect the investor’s returns from its
involvement with the investee. Thus, an investor with decision-making
rights shall determine whether it is a principal or an agent.
A parent of an investment entity shall consolidate all entities that it controls,
including those controlled through an investment entity subsidiary, unless the
parent itself is an investment entity.
Accounting Requirements
A parent shall prepare consolidated financial statements using uniform
accounting policies for like transactions and other events in similar
circumstances. Intragroup balances and transactions must be eliminated.
Non-controlling interests in subsidiaries shall be presented in the
consolidated statement of financial position within equity, separately from the
equity of the owners of the parent.
Changes in a parent’s ownership interest in a subsidiary that do not result in
the parent losing control of the subsidiary are equity transactions (i .e.,
transactions with owners in their capacity as owners).

95
Ind AS: An Overview

If parent losses control over the subsidiary, the parent shall:

(a) derecognize the assets and liabilities of former subsidiary;
(b) recognizes any investment retained in the subsidiary at its fair value in
accordance with Ind AS 109;
(c) recognizes gain and loss associated with the loss of control.

Ind AS 111, Joint Arrangements

The objective of Ind AS 111 is to establish principles for financial reporting by
entities that have an interest in arrangements that are controlled jointly (i .e.,
joint arrangements). The Standard requires a party to a joint arrangement to
determine the type of joint arrangement in which it is involved by assessing
its rights and obligations arising from the arrangement.
The Standard shall be applied by all entities that are a party to a joint
arrangement. A joint arrangement is an arrangement of which two or more
parties have joint control. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the
relevant activities require the unanimous consent of the parties sharing
control.
A joint arrangement is either a joint operation or a joint venture.
The Standard classifies joint arrangements into two types—joint operations
and joint ventures. The classification of a joint arrangement as a joint
operation or a joint venture depends upon the rights and obligations of the
parties to the arrangement. A joint operation is a joint arrangement whereby
the parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the arrangement. Those
parties are called joint operators. A joint venture is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to
the net assets of the arrangement. Those parties are called joint venturers.
An entity determines the type of joint arrangement in which it is involved by
considering its rights and obligations. An entity assesses its rights and
obligations by considering the structure and legal form of the arrangement,
the contractual terms agreed to by the parties to the arrangement and, when
relevant, other facts and circumstances.
The Standard requires a joint operator to account for the assets, liabilities,
revenues and expenses relating to its interest in a joint operation in

96
 Summary of Ind AS

accordance with the Ind AS applicable to the particular assets, liabilities,

revenues and expenses.
The Standard requires a joint venturer to recognise its interest in a joint
venture as an investment and to account for that investment using the equity
method in accordance with Ind AS 28, Investments in Associates and Joint
Ventures, unless the entity is exempted from applying the equity method as
specified in that standard.

Ind AS 112, Disclosure of Interests in Other

Entities
The objective of Ind AS 112 is to require an entity to disclose information that
enables users of its financial statements to evaluate:
(a) the nature of, and risks associated with, its interests in other entities;
and
(b) the effects of those interests on its financial position, financial
performance and cash flows.
The Standard shall be applied by an entity that has an interest in a
subsidiary, a joint arrangement (i.e., joint operation or joint venture), an
associate or an unconsolidated structured entity.
Significant judgements and assumptions
Ind AS 112 requires that an entity shall disclose information about significant
judgements and assumptions it has made (and changes to those judgements
and assumptions) in determining:
(a) that it has control of another entity;
(b) that it has joint control of an arrangement or significant influence over
another entity; and
(c) the type of joint arrangement (i.e., joint operation or joint venture)
when the arrangement has been structured through a separate
vehicle.
Investment entity status
When a parent determines that it is an investment entity in accordance with
Ind AS 110, the investment entity shall disclose information about significant
judgements and assumptions it has made in determining that it is an

97
Ind AS: An Overview

investment entity. If the investment entity does not have one or more of the
typical characteristics of an investment entity, it shall disclose its reasons for
concluding that it is nevertheless an investment entity.
When an entity becomes, or ceases to be, an investment entity, it shall
disclose the change of investment entity status and the reasons for the
change. In addition, an entity that becomes an investment entity shall
disclose the effect of the change of status on the financial statements for the
period presented, including:
(a) the total fair value, as of the date of change of status, of the
subsidiaries that cease to be consolidated;
(b) the total gain or loss, if any, calculated in accordance with Ind AS 110;
and
(c) the line item(s) in profit or loss in which the gain or loss is recognised
(if not presented separately).
Interest in Subsidiaries
Ind AS 112 requires that an entity should disclose information that enables
users of its consolidated financial statements:-
(a) to understand:
(i) the composition of the group; and
(ii) the interest that non-controlling interests have in the group’s
activities and cash flows; and
(b) to evaluate:
(i) the nature and extent of significant restrictions on its ability to
access or use assets, and settle liabilities, of the group;
(ii) the nature of, and changes in, the risks associated with its
interests in consolidated structured entities;
(iii) the consequences of changes in its ownership interest in a
subsidiary that do not result in a loss of control; and
(iv) the consequences of losing control of a subsidiary during the
reporting period.

98
 Summary of Ind AS

Interest in unconsolidated subsidiaries (investment

entities)
Ind AS 112 requires that an investment entity that, in accordance with Ind AS
110, is required to apply the exception to consolidation and instead account
for its investment in a subsidiary at fair value through profit or loss should
disclose that fact.
For each unconsolidated subsidiary, an investment entity shall disclose:
(a) the subsidiary’s name;
(b) the principal place of business (and country of incorporation if different
from the principal place of business) of the subsidiary; and
(c) the proportion of ownership interest held by the investment entity and,
if different, the proportion of voting rights held.
If an investment entity is the parent of another investment entity, the parent
shall also provide the above disclosures for investments that are controlled
by its investment entity subsidiary.
An investment entity is required to make disclosures regarding the nature
and extent of any significant restrictions on the ability of an unconsolidated
subsidiary to transfer funds to the investment entity in the form of cash
dividends or to repay loans or advances made to the unconsolidated
subsidiary by the investment entity and any current commitments or
intentions to provide financial or other support to an unconsolidated
subsidiary, etc.
Interest in joint arrangements and associates
Ind AS 112 requires that an entity should disclose information that enables
users of its financial statements to evaluate:
(a) the nature, extent and financial effects of its interests in joint
arrangements and associates, including the nature and effects of its
contractual relationship with the other investors with joint control of, or
significant influence over, joint arrangements and associates; and
(b) the nature of, and changes in, the risks associated with its interests in
joint ventures and associates.
Interests in unconsolidated structured entities
Ind AS 112 also requires that an entity should disclose information that

99
Ind AS: An Overview

enables users of its financial statements:

(a) to understand the nature and extent of its interests in unconsolidated
structured entities; and
(b) to evaluate the nature of, and changes in, the risks associated with its
interests in unconsolidated structured entities.

Ind AS 113, Fair Value Measurement

Ind AS 113 applies when another Ind AS requires or permits fair value
measurements or disclosures about fair value measurements (and
measurements, such as fair value less costs to sell, based on fair value or
disclosures about those measurements), except in specified circumstances .
The measurement and disclosure requirements of this Ind AS do not apply to
the following:
(a) share-based payment transactions within the scope of Ind AS 102,
Share- based Payment;
(b) leasing transactions within the scope of Ind AS 17, Leases; and
(c) measurements that have some similarities to fair value but are not fair
value, such as net realisable value in Ind AS 2, Inventories, or value in
use in Ind AS 36, Impairment of Assets.
The disclosures required by this Ind AS are not required for the following:
(a) plan assets measured at fair value in accordance with Ind AS 19,
Employee Benefits; and
(b) assets for which recoverable amount is fair value less costs of
disposal in accordance with Ind AS 36.
Definition of Fair value
The Standard defines fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Asset or liability
A fair value measurement is for a particular asset or liability. Therefore, when
measuring fair value an entity shall take into account the characteristics of
the asset or liability if market participants would take those characteristics
into account when pricing the asset or liability at the measurement date.

100
 Summary of Ind AS

Such characteristics include, the condition and location of the asset; and
restrictions, if any, on the sale or use of the asset.
The transaction
A fair value measurement assumes that the asset or liability is exchanged in
an orderly transaction between market participants to sell the asset or
transfer the liability at the measurement date under current market
conditions. A fair value measurement assumes that the transaction to sell the
asset or transfer the liability takes place either, in the principal market for the
asset or liability or in the absence of a principal market, in the most
advantageous market for the asset or liability.
Market participants
An entity shall measure the fair value of an asset or a liability using the
assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their best economic interest.
The price
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction in the principal (or most
advantageous) market at the measurement date under current market
conditions (i.e., an exit price) regardless of whether that price is directly
observable or estimated using another valuation technique.
Application to non-financial assets
A fair value measurement of a non-financial asset takes into account a
market participant's ability to generate economic benefits by using the asset
in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use. The highest and best use of
a non-financial asset takes into account the use of the asset that is physically
possible, legally permissible and financially feasible.
Application to liabilities and an entity's own equity
instruments
A fair value measurement assumes that a financial or non-financial liability or
an entity's own equity instrument (e.g., equity interests issued as
consideration in a business combination) is transferred to a market
participant at the measurement date. The transfer of a liability or an entity's
own equity instrument assumes the following:

101
Ind AS: An Overview

(a) A liability would remain outstanding and the market participant

transferee would be required to fulfil the obligation. The liability would
not be settled with the counterparty or otherwise extinguished on the
measurement date.
(b) An entity's own equity instrument would remain outstanding and the
market participant transferee would take on the rights and
responsibilities associated with the instrument. The instrument would
not be cancelled or otherwise extinguished on the measurement date.
Liabilities and equity instruments held by other parties as assets
When a quoted price for the transfer of an identical or a similar liability or
entity's own equity instrument is not available and the identical item is held
by another party as an asset, an entity shall measure the fair value of the
liability or equity instrument from the perspective of a market participant that
holds the identical item as an asset at the measurement date.
Liabilities and equity instruments not held by other parties as assets
When a quoted price for the transfer of an identical or a similar liability or
entity's own equity instrument is not available and the identical item is not
held by another party as an asset, an entity shall measure the fair value of
the liability or equity instrument using a valuation technique from the
perspective of a market participant that owes the liability or has issued the
claim on equity.
Valuation techniques
An entity shall use valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair
value, maximising the use of relevant observable inputs and minimising the
use of unobservable inputs. Three widely used valuation techniques are the
market approach, the cost approach and the income approach.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
Disclosure
An entity shall disclose information that helps users of its financial

102
 Summary of Ind AS

statements assess both of the following:

(a) for assets and liabilities that are measured at fair value on a recurring
or non-recurring basis in the balance sheet after initial recognition, the
valuation techniques and inputs used to develop those measurements.
(b) for recurring fair value measurements using significant unobservable
inputs (Level 3), the effect of the measurements on profit or loss or
other comprehensive income for the period.
Ind AS 114, Regulatory Deferral Accounts
The objective of Ind AS 114 is to specify the financial reporting requirements
for regulatory deferral account balances that arise when an entity provides
goods or services to customers at a price or rate that is subject to rate
regulation.
An entity is permitted to apply the requirements of this Standard in its first Ind
AS financial statements, if and only if, it:
(a) conducts rate-regulated activities; and
(b) recognised amounts that qualify as regulatory deferral account
balances in its financial statements in accordance with its previous
GAAP.
An entity shall apply the requirements of the Standard in its financial
statements for subsequent periods, if and only if, in its first Ind AS financial
statements, it recognised regulatory deferral account balances by electing to
apply the requirements of this Standard.
An entity that is within the scope of, and that elects to apply, this Standard
shall apply all of its requirements to all regulatory deferral account balances
that arise from all of the entity’s rate-regulated activities.
An entity that has rate-regulated activities and that is within the scope of, and
elects to apply, this Standard shall apply paragraphs 10 and 12 of Ind AS 8
when developing its accounting policies for the recognition, measurement,
impairment and derecognition of regulatory deferral account balances.
On initial application of this Standard, an entity shall continue to apply
previous GAAP accounting policies for the recognition, measurement,
impairment and derecognition of regulatory deferral account balances,
except for any changes permitted by paragraphs 13–15 of the Standard.
However, the presentation of such amounts shall comply with the

103
Ind AS: An Overview

presentation requirements of this Standard, which may require changes to

the entity’s previous GAAP presentation policies.
An entity shall not change its accounting policies in order to start to
recognise regulatory deferral account balances. An entity may only change
its accounting policies for the recognition, measurement, impairment and
derecognition of regulatory deferral account balances, if the change makes
the financial statements more relevant to the economic decision-making
needs of users and no less reliable, or more reliable and no less relevant to
those needs. An entity shall judge relevance and reliability using the criteria
in paragraph 10 of Ind AS 8.
Any specific exception, exemption or additional requirements related to the
interaction of the Standard with other Standards are contained within the
Standard. In the absence of any such exception, exemption or additional
requirements, other Standards shall apply to regulatory deferral account
balances in the same way as they apply to assets, liabilities, income and
expenses that are recognised in accordance with other Standards.
An entity shall present separate line items in the balance sheet for:
(a) the total of all regulatory deferral account debit balances; and
(b) the total of all regulatory deferral account credit balances.
An entity that elects to apply this Standard shall disclose information that
enables users to assess:
(a) the nature of, and the risks associated with, the rate regulation that
establishes the price(s) that the entity can charge customers for the
goods or services it provides; and
(b) the effects of that rate regulation on its financial position, financial
performance and cash flows.

104
 Major Differences between Ind AS
and IFRS and Reason for the
Differences
This section brings out the differences between the IFRS 4 and the
corresponding Indian Accounting Standards (Ind AS) notified by the Ministry
of Corporate Affairs (MCA), Government of India, as Companies (Indian
Accounting Standards) Rules, 2015 under the Companies Act, 2013.
Section I contains IFRS/IFRIC corresponding to which Ind AS have not been
formulated. Section II contains carve-outs/carve-ins from IFRS in the relevant
Ind AS. Section III contains ‘Other major changes in Indian Accounting
Standards vis-à-vis IFRS not resulting in carve outs’.

Section I. IFRS/IFRIC corresponding to which Ind

AS have not been notified
1. Indian Accounting Standard corresponding to IAS 26, Accounting and
Reporting by Retirement Benefit Plans, is not being notified as this
Standard is not applicable to companies.
2. IFRIC 2, Members’ Shares in Co-operative Entities and Similar
Instruments, is not issued as it is not relevant to the companies and
the Ind AS, notified under the Companies Act, 2013, are applicable to
Companies incorporated under the Act.

4 The term ‘IFRS’ includes not only the International Financial Reporting Standards
(IFRSs) issued by the IASB, it also includes the International Accounting Standards
(IASs), IFRICs and SICs.
105
Ind AS: An Overview

Section II. A. Carve-outs

Carve-outs which are due to differences in application of
accounting principles and practices and economic conditions
prevailing in India.
Ind AS 1, Presentation of Financial Statements
As per IFRS
IAS 1 requires that in case of a loan liability, if any condition of the loan
agreement which was classified as non-current is breached on the reporting
date, such loan liability should be classified as current, even if the breach is
rectified after the balance sheet date.
Carve Out
Ind AS 1 clarifies that 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 entity does not classify the liability as current, if the lender agreed, after
the reporting period and before the approval of the financial statements for
issue, not to demand payment as a consequence of the breach.
Reason
Under Indian banking system, a long-term loan agreement generally contains
a large number of conditions. Some of these conditions are substantive, such
as, recalling the loan in case interest is not paid, and some conditions are
procedural and not substantive, such as, submission of insurance details
where the entity has taken the insurance but not submitted the details to the
lender at the end of the reporting period. Generally, customer-banker
relationships are developed whereby in case of any procedural breach, a
loan is generally not recalled. Also, in many cases, a breach is rectified after
the balance sheet date and before the approval of financial statements.
Carve out has been made as it is felt that if the breach is rectified after the
balance sheet date and before the approval of the financial statements, it
would be appropriate that the users are informed about the true nature of
liabilities being non-current liabilities and not current liabilities.

106
 Major Differences between Ind AS and IFRS and Reason for the Differences

Ind AS 10, Events after the Reporting Period

As per IFRS
Rectification of any breach after the end of the reporting period is a non -
adjusting event.
Carve Out
As a consequence to carve-out ìn Ind AS 1 as stated above, Ind AS 10
provides, in the definition of ‘Events after the reporting period’ that in case of
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, if the lender, before the approval
of the financial statements for issue, agrees to waive the breach, it shall be
considered as an adjusting event.
Ind AS 17, Leases
As per IFRS
IAS 17 requires all leases rentals to be charged to statement of profit and
loss on straight-line basis in case of operating leases unless another
systematic basis is more representative of the time pattern of the user’s
benefit even if the payments to the lessor are not on that basis.
Carve out
A carve-out has been made in Ind AS 17 to provide that lease rentals, in
case of operating leases, shall be charged to the statement of profit and loss
in accordance with the lease agreement unless the payments to the lessor
are structured to increase in line with expected general inflation to
compensate for the lessor’s expected inflationary cost increases. If payments
to the lessor vary because of factors other than general inflation, then this
condition is not met.
Reason
Companies enter into various kinds of lease agreements to get the right to
use an asset of the lessor. Considering the Indian inflationary situation, lease
agreements contain periodic rent escalation. Accordingly, where there is
periodic rent escalation in line with the expected inflation so as to
compensate the lessor for expected inflationary cost increases, the rentals
shall not be straight-lined.

107
Ind AS: An Overview

Ind AS 18, Revenue

As per IFRS
On the basis of principles of the IAS 18, IFRIC 15, Agreement for
Construction of Real Estate, prescribes that construction of real estate
should be treated as sale of goods and revenue should be recognised when
the entity has transferred significant risks and rewards of ownership and
retained neither continuing managerial involvement nor effective control .
Carve out
IFRIC 15 has not been included in Ind AS 18 to scope out such agreements
from Ind AS 18. A separate guidance note on accounting for real estate
developers (for Ind AS compliant entities) has been issued by the ICAI to
address the matter.
Reason
It was observed that requirement will lead to recognition of revenue in the
financial statements by real estate developers based on the completion
method, i.e., only in the last year of the completion of project. It was felt that
in case the revenue for the whole project is recognised in the last year of
completion of project, it will not reflect the true performance of the business
of the real estate developer. Further, it was felt that since Ind AS 11 requires
recognition of revenue of all construction contracts by reference to stage of
completion, it may lead to inappropriate accounting in case of certain real
estate development projects in case this Ind AS is applied for all real estate
development projects. Therefore, it was considered appropriate that rather
than making changes in Ind AS 11 or Ind AS 18, a separate Guidance note
(for Ind AS-compliant entities) be issued by the Institute of Chartered
Accountants of India.
Ind AS 28, Investment in Associates and Joint Ventures
As per IFRS
IAS 28 requires that for the purpose of applying equity method of accounting
in the preparation of investor’s financial statements, uniform accounting
policies should be used. In other words, if the associate’s accounting policies
are different from those of the investor, the investor should change the
financial statements of the associate by using same accounting policies .

108
 Major Differences between Ind AS and IFRS and Reason for the Differences

Carve out
In Ind AS 28, the phrase, ‘unless impracticable to do so’ has been added in
the relevant requirements, i.e., paragraph 35.
Reasons
Certain associates, e.g., regional rural banks (RRBs), being associates of
nationalized banks, are not in a position to use the Ind AS as these may be
too advanced for the RRBs. Accordingly, the above-stated words have been
included to exempt such associates.
Ind AS 32, Financial Instruments: Presentation
As per IFRS
As per accounting treatment prescribed under IAS 32, equity conversion
option in case of foreign currency denominated convertible bonds is
considered a derivative liability which is embedded in the bond. Gains or
losses arising on account of change in fair value of the derivative need to be
recognised in the statement of profit and loss as per IAS 32.
Carve out
In Ind AS 32, an exception has been included to the definition of ‘financial
liability’ in paragraph 11 (b) (ii), whereby conversion option in a convertible
bond denominated in foreign currency to acquire a fixed number of entity’s
own equity instruments is classified as an equity instrument if the exercise
price is fixed in any currency.
Reasons
This treatment as per IAS 32 is not appropriate in instruments, such as,
FCCBs since the number of shares convertible on the exercise of the option
remains fixed and the amount at which the option is to be exercised in terms
of foreign currency is also fixed; merely the difference in the currency should
not affect the nature of derivative, i.e., the option. Further, the fair value of
the option is based on the fair value of the share prices of the company. If
there is decrease in the share price, the fair value of derivative liability would
also decrease which would result in recognition of gain in the statement of
profit and loss. This would bring unintended volatility in the statement of
profit and loss due to volatility in share prices. This will also not give a true
and fair view of the liability as in this situation, when the share prices fall, the
option will not be exercised. However, it has been considered that if such
option is classified as equity, fair value changes would not be required to be

109
Ind AS: An Overview

recognised. Accordingly, the exception has been made in definition of

financial liability in Ind AS 32.
Ind AS 101, First-time Adoption of Indian Accounting
Standards
(i) Definition of previous GAAP under Ind AS 101
As per IFRS
IFRS 1 defines previous GAAP as the basis of accounting that a first -
time adopter used immediately before adopting IFRS.
Carve out
Ind AS 101 defines previous GAAP as the basis of accounting that a
first-time adopter used for its reporting requirement in India
immediately before adopting Ind AS. The changes made it mandatory
for Indian entities to consider the financial statements prepared in
accordance with notified Accounting Standards as was applicable to
them as previous GAAP when it transitions to Ind AS.
Reason
The change makes it mandatory for Indian companies to consider the
financial statements prepared in accordance with Accounting
Standards notified under the Companies (Accounting Standards)
Rules, 2006 as previous GAAP when it transitions to Ind AS as the law
prevailing in India recognises the financial statements prepared in
accordance with the Companies Act.
(ii) Allowing the use of carrying cost of Property, Plant and
Equipment (PPE) on the date of transition of Ind AS 101
As per IFRS
IFRS 1 First time Adoption of International Accounting Standards
provides that on the date of transition either the items of Property,
Plant and Equipment shall be determined by applying IAS 16 Property,
Plant and Equipment retrospectively or the same should be recorded
at fair value.
Carve out
Paragraph D7AA of Ind AS 101 provides an additional option to use
carrying values of all items of property, plant and equipment on the

110
 Major Differences between Ind AS and IFRS and Reason for the Differences

date of transition in accordance with previous GAAP as an acceptable

starting point under Ind AS.
Reason
In case of old companies, retrospective application of Ind AS 16 or fair
values at the date of transition to determine deemed cost may not be
possible for old assets. Accordingly, Ind AS 101 provides relief to an
entity to use carrying values of all items of property, plant and
equipment on the date of transition in accordance with previous GAAP
as an acceptable starting point under Ind AS.
(iii) Long Term Foreign Currency Monetary Items
As per IFRS
No provision in IFRS 1.
Carve out
Paragraph D13AA of Appendix D to Ind AS 101 provides that a first-
time adopter may continue the policy adopted for accounting fo r
exchange differences arising from translation of long-term foreign
currency monetary items recognised in the financial statements for the
period ending immediately before the beginning of the first Ind AS
financial reporting period as per the previous GAAP. Consequently,
Ind AS 21 also provides that it does not apply to long-term foreign
currency monetary items for which an entity has opted for the
exemption given in paragraph D13AA of Appendix D to Ind AS 101.
Such an entity may continue to apply the accounting policy so opted
for such long-term foreign currency monetary items.
Reason
Para 46A of AS 11 provides an option to recognise long term foreign
currency monetary items in the statement of profit and loss as a part of
the cost of property, plant and equipment or to defer its recognition in
the statement of profit and loss over the period of loan in case the loan
is not related to acquisition of fixed assets. To provide transitional
relief, such entities have been given an option to continue the
capitalisation or deferment of exchange differences, as the case may
be, on foreign currency borrowings obtained before the beginning of
first Ind AS reporting period.

111
Ind AS: An Overview

Ind AS 103, Business Combinations

As per IFRS
IFRS 3 requires bargain purchase gain arising on business combination to be
recognised in profit or loss as income.
Carve out
Ind AS 103 requires the bargain purchase gain to be recognised in other
comprehensive income and accumulated in equity as capital reserve, unless
there is no clear evidence for the underlying reason for classification of the
business combination as a bargain purchase, in which case, it shall be
recognised directly in equity as capital reserve. A similar carve-out is made in
Ind AS 28, Investments in Associates and Joint Ventures.
Reasons
At present, since bargain purchase gain occurs at the time of acquiring a
business, these are considered as capital reserve. Recognition of such gains
in profit or loss would result into recognition of unrealised gains, which may
get distributed in the form of dividends. Moreover, such a treatment may lead
to structuring through acquisitions, which may not be in the interest of the
stakeholders of the company.

Section II. B. Carve-in

Ind AS 103, Business Combinations
As per IFRS
IFRS 3 excludes from its scope business combinations of entities under
common control.
Carve-in
Appendix C of Ind AS 103, Business Combinations gives guidance in this
regard.

112
 Major Differences between Ind AS and IFRS and Reason for the Differences

Section III. Other major changes in Indian

Accounting Standards vis-a-vis IFRS not resulting
in carve-outs
Ind AS 1, Presentation of Financial Statements
1. With regard to preparation of statement of profit and loss, IAS 1
provides an option either to follow the single statement approach or to
follow the two statement approach. An entity may present a single
statement of profit or loss and other comprehensive income, with profit
or loss and other comprehensive income presented in two sections or
an entity may present the profit or loss section in a separate statement
of profit or loss which shall immediately precede the statement
presenting comprehensive income, which shall begin with profit or
loss.
Ind AS 1 allows only the single statement approach with profit or loss
and other comprehensive income presented in two sections.
2. IAS 1 gives the option to individual entities to follow different
terminology for the titles of financial statements. Ind AS 1 is changed
to remove alternatives by giving one terminology to be used by all
entities.
3. IAS 1 permits the periodicity, for example, of 52 weeks for preparation
of financial statements. Ind AS 1 does not permit it.
4. IAS 1 requires an entity to present an analysis of expenses recognised
in profit or loss using a classification based on either their nature or
their function within the equity. Ind AS 1 requires only nature-wise
classification of expenses.
5. Paragraphs 29 of IAS 1 requires that items of dissimilar nature or
function shall be presented separately unless these are immaterial and
paragraph 31 provides that specific disclosure required by IFRS need
not be provided if the information is not material. In Ind AS 1, such
paragraphs have been modified to include words ‘except when
required by law’.
6. Paragraph 106(d)(iv) of Ind AS 1 dealing with disclosures regarding
reconciliation between the carrying amount at the beginning and the
end of the period for each component of equity, has been amended to

113
 Ind AS: An Overview

include disclosure regarding recognition of bargain purchase gain

arising on business combination in line with treatment prescribed in
this regard in Ind AS 103.
Ind AS 2, Inventories
Paragraph 38 of IAS 2 dealing with recognition of inventories as an expense
based on function-wise classification, has been deleted keeping in view the
fact that option provided in IAS 1 to present an analysis of expenses
recognised in profit or loss using a classification based on their function
within the entity has been removed and Ind AS 1 requires only nature -wise
classification of expenses.
Ind AS 7, Statement of Cash Flows
1. In case of other than financial entities, IAS 7 gives an option to classify
the interest paid and interest and dividends received as item of
operating cash flows. Ind AS 7 does not provide such an option and
requires these items to be classified as items of financing activity and
investing activity, respectively.
2. IAS 7 gives an option to classify the dividend paid as an item of
operating activity. However, Ind AS 7 requires it to be classified as a
part of financing activity only.
Ind AS 8, Accounting Policies, Changes in Accounting
Estimates and Errors
Paragraph 9 of IAS 8 provides that IFRS are accompanied by guidance to
assist entities in applying their requirements. Guidance that is an integral part
of IFRS is mandatory. Guidance that is not an integral part of IFRS does not
contain requirements for financial statements. In Ind AS 8, paragraph 9 has
been modified by not including the text given in the context of the guidance
forming non-integral part of the Ind AS as such guidance has not been given
in the Ind AS.
Ind AS 12, Income Taxes
1. IAS 12 requires presentation of tax expense (income) in the separate
income statement, where separate income statement is presented. Ind
AS 12 does not require such presentation since in Ind AS 1 option
regarding the two statement approach has been removed.
2. Since fair value model is not allowed in Ind AS 40, paragraph 20 of Ind

114
 Major Differences between Ind AS and IFRS and Reason for the Differences

AS 12 has been modified by not giving reference of Ind AS 40 and

consequently paragraphs 51C-51D have been deleted.
3. IAS 12 provides that acquired deferred tax benefits recognised within
the measurement period that results from new information about facts
and circumstances existed at the acquisition date shall be applied to
reduce the carrying amount of goodwill related to that acquisition. If
the carrying amount of that goodwill is zero, any remaining deferred
tax benefits shall be recognised in profit and loss. As a consequence
of different accounting treatment of bargain purchase gain prescribed
in Ind AS 103, in comparison to IFRS 3, Ind AS 12 provides that if the
carrying amount of such goodwill is zero, any remaining deferred tax
benefits shall be recognised in other comprehensive income and
accumulated in equity as capital reserve or recognised directly in
capital reserve.
4. As against IAS 12, Ind AS 12 does not allow the option of deducting
specified grant from the cost of the related asset as this option is not
permitted in Ind AS 20, Accounting for Government Grants and
Disclosure of Government Assistance.
Ind AS 16, Property, Plant and Equipment
1. Paragraph 28 has been shown as deleted since Ind AS 20 Accounting
for Government Grants and Disclosure of Government Assistance
does not permit the option of reducing the carrying amount of an item
of property, plant and equipment by the amount of government grant
received in respect of such an item, as permitted in IAS 20.
2. Paragraph 5 of Ind AS 16 has been modified, since Ind AS 40,
Investment Property, prohibits the use of fair value model.
3. Paragraph 12 of Appendix B has been modified by giving example of
types of costs that would be included as directly attributable overhead
costs of the stripping activity asset. Paragraph 13A has been added in
Appendix B to provide guidance on allocation basis.
Ind AS 17, Leases
IAS 17 provides that separate measurement of land and buildings elements
is not required when the lessee’s interest in both land and buildings is
classified as an investment property in accordance with Ind AS 40,
Investment Property and fair value model is adopted. IAS 17 also permits
property interest held under an operating lease as an investment property, if

115
Ind AS: An Overview

the definition of investment property is otherwise met and fair value model is
applied. Since Ind AS 40 Investment Property prohibits the use of fair value
model, these provisions of IAS 17 have not been included in Ind AS 17.
Ind AS 18, Revenue

1. On the basis of principles of the IAS 18, IFRIC 15 on Agreement for

Construction of Real Estate prescribes that construction of real estate
should be treated as sale of goods and revenue should be recognised
when the entity has transferred significant risks and rewards of ownership
and retained neither continuing managerial involvement nor effective
control. IFRIC 15 has not been included in Ind AS 18. Instead, the
Guidance Note on Real estate Transactions issued by the Institute of
Chartered Accountants of India shall be followed (as per footnote in Ind
AS 18).
2. Recognition and measurement of interest and dividend is covered in IAS
18. Whereas recognition and measurement of dividend is covered under
Ind AS 109 as against Ind AS 18. Similarly, recognition of interest is
covered under Ind AS 18 and measurement is covered under Ind AS 109.
3. Impairment of any contractual right to receive cash or another financial
asset is covered under IAS 18 whereas the same is dealt within Ind AS
109. (by virtue of paragraph 1B)

Ind AS 19, Employee Benefits

1. According to Ind AS 19, the rate to be used to discount post-
employment benefit obligations (both funded and unfunded) shall be
determined by reference to the market yields on government bonds.
whereas under IAS 19, the government bonds can be used only where
there is no deep market of high quality corporate bonds. However,
requirements given in IAS 19 in this regard have been retained with
appropriate modifications for currencies other than Indian rupee.
2. To illustrate treatment of gratuity subject to ceiling under Indian
Gratuity Rules, an example has been added in Ind AS 19.
3. In Appendix B of Ind AS 19, paragraph of IFRIC 14 dealing with
reason for amending IFRIC 14 has not been included.

116
 Major Differences between Ind AS and IFRS and Reason for the Differences

Ind AS 20, Accounting for Government Grants and

Disclosure of Government Assistance
1. IAS 20 gives an option to measure non-monetary government grants
either at their fair value or at nominal value. Ind AS 20 requires
measurement of such grants only at their fair value. Thus, the option to
measure these grants at nominal value is not available under Ind AS
20.
2. IAS 20 gives an option to present the grants related to assets,
including non-monetary grants at fair value in the balance sheet either
by setting up the grant as deferred income or by deducting the grant in
arriving at the carrying amount of the asset. Ind AS 20 requires
presentation of such grants in balance sheet only by setting up the
grant as deferred income. Thus, the option to present such grants by
deduction of the grant in arriving at the carrying amount of the asset is
not available under Ind AS 20.
3. IAS 20 requires presentation of grants related to income in the
separate income statement. This requirement is not provided in Ind AS
20 consequential to the removal of option regarding two statement
approach in Ind AS 1. Ind AS 1 requires that the components of profit
or loss and components of other comprehensive income shall be
presented as a part of the statement of profit and loss.
Ind AS 21, The Effects of Changes in Foreign Exchange
Rates
When there is a change in functional currency, IAS 21 requires disclosure of
that fact and the reason for the change in functional currency. Ind AS 21
requires an additional disclosure of the date of change in functional currency.
Ind AS 23, Borrowing Costs
IAS 23 provides no guidance as to how the adjustment prescribed in
paragraph 6(e) is to be determined. Ind AS 23 provides guidance in this
regard.
Ind AS 24, Related Party Disclosures
1. In Ind AS 24, disclosures which conflict with confidentiality
requirements of statute/regulations are not required to be made since
Accounting Standards cannot override legal/regulatory requirements.

117
Ind AS: An Overview

2. Paragraph 24A (reproduced below) has been included in the Ind AS

24. It provides additional clarificatory guidance regarding aggregation
of transactions for disclosure.
“24A Disclosure of details of particular transactions with
individual related parties would frequently be too voluminous to be
easily understood. Accordingly, items of a similar nature may be
disclosed in aggregate by type of related party. However, this is not
done in such a way as to obscure the importance of significant
transactions. Hence, purchases or sales of goods are not aggregated
with purchases or sales of fixed assets. Nor a material related party
transaction with an individual party is clubbed in an aggregated
disclosure.”
3. Paragraph 14 of Ind AS 24 has been modified to explain the rationale
for disclosing related party relationship when control exists.
4. In Ind AS 24, ‘(k) management contracts including for deputation or
employees’ has been added in the example of transactions that are
disclosed if they are with related party.
5. ‘Definition of close members of the family of a person’ has been
amended to include brother, sister, father and mother in the category
of family members who may be expected to influence, or be
influenced.
Ind AS 27, Separate Financial Statements
1. IAS 27 requires to disclose the reason for preparing separate financial
statements if not required by law. In India, since the Companies Act
mandates preparation of separate financial statements, such
requirement has been removed in Ind AS 27.
2. IAS 27 allows the entities to use the equity method to account for
investment in subsidiaries, joint ventures and associates in their
Separate Financial Statements (SFS). This option is not given in Ind
AS 27, as the equity method is not a measurement basis like cost and
fair value but is a manner of consolidation and therefore would lead to
inconsistent accounting conceptually.
Ind AS 29, Financial Reporting in Hyperinflationary
Economies
Ind AS 29 requires an additional disclosure regarding the duration of the

118
 Major Differences between Ind AS and IFRS and Reason for the Differences

hyperinflationary situation existing in the economy as compared to IAS 29.

Ind AS 32, Financial Instruments: Presentation
IAS 32 requires presentation of dividends classified as an expense in the
separate income statement, where separate income statement is presented.
This requirement is not provided in Ind AS 32 consequential to the removal of
option regarding two statement approach in Ind AS 1. Ind AS 1 requires that
the components of profit or loss and components of other comprehensive
income shall be presented as a part of the statement of profit and loss.
Ind AS 33, Earnings per Share
1. IAS 33 provides that when an entity presents both consolidated
financial statements and separate financial statements, it may give
EPS related information in consolidated financial statements only,
whereas, Ind AS 33 requires EPS related information to be disclosed
both in consolidated financial statements and separate financial
statements.
2. Paragraph 2 of IAS 33 requires that the entire standard applies to:
(a) the separate or individual financial statements of an entity:
(i) whose ordinary shares or potential ordinary shares are
traded in a public market (a domestic or foreign stock
exchange or an over-the-counter market, including local
and regional markets) or
(ii) that files, or is in the process of filing, its financial
statements with a Securities Regulator or other regulatory
organisation for the purpose of issuing ordinary shares in
a public market; and
(b) the consolidated financial statements of a group with a parent:
(i) whose ordinary shares or potential ordinary shares are
traded in a public market (a domestic or foreign stock
exchange or an over-the-counter market, including local
and regional markets) or
(ii) that files, or is in the process of filing, its financial
statements with a Securities Regulator or other regulatory
organisation for the purpose of issuing ordinary shares in
a public market.

119
Ind AS: An Overview

It also requires that an entity that discloses earnings per share shall
calculate and disclose earnings per share in accordance with this
Standard.
The above requirements have been deleted in the Ind AS as the
applicability or exemptions to the Ind AS are governed by the
Companies Act and the Rules made there under.
3. Paragraph 4 has been modified in Ind AS 33 to clarify that an entity
shall not present in separate financial statements, earnings per share
based on the information given in consolidated financial statements,
besides requiring as in IAS 33, that earnings per share based on the
information given in separate financial statements shall not be
presented in the consolidated financial statements.
4. In Ind AS 33, a paragraph has been added after paragraph 12 on the
following lines -
“Where any item of income or expense which is otherwise required to
be recognised in profit or loss in accordance with Indian Accounting
Standards is debited or credited to securities premium account/other
reserves, the amount in respect thereof shall be deducted from profit
or loss from continuing operations for the purpose of calculating basic
earnings per share.”
5. In Ind AS 33 paragraph 15 has been amended by adding the phrase,
‘irrespective of whether such discount or premium is debited or
credited to securities premium account’ to further clarify that such
discount or premium shall also be amortised to retained earnings.
6. IAS 33 requires disclosure of amounts of per share using a reported
component, basic and diluted earnings per share and basic and diluted
earnings per share for discontinued operations in the separate income
statement, where separate income statement is presented. This
requirement is not provided in Ind AS 33 consequential to the removal
of option regarding two statement approach in Ind AS 1. Ind AS 1
requires that the components of profit or loss and components of other
comprehensive income shall be presented as a part of the statement
of profit and loss.
Ind AS 34, Interim Financial Reporting
1. A footnote has been added to paragraph 1 of Ind AS 34, Interim
Financial Reporting that Unaudited Financial Results required to be

120
 Major Differences between Ind AS and IFRS and Reason for the Differences

prepared and presented under Clause 41 of Listing Agreement with

stock exchanges is not an ‘Interim Financial Report’ as defined in
paragraph 4 of this Standard.
2. IAS 34 provides option either to follow single statement approach or to
follow two statement approaches. Ind AS 34 allows only single
statement approach on the lines of Ind AS 1, Presentation of Financial
Statements, which also allows only single statement approach.
Ind AS 36, Impairment of Assets
Paragraph 2(f) of IAS 36 provides that this standard is not applied to the
accounting for impairment of investment property that is measured at fair
value. Paragraph 2(f) is deleted in Ind AS 36 as Ind AS 40 requires cost
model for measurement of investment property.
Ind AS 38, Intangible Assets
With regard to the acquisition of an intangible asset by way of a government
grant, IAS 38, Intangible Assets, provides the option to an entity to recognise
both asset and grant initially at fair value or at a nominal amount plus any
expenditure that is directly attributable to preparing the asset for its intended
use. Ind AS 38 allows only fair value for recognising the intangible asset and
grant in accordance with Ind AS 20.
Ind AS 40, Investment Property
1. IAS 40 permits both cost model and fair value model (except in some
situations) for measurement of investment properties after initial
recognition. Ind AS 40 permits only the cost model. Fair value model is
not permitted because the unrealised gain and losses would have
been required to be recognised in the statement of profit and loss. The
fair value of investment property in India is not reliable and also using
fair value model may lead to recognition and distribution of unrealised
gains.
2. IAS 40 permits treatment of property interest held in an operating
lease as investment property, if the definition of investment property is
otherwise met and fair value model is applied. In such cases, the
operating lease would be accounted as if it were a finance lease.
Since Ind AS 40 prohibits the use of fair value model, this treatment is
prohibited in Ind AS 40. Also the expression ‘investment property
under a finance or operating lease’ appearing in IAS 40 has been
modified as ‘investment property under finance lease’ in Ind AS 40.

121
Ind AS: An Overview

Ind AS 101, First-time Adoption of Indian Accounting

Standards
1. Paragraph 3 of Ind AS 101 specifies that an entity’s first Ind AS
financial statements are the first annual financial statements in which
the entity adopts Ind AS in accordance with Ind AS notified under the
Companies Act, 2013 whereas IFRS 1 provides various examples of
first IFRS financial statements.
2. IFRS 1 provide various examples of instances when an entity does not
apply this IFRS. Ind AS 101 does not provide the same.
3. IFRS 1 requires the first-time adopter shall exclude from its opening
Ind AS Balance Sheet any item recognised in accordance with
previous GAAP that does not qualify for recognition as an asset or
liability under IFRS. The first-time adopter shall account for the
resulting change in the retained earnings as at the transition date
except in certain specific instances where it requires adjustment in the
goodwill. In such specific instances where IFRS 1 allows adjustment in
the goodwill, under Ind AS 101 it can be adjusted with the Capital
Reserve to the extent such adjustment amount does not exceed the
balance available in Capital Reserve.
4. IFRS 1 provides for various optional exemptions that an entity can
seek while an entity transitions to IFRS from its previous GAAP.
Similar provisions have been retained under Ind AS 101. However,
there are few changes that have been made, which can be broadly
categorized as follows:
(a) Elimination of effective dates prior to transition date to Ind AS.
IFRS 1 provides for various dates from which a standard could
have been implemented. For example,
Paragraph D2 of IFRS 1 provides that an entity is encouraged,
but not required, to apply IFRS 2, Share-based Payment to
equity instruments that were granted on or before 7 November
2002 or to instruments that were granted after 7 November 2002
and vested before the later of (a) the date of transition to IFRS
and (b) 1 January 2005. However, for Ind AS 101 purposes, all
these dates have been changed to coincide with the transition
date elected by the entity adopting these converged standards
i.e. Ind AS.

122
 Major Differences between Ind AS and IFRS and Reason for the Differences

(b) Deletion of borrowing cost exemptions not relevant for India:

Paragraph D23 of IFRS 1 provides for transitional adjustment
requiring companies to apply the provisions of IAS 23
prospectively after the transition date to IFRS. IAS 23 provided
an option to expense out such borrowing cost. However, this
paragraph has not been included in Appendix D of Ind AS 101
since this was considered as not relevant in Indian situation as
Accounting Standard 16 always required an entity to capitalize
borrowing costs.
5. Appendix E of IFRS 1 provides for ‘Short-term exemptions from IFRS’,
however Ind AS 101 does not provide the above said short-term
exemption.
6. The consequential amendments of Ind AS 109, Financial Instruments
which have been early adopted in India have been incorporated in all
the Ind AS including Ind AS 101. Further, the transitional provisions of
Ind AS 109 have also been appropriately incorporated in Ind AS 101.
7. Paragraph D9AA of Ind AS 101 provides that when a lease includes
both land and building elements, a first time adopter may assess the
classification of each element as finance or an operating lease at the
transition date to Ind AS on the basis of the facts and circumstances
existing as at that date. If there is any land lease newly classified as
finance lease then the first time adopter may recognise assets and
liability at fair value on that date; any difference between those fair
values is recognised in retained earnings.
8. Paragraph D7(a) of IFRS 1 provides that option to take fair value at
the date of transition to Ind AS or previous GAAP revalued amount
may be exercised by a first item adopter for investment property.
However, this option has not been provided under Ind AS 101, as Ind
AS 40 permits only the cost model.
Ind AS 105 Non-current Assets Held for Sale and
Discontinued Operations
1. IFRS 5 prescribes the conditions for classification of a non-current
asset (or disposal group) as held for sale. In Ind AS 105, a clarification
has also been added that the non-current asset (or disposal group)
cannot be classified as held for sale, if the entity intends to sell it in a
distant future.

123
Ind AS: An Overview

2. IFRS 105 deals with non-current assets that are accounted for in
accordance with the fair value model in IAS 40. Since Ind AS 40
prohibits the use of fair value model, this has not been included in Ind
AS 105.
3. IFRS 5 requires presentation of discontinued operations in the
separate income statement, where separate income statement is
presented. This requirement is not provided in Ind AS 105
consequential to the removal of option regarding two statement
approach in Ind AS 1. Ind AS 1 requires that the components of profit
or loss and components of other comprehensive income shall be
presented as a part of the statement of profit and loss.
4. Ind AS 101 provides transitional relief, similar to the transitional
provisions in IFRS 5, that while applying Ind AS 105, an entity may use
the transitional date circumstances to measure such assets or
operations at the lower of carrying value and fair value less cost to
sell. This would facilitate smooth convergence with Ind AS.
Ind AS 107, Financial Instruments: Disclosures
IFRS 7 requires disclosure of description of gains and losses presented in
the separate income statement, where separate income statement is
presented. This requirement is not provided in Ind AS 107 consequential to
the removal of option regarding two statement approach in Ind AS 1 as
compared to IAS 1. Ind AS 1 requires that the components of profit or loss
and components of other comprehensive income shall be presented as a part
of the statement of profit and loss.
Ind AS 108, Operating Segments
1. Paragraph 2 of IFRS 8 requires that the standard shall apply to :
a) the separate or individual financial statements of an entity:
(i) whose debt or equity instruments are traded in a public
market (a domestic or foreign stock exchange or an over-
the-counter market, including local and regional markets),
or
(ii) that files, or is in the process of filing, its financial
statements with a securities commission or other
regulatory organisation for the purpose of issuing any
class of instruments in a public market; and

124
 Major Differences between Ind AS and IFRS and Reason for the Differences

b) the consolidated financial statements of a group with a parent:

(i) whose debt or equity instruments are traded in a public
market (a domestic or foreign stock exchange or an over-
the-counter market, including local and regional markets),
or
(ii) that files, or is in the process of filing, the consolidated
financial statements with a securities commission or other
regulatory organisation for the purpose of issuing any
class of instruments in a public market.
The above have been deleted in the Ind AS 108 as the applicability or
exemptions to the Indian Accounting Standards are governed by the
Companies Act and the Rules made thereunder.
Ind AS 109, Financial Instruments
IFRS 9 provides an option to apply requirements of IAS 39, Financial
Instruments: Recognition and Measurement for fair value hedge of the
interest rate exposure of a portfolio of financial assets or financial liabilities.
The said option has been removed in Ind AS 109.
Ind AS 110, Consolidated Financial Statements
IFRS 10 requires all investments to be measured at fair value to qualify for
the exemption from consolidation available to an investment entity. Ind AS
40, Investment Property requires all investment properties to be measured at
cost initially and cost less depreciation subsequently. Accordingly, the
relevant paragraph of IFRS 10 has been deleted in Ind AS 110 as investment
property measured at fair value is not relevant in the Indian context.
Ind AS 111, Joint Arrangements
Paragraph B33D refers to the accounting specified in Appendix C ‘Business
Combinations under Common Control’ of Ind AS 103 for the acquisition of an
interest in a joint operation when the parties sharing joint control, including
the entity acquiring the interest in the joint operation, are under the common
control of the same ultimate controlling party or parties both before and after
the acquisition, and that control is not transitory. IFRS 11 scopes out the
same as IFRS 3, Business Combinations, does not deal with business
combinations under common control.

125
Ind AS: An Overview

Ind AS 113, Fair Value Measurement

Paragraph 7(b) of IFRS 13 refers to IAS 26, Accounting and Reporting by
Retirement Benefit Plans, which is not relevant for the companies. Hence,
the paragraph is deleted in Ind AS 113.
Ind AS 114, Regulatory Deferral Accounts
1. Appendix A ‘Defined terms’ of Ind AS 114 have been modified to
clarify that Guidance Note of Accounting for Rate Regulated Activities
would be considered as the previous GAAP for the purpose of Ind AS
114.
2. Under paragraph 6 of Ind AS 114, a footnote has been added to clarify
the application of requirements of previous GAAP in the case of an
entity subject to rate regulation coming into existence after Ind AS
coming into force or an entity whose activities become subject to rate
regulation as defined in this Ind AS subsequent to preparation and
presentation of its first Ind AS financial statements.

Terminology Changes in Ind AS

Different terminology is used, as used in existing laws e.g.,, the term
‘balance sheet’ is used instead of ‘Statement of financial position’, ‘Statement
of profit and loss’ is used instead of ‘Statement of comprehensive income’.
The words ‘approved the financial statements for issue’ have been used
instead of ‘authorised the financial statements for issue’ in the context of
financial statements considered for the purpose of events after the reporting
period.
Notes:
1. Differences between Indian Accounting Standards (Ind AS) and
corresponding IFRS are given in Appendix 1 at the end of each
Indian Accounting Standard.
2. Apart from the changes in IFRS as a result of carve-outs and
other changes as described in above section III, some other
changes consequential thereto have also been made in Ind AS,
wherever required.

126
 Major Differences between Ind AS
and AS notified under Companies
(Accounting Standards) Rules, 2006
read with Companies (Accounting
Standards) Amendment Rules, 2016

Ind AS 1, Presentation of Financial Statements,

and AS 1, Disclosure of Accounting Policies
Ind AS 1 deals with presentation of financial statements, whereas AS 1 deals
only with the disclosure of accounting policies. The scope of Ind AS 1 is thus
much wider and line by line comparison of the differences with AS 1 is not
possible. However, the major requirements as laid down in Ind AS 1 are as
follows:
(i) An enterprise shall make an explicit statement in the financial
statements of compliance with all the Indian Accounting Standards.
Further, Ind AS 1 allows deviation from a requirement of an accounting
standard in case the management concludes that compliance with Ind
AS will be misleading and if the regulatory framework requires or does
not prohibit such a departure.
(ii) Ind AS 1 requires presentation and provides criteria for classification
of Current / Non- Current assets / liabilities.
(iii) Ind AS 1 prohibits presentation of any item as ‘Extraordinary Item’ in
the statement of profit and loss or in the notes.
(iv) Ind AS 1 requires disclosure of judgments made by management while
framing of accounting policies. Also, it requires disclosure of key
assumptions about the future and other sources of measurement
uncertainty that have significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within next financial
year.
(v) Ind AS 1 requires classification of expenses to be presented based on
nature of expenses.
127
Ind AS: An Overview

(vi) Ind AS 1 requires presentation of balance sheet as at the beginning of

the earliest period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in the
financial statements, or when it reclassifies items in its financial
statements.
(vii) In respect of reclassification of items, Ind AS 1 requires disclosure of
nature, amount and reason for reclassification in the notes to financial
statements.
(viii) Ind AS 1 requires the financial statements to include a ‘Statement of
Changes in Equity’ to be shown as a separate statement, which, inter
alia, includes reconciliation between opening and closing balance for
each component of equity.
(ix) Ind AS 1 requires that an entity shall present a single statement of
profit and loss, with profit or loss and other comprehensive income
presented in two sections. The sections shall be presented together,
with the profit or loss section presented first followed directly by the
other comprehensive income section.
(x) As per Ind AS 1, an entity shall include certain comparative
information for understanding the current period’s financial statements.
(xi) Ind AS 1 clarifies that long-term loan arrangement need not be
classified as current on account of breach of a material provision, for
which the lender has agreed to waive before the approval of financial
statements for issue. (Paragraph 74 of Ind AS 1)

Ind AS 2, Inventories and AS 2, Valuation of

Inventories
(i) Ind AS 2 deals with the subsequent recognition of cost/carrying
amount of inventories as an expense, whereas AS 2 does not provide
the same. (Paragraphs 1 and 34 of Ind AS 2)
(ii) Ind AS 2 provides explanation with regard to inventories of service
providers whereas AS 2 does not contain such an explanation.
(Paragraphs 8, 19 and 29 of Ind AS 2)
(iii) AS 2 explains that inventories do not include spare parts, servicing
equipment and standby equipment which meet the definition of

128
 Major Differences between Ind AS and AS

property, plant and equipment as per AS 10, Property, Plant and

Equipment. Such items are accounted for in accordance with
Accounting Standard (AS) 10, Property, Plant and Equipment. Ind AS
2 does not contain specific explanation in respect of such spares as
this aspect is covered under Ind AS 16.
(iv) Ind AS 2 does not apply to measurement of inventories held by
commodity broker-traders, who measure their inventories at fair value
less costs to sell. However, this aspect is not there in AS 2.
Accordingly, Ind AS 2 defines fair value and provides an explanation in
respect of distinction between ‘net realisable value’ and ‘fair value’. AS
2 does not contain the definition of fair value and such explanation.
(v) Ind AS 2 provides detailed guidance in case of subsequent
assessment of net realisable value (refer paragraph 33 of Ind AS 2). It
also deals with the reversal of the write-down of inventories to net
realisable value to the extent of the amount of original write-down, and
the recognition and disclosure thereof in the financial statements. AS 2
does not deal with such reversal.
(vi) Ind AS 2 excludes from its scope only the measurement of inventories
held by producers of agricultural and forest products, agricultural
produce after harvest, and minerals and mineral products though it
provides guidance on measurement of such inventories (refer
paragraphs 4 and 20 of Ind AS 2). However, AS 2 excludes from its
scope such types of inventories.
(vii) AS 2 specifically provides that the formula used in determining the
cost of an item of inventory should reflect the fairest possible
approximation to the cost incurred in bringing the items of inventory to
their present location and condition whereas Ind AS 2 does not
specifically state so and requires the use of consistent cost formulas
for all inventories having a similar nature and use to the entity . (
Paragraphs 25 and 26 of Ind AS 2)
(viii) Ind AS 2 requires more disclosures as compared to AS 2. (Paragraph
36 of the Ind AS 2)

129
Ind AS: An Overview

Ind AS 7, Statement of Cash Flows and AS 3,

Cash Flow Statements
(i) Ind AS 7 specifically includes bank overdrafts which are repayable on
demand as a part of cash and cash equivalents, whereas AS 3 is
silent on this aspect. (Paragraph 8 of Ind AS 7).
(ii) Ind AS 7 provides the treatment of cash payments to manufacture or
acquire assets held for rental to others and subsequently held for sale
in the ordinary course of business as cash flows from operating
activities. Further, treatment of cash receipts from rent and
subsequent sale of such assets as cash flow from operating activity is
also provided (refer paragraph 14 of Ind AS 7). AS 3 does not contain
such requirements.
(iii) Ind AS 7 includes the following new examples of cash flows arising
from financing activities (refer paragraph 17 of Ind AS 7):
(a) cash payments to owners to acquire or redeem the entity’s
shares;
(b) cash proceeds from mortgages;
(c) cash payments by a lessee for the reduction of the outstanding
liability relating to a finance lease.
(iv) As compared to AS 3, Ind AS 7 specifically requires adjustment of the
profit or loss for the effects of ‘undistributed profits of associates and
non-controlling interests’ while determining the net cash flow from
operating activities using the indirect method. (Paragraph 20(b) of the
Ind AS 7)
(v) AS 3 requires cash flows associated with extraordinary activities to be
separately classified as arising from operating, investing and financing
activities, whereas Ind AS 7 does not contain this requirement.
(vi) As compared to AS 3, Ind AS 7 requires an entity (except an
investment entity) to disclose the amount of cash and cash equivalents
and other assets and liabilities in the subsidiaries or other businesses
over which control is obtained or lost (refer paragraph 40(c) and (d) of
Ind AS 7). Ind AS 7 also requires to report the aggregate amount of
the cash paid or received as consideration for obtaining or losing
control of subsidiaries or other businesses in the statement of cash
flows, net of cash and cash equivalents acquired or disposed of as a

130
 Major Differences between Ind AS and AS

part of such transactions, events or changes in circumstances (refer

paragraph 42 of Ind AS 7). AS 3 does not contain such requirements.
(vii) Ind AS 7 requires to classify cash flows arising from changes in
ownership interests in a subsidiary that do not result in a loss of
control as cash flows from financing activities (refer paragraphs 42A
and 42B of Ind AS 7). AS 3 does not contain such a requirement.
(viii) Ind AS 7 mentions the use of equity or cost method while accounting
for an investment in an associate, joint venture or a subsidiary (refer
paragraph 37 of Ind AS 7). It also specifically deals with the reporting
of interest in an associate or a joint venture using equity method (refer
paragraph 38 of Ind AS 7). AS 3 does not contain such requirements.
(ix) Ind AS 7 uses the term ‘functional currency’ instead of ‘reporting
currency’ (as used in AS 3). Ind AS 7 also deals with translation of
cash flows of a foreign subsidiary (refer paragraphs 25 to 27 of Ind AS
7) whereas in AS 3, it is not dealt with.
(x) Ind AS 7 requires disclosure of changes in liabilities arising from
financing activities. AS 3 does not contain such requirement.
(xi) Ind AS 7 requires more disclosures as compared to AS 3. (Paragraph
50 of the Ind AS 7)

Ind AS 8, Accounting Policies, Changes in

Accounting Estimates and Errors and AS 5, Net
Profit or Loss for the Period, Prior Period Items
and Changes in Accounting Policies
(i) Objective of AS 5 is to prescribe the classification and disclosure of
certain items in the statement of profit and loss for uniform preparation
and presentation of financial statements. Objective of Ind AS 8 is to
prescribe the criteria for selecting and changing accounting policies,
together with the accounting treatment and disclosure of changes in
accounting policies, changes in accounting estimates and corrections
of errors. Ind AS 8 intends to enhance the relevance and reliability of
an entity’s financial statements and the comparability of those financial
statements over time and with the financial statements of other
entities.
(ii) Keeping in view that Ind AS 1, Presentation of Financial Statements,

131
Ind AS: An Overview

prohibits the presentation of any items of income or expense as

extraordinary items, Ind AS 8 does not deal with the same.
(iii) AS 5 restricts the definition of accounting policies to specific
accounting principles and the methods of applying those principles
while Ind AS 8 broadens the definition to include bases, conventions,
rules and practices (in addition to principles) applied by an entity in the
preparation and presentation of financial statements.
(iv) In addition to the situations allowed under Ind AS 8 for changing an
accounting policy, AS 5 allows change in accounting policy if required
by statute.
(v) Ind AS 8 specifically states that an entity shall select and apply its
accounting policies consistently for similar transactions, other events
and conditions, unless an Ind AS specifically requires or permits
categorisation of items for which different policies may be appropriate.
Neither AS 5 nor any other Accounting Standard specifically requires
accounting policies to be consistent for similar transactions, other
events and conditions.
(vi) Ind AS 8 requires that changes in accounting policies should be
accounted for with retrospective effect subject to limited exceptions
viz., where it is impracticable to determine the period specific effects
or the cumulative effect of applying a new accounting policy. On the
other hand, AS 5 does not specify how change in accounting policy
should be accounted for.
(vii) AS 5 defines prior period items as incomes or expenses which arise in
the current period as a result of errors or omissions in the preparation
of financial statements of one or more prior periods. Ind AS 8 uses the
term ‘errors’ and relates it to errors or omissions arising from a failure
to use or misuse of reliable information (in addition to mathematical
mistakes, mistakes in application of accounting policies etc.) that was
available when the financial statements of the prior periods were
approved for issuance and could reasonably be expected to have been
obtained and taken into account in the preparation and presentation of
those financial statements. Ind AS 8 specifically states that errors
include frauds, which is not covered in AS 5.
(viii) Ind AS 8 requires rectification of material prior period errors with
retrospective effect subject to limited exceptions viz., where it is
impracticable to determine the period specific effects or the cumulative

132
 Major Differences between Ind AS and AS

effect of applying a new accounting policy. On the other hand, AS 5

requires the rectification of prior period items with prospective effect.
(ix) Disclosure requirements given in Ind AS 8 are more detailed as
compared to the disclosure requirements given in the AS 5.

Ind AS 10, Events after the Reporting Period and

AS 4, Contingencies and Events occurring after
the Balance Sheet Date
(i) In Ind AS 10, material non-adjusting events are required to be
disclosed in the financial statements, whereas AS 4 requires the same
to be disclosed in the report of approving authority.
(ii) If, after the reporting date, it is determined that the fundamental
accounting assumption of going concern is no longer appropriate, Ind
AS 10 requires a fundamental change in the basis of accounting.
Whereas AS 4 requires assets and liabilities to be adjusted for events
occurring after the balance sheet date that indicate that the
fundamental accounting assumption of going concern is not
appropriate.
In this regard, Ind AS 10 refers to Ind AS 1, which requires an entity to
make the following disclosures:
 disclose the fact that the financial statements are not prepared
on a going concern basis together with the basis on which the
financial statements are prepared
 state the reason why the entity is not regarded as a going
concern.
AS 4 does not require any such disclosure. However, AS 1 requires
the disclosure of the fact in case going concern assumption is not
followed.
(iii) Consequent to changes made in Ind AS 1, it has been provided in the
definition of ‘Events after the reporting period’ that in case of 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, if the lender, before the
approval of the financial statements for issue, agrees to waive the
breach, it shall be considered as an adjusting event.

133
Ind AS: An Overview

(iv) Ind AS 10 includes an Appendix Distribution of Non-cash Assets to

Owners which deals, inter alia, with when to recognise dividends
payable to its owners.

Ind AS 11, Construction Contracts and AS 7,

Construction Contracts
(i) AS 7 includes borrowing costs as per AS 16, Borrowing Costs, in the
costs that may be attributable to contract activity in general and can be
allocated to specific contracts, whereas Ind AS 11 does not specifically
make reference to Ind AS 23.
(ii) AS 7 does not recognise fair value concept as contract revenue is
measured at consideration received/receivable, whereas Ind AS 11
requires that contract revenue shall be measured at fair value of
consideration received/receivable.
(iii) AS 7 does not deal with accounting for Service Concession
Arrangements, i.e., the arrangement where private sector entity (an
operator) constructs or upgrades the infrastructure to be used to
provide the public service and operates and maintains that
infrastructure for a specified period of time, whereas Appendix A of Ind
AS 11 deals with accounting aspects involved in such arrangements
and Appendix B of Ind AS 11 deals with disclosures of such
arrangements.

Ind AS 12, Income Taxes and AS 22, Taxes on

Income
(i) Ind AS 12 is based on balance sheet approach. It requires recognition
of tax consequences of differences between the carrying amounts of
assets and liabilities and their tax base. AS 22 is based on income
statement approach. It requires recognition of tax consequences of
differences between taxable income and accounting income. For this
purpose differences between taxable income and accounting income
are classified into permanent and timing differences.
(ii) As per Ind AS 12, subject to limited exceptions, deferred tax asset is
recognised for all deductible temporary differences to the extent that it
is probable that taxable profit will be available against which the
deductible temporary difference can be utilised. The criteria for
recognising deferred tax assets arising from the carry forward of

134
 Major Differences between Ind AS and AS

unused tax losses and tax credits are the same that for recognising
deferred tax assets arising from deductible temporary differences.
However, the existence of unused tax losses is strong evidence that
future taxable profit may not be available. Therefore, when an entity
has a history of recent losses, the entity recognises a deferred tax
asset arising from unused tax losses or tax credits only to the extent
that the entity has sufficient taxable temporary differences or there is
convincing other evidence that sufficient taxable profit will be available
against which the unused tax losses or unused tax credits can be
utilised by the entity.
As per AS 22, deferred tax assets are recognised and carried forward
only to the extent that there is a reasonable certainty that sufficient
future taxable income will be available against which such deferred tax
assets can be realised. Where deferred tax asset is recognised
against unabsorbed depreciation or carry forward of losses under tax
laws, it is recognised only to the extent that there is virtual certainty
supported by convincing evidence that sufficient future taxable income
will be available against which such deferred tax assets can be
realised.
(iii) As per Ind AS 12, current and deferred tax are recognised as income
or an expense and included in profit or loss for the period, except to
the extent that the tax arises from a transaction or event which is
recognised outside profit or loss, either in other comprehensive income
or directly in equity, in those cases tax is also recognised in other
comprehensive income or in equity, as appropriate. AS 22 does not
specifically deal with this aspect.
(iv) AS 22 deals with disclosure of deferred tax assets and liabilities in the
balance sheet. Ind AS 12 does not deal with this aspect except that it
requires that income tax relating to each component of other
comprehensive income shall be disclosed as current or non-current
asset/liability in accordance with the requirements of Ind AS 1.
(v) Disclosure requirements given in the Ind AS 12 are more detailed as
compared to AS 22.
(vi) Ind AS 12 requires that deferred tax asset/liability arising from
revaluation of non-depreciable assets shall be measured on the basis
of tax consequences from the sale of asset rather than through use.
AS 22 does not deal with this aspect.

135
Ind AS: An Overview

(vii) Ind AS 12 provides guidance as to how an entity should account for

the tax consequences of a change in its tax status or that of its
shareholders. AS 22 does not deal with this aspect.
(viii) AS 22 explains virtual certainty supported by convincing evidence.
Since the concept of virtual certainty does not exist in Ind AS 12, this
explanation is not included.
(ix) AS 22 specifically provides guidance regarding recognition of deferred
tax in the situations of Tax Holiday under Sections 80-IA and 80-IB
and Tax Holiday under Sections 10A and 10B of the Income Tax Act,
1961.
Similarly, AS 22 provides guidance regarding recognition of deferred
tax asset in case of loss under the head ‘capital gains’.
Ind AS 12 does not specifically deal with these situations.
(x) AS 22 specifically provides guidance regarding tax rates to be applied
in measuring deferred tax assets/liabilities in a situation where a
company pays tax under section 115JB. Ind AS 12 does not
specifically deal with this aspect.

Ind AS 16, Property, Plant and Equipment and AS

10, Property, Plant and Equipment
(i) Ind AS 16 does not deal with the assets ‘held for sale’ because the
treatment of such assets is covered in Ind AS 105, Non-current Assets
Held for Sale and Discontinued Operations. AS 10 deals with
accounting for items of fixed assets retired from active use and held
for sale.
(ii) Ind AS 16 provides guidance on measuring ‘Stripping Costs in the
Production Phase of a Surface Mine’. AS does not contain this
guidance.

Ind AS 17, Leases and AS 19, Leases

(i) AS 19 excludes leases of land from its scope. Ind AS 17 does not
have such scope exclusion. It has specific provisions dealing with
leases of land and building applicable. Further, Ind AS 17 is not
applicable as the basis of measurement for:
 property held by lessees/provided by lessors under operating

136
 Major Differences between Ind AS and AS

leases but treated as investment property and

 biological assets held by lessees/provided by lessors under
operating leases that are covered in the Standard on
Agriculture.
AS 19 does not contain such provisions.
(ii) The definition of residual value appearing in AS 19 has been deleted in
Ind AS 17.
(iii) Consequent upon the difference between AS 19 and Ind AS 17 in
respect of treatment of initial direct costs incurred by a non-
manufacturer/non-dealer-lessor in respect of a finance lease (see point
5 below), the term ‘initial direct costs’ has been specifically defined in
Ind AS 17 and definition of the term ‘interest rate implicit in the lease’
as per AS 19 has been modified in Ind AS 17.
(iv) Ind AS 17 makes a distinction between inception of lease and
commencement of lease. In AS 19, though both the terms are used at
some places, these terms have not been defined and distinguished.
Further, Ind AS 17 deals with adjustment of lease payments during the
period between inception of the lease and the commencement of the
lease term. This aspect is not dealt with in AS 19. Also, as per Ind AS
17, the lessee shall recognise finance leases as assets and liabilities
in balance sheet at the commencement of the lease term whereas as
per AS 19 such recognition is at the inception of the lease.
(v) Treatment of initial direct costs under Ind AS 17 differs from the
treatment prescribed under AS 19. This is tabulated below:
Subject AS 19 Ind AS 17
Finance lease-lessee Added to the amount Same as per AS 19.
accounting recognised as asset.
Finance lease-lessor
accounting
Non-manufacturer/ Either recognised as Interest rate implicit in
Non-dealer expense immediately or the lease is defined in
allocated against the such a way that the
finance income over initial direct costs
the lease term. included automatically
in the finance lease

137
Ind AS: An Overview

receivable; there is no
need to add them
separately.
Manufacturer/dealer Recognised as Same as per AS 19.
expense at the
commencement of the
lease term.
Operating lease- No discussion No discussion
Lessee accounting
Operating lease-Lessor Either deferred and Added to the carrying
accounting allocated to income amount of the leased
over the lease term in asset and recognised
proportion to the as expense over the
recognition of rent lease term on the same
income, or recognized basis as lease income.
as expense in the
period in which
incurred.

(vi) Ind AS 17 requires current/non-current classification of lease Liabilities

if such classification is made for other liabilities. Also, it makes
reference to Ind AS 105, Non-current Assets Held for Sale and
Discontinued Operations. These matters are not addressed in AS 19.
(vii) As per AS 19, if a sale and leaseback transaction results in a finance
lease, excess, if any, of the sale proceeds over the carrying amount
shall be deferred and amortised by the seller-lessee over the lease
term in proportion to depreciation of the leased asset. While Ind AS 17
retains the deferral and amortisation principle, it does not specify any
method of amortisation.
(viii) Ind AS 17 provides guidance on accounting for incentives in the case
of operating leases, evaluating the substance of transactions involving
the legal form of a lease and determining whether an arrangement
contains a lease. AS 19 does not contain such guidance.
(ix) Ind AS 17 requires that in case of operating lease, where escalation of
lease rentals is in line with the expected general inflation so as to
compensate the lessor for expected inflationary cost increases shall
not be straight lined. AS 19 does not provide for the same.

138
 Major Differences between Ind AS and AS

(x) There are some differences in disclosure requirements as per AS 19

and disclosure requirements as per Ind AS 17.
Ind AS 18, Revenue and AS 9, Revenue Recognition
(i) Definition of ‘revenue’ given in Ind AS 18 is broad as compared to the
definition of ‘revenue’ given in AS 9 because it covers all economic
benefits that arise in the ordinary course of activities of an entity which
result in increases in equity, other than increases relating to contributions
from equity participants. On the other hand, as per AS 9, revenue is gross
inflow of cash, receivables or other consideration arising in the course of
the ordinary activities of an enterprise from the sale of goods, from the
rendering of services, and from the use by others of enterprise resources
yielding interest, royalties and dividends.
(ii) Measurement of revenue is briefly covered in the definition of revenue in AS
9, while Ind AS 18 deals separately in detail with measurement of revenue.
As per AS 9, revenue is recognised at the nominal amount of consideration
receivable. Ind AS 18 requires the revenue to be measured at fair value of
the consideration received or receivable.
(iii) Ind AS 18 specifically deals with the exchange of goods and services with
goods and services of similar and dissimilar nature. In this regard specific
guidance is given regarding barter transactions involving advertising
services. This aspect is not dealt with in AS 9.
(iv) Ind AS 18 provides guidance on application of recognition criteria to the
separately identifiable components of a single transaction in order to reflect
the substance of the transaction. AS 9 does not specifically deal with the
same.
(v) AS 9 requires the recognition of revenue from interest on time proportion
basis. Ind AS 18 requires interest to be recognised using effective interest
rate method as set out in Ind AS 109, Financial Instruments.
(vi) Ind AS 18 specifically provides guidance regarding revenue recognition in
case the entity is under any obligation to provide free or discounted goods or
services or award credits to its customers due to any customer loyalty
programme. AS 9 does not deal with this aspect.
(vii) Disclosure requirements given in Ind AS 18 are more detailed as compared
to AS 9.

139
Ind AS: An Overview

Ind AS 19, Employee Benefits and AS 15, Employee

Benefits
(i) In Ind AS 19, employee benefits arising from constructive obligations
are also covered whereas AS 15 does not deal with the same.
(Paragraph 4(c) of Ind AS 19)
(ii) As per AS 15, the term ‘employee’ includes whole-time directors
whereas under Ind AS 19 the term includes directors. (Paragraph 7 of
Ind AS 19)
(iii) Definitions of short-term employee benefits, other long-term employee
benefits and past service cost as per AS 15 have been changed in Ind
AS 19. (Paragraph 8 of Ind AS 19)
(iv) Ind AS 19 deals with situations where there is a contractual agreement
between a multi-employer plan and its participants that determine how
the surplus in the plan will be distributed to the participants (or the
deficit funded). (Paragraph 37 of Ind AS 19)
AS 15 does not deal with it.
(v) As per Ind AS 19, participation in a defined benefit plan sharing risks
between various entities under common control is a related party
transaction for each group entity and some disclosures are required in
the separate or individual financial statements of an entity whereas the
AS 15 does not contain similar provisions. (Paragraph 42 of Ind AS 19)
(vi) Ind AS 19 encourages, but does not require, an entity to involve a
qualified actuary in the measurement of all material post-employment
benefit obligations whereas AS 15 though does not require
involvement of a qualified actuary, does not specifically encourage the
same. (Paragraph 59 of Ind AS 19)
(vii) Actuarial valuation is based on certain assumptions. Changes in these
assumptions give rise to actuarial gains and losses, for example,
changes in estimates of salary or medical cost. AS 15 requires
recognition of actuarial gains and losses immediately in the profit and
loss but Ind AS 19 requires that the same shall be recognised in other
comprehensive income and should not be recognised in profit or loss.
(viii) Ind AS 19 makes it clear that financial assumptions shall be based on
market expectations, at the end of the reporting period, for the period
over which the obligations are to be settled whereas AS 15 does not
clarify the same. (Paragraph 80 of Ind AS 19)

140
 Major Differences between Ind AS and AS

(ix) As per Ind AS 19, subsidiaries, associates, joint ventures and

branches domiciled outside India shall discount post-employment
benefit obligations arising on account of post-employment benefit
plans using the rate determined by reference to market yields at the
end of the reporting period on high quality corporate bonds. In case,
such subsidiaries, associates, joint ventures and branches are
domiciled in countries where there is no deep market in such bonds,
the market yields (at the end of the reporting period) on government
bonds of that country shall be used.
As per AS 15, the rate used to discount post-employment benefit
obligations should always be determined by reference to market yields
at the balance sheet date on government bond.
(x) Under Ind AS 19, more guidance has been given for timing of
recognition of termination benefits. Recognition criteria for termination
benefits under the revised standard differ from the criteria prescribed
in AS 15. (Paragraph 165 of Ind AS 19)
(xi) Ind AS 19 gives guidance on the interaction of ceiling of asset
recognition and minimum funding requirement in the case of defined
benefit obligations, whereas this guidance is not available in AS 15.
(Appendix B of Ind AS 19)
Ind AS 20, Accounting for Government Grants and
Disclosure of Government Assistance and AS 12,
Accounting for Government Grants
(i) Ind AS 20 deals with the other forms of government assistance which
do not fall within the definition of government grants. It requires that an
indication of other forms of government assistance from which the
entity has directly benefited should be disclosed in the financial
statements. However, AS 12 does not deal with such government
assistance.
(ii) AS 12 requires that in case the grant is in respect of non-depreciable
assets, the amount of the grant should be shown as capital reserve
which is a part of shareholders’ funds. It further requires that if a grant
related to a non-depreciable asset requires the fulfilment of certain
obligations, the grant should be credited to income over the same
period over which the cost of meeting such obligations is charged to
income. AS 12 also gives an alternative to treat such grants as a

141
Ind AS: An Overview

deduction from the cost of such asset.

As compared to the above, Ind AS 20, is based on the principle that
all government grants would normally have certain obligations
attached to them and these grants should be recognised as income
over the periods which bear the cost of meeting the obligation. It,
therefore, specifically prohibits recognition of grants directly in the
shareholders’ funds.
(iii) AS 12 recognises that some government grants have the
characteristics similar to those of promoters’ contribution. It requires
that such grants should be credited directly to capital reserve and
treated as a part of shareholders’ funds. Ind AS 20 does not recognise
government grants of the nature of promoters’ contribution. As stated
at (ii) above, Ind AS 20 is based on the principle that all government
grants would normally have certain obligations attached to them and it,
accordingly, requires all grants to be recognised as income over the
periods which bear the cost of meeting the obligation.
(iv) AS 12 requires that government grants in the form of non-monetary
assets, given at a concessional rate, should be accounted for on the
basis of their acquisition cost. In case a non-monetary asset is given
free of cost, it should be recorded at a nominal value. Ind AS 20
requires to value non-monetary grants at their fair value, since it
results into presentation of more relevant information and is
conceptually superior as compared to valuation at a nominal amount.
(v) AS 12 gives an option to present the grants related to assets, including
non-monetary grants at fair value in the balance sheet either by setting
up the grant as deferred income or by deducting the grant from the
gross value of asset concerned in arriving at its book value. Ind AS 20
requires presentation of such grants in balance sheet only by setting
up the grant as deferred income. Thus, the option to present such
grants by deduction of the grant in arriving at its book value is not
available under Ind AS 20.
(vi) Ind AS 20 includes Appendix A which deals with Government
Assistance—No Specific Relation to Operating Activities.
(vii) Ind AS 20 requires that loans received from a government that have a
below-market rate of interest should be recognised and measured in
accordance with Ind AS 109 (which requires all loans to be recognised
at fair value, thus requiring interest to be imputed to loans with a

142
 Major Differences between Ind AS and AS

below-market rate of interest), whereas AS 12 does not require so.

Ind AS 21, The Effects of Changes in Foreign Exchange
Rates and AS 11, The Effects of Changes in Foreign
Exchange Rates
(i) Ind AS 21 excludes from its scope forward exchange contracts and
other similar financial instruments, which are treated in accordance
with Ind AS 109. AS 11 does not exclude accounting for such
contracts.
(ii) AS 11, gives an option to recognise exchange differences arising on
translation of certain long-term monetary items from foreign currency
to functional currency directly in equity, to be transferred to profit or
loss over the life of the relevant liability/asset if such items are not
related to acquisition of fixed assets; where such items are related to
acquisition of fixed assets, the foreign exchange differences can be
recognised as part of the cost of the asset. (paragraphs 46 and 46A of
AS 11)
Ind AS 21 does not give the above option. However, Ind AS 21 does
not apply to long-term foreign currency monetary items recognised in
the financial statements before the beginning of the first Ind AS
financial reporting period as per the previous GAAP, i.e. AS 11.
However, as provided in Ind AS 101, such an entity may continue to
apply the accounting policy so opted for such long-term foreign
currency monetary items as per the previous GAAP.
(iii) AS 11 is based on integral foreign operations and non-integral foreign
operations approach for accounting for a foreign operation, whereas
Ind AS 21 is based on the functional currency approach.
(iv) As per Ind AS 21, presentation currency can be different from local
currency and it gives detailed guidance in this regard, whereas AS 11
does not explicitly state so.
Ind AS 23, Borrowing Costs and AS 16, Borrowing Costs
(i) Ind AS 23 does not require an entity to apply this standard to
borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset measured at fair value, for example, a
biological asset whereas AS 16 does not provide for such scope
relaxation.

143
Ind AS: An Overview

(ii) Ind AS 23 excludes the application of this Standard to borrowing costs

directly attributable to the acquisition, construction or production of
inventories that are manufactured, or otherwise produced, in large
quantities on a repetitive basis whereas AS 16 does not provide for
such scope relaxation and is applicable to borrowing costs related to
all inventories that require substantial period of time to bring them in
saleable condition.
(iii) As per AS 16, Borrowing Costs, inter alia, include the following:
(a) interest and commitment charges on bank borrowings and other
short-term and long-term borrowings;
(b) amortisation of discounts or premiums relating to borrowings;
(c) amortisation of ancillary costs incurred in connection with the
arrangement of borrowings.
Ind AS 23 requires to calculate the interest expense using the effective
interest rate method as described in Ind AS 109. Items (b) and (c)
above have been deleted, as some of these components of borrowing
costs are considered as the components of interest expense
calculated using the effective interest rate method.
(iv) AS 16 gives explanation for meaning of ‘substantial period of time’
appearing in the definition of the term ‘qualifying asset’. This
explanation is not included in Ind AS 23.
(v) Ind AS 23 provides that when Ind AS 29, Financial Reporting in
Hyperinflationary Economies, is applied, part of the borrowing costs
that compensates for inflation should be expensed as required by that
Standard (and not capitalised in respect of qualifying assets). AS 16
does not contain a similar clarification because at present, in India,
there is no Standard on Financial Reporting in Hyperinflationary
Economies.
(vi) Ind AS 23 specifically provides that in some circumstances, it is
appropriate to include all borrowings of the parent and its subsidiaries
when computing a weighted average of the borrowing costs while in
other circumstances, it is appropriate for each subsidiary to use a
weighted average of the borrowing costs applicable to its own
borrowings. This specific provision is not there in AS 16.
(vii) Ind AS 23 requires disclosure of capitalisation rate used to determine
the amount of borrowing costs eligible for capitalisation. AS 16 does

144
 Major Differences between Ind AS and AS

not have this disclosure requirement.

Ind AS 24, Related Party Disclosures, and AS 18, Related
Party Disclosures
(i) AS 18 uses the term “relatives of an individual”, whereas Ind AS 24
uses the term “a close member of the family of a person”. AS 18
covers the spouse, son, daughter, brother, sister, father and mother
who may be expected to influence, or be influenced by, that individual
in his/her dealings with the reporting enterprise.
However, definition of close members of family as per Ind AS 24
includes those family members, who may be expected to influence, or
be influenced by, that person in their dealings with the entity,
including:
(a) that person’s children, spouse or domestic partner, brother,
sister, father and mother;
(b) children of that person’s spouse or domestic partner; and
(c) dependants of that person or that person’s spouse or domestic
partner.
Hence, the definition as per Ind AS 24 is much wider.
(ii) AS-18 defines state-controlled enterprise as “an enterprise which is
under the control of the Central Government and/or any State
Government(s)”. However, in Ind AS 24, there is extended coverage of
Government Enterprises, as it defines a government-related entity as
“an entity that is controlled, jointly controlled or significantly influenced
by a government.” Further, “Government refers to government,
government agencies and similar bodies whether local, national or
international.”
(iii) AS 18 covers key management personnel (KMP) of the entity only,
whereas, Ind AS 24 covers KMP of the parent as well. Ind AS 24 also
covers the entity, or any member of a group of which it is a part,
providing key management personnel services to the reporting entity
or to the parent of the reporting entity.
(iv) Under Ind AS 24 there is extended coverage in case of joint ventures.
Two entities are related to each other in both their financial
statements, if they are either co-venturers or one is a venturer and the
other is an associate. Whereas as per AS 18, co-venturers or co-

145
Ind AS: An Overview

associates are not related to each other.

(v) AS 18 mentions that where there is an inherent difficulty for
management to determine the effect of influences which do not lead to
transactions, disclosure of such effects is not required whereas Ind AS
24 does not specifically mention this. (Paragraph 18 of AS 18)
(vi) AS 18 does not specifically cover entities that are post employment
benefit plans, as related parties. However, Ind AS 24 specifically
includes post employment benefit plans for the benefit of employees of
an entity or its related entity as related parties.
(vii) Ind AS 24 requires an additional disclosure as to the name of the next
most senior parent which produces consolidated financial statements
for public use, whereas AS 18 has no such requirement. (Paragraph
13 of Ind AS 24)
(viii) Ind AS 24 requires extended disclosures for compensation of KMP
under different categories, whereas AS 18 does not specifically require
the same.
(ix) Ind AS 24 requires “the amount of the transactions” need to be
disclosed, whereas AS 18 gives an option to disclose the “Volume of
the transactions either as an amount or as an appropriate proportion”.
(Paragraph 23(iv) of AS 18 and paragraph 18 (a) of Ind AS 24)
(x) Ind AS 24 requires disclosures of certain information by the
government-related entities, whereas AS 18 presently exempts the
disclosure of such information.
(xi) AS 18 includes definition and clarificatory text, primarily with regard to
control, substantial interest (including 20% threshold), significant
influence (including 20% threshold). However, Ind AS 24 neither
defines these terms nor it includes such clarificatory text and allows
respective standards to deal with the same.
Ind AS 28, Investments in Associates and Joint ventures
and AS 23, Accounting for Investments in Associates in
Consolidated Financial Statements
(i) In AS 23, ‘Significant Influence’ has been defined as ‘power to
participate in the financial and/or operating policy decisions of the
investee but is not control over those policies’. In Ind AS 28, the s ame
has been defined as ‘power to participate in the financial and operating

146
 Major Differences between Ind AS and AS

policy decisions of the investee but is not control or joint control over
those policies’. Ind AS 28 defines joint control also.
(ii) For considering share ownership for the purpose of significant
influence, potential equity shares of the investee held by investor are
not taken into account as per AS 23. As per Ind AS 28, existence and
effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether an entity has
significant influence or not.
(iii) AS 23 requires application of the equity method only when the entity
has subsidiaries and prepares consolidated financial Statements. Ind
AS 28 requires application of equity method in financial statements
other than separate financial statements even if the investor does not
have any subsidiary.
(iv) One of the exemptions from applying equity method in AS 23 is where
the associate operates under severe long-term restrictions that
significantly impair its ability to transfer funds to the investee. No such
exemption is provided in Ind AS 28.
An explanation has been given in AS 23 regarding the term ‘near
future’ used in another exemption from applying equity method, i .e.,
where the investment is acquired and held exclusively with a view to
its subsequent disposal in the near future. This explanation has not
been given in the Ind AS 28, as such situations are covered by Ind AS
105, Non-current Assets Held for Sale and Discontinued Operations.
(v) Ind AS 28 now permits an entity that has an investment in an
associate, a portion of which is held indirectly through venture capital
organisations, or a mutual fund, unit trust and similar entities including
investment-linked insurance funds, to elect to measure that portion of
the investment in the associate at fair value through profit or loss in
accordance with Ind AS 109 regardless of whether these entities have
significant influence over that portion of the investment.
(vi) Ind AS 28 requires a portion of an investment in an associate or a joint
venture to be classified as held for sale if the disposal of that portion of
the interest would fulfill the criteria to be classified as held for sale in
accordance with Ind AS 105. AS 23 does not specifically deal with this
aspect.
(vii) As per AS 23, in separate financial statements, investment in an

147
Ind AS: An Overview

associate is not accounted for as per the equity method, the same is
accounted for in accordance with AS 13, Accounting for Investments.
As per Ind AS 28, the same is to be accounted for at cost or in
accordance with Ind AS 109, Financial Instruments.
(viii) AS 23 permits the use of financial statements of the associate drawn
upto a date different from the date of financial statements of the
investor when it is impracticable to draw the financial statements of the
associate upto the date of the financial statements of the investor.
There is no limit on the length of difference in the reporting dates of
the investor and the associate. As per Ind AS 28, length of difference
in the reporting dates of the associate or joint venture should not be
more than three months.
(ix) Both AS 23 and Ind AS 28 require that similar accounting policies
should be used for preparation of investor’s financial statements and in
case an associate uses different accounting policies for like
transactions, appropriate adjustments shall be made to the accounting
policies of the associate. AS 23 provides exemption to this that if it is
not possible to make adjustments to the accounting policies of the
associate, the fact shall be disclosed along with a brief description of
the differences between the accounting policies. Ind AS 28 provides
that the entity’s financial statements shall be prepared using uniform
accounting policies for like transactions and events in similar
circumstances unless, in case of an associate, it is impracticable to do
so.
(x) As per AS 23, investor’s share of losses in the associate is recognised
to the extent of carrying amount of investment in the associate. As per
Ind AS 28, carrying amount of investment in the associate or joint
venture determined using the equity method together with any long
term interests that, in substance, form part of the entity’s net
investment in the associate or joint venture shall be considered for
recognising entity’s share of losses in the associate or joint venture.
(xi) With regard to impairment, AS 23 requires that the carrying amount of
investment in an associate should be reduced to recognise a decline,
other than temporary, in the value of the investment. Ind AS 28
requires that after application of equity method, including recognising
the associate’s or joint venture’s losses, the requirements of Ind AS
109 shall be applied to determine whether it is necessary to recognise
any additional impairment loss.

148
 Major Differences between Ind AS and AS

Ind AS 33, Earnings per Share and AS 20, Earnings per

Share
(i) AS 20 does not specifically deal with options held by the entity on its
shares, e.g., purchased options, written put option etc. Ind AS 33
deals with the same.
(ii) Ind AS 33 requires presentation of basic and diluted EPS from
continuing and discontinued operations separately. However, AS 20
does not require any such disclosure.
(iii) AS 20 requires the disclosure of EPS with and without extraordinary
items. Since as per Ind AS 1, Presentation of Financial Statements, no
item can be presented as extraordinary item, Ind AS 33 does not
require the aforesaid disclosure.
Ind AS 34, Interim Financial Reporting and AS 25,
Interim Financial Reporting
(i) Under AS 25, if an entity is required or elects to prepare and present
an interim financial report, it should comply with that standard. Ind AS
34 applies only if an entity is required or elects to prepare and present
an interim financial report in accordance with Accounting Standards.
Consequently, it is specifically stated in Ind AS 34 that the fact that an
entity may not have provided interim financial reports during a
particular financial year or may have provided interim financial reports
that do not comply with Ind AS 34 does not prevent the entity’s annual
financial statements from conforming to Ind AS if they otherwise do so.
(Paragraph 2 of Ind AS 34)
(ii) In Ind AS 34, the term ‘complete set of financial statements’ appearing
in the definition of interim financial report has been expanded as
compared to AS 25. Accordingly, the said term (as described in Ind AS
1, Presentation of Financial Statements) includes balance sheet as at
the beginning of the preceding period when an entity applies an
accounting policy retrospectively or makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its
financial statements and comparative information in respect of the
preceding period as specified in paragraphs 38 and 38A of Ind AS 1.
(Paragraph 5 of Ind AS 34 )
(iii) As per AS 25, the contents of an interim financial report include, at a
minimum, a condensed balance sheet, a condensed statement of profit

149
Ind AS: An Overview

and loss, a condensed cash flow statement and selected explanatory

notes. Ind AS 34 requires, in addition to the above, a condensed
statement of changes in equity. (Consequential to change in Ind AS 1)
(iv) Ind AS 34 prohibits reversal of impairment loss recognised in a
previous interim period in respect of goodwill or an investment in either
an equity instrument or a financial asset carried at cost. There is no
such specific prohibition in AS 25. Ind AS 34 includes Appendix A
which addresses the interaction between the requirements of Ind AS
34 and the recognition of impairment losses on goodwill in Ind AS 36
and certain financial assets in Ind AS 109, and the effect of that
interaction on subsequent interim and annual financial statements
(v) Under AS 25, if an entity’s annual financial report included the
consolidated financial statements in addition to the separate financial
statements, the interim financial report should include both the
consolidated financial statements and separate financial statements,
complete or condensed. Ind AS 34 states that it neither requires nor
prohibits the inclusion of the parent’s separate statements in the
entity’s interim report prepared on a consolidated basis.
(vi) AS 25 requires the Notes to interim financial statements (if material
and not disclosed elsewhere in the interim financial report), to contain
a statement that the same accounting policies are followed in the
interim financial statements as those followed in the most recent
annual financial statements or, in case of change in those policies, a
description of the nature and effect of the change. Ind AS 34
additionally requires the above information in respect of methods of
computation followed. (Paragraph 16A(a) of Ind AS 34)
(vii) AS 25 requires furnishing information, in interim financial report, of
dividends, aggregate or per share (in absolute or percentage terms),
for equity and other shares. Ind AS 34 requires furnishing of
information, in interim financial report, on dividends paid, aggregate or
per share separately for equity and other shares. (Paragraph 16A(f) of
Ind AS 34)
(viii) While AS 25 requires furnishing of information on contingent liabilities
only, Ind AS 34 requires furnishing of information on both contingent
liabilities and contingent assets, if they are significant. (Paragraph
15B(m) of Ind AS 34)
(ix) In comparison to AS 25, reference to extraordinary items (in the

150
 Major Differences between Ind AS and AS

context of materiality) is deleted in Ind AS 34 in line with the Ind AS 1.

(Paragraph 23 of AS 25)
(x) Ind AS 34 requires that, where an interim financial report has been
prepared in accordance with the requirements of Ind AS 34, that fact
should be disclosed. Further, an interim financial report should not be
described as complying with Ind AS unless it complies with all of the
requirements of Ind AS (the latter statement is applicable when interim
financial statements are prepared on complete basis instead of
‘condensed basis’). AS 25 does not contain these requirements.
(Paragraph 19 of Ind AS 34)
(xi) Under AS 25, a change in accounting policy, other than the one for
which the transitional provisions are specified by a new Standard,
should be reflected by restating the financial statements of prior
interim periods of the current financial year. Ind AS 34 additionally
requires restatement of the comparable interim periods of prior
financial years that will be restated in annual financial statements in
accordance with Ind AS 8, subject to specific provisions when such
restatement is impracticable.
(xii) Convergence of all other standards with IFRS also has impact on
interim financial reporting. For example, treatment of constructive
obligation in Ind AS 37, will have impact in interim financial reporting
which could be different in the context of relevant accounting
standards. There are other consequential impacts also. For example,
AS 20 requires EPS with and without extraordinary items. Since the
concept of extraordinary items is no longer valid in the context of Ind
AS 1 the question of EPS with and without extraordinary items does
not arise in the context of Ind AS 33. This changed requirement of Ind
AS 33 is equally applicable to interim financial reporting under Ind AS
34.
(xiii) Under AS 25, when an interim financial report is presented for the first
time in accordance with that Standard, an entity need not present, in
respect of all the interim periods of the current financial year,
comparative statements of profit and loss for the comparable interim
periods (current and year-to-date) of the immediately preceding
financial year and comparative cash flow statement for the comparable
year-to-date period of the immediately preceding financial year. Ind AS
34 does not have this transitional provision.

151
Ind AS: An Overview

Ind AS 36, Impairment of Assets and AS 28, Impairment

of Assets
(i) Ind AS 36 applies to financial assets classified as:
(a) subsidiaries, as defined in Ind AS 110,
(b) associates as defined in Ind AS 28,
(c) joint ventures as defined in Ind AS 111
AS 28 does not apply to the above assets.
(ii) Ind AS 36 specifically excludes biological assets related to agricultural
activity. AS 28 does not specifically exclude biological assets. Ind AS
36 requires annual impairment testing for an intangible asset with an
indefinite useful life or not yet available for use and goodwill acquired
in a business combination. AS 28 does not require the annual
impairment testing for the goodwill unless there is an indication of
impairment.
(iii) Ind AS 36 gives additional guidance on, inter alia, the following
aspects compared to AS 28:
(a) estimating the value in use of an asset;
(b) for managements to assess the reasonableness of the assumptions on
which cash flows are based; and
(c) using present value techniques in measuring an asset’s value in use.
(iv) AS 28 requires that the impairment loss recognised for goodwill should
be reversed in a subsequent period when it was caused by a specific
external event of an exceptional nature that is not expected to recur
and subsequent external events that have occurred that reverse the
effect of that event whereas Ind AS 36 prohibits the recognition of
reversals of impairment loss for goodwill.
(v) AS 28, goodwill is allocated to CGUs only when the allocation can be
done on a reasonable and consistent basis. If that requirement is not
met for a specific CGU under review, the smallest CGU to which the
carrying amount of goodwill can be allocated on a reasonable and
consistent basis must be identified and the impairment test carried out
at this level. Thus, when all or a portion of goodwill cannot be
allocated reasonably and consistently to the CGU being tested for

152
 Major Differences between Ind AS and AS

impairment, two levels of impairment tests are carried out, viz.,

bottom-up test and top-down test.
In Ind AS 36, goodwill is allocated to cash-generating units (CGUs) or
groups of CGUs that are expected to benefit from the synergies of the
business combination from which it arose. There is no bottom-up or
top-down approach for allocation of goodwill.
(vii) Ind AS 36 requires certain extra disclosures as compared to AS 28.
Ind AS 37, Provisions, Contingent Liabilities and
Contingent Assets and AS 29, Provisions, Contingent
Liabilities and Contingent Assets
(i) Unlike AS 29, Ind AS 37 requires creation of provisions in respect of
constructive obligations also [However, AS 29 requires creation of
provisions arising out of normal business practices, custom and a
desire to maintain good business relations or to act in an equitable
manner]. This has resulted in some consequential changes also. For
example, definitions of provision and obligating event have been
revised in Ind AS 37, while the terms ‘legal obligation’ and
‘constructive obligation’ have been inserted and defined in Ind AS 37.
Similarly, the portion of AS 29 pertaining to restructuring provisions
has been revised in Ind AS 37.
(ii) AS 29 prohibits discounting the amounts of provisions except in case
of decommissioning, restoration and similar liabilities that are
recognised as cost of property, plant and equipment. Ind AS 37
requires discounting the amounts of provisions, if effect of the time
value of money is material.
(iii) AS 29 notes the practice of disclosure of contingent assets in the
report of the approving authority but prohibits disclosure of the same in
the financial statements. Ind AS 37 requires disclosure of contingent
assets in the financial statements when the inflow of economic benefits
is probable. The disclosure, however, should avoid misleading
indications of the likelihood of income arising.
(iv) Ind AS 37 makes it clear that before a separate provision for an
onerous contract is established, an entity should recognise any
impairment loss that has occurred on assets dedicated to that contract
in accordance with Ind AS 36. There is no such specific provision in

153
Ind AS: An Overview

AS 29.
(v) AS 29 states that identifiable future operating losses up to the date of
restructuring are not included in a provision. Ind AS 37 gives an
exception to this principle viz. such losses related to an onerous
contract.
(vi) Ind AS 37 gives guidance on:
(a) Rights to Interests arising from Decommissioning, Restoration
and Environmental Rehabilitation Funds.
(b) Liabilities arising from Participating in a Specific Market—
Waste Electrical and Electronic Equipment.
(c) Levies (imposed by government).
AS 29 does not give such guidance.
Ind AS 38, Intangible Assets and AS 26, Intangible
Assets
(i) AS 26 (paragraph 5) does not apply to accounting issues of
specialised nature that arise in respect of accounting for discount or
premium relating to borrowings and ancillary costs incurred in
connection with the arrangement of borrowings, share issue expenses
and discount allowed on the issue of shares. Ind AS 38 does not
include any such exclusion specifically as these are covered by other
accounting standards.
Ind AS 38 contains scope exclusion with regard to the amortisation
method for intangible assets arising from service concession
arrangements in respect of toll roads recognised in the financial
statements before the beginning of the first Ind AS financial reporting
period as per the previous GAAP, i.e., Schedule II to the Companies
Act, 2013.
(ii) AS 26 defines an intangible asset as an identifiable non-monetary
asset without physical substance held for use in the production or
supply of goods or services, for rental to others, or for administrative
purposes whereas in Ind AS 38, the requirement for the asset to be
held for use in the production or supply of goods or services, for rental
to others, or for administrative purposes has been removed from the
definition of an intangible asset. (Paragraph 8 of Ind AS 38 )

154
 Major Differences between Ind AS and AS

(iii) AS 26 does not define ‘identifiability’, but states that an intangible

asset could be distinguished clearly from goodwill if the asset was
separable, but that separability was not a necessary condition for
identifiability. Ind AS 38 provides detailed guidance in respect of
identifiability. (Paragraphs 11 and 12 of Ind AS 38)
(iv) As per Ind AS 38, in the case of separately acquired intangibles, the
criterion of probable inflow of expected future economic benefits is
always considered satisfied, even if there is uncertainty about the
timing or the amount of the inflow. However, there is no such provision
in AS 26. (Paragraph 25 of Ind AS 38)
(v) In Ind AS 38, there is a rebuttable presumption that an amortisation
method that is based on the revenue generated by an activity that
includes the use of an intangible asset is inappropriate. Ind AS 38
allows use of revenue based method of amortisation of intangible
asset, in a limited way. AS 26 does not specifically deal with revenue
based amortisation method.
(vi) Under Ind AS 38, if payment for an intangible asset is deferred beyond
normal credit terms, the difference between this amount and the total
payments is recognised as interest expense over the period of credit
unless it is capitalised as per Ind AS 23. However, there is no such
provision in AS 26. (Paragraph 32 of Ind AS 38)
(vii) Ind AS 38 deals in detail in respect of intangible assets acquired in a
business combination. On the other hand, AS 26 refers only to
intangible assets acquired in an amalgamation in the nature of
purchase and does not refer to business combinations as a whole.
(viii) AS 26 is silent regarding the treatment of subsequent expenditure on
an in-process research and development project acquired in a
business combination whereas Ind AS 38 gives guidance for the
treatment of such expenditure. (Paragraphs 42 and 43 of Ind AS 38)
(ix) Ind AS 38 requires that if an intangible asset is acquired in exchange
of a non-monetary asset, it should be recognised at the fair value of
the asset given up unless (a) the exchange transaction lacks
commercial substance or (b) the fair value of neither the asset
received nor the asset given up is reliably measurable. However, the
AS 26 requires the principles of AS 10 to be followed which require
that when an asset is acquired in exchange for another asset, its cost
is usually determined by reference to the fair market value of the

155
Ind AS: An Overview

consideration given. It may be appropriate to consider also the fair

market value of the asset acquired if this is more clearly evident. An
alternative accounting treatment to record the asset acquired at the
net book value of the asset given up; in each case an adjustment is
made for any balancing receipt or payment of cash or other
consideration also.
(x) As per Ind AS 38, when intangible assets are acquired free of charge
or for nominal consideration by way of government grant, an entity
should, in accordance with Ind AS 20, record both the grant and the
intangible asset at fair value. As per AS 26, intangible assets acquired
free of charge or for nominal consideration by way of government
grant is recognised at nominal value or at acquisition cost, as
appropriate plus any expenditure that is attributable to making the
asset ready for intended use.(Paragraph 33 of AS 26 and paragraph
44 of Ind AS 38)
(x) AS 26 is based on the assumption that the useful life of an intangible
asset is always finite, and includes a rebuttable presumption that the
useful life cannot exceed ten years from the date the asset is available
for use. That rebuttable presumption is not there in Ind AS 38. Ind AS
38 recognizes that the useful life of an intangible asset can even be
indefinite subject to fulfillment of certain conditions, in which case it
should not be amortised but should be tested for impairment.
(xi) In Ind AS 38, guidance is available on cessation of capitalisation of
expenditure (Paragraph 30 of Ind AS 38), de-recognition of a part of an
intangible asset (Paragraph 115 of Ind AS 38) and useful life of a
reacquired right in a business combination (Paragraph 94 of Ind AS
38). There is no such guidance in AS 26 on these aspects.
(xii) Ind AS 38 permits an entity to choose either the cost model or the
revaluation model as its accounting policy, whereas in AS 26,
revaluation model is not permitted.
(xiii) Ind AS 38 provides more guidance on recognition of intangible items
recognised as expense. Ind AS 38 clarifies that in respect of prepaid
expenses, recognition of an asset would be permitted only upto the
point at which the entity has the right to access the goods or upto the
receipt of services. Further, unlike AS 26, mail order catalogues have
been specifically identified as a form of advertising and promotional
activities which are required to be expensed.

156
 Major Differences between Ind AS and AS

(xiv) Paragraph 94 of Ind AS 38 acknowledges that the useful life of an

intangible asset arising from contractual or legal rights maybe shorter
than the legal life. AS 26 does not include such a provision.
(xv) As per AS 26 (Paragraph 73), there will rarely, if ever, be persuasive
evidence to support an amortisation method for intangible assets that
results in a lower amount of accumulated amortisation than under
straight-line method. Ind AS 38 does not contain any such provision.
(xvi) Under Ind AS 38, the residual value is reviewed at least at each
financial year-end. If it increases to an amount equal to or greater than
the asset’s carrying amount, amortisation charge is zero unless the
residual value subsequently decreases to an amount below the asset’s
carrying amount. However, AS 26 specifically requires that the residual
value is not subsequently increased for changes in prices or value.
(xvii) As per AS 26, change in the method of amortisation is a change in
accounting policy whereas as per Ind AS 38 (paragraph 104), this
would be a change in accounting estimate.
(xviii) Ind AS 38 also requires certain additional disclosures as compared to
AS 26.
(xix) Intangible assets retired from use and held for sale are covered by the
AS 26. However, Ind AS 38 does not include such intangible assets
since they would be covered by Ind AS 105.
Ind AS 40, Investment Property and AS 13, Accounting
for Investments
AS 13 provides limited guidance on investment properties. As per AS 13, an
enterprise holding investment properties should account for them as per cost
model prescribed in AS 10, Property, Plant and Equipment. However, Ind AS
40 is a detailed standard dealing with various aspects of investment property
accounting.
Ind AS 103, Business Combinations and AS 14,
Accounting for Amalgamations
(i) Ind AS 103 defines a business combination which has a wider scope
whereas AS 14 deals with amalgamation and mergers.
(ii) Under AS 14, there are two methods of accounting for amalgamation:
the pooling of interest method and the purchase method. Ind AS 103

157
Ind AS: An Overview

prescribes only the acquisition method for every business combination.

(Paragraph 7 of AS 14)
(iii) Under AS 14, the acquired assets and liabilities are recognised at their
existing book values or at fair values under the purchase method. Ind
AS 103 requires the acquired identifiable assets liabilities and non-
controlling interest to be recognised at fair value under acquisition
method. (Paragraph 12 of AS 14 and paragraphs 18-19 of Ind AS 103)
(iv) Ind AS 103 requires that for each business combination, the acquirer
shall measure any non-controlling interest in the acquiree either at fair
value or at the non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets. On the other hand, AS 14 states that
the minority interest is the amount of equity attributable to minorities at
the date on which investment in a subsidiary is made and it is shown
outside shareholders’ equity. (Paragraph 13(e) of AS 21 and
paragraph 19 of Ind AS 103)
(v) Under Ind AS 103, the goodwill is not amortised but tested for
impairment on annual basis in accordance with Ind AS 36. AS 14
requires that the goodwill arising on amalgamation in the nature of
purchase is amortised over a period not exceeding five years.
(vi) Ind AS 103 deals with reverse acquisitions, whereas AS 14 does not
deal with the same.
(vii) Ind AS 103 deals with the contingent consideration in case of business
combination, i.e., an obligation of the acquirer to transfer additional
assets or equity interests to the former owners of an acquiree as part
of the exchange for control of the acquiree if specified future events
occur or conditions are met. AS 14 does not provide specific guidance
on this aspect.
(viii) Ind AS 103 requires bargain purchase gain arising on business
combination to be recognised in other comprehensive income and
accumulated in equity as capital reserve, unless there is no clear
evidence for the underlying reason for classification of the business
combination as a bargain purchase, in which case, it shall be
recognised directly in equity as capital reserve. Under AS 14 the
excess amount is treated as capital reserve. (Paragraph 34 of Ind AS
103 and paragraph 17 of AS 14)
(ix) Appendix C of Ind AS 103 deals with accounting for common control

158
 Major Differences between Ind AS and AS

transactions, which prescribes a method of accounting different from

Ind AS 103. AS 14 does not prescribe accounting for such transactions
different from other amalgamations.
Ind AS 105, Non-current Assets Held for Sale and
Discontinued Operations and AS 24, Discontinuing
Operations
(i) Ind AS 105 specifies the accounting for non-current assets held for
sale, and the presentation and disclosure of discontinued operations.
AS 24 establishes principles for reporting information about
discontinuing operations. It does not deal with the non-current assets
held for sale; fixed assets retired from active use and held for sale,
which are dealt in AS 10, Accounting for Fixed Assets. (Paragraph 1 of
Ind AS 105 and ‘Objective’ of AS 24)
(ii) In AS 24, requirements related to cash flow statement are applicable
when the enterprise presents a cash flow statement. Ind AS 105 does
not mention so. (Paragraph 2 of AS 24)
(iii) Under Ind AS 105, a discontinued operation is a component of an
entity that either has been disposed of or is classified as held for sale.
In AS 24, there is no concept of discontinued operations but it deals
with discontinuing operations.
(iv) As per Ind AS 105, the sale should be expected to qualify for
recognition as a completed sale within one year from the date of
classification with certain exceptions. AS 24 does not specify any time
period in this regard as it relates to discontinuing operations.
(v) AS 24 specifies about the initial disclosure event in respect to a
discontinuing operation. Ind AS 105 does not mention so as it relates
to discontinued operation. (Paragraph 15 of AS 24)
(vi) Under Ind AS 105, non-current assets (disposal groups) held for sale
are measured at the lower of carrying amount and fair value less costs
to sell, and are presented separately in the balance sheet. AS 24
requires to apply the principles set out in other relevant Accounting
Standards, e.g., AS 10 requires that the fixed assets retired from
active use and held for disposal should be stated at the lower of their
net book value and net realisable value and shown separately in the
financial statements.

159
Ind AS: An Overview

(vii) Ind AS 105 specifically mentions that abandonment of assets should

not be classified as held for sale. In AS 24, abandonment of assets is
classified as a discontinuing operation; however, changing the scope
of an operations or the manner in which it is conducted is not
abandonment and hence not a discontinuing operation. (Paragraph 7
of AS 24 and paragraph 13 of Ind AS 105)
(viii) Ind AS 105 provides guidance regarding changes to the plan to sell
non-current assets (or disposal groups) which are classified as held for
sale. AS 24 does not give any specific guidance regarding this aspect.
(Paragraphs 26-29 of Ind AS 105)
(ix) As per Ind AS 105, a discontinued operation is a component of an
entity that represents a separate major line of business or
geographical area, or is a subsidiary acquired exclusively with a view
to resale. Under AS 24, a discontinuing operation is a component of an
entity that represents the major line of business or geographical area
of operations and that can be distinguished operationally and for
financial reporting purposes. (Paragraph 3 of AS 24 and paragraph 32
of Ind AS 15)
Ind AS 108, Operating Segments and AS 17, Segment
Reporting
(i) Identification of segments under Ind AS 108 is based on ‘management
approach’ i.e., operating segments are identified based on the internal
reports regularly reviewed by the entity’s chief operating decision
maker. AS 17 requires identification of two sets of segments; one
based on related products and services, and the other on geographical
areas based on the risks and returns approach. One set is regarded as
primary segments and the other as secondary segments.
(ii) Ind AS 108 requires that the amounts reported for each operating
segment shall be measured on the same basis as that used by the
chief operating decision maker for the purposes of allocating resources
to the segments and assessing its performance. AS 17 requires
segment information to be prepared in conformity with the accounting
policies adopted for preparing and presenting the financial statements.
Accordingly, AS 17 also defines segment revenue, segment expense,
segment result, segment assets and segment liabilities.
(iii) Ind AS 108 specifies aggregation criteria for aggregation of two or

160
 Major Differences between Ind AS and AS

more segments and also requires the related disclosures in this

regard. AS 17 does not deal specifically with this aspect.
(iv) An explanation has been given in AS 17 that in case there is neither
more than one business segment nor more than one geographical
segment, segment information as per this standard is not required to
be disclosed. However, this fact shall be disclosed by way of footnote.
Ind AS 108 requires certain disclosures even in case of entities havin g
single reportable segment.
(v) An explanation has been given in AS 17 that interest expense relating
to overdrafts and other operating liabilities identified to a particular
segment should not be included as a part of the segment expense. It
also provides that in case interest is included as a part of the cost of
inventories and those inventories are part of segment assets of a
particular segment, such interest should be considered as a segment
expense. These aspects are specifically dealt with keeping in view that
the definition of ‘segment expense’ given in AS 17 excludes interest.
Ind AS 108 requires the separate disclosures about interest revenue
and interest expense of each reportable segment, therefore, these
aspects have not been specifically dealt with.
(vi) Ind AS 108 requires disclosures of revenues from external customers
for each product and service. With regard to geographical information,
it requires the disclosure of revenues from customers in the country of
domicile and in all foreign countries, non-current assets in the country
of domicile and all foreign countries. It also requires disclosure of
information about major customers. Disclosures in AS 17 are based on
the classification of the segments as primary or secondary segments.
Disclosure requirements for primary segments are more detailed as
compared to secondary segments.
Ind AS 110, Consolidated Financial Statements and AS
21, Consolidated Financial Statements
(i) Ind AS 110 makes the preparation of Consolidated Financial
Statements mandatory for a parent. AS 21 does not mandate the
preparation of consolidated financial statements by a parent. As per
AS 21, control is the ownership of more than one-half of the voting
power of an enterprise or control of the composition of the board of
directors or governing body. However, unlike rule based definition
given in AS 21, definition of control in Ind AS 110 is principle based

161
Ind AS: An Overview

which states that, an investor controls an investee when it is exposed,

or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the
investee.
(ii) AS 21 provides clarification regarding inclusion of notes appearing in
the separate financial statements of the parent and its subsidiaries in
the consolidated financial statements. However, Ind AS 110 does not
provide any clarification in this regard.
(iii) Under AS 21, there can be more than one parent of a subsidiary
therefore AS 21 provides clarification regarding consolidation in case
an entity is controlled by two entities. No clarification has been
provided in this regard in Ind AS 110, keeping in view that as per the
definition of control given in Ind AS 110, control of an entity could be
with one entity only.
(iv) As per AS 21, difference between the date of the subsidiary’s financial
statements and that of the consolidated financial statements shall not
exceed 6 months. However, as per Ind AS 110 the difference shall not
be more than three months.
(v) Ind AS 110 provides detailed guidance as compared to AS 21
regarding accounting in case of loss of control over subsidiary.
(vi) Both AS 21 and Ind AS 110, require the use of uniform accounting
policies. However, AS 21 specifically states that if it is not practicable
to use uniform accounting policies in preparing the consolidated
financial statements, that fact should be disclosed together with the
proportions of the items in the consolidated financial statements to
which the different accounting policies have been applied. However,
Ind AS 110 does not recognise the situation of impracticability.
(vii) As per AS 21, minority interest should be presented in the
consolidated balance sheet separately from liabilities and equity of the
parent’s shareholders. However, as per Ind AS 110, non-controlling
interests shall be presented in the consolidated balance sheet within
equity separately from the parent shareholders’ equity.
(viii) For considering share ownership, potential equity shares of the
investee held by investor are not taken into account as per AS 21.
However, as per Ind AS 110, potential voting rights that are
substantive are also considered when assessing whether an entity has
control over the subsidiary.

162
 Major Differences between Ind AS and AS

(ix) As per AS 21, subsidiary is excluded from consolidation when control

is intended to be temporary or when subsidiary operates under severe
long term restrictions. Ind AS 110 does not give any such exemption
from consolidation.
AS 21 explains where an entity owns majority of voting power because
of ownership and all the shares are held as stock-in-trade, whether
this amounts to temporary control. AS 21 also explains the term ‘near
future’. However, Ind AS 110 does not explain the same, as these are
not relevant.

Ind AS 111, Joint Arrangements and AS 27, Financial

Reporting of Interests in Joint Ventures
(i) AS 27 recognises three forms of joint venture namely: a) jointly
controlled operations, b) jointly controlled assets and c) jointly
controlled entities. As per Ind AS 111, a joint arrangement is either a
joint operation or a joint venture. Such classification of joint
arrangement depends upon the rights and obligations of the parties to
the arrangement and disregards the legal structure.
(ii) AS 27 provides that in some exceptional cases, an enterprise by a
contractual arrangement establishes joint control over an entity which
is a subsidiary of that enterprise within the meaning of Accounting
Standard (AS) 21, Consolidated Financial Statements. In those cases,
the entity is consolidated under AS 21 by the said enterprise, and is
not treated as a joint venture. Ind AS 111 does not recognise such
cases keeping in view the definition of control given in Ind AS 110.
(iii) Ind AS 111 provides that a venturer can recognise its interest in joint
venture using only equity method as per Ind AS 28. AS 27 prescribes
the use of proportionate consolidation method only.
(iv) In case of separate financial statements under AS 27, interest in jointly
controlled entity is accounted for as per AS 13, Accounting for
Investments, i.e., at cost less provision for other than temporary
decline in the value of investment. Ind AS 111 requires that the joint
operator shall recognise its interest in joint operation as given in the
paragraphs 20-22 and a joint venture in accordance with Ind AS 28,
Investments in Associates and Joint Ventures.
(v) An explanation has been given in AS 27 regarding the term ‘near
future’ used in an exemption given from applying proportionate

163
Ind AS: An Overview

consolidation method, i.e., where the investment is acquired and held

exclusively with a view to its subsequent disposal in the near future.
This explanation has not been given in the Ind AS 111, as such
situations are now covered by Ind AS 105, Non-current Assets Held for
Sale and Discontinued Operations.
(vi) AS 27 requires application of the proportionate consolidation method
only when the entity has subsidiaries and prepares Consolidated
Financial Statements. Ind AS 111 requires application of equity
method in financial statements other than separate financial
statements in case of a joint venture, even if the venturer does not
have any subsidiary in the financial statements
(vii) AS 21 provides clarification regarding disclosure of venturer’s share in
post-acquisition reserves of a jointly controlled entity. The same has
not been dealt with in the Ind AS 111.

164
 Ind AS Implementation Initiatives
The Institute of Chartered Accountants of India (ICAI) being the premier
accounting body in India has been engaged in formulation of Indian
Accounting Standards (Ind AS). Apart from formulation of Ind AS, the ICAI
has been taking various initiatives to get the members ready for
implementation of Ind AS. For this purpose, the ICAI had constituted a
Committee, namely, Ind AS Implementation Committee in the year 2011. The
Committee has been entrusted with the task of providing guidance to the
members on Indian Accounting Standards (Ind AS). For this purpose, the
Committee has been making relentless efforts in making this transition to Ind
AS smooth through its various initiatives such as issuance of Educational
Materials on Ind AS containing Frequently Asked Questions. For addressing
transition related queries in a timely and speedy manner, an Ind AS Transition
Facilitation Group (ITFG) of the Committee is working hard in providing timely
clarifications to members and others concerned. Queries raised are also
addressed through Support-desk for implementation of Ind AS. Apart from this,
the Committee organises Certificate Course on Ind AS, conducts In-house
training programmes on Ind AS for regulatory bodies such as C&AG, IRDAI etc.
and other corporate entities, develops e-learning modules on Ind AS, organises
seminars, awareness programmes on Ind AS and series of webcasts on Ind AS.

Educational Material on Ind AS

In order to provide guidance to members on Ind AS and to ensure
implementation of these Standards in the same spirit in which these have
been formulated, the Committee issues Educational Material on Ind AS,
which contains summary of the respective Standard and Frequently Asked
Questions (FAQs) which are expected to be encountered while implementing
the Standards. Educational Materials on following Ind AS have so far been
issued by the Committee:
 Educational Material on Ind AS 1, Presentation of Financial
Statements (Revised 2016)
 Educational Material on Ind AS 2, Inventories (Revised 2016)
 Educational Material on Ind AS 7, Statement of Cash Flows (Revised
2016)
 Educational Material on Ind AS 10, Events after the Reporting period
165
Ind AS: An Overview

 Educational Material on Ind AS 16, Property, Plant and Equipment

 Educational Material on Ind AS 18, Revenue (Revised 2017)
 Educational Material on Ind AS 37, Provisions, Contingent Liabilities
and Contingent Assets (Revised 2016)
 Educational Material on Ind AS 101, First-time Adoption of Indian
Accounting Standards
 Educational Material on Ind AS 108, Operating Segments

Certificate Course on Ind AS

An extensive Certificate course on Ind AS is being organised by the
Committee for educating members about Ind AS. The duration of the course
is 12 days. Classes are held at weekends. Apart from the comprehensive
theoretical aspects, this course sharpens the expertise and excellence of the
members of the ICAI through multiple case studies across the industry and
service sector. A certificate is awarded to the participants after attending and
satisfactorily completing the course and passing the examination. Certificate
Course on Ind AS exam is conducted on second Sunday of every quarter end
(i.e. March, June, September and December). For Further details about the
course, click on the following link:
http://www.icai.org/post.html?post_id=3562&c_id=266.

Ind AS Transition Facilitation Group (ITFG)

Pursuant to the issuance of roadmap for Ind AS implementation, Ind AS are
applicable to certain companies from 1st April, 2016 on mandatory basis.
Following which, various issues related to the applicability of Ind
AS/Implementation under Companies (Indian Accounting Standards) Rules,
2015, are being raised by preparers, users and other stakeholders.
Considering the need to address various issues raised on urgent basis an
Ind AS Transition Facilitation Group (ITFG) has been constituted. The Group
issues clarification bulletins addressing implementation issues from time to
time. These clarifications are very useful to the members of the profession
and to other concerned stakeholders in proper understanding and
implementation of Ind AS and its roadmap. The Group is continuously in
receipt of various issues on Ind AS and the same are being considered to be
addressed at the earliest.
So far, 11 ITFG Clarification bulletins have been brought out addressing 75

166
 Ind AS Implementation Initiatives

issues.

Support Desk for implementation of Ind AS

Support Desk for implementation of Ind AS has been launched, wherein the
members can submit their queries, questions, suggestions online. Many
queries have been resolved through the support desk.

Awareness programmes on Ind AS

The Committee also organises one/two days awareness programme on Ind
AS at various locations across the Country. In these awareness programmes,
training on the basic Standards which form the premise for preparation and
presentation of financial statements under Ind AS, such as, Ind AS related to
presentation of financial statements, consolidation, business combinations,
financial instruments, revenue recognition, first-time adoption etc. is
imparted. Difference between Ind AS and AS are also specifically covered in
order to educate the members and stakeholders about how accounting under
Ind AS would be different from AS. These awareness programmes are very
helpful for the participants in getting ready for implementing Ind AS.

Ind AS training programmes for Regulators,

Corporates and other organizations
The Committee also organises in-house training programmes on Ind AS for
various regulators, organisations and corporate houses.

E-learning Modules on Ind AS

In order to provide web based access of learning materials on Ind AS, e-
learning lectures on Ind AS have been developed. So far, E-learning Modules
on 12 Ind AS have been issued and the same are available at icaitv.com.

167
 Appendix - A

Comparison of IFRS with Ind AS notified by the

MCA
S No. IFRS/ Indian Name
IAS Accounting
Standard
1. IAS 1 Ind AS 1 Presentation of Financial Statements
2. IAS 2 Ind AS 2 Inventories
3. IAS 7 Ind AS 7 Statement of Cash Flows
4. IAS 8 Ind AS 8 Accounting Policies, Changes in
Accounting Estimates and Errors
5. IAS 10 Ind AS 10 Events after the Reporting Period
6. IAS 11 Ind AS 11 Construction Contracts
7. IAS 12 Ind AS 12 Income Taxes
8. IAS 16 Ind AS 16 Property, Plant and Equipment
9. IAS 17 Ind AS 17 Leases
10. IAS 18 Ind AS 18 Revenue
11. IAS 19 Ind AS 19 Employee Benefits
12. IAS 20 Ind AS 20 Accounting for Government Grants
and Disclosure of Government
Assistance
13. IAS 21 Ind AS 21 The Effects of Changes in Foreign
Exchange Rates
14. IAS 23 Ind AS 23 Borrowing Costs
15. IAS 24 Ind AS 24 Related Party Disclosures
16. IAS 26 * Accounting and Reporting by
Retirement Benefit Plans
17. IAS 27 Ind AS 27 Separate Financial Statements
18. IAS 28 Ind AS 28 Investments in Associates and Joint
Ventures
19. IAS 29 Ind AS 29 Financial Reporting in
Hyperinflationary Economies
168
 Appendix - A

S No. IFRS/ Indian Name

IAS Accounting
Standard
20. IAS 32 Ind AS 32 Financial Instruments: Presentation
21. IAS 33 Ind AS 33 Earnings per Share
22. IAS 34 Ind AS 34 Interim Financial Reporting
23. IAS 36 Ind AS 36 Impairment of Assets
24. IAS 37 Ind AS 37 Provisions, Contingent Liabilities and
Contingent Assets
25. IAS 38 Ind AS 38 Intangible Assets
26. IAS 39 ** Financial Instruments: Recognition
and Measurement
27. IAS 40 Ind AS 40 Investment Property
28. IAS 41 Ind AS 41 Agriculture
29. IFRS 1 Ind AS 101 First-time Adoption of Indian
Accounting Standards
30. IFRS 2 Ind AS 102 Share-based Payment
31. IFRS 3 Ind AS 103 Business Combinations
32. IFRS 4 Ind AS 104 Insurance Contracts
33. IFRS 5 Ind AS 105 Non-current Assets Held for Sale and
Discontinued Operations
34. IFRS 6 Ind AS 106 Exploration for and Evaluation of
Mineral Resources
35. IFRS 7 Ind AS 107 Financial Instruments: Disclosures
36. IFRS 8 Ind AS 108 Operating Segments
37. IFRS 9 Ind AS 109 Financial Instruments
38. IFRS 10 Ind AS 110 Consolidated Financial Statements
39. IFRS 11 Ind AS 111 Joint Arrangements
40. IFRS 12 Ind AS 112 Disclosure of Interest in Other Entities
41. IFRS 13 Ind AS 113 Fair Value Measurement
42. IFRS 14 Ind AS 114 Regulatory Deferral Account
43. IFRS 15 Ind AS Revenue from Contracts with
corresponding Customers (Effective from January
to IFRS 15, 01, 2018 will replace IAS 18 and IAS
IFRS 16 and 11)

169
 Ind AS: An Overview

S No. IFRS/ Indian Name

IAS Accounting
Standard
44. IFRS 16 IFRS 17 are Leases (Effective from January 01,
under 2019, will replace IAS 17)
45. IFRS 17 formulation Insurance Contracts (Effective from
January 01, 2021, will replace IFRS
4)
* Ind AS corresponding to IAS 26, Accounting and Reporting by Retirement
Benefit Plans, has not been issued as this standard is not applicable to
companies.
** Since India has decided to converge early with IFRS 9, Financial
Instruments. Accordingly, Ind AS 109, Financial Instruments, has been
issued and Ind AS 39, Financial Instruments: Recognition and
Measurement, has not been issued.

170
 Appendix - B

IFRICs/SICs included in the corresponding

Appendices to Ind AS
As per the scheme of formulation of Indian Accounting Standards, the
interpretations issued by the IASB, IFRIC and SIC be added as an appendix
with the relevant Ind AS.
S IFRIC/ Corresponding IFRIC/SIC
No. SIC No. Appendix included in
Ind AS
1. IFRIC 1 Appendix A to Ind AS 16 Changes in Existing
Decommissioning,
Restoration and Similar
Liabilities
2. IFRIC 2 # Members’ Shares in
Co-operative Entities and
Similar Instruments
3. IFRIC 4 Appendix C to Ind AS 17 Determining whether an
Arrangement contains a
Lease
4. IFRIC 5 Appendix A to Ind AS 37 Rights to Interests arising
from Decommissioning,
Restoration and
Environmental
Rehabilitation Funds
5. IFRIC 6 Appendix B to Ind AS 37 Liabilities arising from
Participating in a Specific
Market—Waste Electrical
and Electronic Equipment
6. IFRIC 7 Appendix A to Ind AS 29 Applying the Restatement
Approach under Ind AS
29 Financial Reporting in
Hyperinflationary
Economies
7. IFRIC 9 Not included as Ind AS Reassessment of
171
Ind AS: An Overview

S IFRIC/ Corresponding IFRIC/SIC

No. SIC No. Appendix included in
Ind AS
39 have been replaced Embedded Derivatives
with Ind AS 109
8. IFRIC 10 Appendix A to Ind AS 34 Interim Financial
Reporting and Impairment
9. IFRIC 12 Appendix A to Ind AS 11 Service Concession
Arrangements
10. IFRIC 13 Appendix B to Ind AS 18 Customer Loyalty
Programmes

11. IFRIC 14 Appendix B to Ind AS 19 Ind AS 19— The Limit on

a Defined Benefit Asset,
Minimum Funding
Requirements and their
Interaction
12. IFRIC 16 Appendix C to Ind AS 109 Hedges of a Net
Investment in a Foreign
Operation
13. IFRIC 17 Appendix A to Ind AS 10 Distributions of Non-cash
Assets to Owners
14. IFRIC 18 Appendix C to Ind Transfer of Assets from
AS 18 Customers
15. IFRIC 19 Appendix D to Ind AS 109 Extinguishing Financial
Liabilities with Equity
Instruments
16. IFRIC 20 Appendix B to Ind AS 16 Stripping Cost in the
Production Phase of a
Surface Mine
17. IFRIC 21 Appendix C to Ind AS 37 Levies
18. IFRIC 22 Under formulation (As an Foreign Currency
Appendix to Ind AS 21) Transactions and
Advance Consideration
(Effective from 1 January,
2018)
19. IFRIC 23 Under formulation (As an Uncertainty over Income

172
 Appendix - B

S IFRIC/ Corresponding IFRIC/SIC

No. SIC No. Appendix included in
Ind AS
Appendix to Ind AS 12) Tax Treatments (Effective
from 1 January 2019)
20. SIC-7 ## Introduction of Euro
21. SIC-10 Appendix A to Ind AS 20 Government Assistance—
No Specific Relation to
Operating Activities
22. SIC-15 Appendix A to Ind AS 17 Operating Leases—
Incentives
23. SIC-25 Appendix A to Ind AS 12 Income Taxes—Changes
in the Tax Status of an
Entity or its Shareholders
24. SIC-27 Appendix B to Ind AS 17 Evaluating the Substance
of Transactions Involving
the Legal Form of a
Lease
25. SIC-29 Appendix B to Ind AS 11 Service Concession
Arrangements:
Disclosures
26. SIC-31 Appendix A to Ind AS 18 Revenue—Barter
Transactions Involving
Advertising Services
27. SIC-32 Appendix A to Ind AS 38 Intangible Assets—Web
Site Costs
# Appendix corresponding to IFRIC 2 is not issued as it is not relevant
for the companies.
## Appendix corresponding to SIC 7 is not issued as it is not relevant in
the Indian context.

173
 Appendix - C

Notification by MCA for Companies (Indian

Accounting Standards) Rules 2015
Government of India
Ministry of Corporate Affairs
Notification
New Delhi, dated 16th February 2015
G.S.R…………(E).- In exercise of the powers conferred by section 133 read
with section 469 of the Companies Act, 2013 (18 of 2013) and sub-section
(1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, hereby makes the following rules, namely:-
1. Short title and commencement- (1) These rules may be called the
Companies (Indian Accounting Standards) Rules, 2015.
(2) They shall come into force on the 1st day of April, 2015
2. Definitions- (1) In these rules, unless the context otherwise requires,-
(a) “Accounting Standards” means the standards of accounting, or
any addendum thereto for companies or class of companies as
specified in rule 3;
(b) “Act” means the Companies Act, 2013 (18 of 2013);
(c) “Annexure” in relation to these rules means the Annexure
containing the Indian Accounting Standards (Ind AS) appended
to these rules;
(d) “entity” means a company as defined in clause (20) of section 2
of the Act;
(e) “financial statements” means financial statements as defined in
clause (40) of section 2 of the Act;
(f) “net worth” shall have the meaning assigned to it in clause (57) of
section 2 of the Act.

174
 Appendix - C

(2) Words and expressions used herein and not defined in these rules
but defined in the Act shall have the same meaning respectively
assigned to them in the Act.
3. Applicability of Accounting Standards. - (1) The accounting
standards as specified in the Annexure to these rules to be called the
Indian Accounting Standards (Ind AS) shall be the accounting
standards applicable to classes of companies specified in rule 4.
(2) The Accounting standards as specified in Annexure to the
Companies (Accounting Standards) Rules, 2006 shall be the
Accounting Standards applicable to the companies other than the
classes of companies specified in rule 4.
(3) A company which follows the Indian Accounting Standards (Ind AS)
specified in Annexure to these rules in accordance with the provisions
of rule 4 shall follow such standards only.
(4) A company which follows the accounting standards specified in
Annexure to the Companies (Accounting Standards) Rules, 2006 shall
comply with such standards only and not the Standards specified in
Annexure to these rules.
4. Obligation to comply with Indian Accounting Standards (Ind AS). -
(1) The Companies and their auditors shall comply with the Indian
Accounting Standards (Ind AS) specified in Annexure to these rules in
preparation of their financial statements and audit respectively, in the
following manner, namely:-
(i) any company may comply with the Indian Accounting Standards
(Ind AS) for financial statements for accounting periods
beginning on or after 1 st April, 2015, with the comparatives for
the periods ending on 31st March, 2015, or thereafter;
(ii) the following companies shall comply with the Indian Accounting
Standards (Ind AS) for the accounting periods beginning on or
after 1st April, 2016, with the comparatives for the periods
ending on 31st March, 2016, or thereafter, namely:-
(a) companies whose equity or debt securities are listed or
are in the process of being listed on any stock exchange
in India or outside India and having net worth of rupees
five hundred crore or more;
(b) companies other than those covered by sub-clause (a) of

175
Ind AS: An Overview

clause (ii) of sub rule (1) and having net worth of rupees
five hundred crore or more;
(c) holding, subsidiary, joint venture or associate companies
of companies covered by sub-clause (a) of clause (ii) of
sub- rule (1) and sub-clause (b) of clause (ii) of sub- rule
(1) as the case may be; and
(iii) the following companies shall comply with the Indian Accounting
Standards (Ind AS) for the accounting periods beginning on or
after 1st April, 2017, with the comparatives for the periods
ending on 31st March, 2017, or thereafter, namely:-
(a) companies whose equity or debt securities are listed or
are in the process of being listed on any stock exchange
in India or outside India and having net worth of less than
rupees five hundred crore;
(b) companies other than those covered in clause (ii) of sub-
rule (1) and sub-clause (a) of clause (iii) of sub-rule (1),
that is, unlisted companies having net worth of rupees
two hundred and fifty crore or more but less than rupees
five hundred crore.
(c) holding, subsidiary, joint venture or associate companies
of companies covered under sub-clause (a) of clause (iii)
of sub- rule (1) and sub-clause (b) of clause (iii) of sub-
rule (1), as the case may be:
Provided that nothing in this sub-rule, except clause (i), shall apply to
companies whose securities are listed or are in the process of being
listed on SME exchange as referred to in Chapter XB or on the
Institutional Trading Platform without initial public offering in
accordance with the provisions of Chapter XC of the Securities and
Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009.
Explanation 1. - SME Exchange shall have the same meaning as
assigned to it in Chapter XB of the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations,
2009.
Explanation 2. - “Comparatives” shall mean comparative figures for the
preceding accounting period.

176
 Appendix - C

(2) For the purposes of calculation of net worth of companies under

sub-rule (1), the following principles shall apply, namely:-
(a) the net worth shall be calculated in accordance with the stand-
alone financial statements of the company as on 31st March,
2014 or the first audited financial statements for accounting
period which ends after that date;
(b) for companies which are not in existence on 31st March, 2014
or an existing company falling under any of thresholds specified
in sub-rule (1) for the first time after 31st March, 2014, the net
worth shall be calculated on the basis of the first audited
financial statements ending after that date in respect of which it
meets the thresholds specified in sub-rule (1).
Explanation.- For the purposes of sub-clause (b), the companies
meeting the specified thresholds given in sub-rule (1) for the first time
at the end of an accounting year shall apply Indian Accounting
Standards (Ind AS) from the immediate next accounting year in the
manner specified in sub-rule (1).
Illustration .- (i) The companies meeting threshold for the first time as
on 31st March, 2017 shall apply Ind AS for the financial year 2017 -18
onwards.
(ii) The companies meeting threshold for the first time as on 31st
March, 2018 shall apply Ind AS for the financial year 2018-19 onwards
and so on.
(3) Standards in Annexure to these rules once required to be
complied with in accordance with these rules, shall apply to both
stand-alone financial statements and consolidated financial
statements.
(4) Companies to which Indian Accounting Standards (Ind AS) are
applicable as specified in these rules shall prepare their first set of
financial statements in accordance with the Indian Accounting
Standards (Ind AS) effective at the end of its first Indian Accounting
Standards (Ind AS) reporting period.
Explanation.- For the removal of doubts, it is hereby clarified that the
companies preparing financial statements applying the Indian
Accounting Standards (Ind AS) for the accounting period beginning on
1st April, 2016 shall apply the Indian Accounting Standards (Ind AS)
effective for the financial year ending on 31st March, 2017.

177
Ind AS: An Overview

(5) Overseas subsidiary, associate, joint venture and other similar

entities of an Indian company may prepare its standalone financial
statements in accordance with the requirements of the specific
jurisdiction:
Provided that such Indian company shall prepare its consolidated
financial statements in accordance with the Indian Accounting
Standards (Ind AS) either voluntarily or mandatorily if it meets the
criteria as specified in sub-rule (1).
(6) Indian company which is a subsidiary, associate, joint venture and
other similar entities of a foreign company shall prepare its financial
statements in accordance with the Indian Accounting Standards (Ind
AS) either voluntarily or mandatorily if it meets the criteria as specified
in sub-rule (1).
(7) Any company opting to apply the Indian Accounting Standards (Ind
AS) voluntarily as specified in sub-rule (1) for its financial statements
shall prepare its financial statements as per the Indian Accounting
Standards (Ind AS) consistently.
(8) Once the Indian Accounting Standards (Ind AS) are applied
voluntarily, it shall be irrevocable and such companies shall not be
required to prepare another set of financial statements in accordance
with Accounting Standards specified in Annexure to Companies
(Accounting Standards) Rules, 2006.
(9) Once a company starts following the Indian Accounting Standards
(Ind AS) either voluntarily or mandatorily on the basis of criteria
specified in sub-rule (1), it shall be required to follow the Indian
Accounting Standards (Ind AS) for all the subsequent financial
statements even if any of the criteria specified in this rule does not
subsequently apply to it.
5. Exemptions. The insurance companies, banking companies and non-
banking finance companies shall not be required to apply Indian
Accounting Standards (Ind AS) for preparation of their financial
statements either voluntarily or mandatorily as specified in sub-rule (1)
of rule 4.
[File Number 01/01/2009/CL-V(Part)]

[Ajai Das Mehrotra]

Joint Secretary to Government of India

178
 Appendix - C

Annexure
[See rule 3]
A. General Instruction. - (1) Indian Accounting Standards, which are
specified, are intended to be in conformity with the provisions of
applicable laws. However, if due to subsequent amendments in the
law, a particular Indian Accounting Standard is found to be not in
conformity with such law, the provisions of the said law shall prevail
and the financial statements shall be prepared in conformity with such
law.
(2) Indian Accounting Standards are intended to apply only to items which
are material.
(3) The Indian Accounting Standards include paragraphs set in bold italic
type and plain type, which have equal authority. Paragraphs in bold
italic type indicate the main principles. An individual Indian Accounting
Standard shall be read in the context of the objective, if stated, in that
Indian Accounting Standard and in accordance with these General
Instructions.
B. Indian Accounting Standards (Ind AS)
[Notification provides text of all Standards]

179
Ind AS: An Overview

Extracts of Notification by MCA for Companies

(Indian Accounting Standards) Amendment Rules,
2016
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 30th March, 2016
G.S.R. 365 (E).—In exercise of the powers conferred by section 133 read
with section 469 of the Companies Act, 2013 (18 of 2013) and sub-section
(1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, hereby makes the following rules to amend the
Companies (Indian Accounting Standards) Rules, 2015, namely:—
(i) Short title and commencement.-(1) These rules may be called the
Companies (Indian Accounting Standards) (Amendment) Rules, 2016.
(2) They shall come into force on the date of their publication in the
Official Gazette.
(ii) In the Companies (Indian Accounting Standards) Rules, 2015
(hereinafter referred to as the principal rules) in rule 2, in sub-rule (1),
after clause (f), the following clause shall be inserted, namely:-
‘(g) “Non-Banking Financial Company” means a Non-Banking
Financial Company as defined in clause (f) of section 45-I of the
Reserve Bank of India Act, 1934 and includes Housing Finance
Companies, Merchant Banking companies, Micro Finance Companies,
Mutual Benefit Companies, Venture Capital Fund Companies, Stock
Broker or Sub-Broker Companies, Nidhi Companies, Chit Companies,
Securitisation and Reconstruction Companies, Mortgage Guarantee
Companies, Pension Fund Companies, Asset Management
Companies and Core Investment Companies.’.
(iii) In the principal rules, in rule 4,-
(I) in sub-rule (1),-
(a) in clause (i), for the words “any company” the words “ any
company and its holding, subsidiary, joint venture or associate
company” shall be substituted;

180
 Appendix - C

(b) after clause (iii), the following clauses shall be inserted,

namely:-
“ (iv) Notwithstanding the requirement of clauses (i) to (iii),
Non-Banking Financial Companies (NBFCs) shall comply
with the Indian Accounting Standards (Ind ASs) in
preparation of their financial statements and audit
respectively, in the following manner, namely:-
(a) The following NBFCs shall comply with the Indian Accounting
Standards (Ind AS) for accounting periods beginning on or after
the 1st April, 2018, with comparatives for the periods ending on
31st March, 2018, or thereafter—
(A) NBFCs having net worth of rupees five hundred crore or
more;
(B) holding, subsidiary, joint venture or associate companies
of companies covered under item (A), other than those
already covered under clauses (i), (ii) and (iii) of sub-rule
(1) of rule 4.
(b) The following NBFCs shall comply with the Indian Accounting
Standards (Ind AS) for accounting periods beginning on or after
the 1st April, 2019, with comparatives for the periods ending on
31st March, 2019, or thereafter—
(A) NBFCs whose equity or debt securities are listed or in
the process of listing on any stock exchange in India or
outside India and having net worth less than rupees five
hundred crore;
(B) NBFCs, that are unlisted companies, having net worth of
rupees two-hundred and fifty crore or more but less than
rupees five hundred crore; and
(C) holding, subsidiary, joint venture or associate companies
of companies covered under item (A) or item (B) of sub-
clause (b), other than those already covered in clauses
(i), (ii) and (iii) of sub-rule (1) or item (B) of sub-clause
(a) of clause (iv).
Explanation.- For the purposes of clause (iv), if in a group
of Companies, some entities apply Accounting Standards
specified in the Annexure to the Companies (Accounting

181
Ind AS: An Overview

Standards) Rules, 2006 and others apply accounting

standards as specified in the Annexure to these rules, in
such cases, for the purpose of individual financial
statements, the entities should apply respective
standards applicable to them. For preparation of
consolidated financial statements, the following conditions
are to be followed, namely:-
(i) where an NBFC is a parent (at ultimate level or at
intermediate level), and prepares consolidated
financial statements as per Accounting Standards
specified in the Annexure to the Companies
(Accounting Standards) Rules, 2006, and its
subsidiaries, associates and joint ventures, if
covered by clause (i), (ii) and (iii) of sub-rule (1)
has to provide the relevant financial statement data
in accordance with the accounting policies followed
by the parent company for consolidation purposes
(until the NBFC is covered under clause (iv) of sub-
rule (1);
(ii) where a parent is a company covered under clause
(i), (ii) and (iii) of sub-rule (1) and has an NBFC
subsidiary, associate or a joint venture, the parent
has to prepare Ind AS-compliant consolidated
financial statements and the NBFC subsidiary,
associate and a joint venture has to provide the
relevant financial statement data in accordance
with the accounting policies followed by the parent
company for consolidation purposes (until the
NBFC is covered under clause (iv) of sub-rule (1).
(v) Notwithstanding clauses (i) to (iv), the holding,
subsidiary, joint venture or associate companies of
Scheduled commercial banks (excluding RRBs) would be
required to prepare Ind AS based financial statements for
accounting periods beginning from 1 st April, 2018
onwards, with comparatives for the periods ending 31 st
March, 2018 or thereafter:”;
(II) in sub-rule (2), for the words brackets and figure “sub-rule (1)’’
the words, brackets and figures “clause (i), (ii) and (iii) of sub-

182
 Appendix - C

rule (1)’’, shall be substituted, wherever they occur;

(III) after sub-rule (2), the following sub-rule shall be inserted,
namely:-
“(2A) For the purposes of calculation of net worth of Non-
Banking Financial Companies covered under clause (iv)
of sub-rule (1), the following principles shall apply,
namely:-
(a) the net worth shall be calculated in accordance with
the stand-alone financial statements of the NBFCs
as on 31st March, 2016 or the first audited financial
statements for accounting period which ends after
that date;
(b) for NBFCs which are not in existence on 31st
March, 2016 or an existing NBFC falling first time,
after 31st March, 2016, the net worth shall be
calculated on the basis of the first audited stand-
alone financial statements ending after that date, in
respect of which it meets the thresholds.
Explanation.- For the purposes of sub-clause (b), the NBFCs
meeting the specified thresholds given in sub-clause (b) of
clause (iv) of sub-rule (1) for the first time at the end of an
accounting year shall apply Indian Accounting Standards (Ind
ASs) from the immediate next accounting year in the manner
specified in sub-clause (b) of clause (iv) of sub-rule (1).
Illustration- (i) The NBFCs meeting threshold for the first time
as on 31 st March, 2019 shall apply Ind AS for the
financial year 2019-20 onwards.
(ii) The NBFCs meeting threshold for the first time as on
31st March, 2020 shall apply Ind AS for the financial
year 2020-21 onwards and so on.’’;
(IV) in the Explanation to sub-rule (4),-
(a) after the words, figures and letters ‘the Indian Accounting
Standards (Ind AS) for the accounting period beginning on
1stApril, 2016’ the words, figures and letters ‘‘or 1 stApril, 2018,
as the case may be’’ shall be inserted;

183
Ind AS: An Overview

(b) after the words, figures and letters ‘effective for the
financial year ending on 31 st March, 2017’ the words, figures
and letters ‘or 31st March, 2019, as the case may be’, shall be
inserted;
(V) in the proviso to sub-rule (5), sub-rule (6) and sub-rule (9), the
words ‘either voluntarily or mandatorily’ shall be omitted.
(iv) for rule 5, the following rule shall be substituted, namely:-
“(5) The Banking Companies and Insurance Companies
shall apply the Ind ASs as notified by the Reserve
Bank of India (RBI) and Insurance Regulatory
Development Authority (IRDA) respectively. An
insurer or insurance company shall however, provide
Ind AS compliant financial statement data for the
purposes of preparation of consolidated financial
statements by its parent or investor or venturer, as
required by the parent or investor or venturer to
comply with the requirements of these rules.’’.

184
 Appendix- D

Extracts of Roadmap for implementation of Ind AS

for Scheduled Commercial Banks (Excluding
RRBs) and Insurers/Insurance Companies (as
issued vide Press release dated January 18,
2016)5
(I) Scheduled commercial banks (excluding RRBs) and Insurer/Insurance
Companies:
(a) Scheduled commercial banks (excluding Regional Rural Banks
(RRBs), All-India Term-lending Refinancing Institutions (i.e. Exim
Bank, NABARD, NHB and SIDBI) and Insurers/Insurance companies
would be required to prepare Ind AS based financial statements for
accounting periods beginning from April 1, 2018 onwards, with
comparatives for the periods ending March 31, 2018 or thereafter. Ind
AS would be applicable to both consolidated and individual financial
statements.
(b) Notwithstanding the roadmap for companies, the holding, subsidiary,
joint venture or associate companies of Scheduled commercial banks
(excluding RRBs) would be required to prepare Ind AS based financial
statements for accounting periods beginning from April 1, 2018
onwards, with comparatives for the periods ending March 31, 2018 or
thereafter.
(c) Urban Cooperative Banks (UCBs) and Regional Rural Banks (RRBs)
shall not be required to apply Ind AS and shall continue to comply with
the existing Accounting Standards, for the present.
(II) Scheduled commercial banks (excluding RRBs)/NBFCs/Insurance
companies/Insurers shall apply Indian Accounting Standards (Ind AS) only if

5IRDAI issued circular IRDA/F&A/CIR/ACTS/146/06/2017 dated June 28, 2017 whereby

the implementation of Ind AS in the Insurance Sector in India has been deferred for a
period of two years and the same shall now be implemented effective 2020-21.
Accordingly, this press release shall be read only in context of scheduled commercial
banks (excluding RRBs).
185
Ind AS: An Overview

they meet the specified criteria, they shall not be allowed to voluntarily adopt
Indian Accounting Standards (Ind AS). This, however, does not preclude an
insurer/insurance company/NBFC from providing Ind AS compliant financial
statement data for the purposes of preparation of consolidated financial
statements by its parent/investor, as required by the parent/investor to
comply with the existing requirements of law.

186