Quick Referencer
on
Indian Accounting Standards
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 Quick Referencer 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 2019.
Edition : November 2019
Committee/Department : Ind AS Implementation Committee
E-mail : indas@icai.in
Website : www.icai.org
Price : INR 160/-
ISBN : 978-81-8441-970-2
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.
Foreword
The need for converging to international financial reporting practices in India
is now being realised with the adoption of Indian Accounting Standards by
Indian companies that are converged International Financial Reporting
Standards. With incorporating the aspects of international financial reporting
framework and accounting practices, the financial statements of reporting
entities now provide a picture comparable on international level for the users.
This provides an ease in comparing the performance of multiple entities from
different countries.
Being one of the active formulators of the IFRS-converged Indian Accounting
Standards (Ind AS), the Institute of Chartered Accountants of India adheres
to the responsibility of successful and proper implementation of these
standards in the spirit they were formulated. For this purpose, the Institute of
Chartered Accountants of India (ICAI) is actively engaged in providing
guidance to members and other stakeholders through Ind AS Implementation
Committee.
The Ind AS Implementation Committee of ICAI has brought out this Quick
Referencer on Ind AS with an objective to provide a basic understanding of
Ind ASs for the members.
I acknowledge with thanks the sincere efforts of Ind AS Implementation
Committee, and all the members of the Committee for bringing out this
publication. I would like to thank CA. Nihar Niranjan Jambusaria, Chairman
and CA. Dayaniwas Sharma, Vice-Chairman of the Ind AS Implementation
Committee for leading the progress of this publication and to take active
efforts in providing regular guidance to the members on adoption and
implementation of Ind ASs. I am confident that this publication will be very
useful for the members of the Institute and other concerned stakeholders.
CA. Prafulla P. Chhajed
President, ICAI
Preface
The implementation of the IFRS-converged Indian Accounting Standards (Ind
AS) has been driven by tireless efforts of the Institute of Chartered
Accountants of India (ICAI) to make sure that the financial reports of the
Indian entities are on par with the internationally accepted practices. The
importance on the adoption and implementation of these standards has been
stressed by ICAI through its various collective efforts in programs and
publications. With the phased adoption road map numerous entities are now
reporting their annual performances in accordance with the requirements of
these standards.
The Ind AS Implementation Committee has strived with its onerous efforts for
the implementation of these standards as per the crux and the spirit in which
they were formulated. The Ind AS Implementation Committee has conducted
countless programs to provide guidance to the members and other
stakeholders on the notified Ind AS. A great deal of publications such as
Educational Materials on Ind AS covering various issues are being
formulated and updated on a regular basis by the Committee. The Committee
has offered a helping hand to address the issues faced by the members
while transiting from the previous GAAP to Ind AS through the Ind AS
Technical Facilitation Group (ITFG). ITFG Clarification Bulletins are being
issued by the Ind AS Technical Facilitation Group (ITFG) which contain the
clarifications to the implementation issues reported to the group in a speedy
and timely manner. Regular batches for Certificate Course on Ind AS with
quarterly examinations are being conducted throughout the year and in
multiple locations throughout the nation.
Looking at the vast literature of the Indian Accounting Standards and the
practical problems of skimming through the entire literature when in need of
an aspect to be looked upon, the Committee progressed with the thought of
bringing in the ease of use and referral characteristic to this issue by creating
a publication that gives a glance on the basic aspects of applicable
standards in a summarised manner. This idea is realised in the form of Quick
Referencer on Indian Accounting Standards. This publication provides only a
glance through the applicable Ind ASs and for a better and detailed
understanding of Ind ASs, it is advisable go thoroughly through the entire text
of the Standards and publications such as Educational Materials and ITFG
Clarification Bulletins.
I am gratefully thankful to the Honourable President, CA. Prafulla Premsukh
Chhajed and the Vice-President, CA. Atul Kumar Gupta for providing us the
opportunity of bringing out this publication. I am also thankful to CA.
Dayaniwas Sharma, Vice-Chairman of Ind AS Implementation Committee
and all the members of the Ind AS Implementation Committee for their
valuable contribution in various endeavours of the Committee.
I would like to place on record appreciation of technical contribution made by
CA. Geetanshu Bansal, Secretary, Ind AS Implementation Committee and
CA. Choshal Patil in bringing out this publication. I would also like to thank
CA. Vidhyadhar Kulkarni, Head, Technical Directorate for his support.
I sincerely believe that this publication would help members and other
stakeholders to get a basic understanding of Ind ASs.
CA. Nihar Niranjan Jambusaria
Chairman
Ind AS Implementation Committee
Contents
Sl. Page No.
No.
1 Ind AS 101, First-time Adoption of Indian Accounting 1
Standards
2 Ind AS 102, Share-based Payment 7
3 Ind AS 103, Business Combinations 13
4 Ind AS 104, Insurance Contracts 21
5 Ind AS 105, Non-current Assets Held for Sale and 24
Discontinued Operations
6 Ind AS 106, Exploration for and Evaluation of Mineral 26
Resources
7 Ind AS 107, Financial Instruments: Disclosures 29
8 Ind AS 108, Operating Segments 35
9 Ind AS 109, Financial Instruments 37
10 Ind AS 110, Consolidated Financial Statements 44
11 Ind AS 111, Joint Arrangements 48
12 Ind AS 112, Disclosure of Interest in Other Entities 50
13 Ind AS 113, Fair Value Measurement 53
14 Ind AS 114, Regulatory Deferral Account 56
15 Ind AS 115, Revenue from Contracts with Customers 59
16 Ind AS 116, Leases 65
17 Ind AS 1, Presentation of Financial Statements 75
18 Ind AS 2, Inventories 80
19 Ind AS 7, Statement of Cash Flows 83
20 Ind AS 8, Accounting Policies, Changes in Accounting 86
Estimates and Errors
21 Ind AS 10, Events after the Reporting Period 91
22 Ind AS 12, Income Taxes 95
23 Ind AS 16, Property, Plant and Equipment 100
24 Ind AS 19, Employee Benefits 105
25 Ind AS 20, Accounting for Government Grants and 111
Disclosure of Government Assistance
26 Ind AS 21, The Effects of Changes in Foreign Exchange 115
Rates
27 Ind AS 23, Borrowing Costs 120
28 Ind AS 24, Related Party Disclosures 122
29 Ind AS 27, Separate Financial Statements 128
30 Ind AS 28, Investments in Associates and Joint Ventures 130
31 Ind AS 29, Financial Reporting in Hyperinflationary 134
Economies
32 Ind AS 32, Financial Instruments: Presentation 139
33 Ind AS 33, Earnings per Share 144
34 Ind AS 34, Interim Financial Reporting 151
35 Ind AS 36, Impairment of Assets 156
36 Ind AS 37, Provisions, Contingent Liabilities and Contingent 161
Assets
37 Ind AS 38, Intangible Assets 167
38 Ind AS 40, Investment Property 173
39 Ind AS 41, Agriculture 177
40 List of applicable Indian Accounting Standards 179
41 Ind AS Implementation Initiatives 181
Ind AS 101, First-time Adoption of Indian
Accounting Standards
Ind AS 101 prescribes the accounting principles for first-time adoption of
Indian Accounting Standards (Ind AS). It lays down various `transition'
requirements when a company adopts Ind AS for the first time, i.e., a move
from Accounting Standards (Indian GAAP) to Ind AS. Conceptually, the
accounting under Ind AS should be applied retrospectively at the time of
transition to Ind AS. However, to ease the process of transition, Ind AS 101
provides certain exemptions from retrospective application of Ind ASs. The
exemptions are broadly categorised into those which are mandatory in nature
(i.e., cases where the company is not allowed to apply Ind AS
retrospectively) and those which are voluntary in nature (i.e., the company
may elect not to apply certain requirements of Ind AS retrospectively). Ind AS
101 also prescribes presentation and disclosure requirements to explain the
transition to the users of financial statements including explaining how the
transition from Indian GAAP to Ind AS affected the company's financial
position, financial performance and cash flows. Ind AS 101 does not provide
any exemption from the disclosure requirements in other Ind ASs.
Definitions
Ind AS 101 defines various terms used in the Standard. These are contained
in Appendix A to Ind AS 101. These definitions are important to understand
the requirements of Ind AS 101. Some of the key definitions are given below:
Date of transition to Ind AS: The beginning of the earliest period for which
an entity presents full comparative information under Ind AS in first Ind AS
financial statements.
Deemed cost: An amount used as a surrogate for cost or depreciated cost at
a given date. Subsequent depreciation or amortisation assumes that the
entity had initially recognised the asset or liability at the given date and that
its cost was equal to the deemed cost.
First Ind AS financial statements: The first annual financial statements in
which an entity adopts Ind AS, by an explicit and unreserved statement of
compliance with Ind ASs.
First Ind AS reporting period: The latest reporting period covered by an
entity's first Ind AS financial statements.
Quick Referencer on Ind AS
First-time adopter: An entity that presents its first Ind AS financial
statements.
Opening Ind AS balance sheet: An entity's balance sheet at the date of
transition to Ind ASs.
Previous GAAP: The basis of accounting that a first-time adopter used for
its statutory reporting requirements in India immediately before adopting Ind
ASs. For instance, companies required to prepare their financial statements
in accordance with Section 133 of the Companies Act, 2013, shall consider
those financial statements as previous GAAP financial statements.
Objective
To ensure that an entity's first Ind AS financial statements, and its interim
financial reports for part of the period covered by those financial statements,
contain high quality information that:
(a) is transparent and comparable over all periods presented;
(b) provides a suitable starting point for accounting in accordance with Ind
ASs; and
(c) its cost does not exceed the benefits.
Scope
An entity shall apply Ind AS 101 in its first Ind AS financial statements and
each interim financial report, if any, that it presents in accordance with Ind
AS 34, Interim Financial Reporting, for part of the period covered by its first
Ind AS financial statements.
Opening Ind AS Balance Sheet
An entity shall prepare and present an opening Ind AS Balance Sheet at the
date of transition to Ind ASs. This is the starting point for its accounting in
accordance with Ind ASs.
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. These accounting policies should comply with each Ind
AS effective at the end of its first Ind AS reporting period.
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Quick Referencer on Ind AS
Subject to mandatory exceptions and voluntary exemptions (if elected) an
entity shall, in its opening Ind AS Balance Sheet:
(a) recognise all assets and liabilities whose recognition is required by Ind
ASs;
(b) not recognise items as assets or liabilities if Ind ASs 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 ASs; and
(d) apply Ind ASs 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 ASs, which shall be recognised directly in retained earnings (or, if
appropriate, another category of equity) at the date of transition to Ind ASs.
Estimates
In preparing Ind AS estimates at the date of transition to Ind ASs
retrospectively, the entity must use the inputs and assumptions that had
been used to determine previous GAAP estimates as of that date (after
adjustments to reflect any differences in accounting policies). The entity is
not permitted to use information that became available only after the
previous GAAP estimates were made except to correct an error.
Presentation and Disclosure
Ind AS 101 does not provide exemptions from the presentation and
disclosure requirements in other Ind ASs. This Ind AS 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.
Ind AS 101 requires disclosures that explain how the transition from previous
GAAP to Ind AS affected the entity's reported financial position, financial
performance and cash flows. This includes:
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Quick Referencer on Ind AS
1. reconciliations of equity reported under previous GAAP to equity under
Ind AS both (a) at the date of transition to Ind ASs and (b) the end of
the last annual period reported under the previous GAAP;
2. reconciliations of total comprehensive income for the last annual
period reported under previous GAAP to total comprehensive income
under Ind ASs for the same period;
3. explanation of material adjustments that were made, in adopting Ind
ASs for the first time, to the balance sheet statement of
comprehensive income and statement of cash flows;
4. if errors in previous GAAP financial statements were discovered in the
course of transition to Ind ASs, those must be separately disclosed;
5. if the entity recognised or reversed any impairment losses in
preparing its opening Ind AS balance sheet these must be disclosed;
and
6. appropriate explanations if the entity has elected to apply any of the
specific recognition and measurement exemptions permitted under Ind
AS 101 for instance, if it used fair values as deemed cost.
Explanation of transition to Ind ASs
Ind AS 101 requires that an entity should explain how the transition from
previous GAAP to Ind ASs affected its reported balance sheet, financial
performance and cash flows.
Exceptions to the retrospective application of other Ind
ASs
Ind AS 101 prohibits retrospective application of some aspects of other Ind
ASs, i.e., provides mandatory exception in relation to the following:
estimates;
derecognition of financial assets and financial liabilities;
hedge accounting;
non-controlling interests;
classification and measurement of financial assets;
impairment of financial assets;
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Quick Referencer on Ind AS
embedded derivatives; and
government loans.
An entity's estimates in accordance with Ind ASs at the date of transition to
Ind ASs should be consistent with estimates made for the same date in
accordance with previous GAAP (after adjustments to reflect any difference
in accounting policies), unless there is objective evidence that those
estimates were in error.
Further, Ind AS 101 provides the optional exemptions in context of some
requirements of Ind ASs where it has been felt that the retrospective
application could be difficult or could result in undue cost exceeding any
benefits to users. An entity shall not apply these exemptions by analogy to
other items. An entity may elect to use one or more of the exemptions in
relation to the following:
business combinations;
share-based payment transactions;
insurance contracts;
deemed cost;
leases;
cumulative translation differences;
long term foreign currency monetary items;
investments in subsidiaries, joint ventures and associates;
assets and liabilities of subsidiaries, associates and joint ventures;
compound financial instruments;
designation of previously recognised financial instruments;
fair value measurement of financial assets or financial liabilities at
initial recognition;
decommissioning liabilities included in the cost of property, plant and
equipment;
financial assets or intangible assets accounted for in accordance with
Appendix D to Ind AS 115 (Service Concession Arrangements);
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Quick Referencer on Ind AS
borrowing costs;
extinguishing financial liabilities with equity instruments;
severe hyperinflation;
joint arrangements;
stripping costs in the production phase of a surface mine;
designation of contracts to buy or sell a non-financial item;
revenue;
non-current assets held for sale and discontinued operations; and
foreign currency transactions and advance consideration.
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Quick Referencer on Ind AS
Ind AS 102, Share-based Payment
The objective of this Standard 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. Further,
goods or services received in a share-based payment transaction are
measured at fair value.
Share-based payment arrangement is an agreement between the entity (or
another group entity or any shareholder of any group entity) and another party
(including an employee) that entitles the other party to receive:
(a) cash or other assets of the entity 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, or
(b) equity instruments (including shares or share options) of the entity or
another group entity, provided the specified vesting conditions, if any, are
met.
Share-based payment transaction is a transaction in which the entity:
(a) receives goods or services from the supplier of those goods or services
(including an employee) in a share-based payment arrangement, or
(b) incurs an obligation to settle the transaction with the supplier in a share-
based payment arrangement when another group entity receives those
goods or services.
Vest means to become an entitlement. Under a share-based payment
arrangement, a counterparty's right to receive cash, other assets or equity
instruments of the entity vests when the counterparty's entitlement is no longer
conditional on the satisfaction of any vesting conditions.
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
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.
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Quick Referencer on Ind AS
When the goods or services received or acquired in a share-based payment
transaction do not qualify for recognition as assets, they should 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 equity instruments
(including shares or share options) of another group entity, 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.
Equity-settled share-based payment transactions
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 should
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
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Quick Referencer on Ind AS
at the date the entity obtains the goods or the counterparty renders
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 (other than market
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 (other than market
condition).
(d) an entity shall measure the fair value of equity instruments granted at
the grant date, based on market prices if available, taking into account
the terms and conditions upon which those equity instruments were
granted subject to certain requirements specified in the Standard. 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 and willing parties.
Cash-settled share-based payment transactions
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 certain requirements. Until the liability is settled, the
entity shall remeasure the fair value of the liability at the end of each
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Quick Referencer on Ind AS
reporting period and at the date of settlement, with any changes in fair value
recognised in profit or loss for the period.
Share-based payment transactions with cash
alternatives
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
instruments, the entity should account for that transaction, or the
components of that transaction, as:
a) 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
b) an equity-settled share based payment transaction if, and to the extent
that, no such liability has been incurred.
Thus, grants in which the counterparty has the choice of equity or cash
settlement are accounted for as compound instruments. Therefore, the entity
accounts for a liability component and a separate equity component.
However, the classification of grants in which the entity has the choice of
equity or cash settlement depends on whether the entity has the ability and
intent to settle in shares.
Modifications and cancellations of employee
transactions
-- In case of modification to the terms and conditions on which equity
instruments were granted, the entity recognises, as a minimum, the
goods or services measured at the grant date fair value of equity
instruments. In addition, the entity recognises effects of modifications
that increase the total fair value of the share-based payment
arrangement or are otherwise beneficial to the employee. Any
decrease in fair value is ignored. Replacements are accounted for as
modifications.
-- The entity accounts for the cancellation or settlement as an
acceleration of vesting.
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Quick Referencer on Ind AS
Group share-based payment arrangements
A share-based payment transaction may be settled by another group entity
(or a shareholder of any group entity) on behalf of the entity receiving or
acquiring the goods or services. The Standard also applies to an entity that:
(a) receives goods or services when another entity in the same group (or
a shareholder of any group entity) has the obligation to settle the
share-based payment transaction, or
(b) has an obligation to settle a share-based payment transaction when
another entity in the same group receives the goods or services unless
the transaction is clearly for a purpose other than payment for goods
or services supplied to the entity receiving them.
A receiving entity that has no obligation to settle the transaction
accounts for the share-based payment transaction as equity-settled.
A settling entity classifies a share-based payment transaction as
equity-settled if it is obliged to settle in its own equity instruments;
otherwise, it classifies the transaction as cash-settled.
Share-based payment transactions with a net settlement
feature for withholding tax obligations
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:
a share-based payment arrangement with a net settlement feature for
which there is no obligation on the entity under tax laws or regulations
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Quick Referencer on Ind AS
to withhold an amount for an employee's tax obligation associated with
that share-based payment; or
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.
Disclosures
An entity shall disclose information that enables users of the financial
statements to understand
-- the nature and extent of share-based payment arrangements that
existed during the period;
-- how the fair value of the goods or services received, or the fair value
of the equity instruments granted, during the period was determined;
-- the effect of share-based payment transactions on the entity's profit or
loss for the period and on its financial position.
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Quick Referencer on Ind AS
Ind AS 103, Business Combinations
Business is an integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the form of
dividends, lower costs or other economic benefits directly to investors or
other owners, members or participants.
Business combination is a transaction or other event in which an acquirer
obtains control of one or more businesses. Transactions sometimes referred
to as `true mergers' or `mergers of equals' are also business combinations as
that term is used in this Ind AS.
Ind AS 103 must be applied when accounting for business combinations but
does not apply to (1) formation of a joint venture; (2) The acquisition of an
asset or group of assets that is not a business, although general guidance is
provided on how such transactions should be accounted; and (3) acquisition
by an investment entity, as defined in Ind AS 110, Consolidated Financial
Statements, of an investment in a subsidiary that is required to be measured
at fair value through profit or loss. Appendix C to Ind AS 110 deals with
accounting for combination of entities or businesses under common control.
Determining whether a transaction is a business combination:
· Business combinations can occur in various ways, such as by
transferring cash, incurring liabilities, issuing equity instruments (or
any combination thereof), or by not issuing consideration at all (i.e. by
contract alone)
· Business combinations can be structured in various ways to satisfy
legal, taxation or other objectives, including one entity becoming a
subsidiary of another, the transfer of net assets from one entity to
another or to a new entity.
· The business combination must involve the acquisition of a business,
which generally has three elements:
Inputs an economic resource (e.g. non-current assets,
intellectual property) that creates outputs when one or more
processes are applied to it
Process a system, standard, protocol, convention or rule
that when applied to an input or inputs, creates outputs (e.g.
strategic management, operational processes, resource
management)
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Output the result of inputs and processes applied to those
inputs.
The acquisition method
An entity should account for each business combination by applying the
acquisition method, which requires:
(a) identifying the acquirer;
(b) determining the acquisition date;
(c) recognising and measuring the identifiable assets acquired, the
liabilities assumed and any non-controlling interest in the acquiree;
and
(d) recognising and measuring goodwill or a gain from a bargain
purchase.
For each business combination, one of the combining entities should be
identified as the acquirer.
The acquirer should identify the acquisition date, which is the date on which
it obtains control of the acquiree.
Recognising and measuring the identifiable assets
acquired, the liabilities assumed and any non-controlling
interest in the acquire
Recognition principle
As of the acquisition date, the acquirer should recognise, separately from
goodwill, the identifiable assets acquired, the liabilities assumed and any
non-controlling interest in the acquiree.
Measurement principle
The acquirer should measure the identifiable assets acquired and the
liabilities assumed at their acquisition date fair values.
The acquirer should measure at the acquisition date, components of non-
controlling interest in the acquiree that are present ownership interests and
entitle their holders to a proportionate share of the entity's net assets in the
event of liquidation at either:
(a) fair value; or
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(b) the present ownership instruments' proportionate share in the
recognised amounts of the acquiree's identifiable net assets.
All other components of non-controlling interests should be measured at their
acquisition date fair values, unless another measurement basis is required by
Ind AS.
Exception to the recognition principle
Contingent liabilities The acquirer recognises a contingent liability
assumed in a business combination at the
acquisition date if it is a present obligation that
arises from past events and its fair value can be
measured reliably, even if it is not probable that
an outflow of resources embodying economic
benefits will be required to settle the obligation.
Exceptions to both the recognition and measurement principles
Income taxes The acquirer shall recognise and measure a
deferred tax asset or liability arising from the
assets acquired and liabilities assumed in a
business combination and account for the
potential tax effects of temporary differences and
carry-forwards of an acquiree that exist at the
acquisition date or arise as a result of the
acquisition in accordance with Ind AS 12.
Employee benefits The acquirer shall recognise and measure a
liability (or asset, if any) related to the acquiree's
employee benefit arrangements in accordance
with Ind AS 19, Employee Benefits.
Indemnification assets If the indemnification relates to an asset or a
liability that is recognised at the acquisition date
and measured at its acquisition-date fair value,
the acquirer shall recognise the indemnification
asset at the acquisition date measured at its
acquisition-date fair value.
Leases in which The acquirer shall recognise right-of-use assets
acquiree is the lessee and lease liabilities for leases identified in
accordance with Ind AS 116, Leases in which
the acquiree is the lessee.
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The acquirer shall measure the lease liability at
the present value of the remaining lease
payments as if the acquired lease were a new
lease at the acquisition date. The acquirer shall
measure the right-of-use asset at the same
amount as the lease liability, adjusted to reflect
favourable or unfavourable terms of the lease
when compared with market terms.
Exceptions to measurement principle
Reacquired rights The acquirer shall measure the value of a
reacquired right recognised as an intangible
asset on the basis of the remaining contractual
term of the related contract regardless of
whether market participants would consider
potential contractual renewals when measuring
its fair value.
Share-based The acquirer shall measure a liability or an
payments equity instrument related to share-based
payment transactions of the acquiree or the
replacement of an acquiree's share-based
payment transactions with share-based payment
transactions of the acquirer in accordance with
the method in Ind AS 102, Share-based
Payment, at the acquisition date.
Asset held for sale The acquirer shall measure an acquired non-
current asset (or disposal group) that is
classified as held for sale at the acquisition date
in accordance with Ind AS 105, Non-current
Assets Held for Sale and Discontinued
Operations, at fair value less costs to sell.
Recognising and measuring goodwill or a gain from a
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.
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Bargain purchase
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 recognise
a gain (bargain purchase). The gain shall be recognised by the acquirer 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
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.
Applying the acquisition method to particular types of
business combinations
(I) A business combination achieved in stages
The acquirer shall remeasure its previously held equity interest in the
acquiree at its acquisition-date fair value and recognise the resulting gain or
loss in profit or loss or other comprehensive income, as appropriate.
(II) A business combination achieved without the transfer of
consideration
The acquirer shall attribute to the owners of the acquiree the amount of the
acquiree's net assets recognised in accordance with this Ind AS. In other
words, the equity interests in the acquiree held by parties other than the
acquirer are a non-controlling interest in the acquirer's post-combination
financial statements even if the result is that, all of the equity interests in the
acquiree are attributed to the non-controlling interest.
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Measurement period
If the initial accounting for 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 recognised and additional assets or liabilities that
existed as of the acquisition date to reflect new information obtained.
The measurement period ends as soon as the acquirer receives the
information it was seeking about facts and circumstances that existed as of
the acquisition date or learns that more information is not obtainable.
However, the measurement period shall not exceed one year from the
acquisition date.
Subsequent measurement and accounting of specific
items
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,
(d) contingent consideration.
Disclosures
The acquirer shall disclose information of a business combination that occurs
either:
during the current reporting period; or
after the end of the reporting period but before the financial statements
are approved for issue.
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The Standard requires the acquirer to disclose information for each business
combination that occurs during the reporting period such as the name and a
description of the acquiree, the acquisition date, the percentage of voting
equity interests acquired and other disclosures as prescribed in the standard.
Business combination 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
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:
(i) The assets and liabilities of the combining entities are reflected at their
carrying amounts;
(ii) No adjustments are made to reflect fair values, or recognize any new
assets or liabilities. The only adjustments that are made are to
harmonise accounting policies; and
(iii) 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.
As a consideration for the business combination, securities shall be recorded
at nominal value and assets other than cash shall be considered at their fair
values.
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.
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.
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The difference, if any, between the amount 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.
The following disclosures shall be made in the first financial statements
following the business combination:
(a) names and general nature of business of the combining entities;
(b) the date on which the transferor obtains control of the transferee;
(c) description and number of shares issued, together with the percentage
of each entity's equity shares exchanged to effect the business
combination; and
(d) the amount of any difference between the consideration and the value
of net identifiable assets acquired, and the treatment thereof.
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Ind AS 104, Insurance Contracts
The objective of this Standard 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;
(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.
Definitions
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.
Insurance risk is any risk, other than financial risk, transferred from the
holder of a contract to the issuer.
Insured event is an uncertain future event that is covered by an insurance
contract and creates insurance risk.
Insurer is the party that has an obligation under an insurance contract to
compensate a policyholder if an insured event occurs.
Policyholder is a party that has a right to compensation under an insurance
contract if an insured event occurs.
The Standard applies to:
-- all insurance contracts (including reinsurance contracts) that the entity
issues;
-- reinsurance contracts that entity holds;
-- financial instruments that entity issues with a discretionary
participation feature. Ind AS 107, Financial Instruments: Disclosures,
requires disclosure about financial instruments, including financial
instruments that contain such features.
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The Standard exempts an insurer from some requirements of other Ind AS.
However, the Standard:
(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
not to offset (i) insurance liabilities against related reinsurance assets
(ii) income/expenses from reinsurance contract against
expense/income from related insurance contract.
This Standard will also not be applied to
-- product warranties issued directly by a manufacturer, dealer or retailer;
-- employers' assets and liabilities under employee benefit plans &
retirement benefit obligations reported by defined benefit retirement
plans;
-- contractual rights or contractual obligations that are contingent on the
future use of, or right to use, a non-financial item;
-- financial guarantee contracts unless the issuer entity has previously
asserted explicitly that it regards such contracts as insurance contracts
and has used accounting applicable to insurance contracts, in which
case the issuer entity may elect to (i) apply either Ind AS 32, Ind AS
107 and Ind AS 109 or this Standard to such contracts (ii) may make
that election contract by contract, but the election for each contract is
irrevocable;
-- contingent consideration payable or receivable in a business
combination;
-- direct insurance contracts that the entity holds as a policyholder (other
than reinsurance contracts that entity holds).
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
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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;
(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.
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Ind AS 105, Non-current Assets Held for Sale
and Discontinued Operations
The objective of this Standard is to specify the accounting for assets held for
sale, and the presentation and disclosure of discontinued operations.
In particular, this Ind AS requires in respect of assets that meet the criteria to
be classified as held for sale:
(a) to be measured at the lower of carrying amount and fair value less
costs to sell, and depreciation on such assets to cease;
(b) 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 Standard:
(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.
An entity shall classify a non-current asset (or disposal group) {referred for
brevity as `Assets'} as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use.
Sale includes exchange of non-current assets when the exchange has
commercial substance in accordance with Ind AS 16.
For this to be the case, the Assets must be available for immediate sale in its
present condition subject only to terms that are usual and customary for
sales of such Assets and its sale must be highly probable. Thus, an Asset
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, and an active program to locate a
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buyer and complete the plan must have been initiated. Further, the Asset
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 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. Paragraph 9 read with Appendix B of the Standard
provides the criteria which are required to be met when the sale cannot be
concluded within 12 months.
The Standard also applies to Assets which are held for distribution to owners.
The conditions specified for sale as above also applies to distribution i.e.
distribution within twelve months including considering the requisite
permission for distribution, non-withdrawal of plan to distribute etc.
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. The Standard specifies the treatment/
measurement in circumstances when there is a change in plan to sale Assets
which was previously classified as held for sale.
An entity shall present and disclose information that enables users of the
financial statements to evaluate the financial effects of discontinued
operations and disposals of non-current assets (or disposal groups).
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Ind AS 106, Exploration for and Evaluation
of Mineral Resources
The objective of this Standard is to specify the financial reporting for the
exploration for and evaluation of mineral resources.
Definitions
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 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 and evaluation assets are exploration and evaluation
expenditures recognised as assets in accordance with the entity's
accounting policy.
Measurement
Exploration and evaluation assets at initial recognition shall be measured at
cost.
An entity shall determine an accounting policy specifying which expenditures
are recognised as exploration and evaluation assets and apply the policy
consistently.
After initial recognition, an entity shall apply either the cost model or the
revaluation model to the exploration and evaluation assets. The revaluation
model can be in accordance with AS 16 or Ind AS 38 but the same to be
consistent with the classification of the assets.
Expenditures related to the development of mineral resources shall not be
recognised as exploration and evaluation assets.
An entity should recognise any obligation for removal and restoration that are
incurred during a particular period as a consequence of having undertaken
the exploration for and evaluation of mineral resources.
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The Standard:
(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,
Impairment of Assets;
(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.
Impairment
When facts and circumstances suggest that the carrying amount exceeds the
recoverable amount, an entity shall measure, present and disclose any
resulting impairment loss.
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
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exploration and evaluation asset is unlikely to be recovered in full from
successful development or by sale.
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.
Disclosure
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. An entity shall treat exploration and
evaluation assets as a separate class of assets and make the disclosures
required by either Ind AS 16 or Ind AS 38 consistent with how the assets are
classified.
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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.
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.
Disclosures in Balance Sheet
An entity shall disclose information that enables users of its financial
statements to evaluate the significance of financial instruments for its
financial position and performance.
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The carrying amounts of each of the following, shall be disclosed either in the
balance sheet or in the notes:
(a) financial assets measured at fair value through profit or loss'
(b) financial liabilities at fair value through profit or loss'
(c) financial assets measured at amortised cost'
(d) financial liabilities measured at amortised cost'
(e) financial assets measured at fair value through other comprehensive
income.
If in the current or previous reporting periods an entity reclassifies any
financial asset, then it shall disclose:
(a) the date of reclassification,
(b) a detailed explanation of the change in business model and a
qualitative description of its effect on the entity's financial statements,
and
(c) the amount reclassified into and out of each category.
Collateral
An entity shall disclose:
(a) the carrying amount of financial assets it has pledged as collateral for
liabilities or contingent liabilities; and
(b) the terms and conditions relating to its pledge.
When an entity holds collateral (of financial or non-financial assets) and is
permitted to sell or repledge the collateral in the absence of default by the
owner of the collateral, it shall disclose:
(a) the fair value of the collateral held;
(b) the fair value of any such collateral sold or repledged, and whether the
entity has an obligation to return it; and
(c) the terms and conditions associated with its use of the collateral.
Defaults
For loans payable recognised at the end of the reporting period, an entity
shall disclose:
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(a) details of any defaults during the period of principal, interest, sinking
fund, or redemption terms of those loans payable;
(b) the carrying amount of the loans payable in default at the end of the
reporting period; and
(c) whether the default was remedied, or the terms of the loans payable
were renegotiated, before the financial statements were approved for
issue.
Disclosures in Statement of profit and loss
An entity shall disclose the following items of income, expense, gains or
losses either in the statement of profit and loss or in the notes:
(a) net gains or net losses on:
(i) financial assets or financial liabilities measured at fair value
through profit or loss.
(ii) financial liabilities measured at amortised cost.
(iii) financial assets measured at amortised cost.
(iv) investments in equity instruments designated at fair value
through other comprehensive income.
(v) financial assets measured at fair value through other
comprehensive income.
(b) total interest revenue and total interest expense (calculated using the
effective interest method) for financial assets that are measured at
amortised cost or that are measured at fair value through other
comprehensive income (showing these amounts separately); or
financial liabilities that are not measured at fair value through profit or
loss.
(c) fee income and expense (other than amounts included in determining
the effective interest rate) arising from:
(i) financial assets and financial liabilities that are not at fair value
through profit or loss; and
(ii) trust and other fiduciary activities that result in the holding or
investing of assets on behalf of individuals, trusts, retirement
benefit plans, and other institutions.
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An entity shall disclose an analysis of the gain or loss recognised in the
statement of profit and loss arising from the derecognition of financial assets
measured at amortised cost, showing separately gains and losses arising
from derecognition of those financial assets. This disclosure shall include the
reasons for derecognising those financial assets.
Other disclosures
Hedge accounting
An entity following hedge accounting shall provide information about:
(a) an entity's risk management strategy and how it is applied to manage
risk;
(b) how the entity's hedging activities may affect the amount, timing and
uncertainty of its future cash flows; and
(c) the effect that hedge accounting has had on the entity's balance sheet,
statement of profit and loss and statement of changes in equity.
Fair Value
An entity shall disclose the fair value of that class of assets and liabilities in a
way that permits it to be compared with its carrying amount for each class of
financial assets and financial liabilities.
Nature and extent of risks arising from financial
instruments
An entity shall disclose information that enables users of its financial
statements to evaluate the nature and extent of risks arising from financial
instruments to which the entity is exposed at the end of the reporting period.
Qualitative disclosures
For each type of risk arising from financial instruments, an entity shall
disclose:
(a) the exposures to risk and how they arise;
(b) its objectives, policies and processes for managing the risk and the
methods used to measure the risk; and
(c) any changes in the above from the previous period.
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Quantitative disclosures
For each type of risk arising from financial instruments, an entity shall
disclose:
(a) summary quantitative data about its exposure to that risk at the end of
the reporting period.
(b) the disclosures required by paragraphs 3642 of this standard, to the
extent not provided in accordance with (a).
(c) concentrations of risk if not apparent from the disclosures made in
accordance with (a) and (b).
Credit risk disclosures:
(a) information about an entity's credit risk management practices and
how they relate to the recognition and measurement of expected credit
losses, including the methods, assumptions and information used to
measure expected credit losses;
(b) quantitative and qualitative information that allows users of financial
statements to evaluate the amounts in the financial statements arising
from expected credit losses, including changes in the amount of
expected credit losses and the reasons for those changes; and
(c) information about an entity's credit risk exposure (ie the credit risk
inherent in an entity's financial assets and commitments to extend
credit) including significant credit risk concentrations.
Liquidity risk disclosures:
(a) a maturity analysis for non-derivative financial liabilities (including
issued financial guarantee contracts) that shows the remaining
contractual maturities.
(b) a maturity analysis for derivative financial liabilities. The maturity
analysis shall include the remaining contractual maturities for those
derivative financial liabilities for which contractual maturities are
essential for an understanding of the timing of the cash flows (see
paragraph B11B).
(c) a description of how it manages the liquidity risk inherent in (a) and
(b).
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Market risk disclosures:
(a) a sensitivity analysis for each type of market risk to which the entity is
exposed at the end of the reporting period, showing how profit or loss
and equity would have been affected by changes in the relevant risk
variable that were reasonably possible at that date;
(b) the methods and assumptions used in preparing the sensitivity
analysis; and
(c) changes from the previous period in the methods and assumptions
used, and the reasons for such changes.
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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 that
engages in business activities, whose operating results are regularly
reviewed by the chief operating decision maker (CODM) for allocation of
resources and assessment of performance and for which discrete financial
information is available. 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 start-up operations which is yet to earn revenues may also be
a operating segment.
If the entity chooses to disclose information in regard to segments which do
not meet with the defination of this Standard, the entity shall not describe
such information as segment information.
If a financial report contains both the consolidated financial statements of a
parent that is within the scope of this Standard as well as the parent's
separate financial statements, segment information is required only in the
consolidated financial statements.
The Standard requires an entity to report a measure of profit or loss
operating segment. It also requires an entity to report a measure of total
assets, liabilities and particular income and expense items if such amounts
are regularly provided to the CODM. It requires reconciliations of totals of
segment revenues, reported segment profit or loss, segment assets,
segment liabilities and other material segment items to corresponding
amounts in the entity's financial statements.
CODM identifies a function i.e. allocating resources to and assessing the
performance of the operating segments of an entity & not necessarily a
manager with a specific title. Often the CODM of an entity is its chief
executive officer or chief operating officer but, for example, it may also be a
group of executive directors or others.
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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 in which operating segments were determined, the products and
services provided by such segments, differences between the measurements
used in reportable segment information and those used in the entity's
financial statements, and changes in the measurement of segment amounts
from period to period.
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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 116 Leases
applies. However, lease receivables are subject to the derecognition
and impairment requirements of Ind AS 109, lease liabilities are
subject to the derecognition requirements of Ind AS 109 and
derivatives that are embedded in leases are subject to the embedded
derivatives requirements of Ind AS 109.
(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
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
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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 115, Revenue from
Contracts with Customers, that are financial instruments, except for
those that Ind AS 115 specifies 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
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
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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
(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
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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 liability
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.
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.
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An entity shall recognise a loss allowance for expected credit losses on a
financial asset that is measured at FVTOCI and 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 or 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
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.
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(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
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.
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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.
