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Contents

Foreword p2 / About the report p3 / Ind AS impact analysis p4 / Snapshot of
results p5 / Adoption of Ind AS: Changes to reported net income p6 / In-depth:
Top impact areas p7 / Adoption of Ind AS: Presentation and disclosure
matters p17 / In summary p20 / Publications p22

PwC Ind AS impact analysis

www.pwc.in

Foreword

From 1 April 2016, Indian Accounting Standards (Ind DUHHLWKHUEDQNVRUQRQEDQNLQJğQDQFLDOFRPSDQLHV
AS) converged with International Financial Reporting (NBFCs) or insurance companies to whom Ind AS is
Standards (IFRS) have become the new Generally QRW\HWDSSOLFDEOHFRPSDQLHVZKRKDYHğOHGXQGHU
Accepted Accounting Policies (GAAP) for many Indian GAAP2DQGFRPSDQ\ZKLFKGLGQRWğOH,QG$6
companies. As a result, commencing the June 2016 ğQDQFLDOUHVXOWVIRUWKHTXDUWHUHQGHG-XQH
quarter, Phase I companies in India have reported their The impact of Ind AS transition presented here is based
results under Ind AS. RQWKHUHSRUWHGUHVXOWVIRUWKHTXDUWHUHQGHG-XQH
Earlier during the year, PwC India conducted the Ind 2015 under Ind AS vis-à-vis previously reported Indian
AS Outlook Survey1 to evaluate the impact of Ind GAAP results.
AS adoption and challenges faced by corporates in Since our report is based on quarterly published results
India—in particular, the key impact areas affecting the which do not have detailed disclosures otherwise
net worth and net income of companies. As an update DYDLODEOHLQDQQXDOğQDQFLDOVWDWHPHQWVZHPD\KDYH
to the survey, this publication summarises the actual made certain assumptions and generalisations for the
impact of Ind AS adoption on corporate India. purpose of aggregating the results and analysis.
For the purposes of this report, we have evaluated :HKRSH\RXğQGWKLVSXEOLFDWLRQLQIRUPDWLYHDQG
LQWHULPğQDQFLDOLQIRUPDWLRQUHOHDVHGE\75 companies that it helps us remain connected with you in a
until 14 September 2016. These companies are listed meaningful way.
on the National Stock Exchange (NSE) of India and are
included in NIFTY 50 and NIFTY NEXT 50 benchmark For a variety of additional resources offering more
indices. In our analysis of NIFTY 50 and NIFTY NEXT in-depth perspectives on the impact and other aspects
50 companies, we have excluded 17 companies that of Ind AS, please visit our website at www.pwc.in

1 Ind AS Outlook Survey was released at the ‘Meet the experts - PwC IFRS Conference 2016’ on 3 February 2016. The results are
also available on the PwC India website at www.pwc.in
2 Ind AS is not applicable to these companies due to the financial year end being other than 31 March.

2 PwC

)7<DQG1.About the report During approximately ten weeks beginning from 1 July 2016. various companies released their Ind AS interim ğQDQFLDOLQIRUPDWLRQ:HJDWKHUHGWKHUHVXOWVRI1. life sciences and healthcare 19% Retail and consumer 15% Automotive 12% Metals 11% Oil and gas 9% Power and mining 8% Technology 7% Industrial manufacturing 7% Others 6% Telecom 5% Capital projects 1% and infrastructure PwC Ind AS impact analysis 3 .7FRPSDQLHVIRUWKHSXUSRVHRIWKLV UHSRUW7KHSURğOHVRIFRPSDQLHVE\LQGXVWU\VHFWRUDUHVXPPDULVHGEHORZ Profiles of companies by industry sector Pharmaceuticals.)7<1(.

Ind AS impact analysis A majority of the respondents to our survey in February FRQVROLGDWLRQZHUHDOVRLGHQWLğHGWREHPRUHFRPPRQ 2016 indicated that taxes. revenue recognition. VHJPHQWVğQDQFLDOLQVWUXPHQWV LQFOXGLQJGHULYDWLYHV. operating Ind AS adjustments.

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We also (% of companies impacted) noted that companies would face implementation FKDOOHQJHVLQWKHVHDUHDVHVSHFLDOO\LQğQDQFLDO Taxes 88% instruments. where the new standard is being adopted Financial instruments by India ahead of its global adoption date—i. and business combinations and consolidation 4 PwC . we found that consistent with our initial Retirement benefit obligations 67% survey results.e. a majority of the Ind AS adjustments are Share-based payments 23% RQDFFRXQWRIWD[HVğQDQFLDOLQVWUXPHQWVDQGUHYHQXH UHFRJQLWLRQ$GGLWLRQDOO\UHWLUHPHQWEHQHğWREOLJDWLRQV Business combinations/ 16% share-based payments.ZHUHWKHWRSğYH DUHDVWKDWZRXOGKDYHDVLJQLğFDQWLPSDFWRQğQDQFLDO Accounting areas having a significant impact statements following the adoption of Ind AS. annual (including derivatives) 85% periods beginning on or after 1 January 2018. Revenue 84% When we analysed the reported results for the 75 companies.

2% various accounting areas.Snapshot of results The impact of Ind AS adoption was observed across • Higher share-based payments expense: 0. • