IFRS-RELATED....

IFRS FAQs on Standards

Revenue Recognition

1. What are the major changes in Revised AS 9 – Revenue Recognition?

The definition of revenue itself is broadened. It covers all economic benefits that arise in the ordinary course of activities of an entity, which result in increases in equity other than increases relating to contributions from the equity fund.

Revenue is to be measured at fair value received or receivable and not at the nominal value.

Property Plant and Equipment

2. What criteria are applied to recognise a PPE under revised AS 10?

A PPE is recognised if and only if the following two criteria are satisfied:

(i) Future economic flows
(ii) Measurable costs

All other tests like improved standards performance, extension of life and so on cannot be applied to recognize a PPE.

3. What is the major change in depreciation accounting?

As per the revised AS 10, PPE is based on the component approach. Each major component with significant cost vis-à-vis the total cost should be depreciated separately.

4. Is there an option to retain the cost model in the subsequent years after the initial recognition?

As per revised AS 10, an entity can adopt the cost model or the revaluation model at subsequent recognition. However, the revaluation model requires the value to be closer to fair value. Also, revaluation should be done regularly and to the entire class of assets.

Lease

5. What are the major differences between AS and IAS relating to the accounting of Lease?

Lease of Land is outside the scope of AS 19 whereas in IAS 17 lease of land and building is separated and recognised as either an operating or a finance lease depending on the circumstance.
AS 19 prohibits upward revision of unguaranteed residual value. Whereas, there is no such provisioning in IAS 17.

6. Does AS 19 provide exclusion from its scope?

The scope excludes the measurement principle for the following:

(i) Property held by lessees, that is, accounted for as an investment property
(ii) Investment property provided by lessors under operating leases
(iii) Biological assets held by lessees under finance leases
(iv) Biological assets provided by lessors as operating leases

There is also a distinction between inception of lease and commencement of lease.

Construction Contracts

7. What is the major difference in revenue recognition of a construction contract?

As per revised AS 7:

Contract revenue shall be measured at fair value of consideration received or receivable.

Deals with accounting and disclosure of service concession arrangements.

Business Combination

8. What are the major changes in the revised AS 14 Business Combination?

Whereas the original AS 14 deals only with amalgamation, the revised AS 14 defines business combination, which has a wider scope.

9. What are the methods of accounting permitted in Business Combinations?

The revised AS 14 prescribes only the acquisition method for each business combination. The pooling of interest method and the purchase method, which were allowed earlier, will not be allowed in the new standards.

10. How is goodwill treated in a business combination?

As per revised AS 14, goodwill is not amortised but tested for impairment on an annual basis.

FAQ s on Convergence of Indian Accounting Standards convergence IFRS

1. What is IFRS?

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB). These are becoming the global standard for the preparation of public company financial statements.

2. What is IASB?

IASB is an independent accounting standard-setting body, which consists of 14 members from nine countries and is based in London. This organisation took over from the International Accounting Standards Committee in 2001. It is funded by contributions from major accounting firms, private financial institutions and industrial companies, central and development banks, and other international and professional organisations throughout the world.

3. What is the difference between convergence and adoption?

Adoption would mean full-fledged use of IFRS as issued by the IASB by the Indian public companies.

Convergence means that the Indian Accounting Standards (AS) and the International Financial Reporting Standards (IFRS) would, over time, continue working together to develop high quality, compatible accounting standards.

4. What is the deadline for convergence of IFRS in India?

As per the notification of the Ministry of Corporate Affairs, convergence of Indian Accounting Standards (AS) with International Financial Reporting Standards (IFRS) will take place in phases. The first phase commences 1^st April 2011.

5. Are IFRS and the Revised Indian Accounting Standards the same?

No. They are not the same. India wants to converge with IFRS and not adopt IFRS and there are some differences between IFRS and revised AS. For example, the terminologies are different as against the Indian Accounting Standards.

Indian Accounting Standards	IFRS
Balance Sheet	Statement of Financial Position
Statement of Profit and Loss Account	Statement of Comprehensive Income
Approval for the financial statement for issue	Authorisation of the financial statements for issue

There are some conceptual differences in some standards.