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Ind AS 110, Consolidated Financial
Statements
The objective of this Indian Accounting Standard (Ind AS) 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.
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.
Single control model
An investor controls an investee if and only if the investor has all the
following:
(i) 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. (also see below)
(ii) 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. Returns are broadly defined and include not only
direct returns but also indirect returns.
(iii) 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
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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.
Power arises from rights. Sometimes assessing power is straightforward,
such as when power over an investee is obtained directly and solely from the
voting rights granted by equity instruments such as shares, and can be
assessed by considering the voting rights from those shareholdings. In such
cases, the investor considers potential voting rights that are substantive,
rights arising from other contractual arrangements and factors that may
indicate de facto power. In other cases i.e. where voting rights are not
relevant for assessing power (for example when power results from one or
more contractual arrangements), the assessment will be more complex and
require more than one factor to be considered such as evidence of the
practical ability to direct the relevant activities (the most important factor),
indications of a special relationship with the investee, and the size of the
investor's exposure to variable returns from its involvement with the investee.
To have power over an investee, an investor must have existing rights that
give it the current ability to direct the `relevant activities' ie the activities that
significantly affect the investee's returns. For the purpose of assessing
power, only substantive rights and rights that are not protective shall be
considered.
Control is assessed on a continuous basis.
An `investment entity' shall not consolidate its subsidiaries (or apply Ind AS
103) when it obtains control of another entity. Instead, an investment entity
shall measure an investment in a subsidiary at fair value through profit or
loss in accordance with Ind AS 109. 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
Consolidated financial statements:
(a) combine like items of assets, liabilities, equity, income, expenses and
cash flows of the parent with those of its subsidiaries.
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(b) offset (eliminate) the carrying amount of the parent's investment in
each subsidiary and the parent's portion of equity of each subsidiary
(Ind AS 103 explains how to account for any related goodwill).
(c) eliminate in full intragroup assets and liabilities, equity, income,
expenses and cash flows relating to transactions between entities of
the group (profits or losses resulting from intragroup transactions that
are recognised in assets, such as inventory and fixed assets, are
eliminated in full).
A parent shall prepare consolidated financial statements using uniform
accounting policies for like transactions and other events in similar
circumstances.
The difference between the reporting date of a parent and its subsidiary
should not be more than three months. Adjustments are made for the effects
of significant transactions and events between the two dates.
Consolidation of an investee shall begin from the date the investor obtains
control of the investee and cease when the investor loses control of the
investee.
Non-controlling interest (NCI)
Non-controlling interest is the equity in a subsidiary not attributable,
directly or indirectly, to a parent.
To the extent NCI relates to present ownership interests that entitle their
holders to a proportionate share of the entity's net assets in liquidation, these
are measured at fair value or at their proportionate interest in the net assets
of the acquiree, at the date of acquisition. All other NCI are generally
measured at fair value.
A parent shall present non-controlling interests in the consolidated balance
sheet 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 (ie
transactions with owners in their capacity as owners).
Loss of control
If a parent loses control of a subsidiary, the parent should:
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(a) derecognise the assets and liabilities of the former subsidiary from the
consolidated balance sheet.
(b) recognise any investment retained in the former subsidiary at its fair
value when control is lost and subsequently account for it and for any
amounts owed by or to the former subsidiary in accordance with
relevant Ind ASs. That fair value shall be regarded as the fair value on
initial recognition of a financial asset in accordance with Ind AS 109 or,
when appropriate, the cost on initial recognition of an investment in an
associate or joint venture.
(c) recognise the gain or loss associated with the loss of control
attributable to the former controlling interest.
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Ind AS 111, Joint Arrangements
The objective of this Indian Accounting Standard (Ind AS) is to establish
principles for financial reporting by entities that have an interest in
arrangements that are controlled jointly (ie 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.
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 (including its
share of any assets held jointly), liabilities (including its share of any
liabilities incurred jointly), its revenue from the sale of its share of the output
arising from the joint operation, its share of the revenue from the sale of the
output by the joint operation; its expenses (including its share of any
expenses incurred jointly) relating to its interest in a joint operation in
accordance with the Ind AS applicable to the particular assets, liabilities,
revenues and expenses.
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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.
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Ind AS 112, Disclosure of Interests in Other
Entities
The objective of this Standard 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
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, ie an investee;
(b) that it has joint control of an arrangement or significant influence over
another entity; and
(c) the type of joint arrangement (ie 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
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 status and the reasons for the change. In addition, an
entity that becomes an investment entity shall disclose the effect of the
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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; and
(c) the line item(s) in profit or loss in which the gain or loss is recognised
(if not presented separately).
Insterests in subsidiaries
An entity shall 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.
An entity shall also disclose for each of its subsidiaries that have non-
controlling interests (NCI) that are material to the reporting entity information
required by the Standard. The information includes the proportion of voting
rights held by NCI, if different from the proportion of ownership interests held,
the profit or loss allocated to NCI of the subsidiary during the reporting
period, accumulated NCI of the subsidiary at the end of the reporting period,
summarised financial information about the subsidiary etc.
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Interest in unconsolidated subsidiaries
An investment entity shall disclose:
(a) the name of each unconsolidated subsidiary;
(b) the principal place of business (and country of incorporation if different
from the principal place of business) of each unconsolidated
subsidiary; and
(c) the proportion of ownership interest held by the investment entity and,
if different, the proportion of voting rights held in each unconsolidated
subsidiary.
(d) the nature and extent of any significant restrictions on the ability of the
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
(e) any current commitments or intentions to provide financial or other
support to an unconsolidated subsidiary, including commitments or
intentions to assist the subsidiary in obtaining financial support.
Interests in joint arrangements and associates
An entity shall 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 structure entities
An entity shall disclose information that 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.
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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 116, 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.
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.
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
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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.
Valuation techniques
Valuation techniques used to measure fair value shall maximise the use of
relevant observable inputs and minimise the use of unobservable inputs.
Three widely used valuation techniques are the market approach, the cost
approach and the income approach.
Market approach is a valuation technique that uses prices and other
relevant information generated by market transactions involving identical or
comparable (ie similar) assets, liabilities or a group of assets and liabilities,
such as a business.
Cost approach is a valuation technique that reflects the amount that would
be required currently to replace the service capacity of an asset (often
referred to as current replacement cost).
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Income approach is a valuation techniques that converts future amounts (eg
cash flows or income and expenses) to a single current (ie discounted)
amount. The fair value measurement is determined on the basis of the value
indicated by current market expectations about those future amounts.
Valuation techniques used to measure fair value shall maximise the use of
relevant observable inputs and minimise the use of unobservable inputs.
To increase consistency and comparability in fair value measurements and
related disclosures, this Ind AS establishes a fair value hierarchy that
categorises into three levels, the inputs to valuation techniques used to
measure fair value. The fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
(Level 1 inputs) and the lowest priority to unobservable inputs (Level 3
inputs).
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
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.
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Ind AS 114, Regulatory Deferral Accounts
The objective of this Standard 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.
Rate-regulated activities are an entity's activities that are subject to rate regulation.
A regulator is an authorised body empowered by statute or by any
government or any authorised agency of a government to set rates that binds
an entity's customers.
Rate regulation is a form of regulation for setting an entity's prices (rates) in
which there is a cause-and-effect relationship between the entity's specific
costs and its revenues.
Regulatory deferral account balance is a `Regulatory Asset' or a
`Regulatory Liability'.
A regulatory asset is an entity's right to recover fixed or determinable
amounts of money towards incurred costs as a result of the actual or
expected actions of its regulator under the applicable regulatory framework.
A regulatory liability is an entity's obligation to refund or adjust fixed or
determinable amounts of money as a result of actual or expected action of its
regulator under the applicable regulatory framework.
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.
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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.
Recognition, measurement, impairment and
derecognition
On initial application, an entity shall continue to apply previous GAAP
accounting policies for the recognition, measurement, impairment and
derecognition of regulatory deferral account balances except for the changes
as permitted by the Standard.
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 decisionmaking needs of users and no less reliable, or more
reliable and no less relevant to those needs.
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.
Classification of regulatory defferal account balances
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.
Classification of movements in regulatory deferral
account balances
An entity shall present, in the other comprehensive income section of the
statement of profit and loss, the net movement in all regulatory deferral
account balances for the reporting period that relate to items recognised in
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other comprehensive income. Separate line items shall be used for the net
movement related to items that, in accordance with other Standards:
(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.
An entity shall present a separate line item in the profit or loss section of the
statement of profit and loss, for the remaining net movement in all regulatory
deferral account balances for the reporting period, excluding movements that
are not reflected in profit or loss, such as amounts acquired. This separate
line item shall be distinguished from the income and expenses that are
presented in accordance with other Standards by the use of a sub-total,
which is drawn before the net movement in regulatory deferral account
balances.
Disclosure
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.
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Ind AS 115, Revenue from Contracts with
Customers
The objective of this Standard is to establish the principles that an entity shall
apply to report useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash flows arising
from a contract with a customer.
Scope
The Standard applies to all contracts with customers, except the lease
contracts within the scope of Ind AS 116, Leases; insurance contracts within
the scope of Ind AS 104, Insurance Contracts; financial instruments and
other contractual rights or obligations within the scope of Ind AS 109,
Financial Instruments, Ind AS 110, Consolidated Financial Statements, Ind
AS 111, Joint Arrangements, Ind AS 27, Separate Financial Statements and
Ind AS 28, Investments in Associates and Joint Ventures; and non-monetary
exchanges between entities in the same line of business to facilitate sales to
customers or potential customers.
The core principle of Ind AS 115 is that an entity recognises revenue in the
way that depicts the transfer of promised goods or services to customers at
an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. Revenue shall be
recognised by an entity in accordance with this core principle by applying the
following five steps:
1. Identifying contract with a customer: This Standard defines a
`contract' and a `customer' and specifies five mandatory criteria to be
met for identification of a contract.
2. Identify performance obligations in contract: At contract inception,
an entity shall assess the goods or services promised in a contract
with a customer and shall identify as a performance obligation each
promise to transfer to the customer either:
(a) a good or service (or a bundle of goods or services) that is
distinct in other words
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-- the customer can benefit from the good or service either on its
own or together with other resources that are readily available to
the customer; and
-- the entity's promise to transfer the good or service to the
customer is separately identifiable from other goods or services
in the contract; or
(b) a series of distinct goods or services that are substantially the
same and that have the same pattern of transfer to the
customer.
3. Determine transaction price: This Standard uses transaction price
approach instead of fair value approach in Ind AS 18 while determining
amount of consideration. The transaction price is the amount of
consideration to which an entity expects to be entitled in exchange for
transferring promised goods or services to a customer, excluding
amounts collected on behalf of third parties (for example, some sales
taxes). The consideration promised may include fixed amounts,
variable amounts, or both. If the consideration promised in a contract
includes a variable amount, an entity shall estimate the amount of
consideration to which the entity will be entitled in exchange for
transferring the promised goods or services to a customer. Variable
consideration is included in transaction price only to the extent that it
is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur when the uncertainty
associated with the variable consideration is subsequently resolved,
The estimate of variable consideration can be determined by using
either the expected value method or the most likely amount method.
The transaction price is also adjusted for the effects of the time value
of money if the contract includes a significant financing component
and for any consideration payable to the customer.
Sales and usage-based royalties arising from licences of intellectual
property are excluded from the transaction price and are recognised
only when (or as) the later of the following events occurs:
(a) the subsequent sale or usage occurs; and
(b) the performance obligation to which some or all of the
salesbased or usage-based royalty has been allocated has been
satisfied (or partially satisfied).
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4. Allocate the transaction price to the performance obligations in
the contract: An entity typically allocates the transaction price to each
performance obligation on the basis of the relative stand-alone selling
prices of each distinct good or service promised in the contract. If a
stand-alone selling price is not observable, an entity estimates it.
Sometimes, the transaction price includes a discount or a variable
amount of consideration that relates entirely to a part of the contract.
The requirements specify when an entity allocates the discount or
variable consideration to one or more, but not all, performance
obligations in the contract. Any subsequent changes in the transaction
price shall be allocated to the performance obligations on the same
basis as at contract inception. Amounts allocated to a satisfied
performance obligation shall be recognised as revenue, or as a
reduction of revenue, in the period in which the transaction price
changes.
5. Recognise revenue when the entity satisfies a performance
obligation: An entity recognises revenue when it satisfies a
performance obligation by transferring a promised good or service to a
customer (which is when the customer obtains control of that good or
service). The amount of revenue recognised is the amount allocated to
the satisfied performance obligation. A performance obligation may be
satisfied at a point in time or over time. An entity transfers control of a
good or service over time and, therefore, satisfies a performance
obligation and recognises revenue over time, if one of the following
criteria is met:
-- The customer simultaneously receives and consumes the
benefits provided by the entity's performance as the entity
performs.
-- The entity's performance creates or enhances an asset that the
customer controls as the asset is created or enhanced.
-- The entity's performance does not create an asset with an
alternative use to the entity and the entity has an enforceable
right to payment for performance completed to date.
If an entity does not satisfy a performance obligation over time, the
performance obligation is satisfied at a point in time. For performance
obligations satisfied over time, an entity recognises revenue over time
by selecting an appropriate method (output methods and input
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methods) for measuring the entity's progress towards complete
satisfaction of that performance obligation.
Treatment of Contract Costs
Ind AS 115 specifies the following requirements for contract costs:
1. Incremental costs of obtaining a contract: Those costs that an entity
incurs to obtain a contract with a customer that it would not have
incurred if the contract had not been obtained. An entity shall
recognise these costs as an asset if the entity expects to recover
those costs. Costs to obtain a contract that would have been incurred
regardless of whether the contract was obtained shall be recognised
as an expense when incurred, unless those costs are explicitly
chargeable to the customer regardless of whether the contract is
obtained.
2. Costs to fulfil a contract:
If costs incurred in fulfilling a contract are not within scope of another
Standard, entity shall recognise an asset from the costs incurred to
fulfil a contract only if some specified criteria are met. If costs incurred
in fulfilling a contract are within scope of another Standard, entity shall
account for those costs in accordance with those other Standards.
Contract costs recognised as an asset shall be amortised on a systematic
basis that is consistent with the transfer to the customer of the goods or
services to which the asset relates.
An impairment loss shall be recognised in profit or loss to the extent that the
carrying amount of contract costs recognised as an asset exceeds the
remaining amount of consideration that the entity expects to receive in
exchange for the goods or services to which the asset relates after deducting
the costs that relate directly to providing those goods or services and that
have not been recognised as expenses.
Presentation
When either party to a contract has performed, an entity shall present the
contract in the balance sheet as a contract asset or a contract liability,
depending on the relationship between the entity's performance and the
customer's payment. An entity shall present any unconditional rights to
consideration separately as a receivable.
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Sale with a right of return
To account for the transfer of products with a right of return (and for some
services that are provided subject to a refund), an entity shall recognise all of
the following:
revenue for the transferred products in the amount of consideration to
which the entity expects to be entitled (therefore, revenue would not
be recognised for the products expected to be returned);
a refund liability; and
an asset (and corresponding adjustment to cost of sales) for its right to
recover products from customers on settling the refund liability.
Warranties
If customer has the option to purchase warranty separately, the warranty is a
distinct service because the entity promises to provide the service to the
customer in addition to the product that has the functionality described in the
contract. In that case, entity shall account for the promised warranty as a
performance obligation and allocate a portion of the transaction price to that
performance obligation. If the warranty cannot be purchased separately, an
entity shall account for the warranty in accordance with Ind AS 37 Provisions,
Contingent Liabilities and Contingent Liabilities.
Principal versus agent considerations
When another party is involved in providing goods or services to a customer,
the entity shall determine whether the nature of its promise is a performance
obligation to provide the specified goods or services itself (i.e. the entity is a
principal) or to arrange for those goods or services to be provided by the
other party (i.e. the entity is an agent). An entity determines whether it is a
principal or an agent for each specified good or service promised to the
customer. Indicators that an entity controls the specified good or service
before it is transferred to the customer (and is therefore a principal include,
but are not limited to, the following:
(a) the entity is primarily responsible for fulfilling the promise to provide
the specified good or service
(b) the entity has inventory risk before the specified good or service has
been transferred to a customer or after transfer of control to the
customer (for example, if the customer has a right of return)
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(c) the entity has discretion in establishing the price for the specified
good or service.
Disclosure
To disclose sufficient information to enable users of financial statements to
understand the nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers, an entity shall disclose
qualitative and quantitative information about all of the following:
(a) its contracts with customers;
(b) the significant judgements, and changes in the judgements, made in
applying this Standard to those contracts; and
(c) any assets recognised from the costs to obtain or fulfil a contract with
a customer.
Service concession arrangements
Appendix D of Ind AS 115 gives guidance on the accounting by operators for
public-to-private service concession arrangements. This Appendix applies to
both (a) infrastructure that the operator constructs or acquires from a third
party for the purpose of the service arrangement; and (b) existing
infrastructure to which the grantor gives the operator access for the purpose
of the service arrangement. Infrastructure within the scope of this Appendix
shall not be recognised as property, plant and equipment of the operator
because the contractual service arrangement does not convey the right to
control the use of the public service infrastructure to the operator.
Transition
An entity may transition to Ind AS 115 using one of the two methods:
(a) apply standard retrospectively (with certain practical expedients) and
record the effect of applying the standard at the start of the earliest
comparative period presented; or
(b) apply the standard to open contracts at the date of initial application
and record the effect of applying the standard on that date.
Comparative period information is not restated under this option.
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Ind AS 116, Leases
This Standard sets out the principles for the recognition, measurement,
presentation and disclosure of leases. The objective is to ensure that lessees
and lessors provide relevant information in a manner that faithfully
represents those transactions. This information gives a basis for users of
financial statements to assess the effect that leases have on the financial
position, financial performance and cash flows of an entity.
Scope
The standard applies to all leases, including leases of right-of-use assets in a
sublease, except for:
(a) Leases to explore for or use minerals, oil, natural gas and similar non-
regenerative resources;
(b) Leases of biological assets within the scope of Ind AS 41, Agriculture,
held by a lessee;
(c) Service concession arrangements within the scope of Appendix D,
Service Concession Arrangements of Ind AS 115, Revenue from
Contracts with Customer;
(d) Licences of intellectual property granted by a lessor within the scope
of Ind AS 115, Revenue from Contracts with Customers; and
(e) Rights held by a lessee under licensing agreements within the scope
of Ind AS 38, Intangible Assets for such items as motion picture films,
video recordings, plays, manuscripts, patents and copyrights.
A lessee may, but is not required to, apply Ind AS 116 to leases of intangible
assets other than those described in point (e) above.
This Standard specifies the accounting for an individual lease. However, as a
practical expedient, an entity may apply this Standard to a portfolio of leases
with similar characteristics if the entity reasonably expects that the effects of
accounting on portfolio basis on the financial statements would not differ
materially from applying this Standard to individual leases.
Recognition exemption
In addition to the above scope exclusions, a lessee can elect not to apply the
recognition, measurement and presentation requirements of Ind AS 116 to
short-term leases; and low value leases.
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If a lessee elects for the exemption, then it shall recognise the lease
payments associated with those leases as an expense on either a straight-
line basis over the lease term or another systematic basis if that basis is
more representative of the pattern of the lessee's benefit.
The election for short-term leases shall be made by class of underlying asset
to which the right of use relates. The low value lease exemption can be made
on a lease-by-lease basis.
A Lessee shall assess the value of an underlying asset based on the valued
of the asset when it is new. The assessment of whether an underlying asset
is of low value is performed on an absolute basis. Leases of low-value assets
qualify for exemption regardless of whether those leases are material to the
lessee. The assessment is not affected by the size, nature or circumstances
of the lessee. Accordingly, different lessees are expected to reach the same
conclusions about whether a particular underlying asset is of low value.
Examples of low-value underlying assets can include tablet and personal
computers, small items of office furniture and telephones.
If a lessee subleases an asset, or expects to sublease an asset, the head
lease does not qualify as a lease of a low-value asset.
If an entity applies either exemption, it must disclose that fact and certain
additional information to make the effect of the exemption known to users of
its financial statements.
Lease is a contract, or part of a contract, that conveys the right to use an
asset (the underlying asset) for a period of time in exchange for
consideration.
Right-of-use asset is an asset that represents a lessee's right to use an
underlying asset for the lease term.
Lease term is the non-cancellable period for which a lessee has the right to
use an underlying asset, together with both:
(a) periods covered by an option to extend the lease if the lessee is
reasonably certain to exercise that option; and
(b) periods covered by an option to terminate the lease if the lessee is
reasonably certain not to exercise that option.
Short-term lease is a lease that, at the commencement date, has a lease
term of 12 months or less. A lease that contains a purchase option is not a
short-term lease.
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Lease incentives are payments made by a lessor to a lessee associated
with a lease, or the reimbursement or assumption by a lessor of costs of a
lessee.
Lease payments are payments made by a lessee to a lessor relating to the
right to use an underlying asset during the lease term, comprising the
following:
(a) fixed payments (including in-substance fixed payments), less any
lease incentives;
(b) variable lease payments that depend on an index or a rate;
(c) the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option; and
(d) payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the lease.
Finance lease is a lease that transfers substantially all the risks and rewards
incidental to ownership of an underlying asset.
Operating lease is a lease that does not transfer substantially all the risks
and rewards incidental to ownership of an underlying asset.
Identifying a lease
At inception of a contract, an entity shall assess whether the contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
For a contract that is, or contains, a lease, an entity shall account for each
lease component within the contract as a lease separately from non-lease
components of the contract, unless the entity applies the practical expedient
wherein, a lessee may elect, by class of underlying asset, not to separate
non-lease components from lease components, and instead account for each
lease component and any associated non-lease components as a single
lease component.
Where a contract contains a lease component and one or more additional
lease or non-lease components, a lessee shall allocate the consideration in
the contract to each lease component on the basis of the relative stand-alone
price of the lease component and the aggregate stand-alone price of the
non-lease components.
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For a contract that contains a lease component and one or more additional
lease or non-lease components, a lessor shall allocate the consideration in
the contract by applying guidance in Ind AS 115.
Lessee Accounting
At the commencement date, a lessee shall recognise
(a) a right-of-use asset measured at cost, and
(b) a lease liability measured at the present value of the lease payments
that are not paid at that date, discounted using the interest rate implicit
in the lease, if that rate can be readily determined. If that rate cannot
be readily determined, the lessee shall use the lessee's incremental
borrowing rate.
Cost = Lease Liability + Lease payments made at or before the
commencement date lease incentives received at or before the
commencement date + initial direct costs + estimated dismantling and
restoration costs.
Lease Payments = Fixed payments (including in-substance fixed lease
payments) lease incentives receivable + variable payments that depend on
an index or a rate, initially measured using the index or rate as at the
commencement date + amounts expected to be payable by the lessee under
residual value guarantees + exercise price of purchase option (if reasonably
certain to be exercised) + penalties for termination (if reasonably certain to
be terminated).
In-substance fixed lease payments are payments that may, in form, contain
variability but that, in substance, are unavoidable.
Subsequent measurement
Subsequently, the right-of-use asset shall be measured by applying a cost
model or revaluation model if the underlying asset belongs to the class of
assets to which the entity applies revaluation model as per Ind AS 16,
Property, Plant and Equipment.
Subsequent meansurement - Cost model
Lessee shall measure the right-of-use asset at cost less accumulated
depreciation and any accumulated impairment losses.
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Lessees adjust the carrying amount of the right-of-use asset for
remeasurement of the lease liability, unless the carrying amount has already
been reduced to zero.
Subsequent measurement of lease liability
After initial recognition, the lease liability is measured at amortised cost using
the effective interest method and remeasuring the carrying amount to reflect
any reassessment or lease modifications or to reflect revised in-substance
fixed lease payments.
Reassessment of lease liability
After the commencement date, a lessee shall remeasure the lease liability in
accordance with the standard (using a revised discount rate or an unchanged
discount rate as applicable) to reflect changes to the lease payments. A
lessee shall recognise the amount of the remeasurement of the lease liability
as an adjustment to the right-of-use asset. However, if the carrying amount of
the right-of-use asset is reduced to zero and there is a further reduction in
the measurement of the lease liability, a lessee shall recognise any
remaining amount of the remeasurement in profit or loss.
After the commencement date, a lessee shall recognise in profit or loss,
unless the costs are included in the carrying amount of another asset
applying other applicable Standards, both:
(a) interest on the lease liability; and
(b) variable lease payments not included in the measurement of the lease
liability in the period in which the event or condition that triggers those
payments occurs.
A lessee shall account for a lease modification as a separate lease if both:
(a) the modification increases the scope of the lease by adding the right to
use one or more underlying assets; and
(b) the consideration for the lease increases by an amount commensurate
with the stand-alone price for the increase in scope and any
appropriate adjustments to that stand-alone price to reflect the
circumstances of the particular contract.
Where a lease modification is not accounted for as a separate lease, at the
effective date of the lease modification a lessee shall:
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(a) allocate the consideration in the modified contract;
(b) determine the lease term of the modified lease; and
(c) remeasure the lease liability by discounting the revised lease
payments using a revised discount rate. The lessee shall account for
the remeasurement of the lease liability by:
(a) decreasing the carrying amount of the right-of-use asset to
reflect the partial or full termination of the lease for lease
modifications that decrease the scope of the lease. The lessee
shall recognise in profit or loss any gain or loss relating to the
partial or full termination of the lease.
(b) making a corresponding adjustment to the right-of-use asset for
all other lease modifications.
A lessee shall either present in the balance sheet, or disclose in the notes:
(a) right-of-use assets separately from other assets. If a lessee does not
present right-of-use assets separately in the balance sheet, the lessee
shall:
(i) include right-of-use assets within the same line item as that within
which the corresponding underlying assets would be presented if
they were owned; and
(ii) disclose which line items in the balance sheet include those right-
of-use assets.
(b) lease liabilities separately from other liabilities. If a lessee does not
present lease liabilities separately in the balance sheet, the lessee
shall disclose which line items in the balance sheet include those
liabilities.
The above requirement does not apply to right-of-use assets that meet the
definition of investment property, which shall be presented in the balance
sheet as investment property.
In the statement of profit and loss, a lessee shall present interest expense on
the lease liability separately from the depreciation charge for the right-of-use
asset.
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Lessor Accounting
A lessor shall classify each of its leases as either an operating lease or a
finance lease.
A lease is classified as a finance lease if it transfers substantially all the risks
and rewards incidental to ownership of an underlying asset. A lease is
classified as an operating lease if it does not transfer substantially all the
risks and rewards incidental to ownership of an underlying asset.
In a sub-lease transaction, the intermediate lessor accounts for the head
lease and the sub-lease as two separate contracts. An intermediate lessor
classifies a sublease with reference to the right-of-use asset arising from the
head lease.At the commencement date, a lessor shall recognise assets held
under a finance lease in its balance sheet and present them as a receivable
at an amount equal to the net investment in the lease.
At the commencement date, a manufacturer or dealer lessor shall recognise
the following for each of its finance leases:
(a) revenue being the fair value of the underlying asset, or, if lower, the
present value of the lease payments accruing to the lessor, discounted
using a market rate of interest;
(b) the cost of sale being the cost, or carrying amount if different, of the
underlying asset less the present value of the unguaranteed residual
value; and
(c) selling profit or loss (being the difference between revenue and the
cost of sale) in accordance with its policy for outright sales to which
Ind AS 115 applies. A manufacturer or dealer lessor shall recognise
selling profit or loss on a finance lease at the commencement date,
regardless of whether the lessor transfers the underlying asset as
described in Ind AS 115.
Subsequently, a lessor in a finance lease shall recognise finance income
over the lease term, based on a pattern reflecting a constant periodic rate of
return on the lessor's net investment in the lease.
A lessor shall recognise lease payments from operating leases as income on
either a straight-line basis or another systematic basis. The lessor shall apply
another systematic basis if that basis is more representative of the pattern in
which benefit from the use of the underlying asset is diminished. A lessor
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shall present underlying assets subject to operating leases in its balance
sheet according to the nature of the underlying asset.
Lease Payments = Fixed payments (including in-substance fixed lease
payments) lease incentives payable + variable payments that depend on an
index or a rate, initially measured using the index or rate as at the
commencement date + residual value guarantees provided to the lessor by
the lessee + exercise price of purchase option (if lessee is reasonably certain
to exercise) + penalties for termination (if lease term reflects same).
Gross investment in the lease = lease payments + unguaranteed residual
value.
Net investment in the lease = The gross investment in the lease discounted
at the interest rate implicit in the lease.
Sale and leaseback transactions
Determine whether transfer of asset is a sale of that asset as per
requirement of Ind AS 115
transfer of asset is a sale transfer of asset is a not a sale
Transaction will be accounted for as a Transaction will be accounted for as
sale and a lease by both the lessee a financing arrangement by both the
and the lessor. seller-lessee and the buyer-lessor
Seller-lessee Seller-lessee
Measure right-of-use asset at Continue to recognise
proportion of previous carrying transferred asset.
amount of asset relating to right- Recognise financial liability
of-use asset retained by seller- equal to transfer proceeds
lessee. applying Ind AS 109.
Recognise only amount of gain or Buyer-lessor
loss relating to rights transferred
Not recognise transferred
to buyer-lessor.
asset.
Buyer-lessor
Recognise financial asset
Account for purchase of asset equal to transfer proceeds
applying applicable standards. applying Ind AS 109.
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Account for lease applying lessor
accounting requirements under
Ind AS 116.
Disclosures
A lessee shall disclose the following amounts for the reporting period:
a. depreciation charge for right-of-use assets by class of underlying
asset;
b. interest expense on lease liabilities;
c. the expense relating to short-term leases. This expense need not
include the expense relating to leases with a lease term of one month
or less;
d. the expense relating to leases of low-value assets. This expense shall
not include the expense relating to short-term leases of low-value
assets included in paragraph 53(c);
e. the expense relating to variable lease payments not included in the
measurement of lease liabilities;
f. income from subleasing right-of-use assets;
g. total cash outflow for leases;
h. additions to right-of-use assets;
i. gains or losses arising from sale and leaseback transactions; and
j. the carrying amount of right-of-use assets at the end of the reporting
period by class of underlying asset.
A lessor shall disclose the following amounts for the reporting period:
(a) for finance leases:
(i) selling profit or loss;
(ii) finance income on the net investment in the lease; and
(iii) income relating to variable lease payments not included in the
measurement of the net investment in the lease.
(b) for operating leases, lease income, separately disclosing income
relating to variable lease payments that do not depend on an index or
a rate.
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A lessor shall provide a qualitative and quantitative explanation of the
significant changes in the carrying amount of the net investment in finance
leases.
A lessor shall disclose a maturity analysis of the lease payments receivable,
showing the undiscounted lease payments to be received on an annual basis
for a minimum of each of the first five years and a total of the amounts for the
remaining years. A lessor shall reconcile the undiscounted lease payments to
the net investment in the lease.
Transition date accounting
Definition of lease
On the date of initial application of Ind AS 116, companies have an option
not to reassess its previously identified leases contracts (as per Ind AS 17,
Leases) and apply the transition provisions of this standard to those leases.
Also, they have an option not to apply this Standard to contracts that were
not previously identified as containing a lease applying Ind AS 17.
If an entity chooses the above options then it shall disclose that fact and
apply the practical expedient to all of its contracts.
Transition accounting: In the books of Lessee
A lessee is permitted to:
adopt the standard retrospectively; or
follow a modified retrospective approach.
A lessee applies the election consistently to all of its leases.
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Ind AS 1, Presentation of Financial
Statements
This Standard 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.
Complete set of financial statements
A complete set of financial statements, which should be presented, including
comparatives, at least annually consists of:
(a) a balance sheet as at the end of the period;
(b) a statement of profit and loss for the period;
(c) a 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;
(f) comparative information in respect of the preceding period.
An entity shall prepare a third balance sheet as at the beginning of the
previous year along with the requirements of comparative information for the
year if, it retrospectively applies accounting policies, retrospectively restates
items in financial statements, or reclassifies items in financial statements.
General features of financial statements
present true and fair presentation and compliance with Ind AS.
prepare financial statements on a going concern basis unless
management either intends to liquidate the entity or to cease trading,
or has no realistic alternative but to do so.
prepare using the accrual basis of accounting, except for cash flow
information.
present separately each material class of similar items.
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present separately items of a dissimilar nature or function unless they
are immaterial except when required by law.
shall not offset assets and liabilities or income and expenses, unless
required or permitted by an Ind AS.
present comparative information in respect of the preceding period for
all amounts reported in the current period's financial statements.
shall retain the presentation and classification of items in the financial
statements from one period to the next unless:
-- it is apparent, following a significant change in the nature of the
entity's operations or a review of its financial statements, that
another presentation or classification would be more
appropriate; or
-- an Ind AS requires a change in presentation.
An entity whose financial statements comply with Ind ASs should make an
explicit and unreserved statement of such compliance in the notes. An entity
should not describe financial statements as complying with Ind ASs unless
they comply with all the requirements of Ind ASs
Structure and content
Ind AS 1 does not provide a format for presenting financial statements;
however it provides line items to be presented, if they are material, in the
balance sheet, statement of profit and loss and statement of changes in
equity. The format of presentation of financial statements is provided in
Schedule III to the Companies Act, 2013.
Balance Sheet
The balance sheet shall include line items that present the following
amounts:
(i) In respect of equity: Issued capital and reserves attributable to owners
of the parent and non-controlling interests.
(ii) In respect of assets: Property, plant and equipment; investment
property; intangible assets; financial assets; investments accounted for
using the equity method; biological assets; inventories; trade and other
receivables; cash and cash equivalents; current tax assets; deferred
tax assets.
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(iii) In respect of liabilities: trade and other payables; provisions; financial
liabilities; current tax liabilities; deferred tax liabilities.
(iv) In respect of assets and liabilities held for sale: total of assets
classified as held for sale and assets included in disposal groups
classified as held for sale; and liabilities included in disposal groups
classified as held for sale in accordance with Ind AS 105 Non-current
Assets Held for Sale and Discontinued Operations.
An entity should classify all the assets and liabilities as current and non-
current in its balance sheet except when a presentation based on liquidity
provides information that is reliable and more relevant.
Current Asset Current Liability
Expected to be realised , used Expected to be settled in
or sold in normal operating normal operating cycle; or
cycle; or
Held primarily for trading; or Held primarily for trading; or
Expected to be realised within Due to be settled within 12
12 months after the reporting months of reporting date; or
date; or
Cash or cash equivalent. It does not have an
unconditional right to defer
settlement of the liability for at
least twelve months after the
reporting period.
An entity shall classify all other An entity shall classify all other
assets as non-current. liabilities as non-current.
Statement of Profit and Loss
The statement of profit and loss should present, in addition to the profit or
loss and other comprehensive income sections:
(a) profit or loss;
(b) total other comprehensive income;
(c) comprehensive income for the period, being the total of profit or loss
and other comprehensive income.
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Other comprehensive income comprises items of income and expense
(including reclassification adjustments*) that are not recognised in profit
or loss as required or permitted by other Ind ASs.
Total comprehensive income is the change in equity during a period
resulting from transactions and other events, other than those changes
resulting from transactions with owners in their capacity as owners.
Total Comprehensive Income = Profit or Loss + Other Comprehensive
Income
*Reclassification adjustments are amounts reclassified to profit or loss
in the current period that were recognised in other comprehensive
income in the current or previous periods.
Any items of income or expense as extraordinary items shall not be
presented in the statement of profit and loss or in the notes. An analysis of
expenses recognised in profit or loss shall be presented using a classification
based on the nature of expense method.
An entity shall present additional line items, headings and subtotals in the
balance sheet and statement of profit and loss when such presentation is
relevant to an understanding of the entity's financial position and
performance.
Statement of changes in equity
The statement of changes in equity includes the following information:
(a) total comprehensive income for the period, showing separately the
total amounts attributable to owners of the parent and to non-
controlling interests;
(b) for each component of equity, the effects of retrospective application
or retrospective restatement recognised in accordance with Ind AS 8;
(c) for each component of equity, a reconciliation between the carrying
amount at the beginning and the end of the period, separately (as a
minimum) disclosing changes resulting from:
(i) profit or loss;
(ii) other comprehensive income;
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(iii) transactions with owners in their capacity as owners, showing
separately contributions by and distributions to owners and
changes in ownership interests in subsidiaries that do not result
in a loss of control; and
(iv) any item recognised directly in equity such as amount
recognised directly in equity as capital reserve in accordance
with Ind AS 103, Business Combinations.
Information to be presented in the statement of changes
in equity or in the notes
An entity shall present, either in the statement of changes in equity or in the
notes:
-- the amount of dividends recognised as distributions to owners during
the period, and the related amount of dividends per share; and
-- for each component of equity, an analysis of other comprehensive
income by item.
Statement of cash flows
The statement of cash flows should be presented as per Ind AS 7, Statement
of Cash Flows.
Notes to the financial statements
The notes shall present information about the basis of preparation of the
financial statements and the specific accounting policies used; disclose the
information required by Ind ASs that is not presented elsewhere in the
financial statements; and provide information that is not presented elsewhere
in the financial statements, but is relevant to an understanding of any of
them.
An entity shall disclose its significant accounting policies comprising the
measurement basis (or bases) used in preparing the financial statements;
and the other accounting policies used that are relevant to an understanding
of the financial statements.
Notes also includes information about the assumptions that an entity makes
about the future, and other major sources of estimation uncertainty at the
end of the reporting period, disclosures on capital and puttable financial
instruments classified as equity.
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Ind AS 2, Inventories
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.
Excluded Financial instruments ( covered by Ind AS 32 and Ind AS 109)
Inventories
(Not dealt Biological assets related to agricultural activity
under Ind
AS 2) Agricultural produce at the point of harvest
An exception from the measurement principle in Ind AS 2 for inventories held
by:
producers of agricultural and forest products, agricultural produce
after harvest, and minerals and mineral products, to the extent that
they are measured at net realisable value in accordance with well-
established practices in those industries.
commodity broker-traders who measure their inventories at fair value
less costs to sell.
Changes in the fair value less costs to sell, or in the net realisable value, of
such inventories are recognised in profit or loss in the period of the change
Inventories are assets:
held for sale in ordinary course of business
in the process of production of sales in ordinary course of business
in the form of material or supplies to be consumed in the production
process or rendering of services.
Do not include spare parts, servicing equipment and standby equipment
which meet the definition of PPE in Ind AS 16.
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Measurement of Inventory- Lower of Cost and Net
Realisable Value
Cost of Inventories includes Net Realisable Value includes
Cost of purchase; Estimated selling price in the
ordinary course of business less
Cost of conversion;
the estimated costs of completion
Cost to bring inventories to the and the estimated costs
present location and condition. necessary to make the sale.
Cost of Purchase price exclusing trade discounts, rebates, etc.
purchase
Import duties and taxes to the extent non refundable
Transport and handling costs directly attributable
Other expenditure directly attributable to the acquisition
Cost of Allocation of fixed production overheads based on normal
conversion capacity
Variable production overheads assigned to each unit of
production on the basis of the actual use of production facilities
Examples of Abnormal wastage
cost
exclusions Storage costs unless necessary in production process prior to a
further production stage
Selling and distribution costs
Administrative overheads that do not contribute to bringing the
inventories to their present location and condition
selling costs
Materials and other supplies held for use in the production of
inventories are not written down below cost if the finished products in
which they will be incorporated are expected to be sold at or above
cost.
However, when a decline in the price of materials indicates that the
cost of the finished products exceeds net realisable value, the
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materials are written down to net realisable value. In such
circumstances, the replacement cost of the materials may be the best
available measure of their net realisable value.
When inventories are sold, the carrying amount of those inventories shall be
recognised as an expense in the period in which the related revenue is
recognised. The amount of any write-down of inventories to net realisable
value and all losses of inventories shall be recognised as an expense in the
period the write-down or loss occurs. The amount of any reversal of any
write-down of inventories, arising from an increase in net realisable value,
shall be recognised as a reduction in the amount of inventories recognised
as an expense in the period in which the reversal occurs.
Cost Formulas
The cost of inventories of items that are not ordinarily interchangeable and
goods or services produced and segregated for specific projects shall be
assigned by using specific identification of their individual costs.
Specific identification of cost means that specific costs are attributed
to identified items of inventory.
The cost of inventories, other than those above shall be assigned by using:
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. For inventories with a different nature or use,
different cost formulas may be justified.
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Ind AS 7, Statement of Cash Flows
The objective of this Standard is to require the provision of information about
the historical changes in cash and cash equivalents of an entity by means of
a statement of cash flows which classifies cash flows during the period from
operating, investing and financing activities.
Cash comprises cash on hand and demand deposits.
Cash equivalents are short term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.
An investment normally qualifies as a cash equivalent only when it has a
short maturity of, say, 3 months or less from the date of acquisition.
Presentation of a Statement of Cash Flow
The statement of cash flows shall report cash flows during the period
classified by operating, investing and financing activities.
Operating activities Investing activities Financing activities
Principal revenue- Acquisition and disposal Activities that result in
producing activities and of long-term assets and changes in the size and
other activities that are other investments not composition of the
not investing or financing included in cash contributed equity and
activities equivalents borrowings of the entity
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Reporting methods (Cash flow from
operating activities)
Direct method Indirect Method
Profit/Loss is adjusted for effects of transactions of
Major classes of gross cash non-cash nature, deferrals or accruals of past or
receipts and payments in future operating cash receipts or payments,
respect of operating activities and income and expense items associated with
are presented investing or financing cash flows
Reporting of foreign
currency cash flow
Effects of changes in exchange
Cash flow arising from rates on cash and cash
transactions in a foreign equivalents held in a foreign
currency currency"
To be recorded in the functional To be reported as a separate part of the
currency of the entity using the reconciliation of the changes in cash
exchange rate between the and cash equivalents at the beginning
functional currency and the foreign and the end of the period
currency at the date of cash flow
Unrealised gains and losses arising from changes in foreign
currency exchange rates are not cash flows.
Classification of Interest and Dividends
Non-Financial Institution
Interest paid Interest received Dividend Paid Dividend received
Financing Investing Financing Investing Activities
Activities Activities Activities
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Financial Institution
Interest paid Interest received Dividend Paid Dividend received
Operating Operating Financing Operating Activities
Activities Activities Activities
Taxes on income - Cash flows arising from taxes on income shall be
separately disclosed and shall be classified as cash flows from operating
activities unless they can be specifically identified with financing and
investing activities.
Changes in ownership interests in subsidiaries and other businesses -
The aggregate cash flows arising from obtaining or losing control of
subsidiaries or other businesses shall be presented separately and classified
as investing activities.
Non-cash transactions Non-cash transactions (i.e., investing and
financing transactions that do not require the use of cash or cash
equivalents) shall be excluded from a 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.
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.
Components of 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 the equivalent items
reported in the balance sheet.
Other disclosures - An entity shall disclose, together with a commentary by
management, the amount of significant cash and cash equivalent balances
held by the entity that are not available for use by the group in its
consolidated as well as separate financial statements.
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Ind AS 8, Accounting Policies, Changes in
Accounting Estimates and Errors
Ind AS 8 specifies 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.
The disclosures required in respect of changes in accounting policies are set
out in Ind AS 8. Other disclosure requirements for accounting policies are
laid down in Ind AS 1, Presentation of Financial Statements.
Accounting Policies are the specific principles, bases, conventions, rules
and practices applied by an entity in preparing and presenting financial
statements.
Selection and application of accounting policies
In case specific Ind AS exists - accounting policy shall be determined as per
the applicable Ind AS.
In case no specific Ind AS exists management shall use its judgment to
develop and apply accounting policy that results in information that is:
relevant to the economic decision-making needs of users; and
reliable, such that the financial statement:
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.
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In making the above judgment consider the following sources in
descending order:-
requirements in Ind ASs dealing with similar and related issues;
the definitions, recognition criteria and measurement concepts for
assets, liabilities, income and expenses in the Framework; and
most recent pronouncements of International Accounting Standards
Board and in absence thereof those of the other standard-setting bodies
that use a similar conceptual framework to develop accounting
standards, other accounting literature and accepted industry practices to
the extent that these do not conflict with the above mentioned sources.
Changes in accounting policies
An entity shall 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.
As per
Transition
transition
Initial provisions exist
provisions
application of
Accounting Ind AS Transition
for change in Retrospective
provisions do
accounting application
not exist
policy Voluntary
change in
accounting Retrospective
policy application
A change in accounting policy shall be applied retrospectively except to the
extent that it is impracticable to determine either the period-specific effects or
the cumulative effect of the change.
The Standard clarifies that initial application of a policy to revalue assets in
accordance with Ind AS 16, Property, Plant and Equipment, or Ind AS 38,
Intangible Assets, is a change in an accounting policy to be dealt with as a
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revaluation in accordance with Ind AS 16 or Ind AS 38, rather than in
accordance with Ind AS 8.
Changes in accounting estimates
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.
to the extent relates to adjust carrying amount of
changes in asset and asset, liability or equity in
Changes in liabilities or equity period of change.
accounting
estimates
recognise prospectively in
any other changes profit or loss of the period(s)
affected.
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:
was available when financial statements for those periods were
approved for issue; and
could reasonably be expected to have been obtained and taken into
account in the preparation and presentation of those financial
statements.
An entity should correct material prior period errors retrospectively in the first
set of financial statements approved for issue after their discovery by:
restating the comparative amounts for the prior period(s) presented in
which the error occurred; or
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.
A prior period error shall be corrected by retrospective restatement except to
the extent that it is impracticable to determine either the period-specific
effects or the cumulative effect of the error.
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Retrospective and Prospective
Retrospective application is applying a new accounting policy to
transactions, other events and conditions as if that policy had always been
applied.
Retrospective restatement is correcting the recognition, measurement and
disclosure of amounts of elements of financial statements as if a prior period
error had never occurred.
Impractiable retrospective application or
restatement to comparative information
Period specific effects of Cumulative effects of
Changes in Errors Changes in
accounting policies Errors
accounting policies
Apply to carrying
amount of assets Adjust Restate
and liabilities as at Restate comparative comparative
the beginning of the opening information to information to
earliest period for balances of apply new correct the
which retrospective asset, accounting error
restatement is liabilities and policy prospectively
practicable and equity for prospectively from earliest
corresponding earliest period from earliest date
adjustment to the for which date practicable.
opening balance of retrospective practicable.
each affected restatement is
component of equity practicable.
for that period.
It is impracticable to apply a change in an accounting policy retrospectively
or to make a retrospective restatement to correct an error if:
the effects of the retrospective application or retrospective restatement
are not determinable;
the retrospective application or retrospective restatement requires
assumptions about what management's intent would have been in that
period; or
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the retrospective application or retrospective restatement requires
significant estimates of amounts and it is impossible to distinguish
objectively information about those estimates that:
provides evidence of circumstances that existed on the date(s) as
at which those amounts are to be recognised, measured or
disclosed; and
would have been available when the financial statements for that
prior period were approved for issue from other information.
Prospective application of a change in accounting policy and of recognising
the effect of a change in an accounting estimate, respectively, are:
applying the new accounting policy to transactions, other events and
conditions occurring after the date as at which the policy is changed;
and
recognising the effect of the change in the accounting estimate in the
current and future periods affected by the change.
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Ind AS 10, Events after the Reporting Period
There is always a time lag between the end of the reporting period and the
date on which the financial statements are approved for issue. Thus, a
question arises should the events that occur between the said two dates
have an impact on the financial statements. If yes, to what extent? How
should these be reflected? Should these be disclosed? Indian Accounting
Standard (Ind AS) 10 provides guidance on these and similar issues.
The objective of this Standard 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.
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:
Adjusting events after the reporting period - those that provide
evidence of conditions that existed at the end of the reporting period.
Non-adjusting events after the reporting - those that are indicative of
conditions that arose after the reporting.
Exception: Where there is a breach of a material provision of a long-term
loan arrangement on or before the end of the reporting period with the effect
that the liability becomes payable on demand on the reporting date, the
agreement by lender before the approval of the financial statements for
issue, to not demand payment as a consequence of the breach, shall be
considered as an adjusting event.
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Events after reporting period
Adjusting Event Non-Adjusting event
Adjust the financial No adjustments to the
statements financial statements
The following is an example of adjusting events after the reporting period that
require an entity to adjust the amounts recognised in its financial statements,
or to recognise items that were not previously recognised.
Settlement of a court case: The settlement arrived at after the reporting
period of a court case that confirms that the entity had a present obligation at
the end of the reporting period. In this case, the entity adjusts any previously
recognised provision related to this court case in accordance with Ind AS 37,
Provisions, Contingent Liabilities and Contingent Assets, or recognises a
new provision. The entity does not merely disclose a contingent liability
because the settlement provides additional evidence that would be
considered in accordance with paragraph 16 of Ind AS 37.
Some examples of non-adjusting events after the reporting period that would
generally result in disclosure are as follows:
announcing a plan to discontinue an operation;
the destruction of a major production plant by a fire after the reporting
period.
Dividends
If an entity declares dividends to holders of equity instruments after the
reporting period, the entity shall not recognise those dividends as a liability at
the end of the reporting period.
Going concern
An entity should not prepare its financial statements on a going concern
basis if management determines after the reporting period either that it
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intends to liquidate the entity or to cease trading, or that it has no realistic
alternative but to do so.
It may be noted that the entity shall make disclosures as specified in Ind AS
1, Presentation of Financial Statements, if:
the financial statements are not prepared on a going concern basis; or
the management is aware of material uncertainties related to events or
conditions that may cast significant doubt upon the entity's ability to
continue as a going concern. These events or conditions requiring
disclosure may arise after the reporting period.
Date when financial statements are approved for issue
The Standard requires an entity to disclose:
the date when the financial statements were approved for issue;
who gave this approval; and
the fact that the entity's owners or others have the power to modify the
financial statements after issue.
These disclosures are necessary as it is important for users to know when
the financial statements were approved for issue as the financial statements
do not reflect the events after this date.
Updating disclosure about conditions at the end of the
reporting period
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.
If non-adjusting events after the reporting period are material, non-disclosure
could influence the economic decisions that users make on the basis of the
financial statements, the entity should disclose the following for each material
category of non-adjusting event after the reporting period:
(a) the nature of the event; and
(b) an estimate of its financial effect, or a statement that such an estimate
cannot be made.
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Distribution of Non-cash Assets to Owners
Appendix A of Ind AS 10 provides guidance with regard to distribution of
noncash assets as dividends to owners. The Appendix prescribes that the
liability to pay a dividend shall be recognised when the dividend is
appropriately authorised and is no longer at the discretion of the entity. This
liability shall be measured at the fair value of the 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.
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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 balance sheet; and
(b) transactions and other events of the current period that are recognized
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.
Tax base of-
an asset a liability
carrying amount less any amount
amount that will be deductible for tax
purposes against any taxable that will be deductible for tax
purposes in respect of that liability in
economic benefits that will flow to an
entity when it recovers the carrying future periods. In the case of
amount of the asset. If those revenue which is received in
economic benefits will not be advance, the tax base is its carrying
taxable, the tax base of the asset isamount, less any amount of the
equal to its carrying amount. revenue that will not be taxable in
future periods.
Where tax base is not immediately apparent , with certain limited
exceptions recognise a deferred tax liability (asset) whenever recovery or
settlement of the carrying amount of an asset or liability would make
future tax payments larger (smaller) than they would be if such recovery
or settlement were to have no tax consequences.
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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
recognised as an asset. The benefit relating to a tax loss that can be carried
back to recover current tax of a previous period shall be recognised as an
asset.
Temporary differences are differences between the carrying amount
of an asset or liability in the balance sheet and its tax base.
Taxable temporary differences - temporary differences that will
result in taxable amounts in determining taxable profit (tax loss) of
future periods when the carrying amount of the asset or liability is
recovered or settled.
Deductible temporary differences - temporary differences that will
result in amounts that are deductible in determining taxable profit (tax
loss) of future periods when the carrying amount of the asset or
liability is recovered or settled.
Temporary Difference
Taxable Deductible
Deferred tax liability Deferred tax asset
Deferred tax liabilities are the amounts of income taxes payable in future
periods in respect of taxable temporary differences.
Deferred tax assets are the amounts of income taxes recoverable in future
periods in respect of:
(a) deductible temporary differences;
(b) the carry forward of unused tax losses; and
(c) the carry forward of unused tax credits.
A deferred tax liability should be recognised for all taxable temporary
differences, except to the extent that the deferred tax liability arises from the
initial recognition of goodwill or the initial recognition of an asset or liability in
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a transaction which is not a business combination and at the time of the
transaction, affects neither accounting profit nor taxable profit (tax loss). 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 an
entity to recognise a deferred tax liability (deferred tax asset), with certain
limited exceptions.
A deferred tax asset should be 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, unless the
deferred tax asset arises from the initial recognition of an asset or liability in
a transaction that is not a business combination and at the time of the
transaction, affects neither accounting profit nor taxable profit (tax loss).
Unused tax losses and tax credits
A deferred tax asset should 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.
It is inherent in the recognition of a liability that the carrying amount will be
settled in future periods through an outflow from the entity of resources
embodying economic benefits. When resources flow from the entity, part or
all of their amounts may be deductible in determining taxable profit of a
period later than the period in which the liability is recognised. In such cases,
a temporary difference exists between the carrying amount of the liability and
its tax base.
An entity recognises deferred tax assets only when it is probable that taxable
profits will be available against which the deductible temporary differences
can be utilised.
When an entity assesses whether taxable profits will be available against
which it can utilise a deductible temporary difference, it considers whether
tax law restricts the sources of taxable profits against which it may make
deductions on the reversal of that deductible temporary difference. If tax law
imposes no such restrictions, an entity assesses a deductible temporary
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difference in combination with all of its other deductible temporary
differences. However, if tax law restricts the utilisation of losses to deduction
against income of a specific type, a deductible temporary difference is
assessed in combination only with other deductible temporary differences of
the appropriate type.
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.
Deferred tax assets and liabilities should not be discounted.
Current and Deferred tax
Relates to transaction recognised Current and Deferred tax is
in recognised
Other comprehensive income In other comprehensive income
Equity In Equity
Any other As income or expense in profit or
loss
Offsetting
An entity shall offset current tax assets and current tax liabilities if, and only
if, the entity:
(a) has a 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 shall offset deferred tax assets and deferred tax liabilities if, and
only if:
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(a) the entity has a legally enforceable right to set off current tax assets
against current tax liabilities; and
(b) the deferred tax assets and the deferred tax liabilities relate to income
taxes levied by the same taxation authority on either:
I. the same taxable entity; or
II. different taxable entities which intend either to settle current tax
liabilities and assets on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Disclosure
The major components of tax expense (income) shall be disclosed
separately.
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.
Uncertainty over Income Tax Treatments
Appendix C of this Standard clarifies how to apply the recognition and
measurement requirements in Ind AS 12 when there is uncertainty over
income tax treatments.
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Ind AS 16, Property, Plant and Equipment
The objective of this Standard 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
rental to others, or for administrative purposes; and
(b) are expected to be used during more than one period.
Recognition
The cost of an item of property, plant and equipment shall 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.
Items such as spare parts, stand-by equipment and servicing
equipment are recognised as property, plant or equipment if they
meet the definition. Otherwise, such items are classified as
inventory.
Measurement at recognition
An item of property, plant and equipment that qualifies for recognition as an
asset shall be measured at its cost.
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Elements of cost
Directly attributable Costs of dismantling
Purchase Costs
and necessary costs and restoration
Directly attributable
Purchase price, costs to bring the asset The initial estimate of
including import duties to the location and the costs of dismantling
and non-refundable condition necessary for and removing the item
purchase taxes, after it to be capable of and restoring the sale
deduction of trade operating in the manner on which PPE is
discounts and rebates intended by located.
management
Examples of directly attributable costs are costs of site preparation; initial
delivery and handling costs; installation and assembly costs, etc.
Examples of costs that are not costs of an item of property, plant and
equipment are costs of opening a new facility; costs of conducting business
in a new location or with a new class of customer (including costs of staff
training); administration and other general overhead costs, etc.
Examples of costs that are not included in the carrying amount of an item of
property, plant and equipment are costs incurred while an item capable of
operating in the manner intended by management has yet to be brought into
use or is operated at less than full capacity; initial operating losses, such as
those incurred while demand for the item's output builds up; and costs of
relocating or reorganising part or all of an entity's operations.
The income and related expenses of incidental operations are
recognised in profit or loss.
PPE acquired in exchange for a non-monetary asset or assets or a
combination of monetary and non-monetary assets
The cost of such an item of PPE is measured at fair value 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.
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The acquired item is measured in this manner even if an enterprise cannot
immediately derecognise the asset given up. If the acquired item is not
measured at fair value, its/their cost is measured at the carrying amount of
the asset given up.
Subsequent Costs
Regular Major
Costs of day-to-day Replacement Cost Inspection Cost
servicing
The cost of replacing part It is recognised in the
These are primarily the is recognised in the carrying amount of the PPE
costs of labour and carrying amount of PPE if if the recognition criteria
consumables and may the recognition criteria are are met.
include the cost of small met. The carrying amount Any remaining carrying
parts. Not recognised of the replaced parts is amount of the cost of the
as PPE derecognised previous inspection is
derecognised.
Measurement after recognition
An entity should choose either the cost model or the revaluation model as its
accounting policy and shall apply that policy to an entire class of property,
plant and equipment.
Revaluation
Cost Model
Model
Whose fair value can be measured reliably
Cost less any accumulated should be carried at a revalued amount less
depreciation and any any subsequent accumulated depreciation and
accumulated impairment subsequent accumulated impairment losses
losses
With sufficient regularity
For entire class of PPE to which an asset
which is revalued belongs
If an asset's carrying amount is increased as a result of a revaluation,
the increase shall be recognised in other comprehensive income and
accumulated in equity under the heading of revaluation surplus.
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However, the increase shall 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 shall 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.
The depreciable amount of an asset should be allocated on a systematic
basis over its useful life.
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.
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 be
derecognised:
a) on disposal; or
b) when no future economic benefits are expected from its use or
disposal.
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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
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.
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Ind AS 19, Employee Benefits
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.
Employee benefits are all forms of considerations given by an entity
in exchange for service rendered by employees or for the
termination of employment.
Employee benefits include:
Short-term Other long-
Post-employment Termination
employee term employee
benefits benefits
benefits benefits
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 service.
Short-term employee benefits include items such as the following, if expected
to be settled wholly before twelve months after the end of the annual
reporting period in which the employees render the related services:
a) wages, salaries and social security contributions;
b) paid annual leave and paid sick leave;
c) profit-sharing and bonuses; and
d) non-monetary benefits (such as medical care, housing, cars and free
or subsidised goods or services) for current employees.
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When an employee has rendered service to an entity during an accounting
period, the entity should 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 should 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 cash refund.
b) as an expense, unless another Ind AS requires or permits the inclusion
of the benefits in the cost of an asset.
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 benefits include items such as the following:
(a) retirement benefits (eg pensions and lump sum payments on
retirement); and
(b) other post-employment benefits, such as post-employment life
insurance and post-employment medical care.
Post-employment
benefit plan
Defined Contribution
Defined Benefits plan
plan
Defined contribution plan
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.
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Under defined contribution plans the entity's legal or constructive obligation
is limited to the amount that it agrees to contribute to the fund. 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 should 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 should
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 cash refund.
(b) as an expense, unless another Ind AS requires or permits the inclusion
of the contribution in the cost of an asset.
Defined benefits plan
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:
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i. using an actuarial technique 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.
ii. discounting that benefit 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 adjusted for any effect of limiting a
net defined benefit asset to the asset ceiling.
c) determining amounts to be recognised in profit or loss:
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, excluding amounts
included in net interest on the net defined benefit liability (asset).
An entity shall determine the net defined benefit liability (asset) with sufficient
regularity that the amounts recognised in the financial statements do not
differ materially from the amounts that would be determined at the end of the
reporting period.
Accounting for constructive obligation
An entity shall account not only for its legal obligation under the formal terms
of a defined benefit plan, but also for any constructive obligation that arises
from the entity's informal practices. Informal practices give rise to a
constructive obligation where the entity has no realistic alternative but to pay
employee benefits. An example of a constructive obligation is where a
change in the entity's informal practices would cause unacceptable damage
to its relationship with employees.
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Multi-employer plan
Multi-employer plans are defined contribution plans (other than state
plans) or defined benefit plans (other than state plans) that:
(a) pool the assets contributed by various entities that are not
under common control; and
(b) use those assets to provide benefits to employees of more than
one entity, on the basis that contribution and benefit levels are
determined without regard to the identity of the entity that
employs the employees.
An entity should classify a multi-employer plan as a defined contribution plan
or a defined benefit plan under the terms of the plan (including any
constructive obligation that goes beyond the formal terms).
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.
Other long-term employee benefits include items such as the following, if not
expected to be settled wholly before twelve months after the end of the
annual reporting period in which the employees render the related service:
a) long-term paid absences such as long-service or sabbatical leave;
b) jubilee or other long-service benefits;
c) long-term disability benefits;
d) profit-sharing and bonuses; and
e) deferred remuneration.
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.
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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 should recognise a liability and expense for termination benefits at
the earlier of the following dates:
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.
An entity should measure termination benefits on initial recognition, and
should measure and recognise subsequent changes, in accordance with the
nature of the employee benefit, provided that if the termination benefits are
an enhancement to post-employment benefits, the entity should apply the
requirements for post-employment benefits. Otherwise:
a) if the termination benefits are expected to be settled wholly before
twelve months after the end of the annual reporting period in which the
termination benefit is recognised, the entity should apply the
requirements for short-term employee benefits.
b) if the termination benefits are not expected to be settled wholly before
twelve months after the end of the annual reporting period, the entity
should apply the requirements for other long-term employee benefits.
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Ind AS 20, Accounting for Government
Grants and Disclosure of Government
Assistance
The objective of this Standard is to provide for accounting of, and the
disclosures of, government grants and also the disclosure of other forms of
government assistance.
Government grants
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 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.
Government grants shall be recognised in profit or loss on a systematic basis
over the periods in which the entity recognises as expenses the related costs
for which the grants are intended to compensate.
There are two broad approaches to the accounting for government grants:
a) the capital approach, under which a grant is recognised outside profit
or loss, and
b) the income approach, under which a grant is recognised in profit or
loss over one or more periods.
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.
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Non-monetary government grants
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, it is usual to assess the fair value of the non-monetary asset
and to account for both grant and asset at that fair value. An alternative
course that is sometimes followed is to record both asset and grant at a
nominal amount.
Government grants related to assets
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 either by setting up the grant
as deferred income or by deducting the grant in arriving at the carrying
amount of the asset.
Two methods of presentation in financial statements of grants or the
appropriate portions of grants related to assets are regarded as acceptable
alternatives.
a) One method recognises the grant as deferred income that is
recognised in profit or loss on a systematic basis over the useful life of
the asset.
b) The other method deducts the grant in calculating the carrying amount
of the asset. The grant is recognised in profit or loss over the life of a
depreciable asset as a reduced depreciation expense.
Government grants related to income
Grants related to income shall be presented as part of profit or loss, either
separately or under a general heading such as `Other income'; alternatively,
they can be deducted in reporting the related expense.
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Repayment of government grants
A Government grant that becomes repayable shall be accounted for as
a change in accounting estimate as per 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
increasing the Ind AS 20, Accounting for Government Grants and
Disclosure of Government Assistance carrying amount of the asset or
reducing the deferred income balance by the amount repayable.
The cumulative additional depreciation that would have been
recognised in profit or loss to date in the absence of the grant shall be
recognised immediately in profit or loss.
Government Assistance
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.
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.
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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.
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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 this Standard 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.
Exchange difference is the difference resulting from translating a given
number of units of one currency into another currency at different exchange
rates.
Foreign currency is a currency other than the functional currency of the
entity.
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 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).
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An entity's functional currency reflects the underlying transactions, events
and conditions that are relevant to it. Accordingly, once determined, the
functional currency is not changed unless there is a change in those
underlying transactions, events and conditions.
Reporting foreign currency transactions in functional
currency
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
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.
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.
Exchange differences arising on a monetary item that forms part of a
reporting entity's net investment in a foreign operation 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
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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.
Presentation Currency
Presentation currency is the currency in which the financial statements are
presented.
An entity may present its financial statements in any currency (or currencies).
If the presentation currency differs from the entity's functional currency, it
translates its results and financial position into the presentation currency.
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
(i.e. 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.
The results and financial position of an entity whose functional currency is
the currency of a hyperinflationary economy shall be translated into a
different presentation currency using the following procedures:
a) all amounts (i.e. assets, liabilities, equity items, income and expenses,
including comparatives) shall be translated at the closing rate at the
date of the most recent balance sheet, except that.
b) when amounts are translated into the currency of a non-
hyperinflationary economy, comparative amounts shall be those that
were presented as current year amounts in the relevant prior year
financial statements (i.e. not adjusted for subsequent changes in the
price level or subsequent changes in exchange rates).
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Translation of foreign operation
The incorporation of the results and financial position of a foreign operation
with those of the reporting entity follows normal consolidation procedures,
such as the elimination of intragroup balances and intragroup transactions of
a subsidiary.
However, an intragroup monetary asset (or liability), whether short-term or
long-term, cannot be eliminated against the corresponding intragroup liability
(or asset) without showing the results of currency fluctuations in the
consolidated financial statements. This is because the monetary item
represents a commitment to convert one currency into another and exposes
the reporting entity to a gain or loss through currency fluctuations.
Disposal or partial disposal of a foreign operation
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.
On disposal of a subsidiary that includes a foreign operation, the cumulative
amount of the exchange differences relating to that foreign operation that
have been attributed to the non-controlling interests shall be derecognised,
but shall not be reclassified to profit or loss.
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.
Appendix B of Ind AS 21 addresses how to determine the date of the
transaction for the purpose of determining the exchange rate to use on initial
recognition of the related asset, expense or income (or part of it) on the
derecognition of a non-monetary asset or non-monetary liability arising from
the payment or receipt of advance consideration in a foreign currency.
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The date of the transaction for the purpose of determining the exchange rate
to use on initial recognition of the related asset, expense or income (or part
of it) is the date on which an entity initially recognises the non-monetary
asset or non-monetary liability arising from the payment or receipt of advance
consideration. If there are multiple payments or receipts in advance, the
entity shall determine a date of the transaction for each payment or receipt of
advance consideration.
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Ind AS 23, Borrowing Costs
Borrowing costs are interest and other costs that an entity incurs in
connection with the borrowing of funds.
A qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale.
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.
Borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset shall be included in the cost of that asset.
Such borrowing costs shall be capitalised as part of the cost of the asset
when it is probable that they will result in future economic benefits to the
entity and the costs can be measured reliably.
Specific Borrowings -The borrowing costs eligible for capitalisation are the
actual borrowing costs incurred on that borrowing during the period reduced by
any investment income on the temporary investment of those borrowings.
General Borrowings -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 all borrowings of the entity that are outstanding during the period.
However, an entity shall exclude from this calculation borrowing costs applicable
to borrowings made specifically for the purpose of obtaining a qualifying asset
until substantially all the activities necessary to prepare that asset for its intended
use or sale are complete. 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.
Commencement of capitalisation
An entity shall begin capitalising borrowing costs as part of the cost of a
qualifying asset on the commencement date. The commencement date for
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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.
Suspension of capitalisation
An entity shall suspend capitalisation of borrowing costs during extended
periods in which it suspends active development of a qualifying asset.
Cessation of capitalisation
An entity shall cease capitalising borrowing costs when substantially all the
activities necessary to prepare the qualifying asset for its intended use or
sale are complete.
Disclosure
An entity shall disclose the amount of borrowing costs capitalised during the
period and the capitalisation rate used to determine the amount of borrowing
costs eligible for capitalisation.
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Ind AS 24, Related Party Disclosures
The objective of this Standard 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.
This standard shall be applied in:
a) identifying related party relationships and transactions;
b) identifying outstanding balances, including commitments, between an
entity and its related parties;
c) identifying the circumstances in which disclosure of the items in (a)
and (b) is required; and
d) determining the disclosures to be made about those items.
Further this Standard also requires disclosure of related party relationships,
transactions and outstanding balances, including commitments, in the
consolidated and separate financial statements of a parent or investors with
joint control of, or significant influence over, an investee. This Standard also
applies to individual financial statements.
Intragroup related party transactions and outstanding balances are
eliminated, except for those between an investment entity and its
subsidiaries measured at fair value through profit or loss, in the preparation
of consolidated financial statements of the group.
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.
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A related party is a person or entity that is related to the entity that is
preparing its financial statements (referred to as the `reporting entity').
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.
An entity is related to a reporting entity if any of the following 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.
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In the definition of a related party, an associate includes subsidiaries of the
associate and a joint venture includes subsidiaries of the joint venture.
Therefore, for example, an associate's subsidiary and the investor that has
significant influence over the associate are related to each other.
Additionally, `compensation', `government' and `government-related entity'
are all defined in the Standard
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.
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including any director (whether executive
or otherwise) of that entity.
In the context of this Standard, the following are not related parties:
a) two entities simply because they have a director or other member of
key management personnel in common or because a member of key
management personnel of one entity has significant influence over the
other entity.
b) two joint venturers simply because they share joint control of a joint
venture.
c) providers of finance, trade unions, public utilities, and departments and
agencies of a government that does not control, jointly control or
significantly influence the reporting entity, simply by virtue of their
normal dealings with an entity (even though they may affect the
freedom of action of an entity or participate in its decision-making
process).
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d) a customer, supplier, franchisor, distributor or general agent with
whom an entity transacts a significant volume of business, simply by
virtue of the resulting economic dependence.
Disclosures for all entities
Relationships between a parent and its subsidiaries shall be disclosed
irrespective of whether there have been transactions between them. An
entity should 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.
Unless an entity obtains key management personnel services from another
entity (the `management entity'), it 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.
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. 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
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d. the expense recognised during the period in respect of bad or doubtful
debts due from related parties.
The above disclosures shall be made separately for each of the following
categories:
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.
Amounts incurred by the entity for the provision of key management
personnel services that are provided by a separate management entity shall
be disclosed.
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.
Disclosures for government-related entities
A government-related reporting entity is exempt from the disclosure
requirements of 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.
If a reporting entity applies the above exemption, it should disclose the
following about the transactions and related outstanding balances:
a) the name of the government and the nature of its relationship with the
reporting entity (i.e. control, joint control or significant influence);
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b) the following information in sufficient detail to enable users of the
entity's financial statements to understand the effect of related party
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.
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Ind AS 27, Separate Financial Statements
The objective of this Standard 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.
Separate financial statements are those presented in addition to consolidated
financial statements or in addition to financial statements in which
investments in associates or joint ventures are accounted for using the equity
method, other than in the following circumstances:
· an entity may present separate financial statements as its only
financial statements, if it is exempted from consolidation or from
applying equity method of accounting;
· an investment entity shall present separate financial statements as its
only financial statements, if it is required, throughout the current period
and all comparative periods, to apply the exception to consolidation for
all of its subsidiaries.
Preparation of separate financial statements
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.
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
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is classified as held for sale). The measurement of investments accounted
for in accordance with Ind AS 109 is not changed in such circumstances.
If an entity elects to measure its investments in associates or joint ventures
at fair value through profit or loss in accordance with Ind AS 109, it shall also
account for those investments in the same way in its separate financial
statements.
If a parent is required, in accordance with Ind AS 110, to measure its
investment in a subsidiary at fair value through profit or loss in accordance
with Ind AS 109, it shall also account for its investment in a subsidiary in the
same way in its separate financial statements.
An entity shall recognise a dividend from a subsidiary, a joint venture or an
associate in profit or loss in its separate financial statements when its right to
receive the dividend is established.
Disclosure
An entity shall apply all applicable Ind ASs when providing disclosures in its
separate financial statements, including the specific disclosures as required
by this Standard.
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Ind AS 28, Investments in Associates and
Joint Ventures
The Standard sets out the requirements for the application of the equity
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.
If an entity holds, directly or indirectly through intermediary (eg subsidiaries),
20 per cent or more of the voting power of the investee, it is presumed that
the entity has significant influence, unless it can be clearly demonstrated that
this is not the case. Conversely, if the entity holds, directly or indirectly
through intermediary (eg subsidiaries), less than 20 per cent of the voting
power of the investee, it is presumed that the entity does not have significant
influence, unless such influence can be clearly demonstrated. A substantial
or majority ownership by another investor does not necessarily preclude an
entity from having significant influence.
The existence of significant influence by an entity is usually evidenced in one
or more of the following ways:
(a) representation on the board of directors or equivalent governing body
of the investee;
(b) participation in policy-making processes, including participation in
decisions about dividends or other distributions;
(c) material transactions between the entity and its investee;
(d) interchange of managerial personnel; or
(e) provision of essential technical information.
The existence and effect of potential voting rights that are currently
exercisable or convertible, including potential voting rights held by other
entities, are considered when assessing whether an entity has significant
influence.
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The equity method is a method of accounting whereby the investment is
initially recognised at cost and adjusted thereafter for the post-acquisition
change in the investor's share of the investee's net assets. The investor's
profit or loss includes its share of the investee's profit or loss and the
investor's other comprehensive income includes its share of the investee's
other comprehensive income.
Equity method
The investment in an associate or a joint venture upon acquisition is
recognised at cost.
On acquisition of the investment, any difference between the cost of
the investment and the entity's share of the net fair value of the
investee's identifiable assets and liabilities is accounted for as - (a)
Goodwill relating to an associate or a joint venture is included in the
carrying amount of the investment. Amortisation of that goodwill is not
permitted. (b) Any excess of the entity's share of the net fair value of
the investee's identifiable assets and liabilities over the cost of the
investment is recognised directly in equity as capital reserve in the
period in which the investment is acquired.
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. Appropriate adjustments to the entity's share of the
associate's or joint venture's profit or loss after acquisition are made in
order to account, for example, for depreciation of the depreciable
assets based on their fair values at the acquisition date. Unrealised
profits and losses on transactions with associates are eliminated to the
extent of the investor's interest in the investee.
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.
The investor's share of proportionate interest in the investee arising
from changes in the investee's other comprehensive income are
recognised in the investor's other comprehensive income.
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An entity with joint control of, or significant influence over, an investee shall
account for its investment in an associate or a joint venture using the equity
method except when that investment qualifies for exemption.
Ind AS 109, Financial Instruments, does not apply to interests in associates
and joint ventures that are accounted for using the equity method. When
instruments containing potential voting rights in substance currently give
access to the returns associated with an ownership interest in an associate
or a joint venture, the instruments are not subject to Ind AS 109. In all other
cases, instruments containing potential voting rights in an associate or a joint
venture are accounted for in accordance with Ind AS 109. An entity also
applies Ind AS 109 to other financial instruments in an associate or joint
venture to which the equity method is not applied.
When an 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, the entity may elect to measure that investment at fair value through
profit or loss in accordance with Ind AS 109. An entity shall make this
election separately for each associate or joint venture, at initial recognition of
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.
An entity shall apply Ind AS 105 to an investment, or a portion of an
investment, in an associate or a joint venture that meets the criteria to be
classified as held for sale. 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 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. However, 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
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the investment entity associate's or joint venture's interests in subsidiaries'.
This election is made separately for each investment entity associate or joint
venture, at the later of the date on which (a) the investment entity associate
or joint venture is initially recognised; (b) the associate or joint venture
becomes an investment entity; and (c) the investment entity associate or joint
venture first becomes a parent.
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 to
determine whether it is necessary to recognise any additional impairment
loss with respect to its net investment in the associate or joint venture.
An entity loses significant influence over an investee when it loses the power
to participate in the financial and operating policy decisions of that investee.
The loss of significant influence can occur with or without a change in
absolute or relative ownership levels. On the loss of significant influence or
joint control, the gain or loss is recognised in profit or loss. The entity shall
account for all amounts previously recognised in other comprehensive
income in relation to that investment on the same basis as would have been
required if the investee had directly disposed of the related assets or
liabilities.
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Ind AS 29, Financial Reporting in
Hyperinflationary Economies
In a hyperinflationary economy, reporting of operating results and financial
position in the local currency without restatement is not useful. Money loses
purchasing power at such a rate that comparison of amounts from
transactions and other events that have occurred at different times, even
within the same accounting period, is misleading.
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;
(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%.
Restatement of financial statements
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, they should be stated in
terms of the measuring unit current at the end of the reporting period. The
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corresponding figures for the previous period required by Ind AS 1,
Presentation of Financial Statements, and any information in respect of
earlier periods should 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, Ind AS 21, The Effects of
Changes in Foreign Exchange Rates should be applied.
The gain or loss on the net monetary position should be included in profit or
loss and separately disclosed.
Historical Cost Financial Current Cost Financial Statements
Statements
Balance Sheet Balance Sheet
Amounts not already expressed Items stated at current cost are not
in terms of the measuring unit restated because they are already
current at the end of the reporting expressed in terms of the measuring
period are restated by applying a unit current at the end of the
general price index. reporting period. All other items
Monetary items are not restated follow measurement is same as
since they are carried at current described for Historical Costs
amounts at the end of the Financial Statements.
reporting period.
Assets and liabilities linked by
agreement to changes in prices
are adjusted in accordance with
the agreement in order to
ascertain the amount outstanding
at the end of the reporting period.
They are carried at this adjusted
amount in the restated balance
sheet.
All non-monetary items not
carried at current amounts at the
end of the reporting period are
restated.
Statement of profit and loss Statement of profit and loss
All amounts need to be restated by All amounts need to be restated into
applying the change in the general the measuring unit current at the end
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price index from the dates when the of the reporting period by applying a
items of income and expenses were general price index.
initially recorded in the financial
statements.
Gain or loss on net monetary Gain or loss on net monetary
position position
The gain or loss may be estimated The gain or loss on the net monetary
by applying the change in a general position is accounted for in the same
price index to the weighted average manner as described for Historical
for the period of the difference Cost Financial Statements.
between monetary assets and
monetary liabilities. The gain or loss
on the net monetary position is
included in profit or loss.
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 amounts
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.
This Standard requires that all items in the statement of cash flows are
expressed in terms of the measuring unit current at the end of the reporting
period.
Corresponding figures for the previous reporting period, whether they were
based on a historical cost approach or a current cost approach, are restated
by applying a general price index so that the comparative financial
statements are presented in terms of the measuring unit current at the end of
the reporting period.
A parent that reports in the currency of a hyperinflationary economy may
have subsidiaries that also report in the currencies of hyperinflationary
economies. The financial statements of any such subsidiary need to be
restated by applying a general price index of the country in whose currency it
reports before they are included in the consolidated financial statements
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issued by its parent. Where such a subsidiary is a foreign subsidiary, its
restated financial statements are translated at closing rates. The financial
statements of subsidiaries that do not report in the currencies of
hyperinflationary economies are dealt with in accordance with Ind AS 21.
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.
Economies ceasing to be hyperinflationary
When an economy ceases to be hyperinflationary and an entity discontinues
the preparation and presentation of financial statements prepared in
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.
Disclosure
The following disclosures shall be made:
a) the fact that the financial statements and the corresponding figures for
previous periods have been restated for the changes in the general
purchasing power of the functional currency and, as a result, are
stated in terms of the measuring unit current at the end of the reporting
period;
b) whether the financial statements are based on a historical cost
approach or a current cost approach; and
c) the identity and level of the price index at the end of the reporting
period and the movement in the index during the current and the
previous reporting period.
d) the duration of the hyperinflationary situation existing in the economy.
The disclosures required by this Standard are needed to make clear the
basis of dealing with the effects of inflation in the financial statements. They
are also intended to provide other information necessary to understand that
basis and the resulting amounts.
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
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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.
Appendix A also provides guidance on the entity's opening balance sheet for
the reporting period as well as the entity's opening balance sheet at the
beginning of the earliest period presented.
After an entity has restated its financial statements, all corresponding figures
in the financial statements for a subsequent reporting period, including
deferred tax items, are restated by applying the change in the measuring unit
for that subsequent reporting period only to the restated financial statements
for the previous reporting period.
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Ind AS 32, Financial Instruments:
Presentation
The objective of this Standard 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.
Definitions
A financial instrument is any contract that gives rise to a financial asset of one
entity and a financial liability or equity instrument of another entity.
A financial asset is any asset that is:
(a) cash;
(b) an equity instrument of another entity;
(c) a contractual right:
(i) to receive cash or another financial asset from another entity; or
(ii) to exchange financial assets or financial liabilities with another
entity under conditions that are potentially favourable to the entity;
or
(d) a contract that will or may be settled in the entity's own equity instruments
and is:
(i) a non-derivative for which the entity is or may be obliged to receive
a variable number of the entity's own equity instruments; or
(ii) a derivative that will or may be settled other than by the exchange
of a fixed amount of cash or another financial asset for a fixed
number of the entity's own equity instruments. For this purpose the
entity's own equity instruments do not include puttable financial
instruments classified as equity instruments, instruments that
impose on the entity an obligation to deliver to another party a pro
rata share of the net assets of the entity only on liquidation and are
classified as equity instruments, or instruments that are contracts
for the future receipt or delivery of the entity's own equity
instruments.
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A financial liability is any liability that is:
(a) a contractual obligation :
(i) to deliver cash or another financial asset to another entity; or
(ii) to exchange financial assets or financial liabilities with another
entity under conditions that are potentially unfavourable to the
entity; or
(b) a contract that will or may be settled in the entity's own equity instruments
and is:
(i) a non-derivative for which the entity is or may be obliged to deliver
a variable number of the entity's own equity instruments; or
(ii) a derivative that will or may be settled other than by the exchange
of a fixed amount of cash or another financial asset for a fixed
number of the entity's own equity instruments. For this purpose,
rights, options or warrants to acquire a fixed number of the entity's
own equity instruments for a fixed amount of any currency are
equity instruments if the entity offers the rights, options or warrants
pro rata to all of its existing owners of the same class of its own
non-derivative equity instruments. Apart from the aforesaid, the
equity conversion option embedded in a convertible bond
denominated in foreign currency to acquire a fixed number of the
entity's own equity instruments is an equity instrument if the
exercise price is fixed in any currency. Also, for these purposes the
entity's own equity instruments do not include puttable financial
instruments that are classified as equity instruments, instruments
that impose on the entity an obligation to deliver to another party a
pro rata share of the net assets of the entity only on liquidation and
are classified as equity instruments in, or instruments that are
contracts for the future receipt or delivery of the entity's own equity
instruments.
Presentation of liabilities and equity
The issuer of a financial instrument shall 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.
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An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities.
A financial instrument is an equity instrument if, and only if, both the following
conditions are met.
(a) The instrument includes no contractual obligation:
(i) to deliver cash or another financial asset to another entity; or
(ii) to exchange financial assets or financial liabilities with another entity
under conditions that are potentially unfavourable to the issuer; and
(b) If the instrument will or may be settled in the issuer's own equity
instruments, it is:
(i) a non-derivative that includes no contractual obligation for the issuer to
deliver a variable number of its own equity instruments; or
(ii) a derivative that will be settled only by the issuer exchanging a fixed
amount of cash or another financial asset for a fixed number of its own
equity instruments.
A puttable instrument is a financial instrument that gives the holder 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.
As an exception to the definition of a financial liability, a puttable instrument
is classified as an equity instrument if it has all the following features:
(a) It entitles the holder to a pro rata share of the entity's net assets in the
event of the entity's liquidation.
(b) The instrument is in the class of instruments that is subordinate to all
other classes of instruments and:
(i) has no priority over other claims to the assets of the entity on
liquidation, and
(ii) does not need to be converted into another instrument before it
is in the class of instruments that is subordinate to all other
classes of instruments.
(c) All financial instruments in that class have identical features.
(d) Apart from the contractual obligation for the issuer to repurchase or
redeem the instrument for cash or another financial asset, the
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instrument does not include any contractual obligation to deliver cash
or another financial asset to another entity, or to exchange financial
assets or financial liabilities with another entity under conditions that
are potentially unfavourable to the entity, and it is not a contract that
will or may be settled in the entity's own equity instruments.
(e) The total expected cash flows attributable to the instrument over the
life of the instrument are based substantially on the profit or loss, the
change in the recognised net assets or the change in the fair value of
the recognised and unrecognised net assets of the entity over the life
of the instrument (excluding any effects of the instrument).
(f) the issuer must have no other financial instrument or contract that has:
(i) total cash flows based substantially on the profit or loss, the
change in the recognised net assets or the change in the fair
value of the recognised and unrecognised net assets of the
entity (excluding any effects of such instrument or contract); and
(ii) the effect of substantially restricting or fixing the residual return
to the puttable instrument holders.
Compound financial instruments
The issuer of a non-derivative financial instrument shall evaluate the terms of
the financial instrument to determine whether it contains both a liability and
an equity component. Such components shall be classified separately as
financial liabilities, financial assets or equity instruments.
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.
Interest, dividends, losses and gains
Interest, dividends, losses and gains relating to a financial instrument
or a component that is a financial liability shall be recognised as
income or expense in profit or loss.
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Distributions to holders of an equity instrument shall be recognised by
the entity directly in equity.
Transaction costs of an equity transaction shall be accounted for as a
deduction from equity.
Offsetting a financial asset and liability
A financial asset and a financial liability shall be offset and the net amount
presented in the balance sheet when only when, an entity:
(a) currently has a 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.
In accounting for a transfer of a financial asset that does not qualify for
derecognition, the entity shall not offset the transferred asset and the
associated liability.
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.
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Ind AS 33, Earnings per share
The objective of this Standard 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.
Scope
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 entity that discloses earnings per share shall calculate and
disclose earnings per share in accordance with this Standard.
When an entity presents both consolidated financial statements and separate
financial statements, the disclosures required by this Standard shall be
presented both in the consolidated financial statements and separate
financial statements based on the information in the respective financial
statements.
An ordinary share is an equity instrument that is subordinate to all other
classes of equity instruments. A potential ordinary share is a financial
instrument or other contract that may entitle its holder to ordinary shares.
Basic earnings per share
An entity shall calculate basic earnings per share amounts for profit or loss
attributable to ordinary equity holders of the parent entity and, if presented,
profit or loss from continuing operations attributable to those equity holders.
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.
Earnings
For the purpose of calculating basic earnings per share,the amounts
attributable to ordinary equity holders of the parent entity shall be:
a) profit or loss from continuing operations attributable to the parent
entity; and
b) profit or loss attributable to the parent entity,
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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 or 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.
Shares
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.
The number of ordinary shares shall be the weighted average number of
ordinary shares outstanding during the period, adjusted for events other than
the conversion of potential ordinary shares, that have changed the number of
ordinary shares outstanding without a corresponding change in resources.
Shares are usually included in the weighted average number of shares from
the date consideration is receivable (which is generally the date of their
issue). The Standard includes examples of scenarios when ordinary shares
are issued including shares issued as part of the consideration transferred in
business combination and issued upon the conversion of a mandatorily
convertible instrument.
Contingently issuable shares are treated as outstanding and are included in
the calculation of basic earnings per share only from the date when all
necessary conditions are satisfied (i.e. the events have occurred). Shares
that are issuable solely after passage of time are not contingently issuable
shares, because the passage of time is a certainty.
The Standard also includes examples where ordinary shares may be issued
or reduced without a corresponding change in resources.
Diluted earnings per share
An entity shall calculate diluted earnings per share amounts for profit or loss
attributable to ordinary equity holders of the parent entity and, if presented,
profit or loss from continuing operations attributable to those equity holders.
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For the purpose of calculating diluted earnings per share, an entity shall
adjust 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.
Earnings
For the purpose of calculating diluted earnings per share, an entity shall
adjust profit or loss attributable to ordinary equity holders of the parent entity,
by the after-tax effect of income or expense resulting from dilutive potential
ordinary shares.
Shares
For the purpose of calculating diluted earnings per share, the number of
ordinary shares shall be the weighted average number of ordinary shares,
plus the weighted average number of ordinary shares that would be issued
on conversion of all the dilutive potential ordinary shares into ordinary
shares. Dilutive potential ordinary shares shall be deemed to have been
converted into ordinary shares at the beginning of the period or, if later, the
date of the issue of the potential ordinary shares.
Dilutive potential 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 antidilutive. In determining whether potential ordinary
shares are dilutive or antidilutive, each issue or series of potential ordinary
shares is considered separately rather than in aggregate. The sequence in
which potential ordinary shares are considered may affect whether they are
dilutive.
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Potential ordinary shares are antidilutive when their conversion to ordinary
shares would increase earnings per share or decrease loss per share from
continuing operations. The calculation of diluted earnings per share does not
assume conversion, exercise, or other issue of potential ordinary shares that
would have an antidilutive effect on earnings per share.
Options, warrants and their equivalents
For the purpose of calculating diluted earnings per share, an entity shall
assume the exercise of dilutive options and warrants of the entity. The
assumed proceeds from these instruments shall be regarded as having been
received from the issue of ordinary shares at the average market price of
ordinary shares during the period. The difference between the number of
ordinary shares issued and the number of ordinary shares that would have
been issued at the average market price of ordinary shares during the period
shall be treated as an issue of ordinary shares for no consideration.
Convertible instruments
The dilutive effect of convertible instruments shall be reflected in diluted
earnings per share. Convertible preference shares are antidilutive whenever
the amount of dividend on such shares declared in or accumulated for the
current period per ordinary share obtainable on conversion exceeds basic
earnings per share. Similarly, convertible debt is antidilutive whenever its
interest (net of tax and other changes in income or expense) per ordinary
share obtainable on conversion exceeds basic earnings per share.
Contingently issuable shares
As in the calculation of basic earnings per share, contingently issuable
ordinary shares are treated as outstanding and included in the calculation of
diluted earnings per share if the conditions are satisfied. If the conditions are
not satisfied, the number of contingently issuable shares included in the
diluted earnings per share calculation is based on the number of shares that
would be issuable if the end of the period were the end of the contingency
period. Contingently issuable shares are included from the beginning of the
period (or from the date of the contingent share agreement, if later).
Contracts that may be settled in ordinary shares or cash
When an entity has issued a contract that may be settled in ordinary shares
or cash at the entity's option, the entity shall presume that the contract will be
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settled in ordinary shares, and the resulting potential ordinary shares shall be
included in diluted earnings per share if the effect is dilutive.
For contracts that may be settled in ordinary shares or cash at the holder's
option, the more dilutive of cash settlement and share settlement shall be
used in calculating diluted earnings per share.
Purchased options
Contracts such as purchased put options and purchased call options (i.e.
options held by the entity on its own ordinary shares) are not included in the
calculation of diluted earnings per share because including them would be
antidilutive.
Written put options
Contracts that require the entity to repurchase its own shares, such as
written put options and forward purchase contracts, are reflected in the
calculation of diluted earnings per share if the effect is dilutive.
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. The fact that per share calculations reflect such changes
in the number of shares shall be disclosed.
In addition, basic and diluted earnings per share of all periods presented
shall be adjusted for the effects of errors and adjustments resulting from
changes in accounting policies accounted for retrospectively.
Presentation
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
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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.
An entity shall present basic and diluted earnings per share, even if the
amounts are negative (ie a loss per share).
Disclosure
An entity shall disclose the following:
a) the amounts used as the numerators in calculating basic and diluted
earnings per share, and a reconciliation of those amounts to profit or
loss attributable to the parent entity for the period. The reconciliation
shall include the individual effect of each class of instruments that
affects earnings per share.
b) the weighted average number of ordinary shares used as the
denominator in calculating basic and diluted earnings per share, and a
reconciliation of these denominators to each other. The reconciliation
shall include the individual effect of each class of instruments that
affects earnings per share.
c) instruments (including contingently issuable shares) that could
potentially dilute basic earnings per share in the future, but were not
included in the calculation of diluted earnings per share because they
are antidilutive for the period(s) presented.
d) transactions, other than with respect to retrospective adjustments, that
occur after the reporting period and that would have changed
significantly the number of ordinary shares or potential ordinary shares
outstanding at the end of the period if those transactions had occurred
before the end of the reporting period.
If an entity discloses, in addition to basic and diluted earnings per share,
amounts per share using a reported component of the statement of profit and
loss other than one required by this Standard, such amounts shall be
calculated using the weighted average number of ordinary shares determined
in accordance with this Standard. An entity shall indicate the basis on which
the numerator(s) is (are) determined, including whether amounts per share
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are before tax or after tax. If a component of the statement of profit and loss
is used that is not reported as a line item in the statement of profit and loss,
reconciliation shall be provided between the component used and a line item
that is reported in the statement of profit and loss.
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Ind AS 34, Interim Financial Reporting
The objective of this Standard 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.
Minimum components of an interim financial report
An interim financial report should include, at a minimum, the following
components:
a) a condensed balance sheet ;
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b) a condensed statement of profit and loss;
c) a condensed statement of changes in equity;
d) a condensed statement of cash flows; and
e) selected explanatory notes.
Form and content of interim financial statements
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.
If an entity publishes a set of condensed financial statements in its interim
financial report, those condensed statements should 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 should be included if their
omission would make the condensed interim financial statements misleading.
In the statement that presents the components of profit or loss for an interim
period, an entity shall present basic and diluted earnings per share for that
period when the entity is within the scope of Ind AS 33.
Significant events and transactions
An entity shall include in its interim financial report an explanation of events
and transactions that are significant to an understanding of the changes in
financial position and performance of the entity since the end of the last
annual reporting period. Information disclosed in relation to those events and
transactions shall update the relevant information presented in the most
recent annual financial report.
Other Disclosures
In addition to disclosing significant events and transactions, an entity shall
include information as described in this Standard, in the notes to its interim
financial statements, if not disclosed elsewhere in the interim financial report.
The information shall normally be reported on a financial year-to-date basis.
Disclosure of compliance with Ind Ass
If an entity's interim financial report is in compliance with this Standard, that
fact shall be disclosed. An interim financial report shall not be described as
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complying with Ind ASs unless it complies with all of the requirements of Ind
ASs.
Periods for which interim financial statements are required to be presented
Interim reports balance sheet, statements of profit and loss, statement of
changes in equity and statement of cash flows shall include interim financial
statements (condensed or complete) for current interim period and
comparative period in immediately preceding financial year.
Materiality
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.
Disclosure in annual financial statements
If an estimate of an amount reported in an interim period is changed
significantly during the final interim period of the financial year but a separate
financial report is not published for that final interim period, the nature and
amount of that change in estimate shall be disclosed in a note to the annual
financial statements for that financial year.
Recognition and measurement
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.
Revenues received seasonally, cyclically, or occasionally
Revenues that are received seasonally, cyclically, or occasionally within a
financial year shall not be anticipated or deferred as of an interim date if
anticipation or deferral would not be appropriate at the end of the entity's
financial year. Examples include dividend revenue, royalties and
government grants.
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Costs incurred unevenly during the financial year
Costs that are incurred unevenly during an entity's financial year shall be
anticipated or deferred for interim reporting purposes if, and only if, it is also
appropriate to anticipate or defer that type of cost at the end of the financial
year.
Use of estimates
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.
Restatement of previously reported interim periods
A change in accounting policy, other than one for which the transition is
specified by a new Ind AS, shall be reflected by:
a) restating the financial statements of prior interim periods of the current
financial year and the comparable interim periods of any prior financial
years that will be restated in the annual financial statements in
accordance with Ind AS 8; or
b) when it is impracticable to determine the cumulative effect at the
beginning of the financial year of applying a new accounting policy to
all prior periods, adjusting the financial statements of prior interim
periods of the current financial year, and comparable interim periods of
prior financial years to apply the new accounting policy prospectively
from the earliest date practicable.
The objective of the preceding principle is to ensure that a single accounting
policy is applied to a particular class of transactions throughout an entire
financial year. The effect of the principle is to require that within the current
financial year any change in accounting policy isapplied either retrospectively
or, if that is not practicable, prospectively, from no later than the beginning of
the financial year.
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There is an issue that whether an entity should reverse impairment losses
recognised in an interim period on goodwill in case 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 conflict
between Ind AS 34 and other Indian Accounting Standards.
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Ind AS 36, Impairment of Assets
The objective of this Standard 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.
b) test goodwill acquired in a business combination for impairment
annually.
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 the recoverable amount
The recoverable amount of an asset or a cash-generating unit is the higher
of 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
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asset's carrying amount, the asset is not impaired and it is not necessary to
estimate the other amount.
Value in use
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.
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). An
impairment loss on a non-revalued asset is recognised in profit or loss.
However, an impairment loss on a revalued asset is recognised in other
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comprehensive income to the extent that the impairment loss does not
exceed the amount in the revaluation surplus for that same asset. Such an
impairment loss on a revalued asset reduces the revaluation surplus for that
asset.
Cash-generating units and goodwill
If there is any indication that an asset may be impaired, recoverable amount
shall be estimated for the 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).
For the purpose of impairment testing, goodwill acquired in a business
combination shall 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.
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.
Impairment loss for cash-generating unit
An impairment loss shall be recognised for a cash-generating unit (the
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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).
These reductions in carrying amounts shall be treated as impairment losses
on individual assets. In allocating an impairment loss, 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
to the asset shall be allocated pro rata to the other assets of the unit (group
of units).
Reversing an impaitment 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 there has been a change in the estimates used
to determine the asset's recoverable amount since the last impairment loss
was recognised, in which case the carrying amount of the asset shall be
increased to its recoverable amount.
The increased carrying amount of an asset other than goodwill attributable to
a reversal of an impairment loss shall not exceed the carrying amount that
would have been determined (net of amortisation or depreciation) had no
impairment loss been recognised for the asset in prior years.
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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.
After a reversal of an impairment loss is recognised, the depreciation
(amortisation) charge for the asset shall be adjusted in future periods to
allocate the asset's revised carrying amount, less its residual value (if any),
on a systematic basis over its remaining useful life.
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. These increases in carrying amounts shall be
treated as reversals of impairment losses for individual assets.
In allocating a reversal of an impairment loss for a cash-generating unit, the
carrying amount of an asset shall not be increased above the lower of:
(a) its recoverable amount (if determinable); and
(b) the carrying amount that would have been determined (net of
amortisation or depreciation) had no impairment loss been recognised
for the asset in prior periods.
The amount of the reversal of the impairment loss that would otherwise have
been allocated to the asset shall be allocated pro rata to the other assets of
the unit, except for goodwill.
An impairment loss recognised for goodwill shall not be reversed in a
subsequent period.
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Ind AS 37, Provisions, Contingent Liabilities
and Contingent Assets
The objective of this Standard 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.
Provisions
A provision is a liability of uncertain timing or amount.
A liability is a present obligation of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits.
An obligating event is an event that creates a legal or constructive obligation
that results in an entity having no realistic alternative to settling that obligation.
A legal obligation is an obligation that derives from:
(a) a contract (through its explicit or implicit terms);
(b) legislation; or
(c) other operation of law.
A constructive obligation is an obligation that derives from an entity's actions
where:
(a) by an established pattern of past practice, published policies or a
sufficiently specific current statement, the entity has indicated to other
parties that it will accept certain responsibilities; and
(b) as a result, the entity has created a valid expectation on the part of those
other parties that it will discharge those responsibilities.
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A provision shall be recognised if and only if:
(a) an entity has a present obligation (legal or constructive) as a result of
a past event;
(b) payment is probable (more likely than not); and
(c) a reliable estimate can be made of the amount of the obligation.
If these conditions are not met, provision shall not be recognised.
Provisions shall be reviewed at the end of each reporting period and adjusted
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 where it is not clear whether there exists a present obligation, a
past event is deemed to give rise to a present obligation if, after taking
account of all available evidence, it is more likely that a present obligation
may exist 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.
Best estimate - The amount recognised as a provision should be the best
estimate of the expenditure required to settle the present obligation at the
end of the reporting period. In reaching its best estimate, the entity should
take into account the risks and uncertainties that surround the underlying
events.
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Time value of money - 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.
Provisions for one-off events (restructuring, environmental clean-up,
settlement of a lawsuit) are measured at the most likely amount.
Provisions for large populations of events (warranties, customer
refunds) are measured at a probability-weighted expected value.
Both measurements are at discounted present value using a pre-tax
discount rate that reflects the current market assessments of the time
value of money and the risks specific to the liability.
In measuring a provision consider future events as follows:
forecast reasonable changes in applying existing technology;
ignore possible gains on sale of assets;
consider changes in legislation only if virtually certain to be
enacted.
Expected disposal of assets - Gains from the expected disposal of assets
shall not be taken into account in measuring a provision.
Reimbursements - Where some or all of the expenditure required to settle a
provision is expected to be reimbursed by another party, the reimbursement
should be recognised 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
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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
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.
A restructuring is :
sale or termination of a line of business;
closure of business locations;
changes in management structure; or
fundamental reorganisations.
Restructuring provisions should be recognised as follows:
Sale of operation: recognise a provision only after a binding sale
agreement.
Closure or reorganisation: recognise a provision only after a detailed
formal plan is adopted and has started being implemented, or
announced to those affected. A board decision of itself is insufficient.
Future operating losses: provisions are not recognised for future
operating losses, even in a restructuring.
Restructuring provision on acquisition: recognise a provision only if
there is an obligation at acquisition date.
Restructuring provisions should include only direct expenditures necessarily
entailed by the restructuring, not costs that associated with the ongoing
activities of the entity.
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Contingent liabilities and assets
A contingent liability is:
(a) a possible obligation that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not wholly within the control of the entity;
or
(b) a present obligation that arises from past events but is not recognised
because:
(i) it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient
reliability.
A contingent asset is a possible asset that arises from past events and
whose existence will be confirmed only by the occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of the
entity.
An entity shall not recognise contingent assets or liabilities.
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
Appendix prescribes that the contributor shall recognise its obligation 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.
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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.
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Ind AS 38, Intangible Assets
The objective of this Standard 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.
Intangible assets meeting the relevant recognition criteria are initially
measured at cost, subsequently measured at cost or using the revaluation
model, and amortised on a systematic basis over their useful lives (unless
the asset has an indefinite useful life, in which case it is not amortised).
An intangible asset is an identifiable (either being separable or arising from
contractual or other legal rights), non-monetary asset without physical
substance.
Intangible assets can be acquired:
· by separate purchase as part of a business combination;
· by a government grant;
· by exchange of assets; and
· by self-creation (internal generation).
An intangible asset shall be recognised 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 entity shall 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.
An intangible asset shall be measured initially at cost.
Separately acquired intangible assets
The cost of a separately acquired intangible asset comprises:
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(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.
Intangible asset acquired in a business combination
As per 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 recognises 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 recognises as
an asset in-process research and development project of the acquiree if the
project meets the definition of an intangible asset.
Internally generated goodwill shall not be recognised as an asset.
Research phase
Intangible asset arising from research (or from the research phase of an
internal project) shall not be recognised. Expenditure on research (or on the
research phase of an internal project) shall be recognised as an expense
when it is incurred.
Development phase
An intangible asset arising from development (or from the development
phase of an internal project) shall be recognised 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.
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(d) how the intangible asset will generate probable future economic
benefits. Among other things, the entity can demonstrate the existence
of a market for the output of the intangible asset or the intangible asset
itself or, if it is to be used internally, the usefulness of the intangible
asset.
(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 shall 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 Expenses
Expenditure on an intangible item shall 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
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).
Expenditure on an intangible item that was initially recognised as an expense
shall not be recognised as part of the cost of an intangible asset at a later
date.
Measurement of intangible assets
An entity shall 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 shall also be accounted for
using the same model, unless there is no active market for those assets.
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Cost model
After initial recognition, an intangible asset shall 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. Also, the revaluation model may be applied to an
intangible asset that was received by way of a Government grant and
recognised at a nominal amount
Treatment of Revaluation Gains and Losses
If an intangible asset's carrying amount is increased as a result of a
revaluation, the increase shall 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
asset.
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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
Derecognition
An intangible asset should be derecognised on disposal or when no future
economic benefits are expected from its use or disposal.
The gain or loss arising from the derecognition of an intangible asset should
be determined as the difference between the net disposal proceeds, if any,
and the carrying amount of the asset. It should be recognised in profit or loss
when the asset is derecognised (unless Ind AS 116 requires otherwise on a
sale and leaseback). Gains should not be classified as revenue.
The disposal of an intangible asset may occur in a variety of ways (e.g. by
sale, by entering into a finance lease, or by donation). The date of disposal of
an intangible asset is the date that the recipient obtains control of that asset
in accordance with the requirements for determining when a performance
obligation is satisfied in Ind AS 115, Revenue from Contracts with
Customers. Ind AS 116 applies to disposal by a sale and leaseback.
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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 Ind AS 38. The best estimate of a web site's useful life
should be short.
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Ind AS 40, Investment Property
The objective of this Standard is to prescribe the accounting treatment for
investment property and related disclosure requirements.
Definitions
Investment property is property (land or a building, or part of a building, or
both) held (by the owner or by the lessee as a right of use asset) 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.
Owner-occupied property is property held (by the owner or by the lessee
as a right-of-use asset) for use in the production or supply of goods or
services or for administrative purposes.
An owned investment property should be recognised as an asset 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.
An owned investment property should be measured initially at its cost.
Transaction costs should be included in the initial measurement.
An investment property held by a lessee as a right-of-use asset shall be
measured initially at its cost in accordance with Ind AS 116.
When a lessee measures fair value of an investment property that is held as
a right-of-use asset, it shall measure the right-of-asset, and not the
underlying property at fair value.
An entity should adopt as its accounting policy the cost model to all of its
investment property. After initial recognition, an entity should measure
investment property:
(a) in accordance with Ind AS 105, Non-current Assets Held for Sale and
Discontinued Operations, if it meets the criteria to be classified as held
for sale (or is included in a disposal group that is classified as held for
sale);
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(b) in accordance with Ind AS 116, Leases if it is held by a lessee as a
right of use asset and is not held for sale in accordance with Ind AS
105; and
(c) in accordance with the requirements in Ind AS 16 for cost model in all
other cases.
The Standard requires all entities to measure the fair value of investment
property, for the purpose of disclosure.
Transfer
An entity should transfer a property to, or from, investment property only
when, there is a change in use. A change in use occurs when the property
meets, or ceases to meet, the definition of investment property and there is
evidence of the change in use. In isolation, a change in management's
intentions for the use of a property does not provide evidence of a change in
use.
Transfers between investment property, owner-occupied property and
inventories do not change the carrying amount of the property transferred
and they do not change the cost of that property for measurement or
disclosure purposes.
Disposal
An investment property should 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.
When an entity decides to dispose of an investment property without
development, it should continue to treat the property as an investment
property until it is derecognised (eliminated from the balance sheet) and
should not reclassify it as inventory. Similarly, if an entity begins to redevelop
an existing investment property for continued future use as investment
property, the property remains an investment property and should not be
reclassified as owner-occupied property during the redevelopment.
Gains or losses arising from the retirement or disposal of investment property
should be determined as the difference between the net disposal proceeds
and the carrying amount of the asset and should be recognised in profit or
loss (unless Ind AS 116 requires otherwise on a sale and leaseback) in the
period of the retirement or disposal.
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Compensation from third parties for investment property that was impaired,
lost or given up should be recognised in profit or loss when the compensation
becomes receivable.
Disclosures
The owner of an investment property provides lessors' disclosures about
leases into which it has entered as required by Ind AS 116. A lessee that
holds an investment property as a righ-of-use asset provides lessees'
disclosures as required by Ind AS 116 and lessors' disclosures as required
by Ind AS 116 for any operating leases into which it has entered.
This Standard required an entity to disclose:
(a) its accounting policy for measurement of investment property.
(b) when classification is difficult, the criteria it uses to distinguish
investment property from owner-occupied property and from property
held for sale in the ordinary course of business.
(c) the extent to which the fair value of investment property (as measured
or disclosed in the financial statements) is based on a valuation by an
independent valuer who holds a recognised and relevant professional
qualification and has recent experience in the location and category of
the investment property being valued. If there has been no such
valuation, that fact shall be disclosed.
(d) the amounts recognised in profit or loss for rental income from
investment property and direct operating expenses arising from
investment property that generated rental income during the period as
well as that did not generate rental income during the period.
(e) the existence and amounts of restrictions on the realisability of
investment property or the remittance of income and proceeds of
disposal.
(f) contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance or enhancements.
An entity shall also disclose the depreciation methods used; the useful lives
or the depreciation rates used, the gross carrying amount and the
accumulated depreciation (aggregated with accumulated impairment losses)
at the beginning and end of the period and a reconciliation of the carrying
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amount of investment property at the beginning and end of the period and
the fair value of investment property.
In the exceptional cases, when an entity cannot measure the fair value of the
investment property reliably, it shall disclose:
(i) a description of the investment property;
(ii) an explanation of why fair value cannot be measured reliably; and
(iii) if possible, the range of estimates within which fair value is highly
likely to lie.
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Ind AS 41, Agriculture
The objective of this Standard 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.
Agricultural produce is the harvested product of the entity's biological assets.
A bearer plant is a living plant that:
(a) is used in the production or supply of agricultural produce;
(b) is expected to bear produce for more than one period; and
(c) has a remote likelihood of being sold as agricultural produce, except for
incidental scrap sales.
A biological asset is a living animal or plant.
Biological transformation comprises the processes of growth, degeneration,
production, and procreation that cause qualitative or quantitative changes in a
biological asset.
Costs to sell are the incremental costs directly attributable to the disposal of an
asset, excluding finance costs and income taxes.
A group of biological assets is an aggregation of similar living animals or
plants.
Harvest is the detachment of produce from a biological asset or the cessation of
a biological asset's life processes.
An entity should recognise a biological asset or agricultural produce only
when:
(a) the entity controls the asset as a result of past events;
(b) it is probable that future economic benefits associated with the asset
will flow to the entity; and
(c) the fair value or cost of the asset can be measured reliably.
A biological asset should be measured on initial recognition and at the end of
each reporting period at its fair value less costs to sell, except where the fair
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value cannot be measured reliably, in which case it should be measured at
its cost less any accumulated depreciation and any accumulated impairment
losses.
Agricultural produce harvested from an entity's biological assets should be
measured at its fair value less costs to sell at the point of harvest.
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 should 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 should be included in profit or loss for the period in which it
arises.
An unconditional government grant related to a biological asset measured at
its fair value less costs to sell should be recognised in profit or loss when,
and only when, the government grant becomes receivable.
An entity is required to make disclosures as prescribed in the Standard.
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List of applicable Indian Accounting
Standards
Sr. No. Ind AS Name
1. 101 First-time Adoption of Indian Accounting Standards
2. 102 Share-based Payment
3. 103 Business Combinations
4. 104 Insurance Contracts
5. 105 Non-current Assets Held for Sale and Discontinued
Operations
6. 106 Exploration for and Evaluation of Mineral Resources
7. 107 Financial Instruments: Disclosures
8. 108 Operating Segments
9. 109 Financial Instruments
10. 110 Consolidated Financial Statements
11. 111 Joint Arrangements
12. 112 Disclosure of Interest in Other Entities
13. 113 Fair Value Measurement
14. 114 Regulatory Deferral Account
15. 115 Revenue from Contracts with Customers
16. 116 Leases
17. 1 Presentation of Financial Statements
18. 2 Inventories
19. 7 Statement of Cash Flows
20. 8 Accounting Policies, Changes in Accounting
Estimates and Errors
21. 10 Events after the Reporting Period
22. 12 Income Taxes
23. 16 Property, Plant and Equipment
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24. 19 Employee Benefits
25. 20 Accounting for Government Grants and Disclosure of
Government Assistance
26. 21 The Effects of Changes in Foreign Exchange Rates
27. 23 Borrowing Costs
28. 24 Related Party Disclosures
29. 27 Separate Financial Statements
30. 28 Investments in Associates and Joint Ventures
31. 29 Financial Reporting in Hyperinflationary Economies
32. 32 Financial Instruments: Presentation
33. 33 Earnings per Share
34. 34 Interim Financial Reporting
35. 36 Impairment of Assets
36. 37 Provisions, Contingent Liabilities and Contingent
Assets
37. 38 Intangible Assets
38. 40 Investment Property
39. 41 Agriculture
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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
implementation related queries in a timely and speedy manner, an Ind AS
Technical Facilitation Group (ITFG) has been formed which is working hard
in providing timely clarifications to members and others concerned. Apart
from this, the Ind AS Implementation Committee organises Certificate Course
on Ind AS, conducts In-house training programmes on Ind AS for regulatory
bodies such as C&AG, IRDAI, CBDT, various departments of ministries 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)
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Quick Referencer on Ind AS
Educational Material on Ind AS 8, Accounting Policies, Changes in
Accounting Estimates and Errors
Educational Material on Ind AS 10, Events after the Reporting Period
Educational Material on Ind AS 16, Property, Plant and Equipment
Educational Material on Ind AS 18, Revenue (Revised 2017)
Educational Material on Ind AS 27, Separate Financial Statements and
Ind AS 28, Investments in Associates and Joint Ventures
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 103, Business Combinations
Educational Material on Ind AS 108, Operating Segments
Educational Material on Ind AS 110, Consolidated Financial
Statements
Educational Material on Indian Accounting Standard (Ind AS)
111, Joint Arrangements
Educational Material on Indian Accounting Standard (Ind AS)
115, Revenue from Contracts with Customers
Certificate Course on Ind AS
An extensive Certificate course on Ind AS is being organised by the Ind AS
Implementation 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.
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Quick Referencer on Ind AS
Ind AS Technical Facilitation Group (ITFG)
Pursuant to the issuance of roadmap for Ind AS implementation, Ind ASs 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 Technical 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, 23 ITFG Clarification bulletins have been brought out addressing 162
issues.
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 is 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.
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