6. What are the advantages of converging with IFRS?

Convergence with IFRS:

Improves investor confidence across the world with transparency and comparability
Improves inter-unit/ inter-firm/inter-industry comparison
Group consolidation made easy with same standard by all companies in group wherever located
Acceptability of financial statements across all stock exchanges, which facilitates entry of any Indian company to any stock exchange across the globe.

7. What are the major differences between existing Indian Standards and IFRS?

The major difference is in fair value accounting. Also, some new concepts and models have been introduced. For example, Acquisition Method in lieu of Purchase Method in business combinations. Also, certain practices have been removed. For example, the LIFO method has been removed in accounting of inventories.

8. How difficult is it to converge Indian Accounting Standards with IFRS?

It will not be difficult because we have always been following good standards of accounting. However, every corporate has to take the necessary step in understanding the new standards, training its staff and paving a smooth transition. The management at the top level should take interest in this regard.

9. What other areas of the profession will IFRS affect apart from the accounting professionals?

Apart from accounting professionals, other professionals like valuation experts, actuaries and so on will have a role to play once there is convergence with IFRS.

10. What are the likely costs of converting to IFRS?

The costs would be determined largely by the size and nature of the respective company. The initial cost to identify and quantify the differences between Indian GAAP and IFRS, staff training, and implementing IT support could be significant.

11. What are the different phases of convergence for companies in India?

Phase I	Date	Coverage
Phase I	Opening Balance Sheet as at 1 April 2011	Companies which are part of NSE Index – Nifty 50 ii. Companies which are part of BSE Sens*x – BSE 30 Companies whose shares or other securities are listed on a stock exchange outside India Companies, whether listed or not, having a net worth of more than INR1,000 crore
Phase II	Opening balance sheet as at 1 April 2013*	Companies not covered in Phase 1 and having net worth exceeding INR 500 crore
Phase II	Opening balance sheet as at 1 April 2014*	Listed companies not covered in the earlier phases
* If the financial year of a company commences at a date other than 1 April, it shall prepare its opening balance sheet at the commencement of immediately following financial year.

12. For implementing the Converged AS, is there a need to change other regulatory requirements?

Yes. The changes in the regulations relating to SEBI, RBI and IRDA are required to be aligned with IFRS. The Institute of Chartered Accountants of India is liaising with the respective regulators to enable a smooth transition.

13. What are the challenges envisaged in convergence?

Training of accounting professionals to adapt to the new standards
Changes required in accounting software and information technology systems
Issues related to different legal and regulatory requirements

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BALASUBRAMANYA B N

IFRS FAQs on Standards

Revenue Recognition

1. What are the major changes in Revised AS 9 – Revenue Recognition?

The definition of revenue itself is broadened. It covers all economic benefits that arise in the ordinary course of activities of an entity, which result in increases in equity other than increases relating to contributions from the equity fund.

Revenue is to be measured at fair value received or receivable and not at the nominal value.

Property Plant and Equipment

2. What criteria are applied to recognise a PPE under revised AS 10?

A PPE is recognised if and only if the following two criteria are satisfied:

(i) Future economic flows (ii) Measurable costs

All other tests like improved standards performance, extension of life and so on cannot be applied to recognize a PPE.

3. What is the major change in depreciation accounting?

As per the revised AS 10, PPE is based on the component approach. Each major component with significant cost vis-à-vis the total cost should be depreciated separately.

4. Is there an option to retain the cost model in the subsequent years after the initial recognition?

As per revised AS 10, an entity can adopt the cost model or the revaluation model at subsequent recognition. However, the revaluation model requires the value to be closer to fair value. Also, revaluation should be done regularly and to the entire class of assets.

Lease

5. What are the major differences between AS and IAS relating to the accounting of Lease?

Lease of Land is outside the scope of AS 19 whereas in IAS 17 lease of land and building is separated and recognised as either an operating or a finance lease depending on the circumstance.

AS 19 prohibits upward revision of unguaranteed residual value. Whereas, there is no such provisioning in IAS 17.

6. Does AS 19 provide exclusion from its scope?

The scope excludes the measurement principle for the following:

(i) Property held by lessees, that is, accounted for as an investment property (ii) Investment property provided by lessors under operating leases (iii) Biological assets held by lessees under finance leases (iv) Biological assets provided by lessors as operating leases

There is also a distinction between inception of lease and commencement of lease.

Construction Contracts

7. What is the major difference in revenue recognition of a construction contract?

As per revised AS 7:

Contract revenue shall be measured at fair value of consideration received or receivable.

Deals with accounting and disclosure of service concession arrangements.

Business Combination

8. What are the major changes in the revised AS 14 Business Combination?

Whereas the original AS 14 deals only with amalgamation, the revised AS 14 defines business combination, which has a wider scope.

9. What are the methods of accounting permitted in Business Combinations?

The revised AS 14 prescribes only the acquisition method for each business combination. The pooling of interest method and the purchase method, which were allowed earlier, will not be allowed in the new standards.

10. How is goodwill treated in a business combination?

As per revised AS 14, goodwill is not amortised but tested for impairment on an annual basis.

BALASUBRAMANYA B N

FAQ s on Convergence of Indian Accounting Standards convergence IFRS

1. What is IFRS?

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB). These are becoming the global standard for the preparation of public company financial statements.

2. What is IASB?

3. What is the difference between convergence and adoption?

Adoption would mean full-fledged use of IFRS as issued by the IASB by the Indian public companies.

Convergence means that the Indian Accounting Standards (AS) and the International Financial Reporting Standards (IFRS) would, over time, continue working together to develop high quality, compatible accounting standards.

4. What is the deadline for convergence of IFRS in India?

As per the notification of the Ministry of Corporate Affairs, convergence of Indian Accounting Standards (AS) with International Financial Reporting Standards (IFRS) will take place in phases. The first phase commences 1st April 2011.

5. Are IFRS and the Revised Indian Accounting Standards the same?

No. They are not the same. India wants to converge with IFRS and not adopt IFRS and there are some differences between IFRS and revised AS. For example, the terminologies are different as against the Indian Accounting Standards.

Indian Accounting Standards

IFRS

Balance Sheet

Statement of Financial Position

Statement of Profit and Loss Account

Statement of Comprehensive Income

Approval for the financial statement for issue

Authorisation of the financial statements for issue

There are some conceptual differences in some standards.

6. What are the advantages of converging with IFRS?

Convergence with IFRS:

Improves investor confidence across the world with transparency and comparability

Improves inter-unit/ inter-firm/inter-industry comparison

Group consolidation made easy with same standard by all companies in group wherever located

Acceptability of financial statements across all stock exchanges, which facilitates entry of any Indian company to any stock exchange across the globe.

7. What are the major differences between existing Indian Standards and IFRS?

8. How difficult is it to converge Indian Accounting Standards with IFRS?

9. What other areas of the profession will IFRS affect apart from the accounting professionals?

Apart from accounting professionals, other professionals like valuation experts, actuaries and so on will have a role to play once there is convergence with IFRS.

10. What are the likely costs of converting to IFRS?

The costs would be determined largely by the size and nature of the respective company. The initial cost to identify and quantify the differences between Indian GAAP and IFRS, staff training, and implementing IT support could be significant.

11. What are the different phases of convergence for companies in India?

Phase I

Date

Coverage

Phase I

Opening Balance Sheet as at 1 April 2011

Companies which are part of NSE Index – Nifty 50

ii. Companies which are part of BSE Sens*x – BSE 30

Companies whose shares or other securities are listed on a stock exchange outside India

(i) Future economic flows
(ii) Measurable costs

(i) Property held by lessees, that is, accounted for as an investment property
(ii) Investment property provided by lessors under operating leases
(iii) Biological assets held by lessees under finance leases
(iv) Biological assets provided by lessors as operating leases

As per the notification of the Ministry of Corporate Affairs, convergence of Indian Accounting Standards (AS) with International Financial Reporting Standards (IFRS) will take place in phases. The first phase commences 1^st April 2011.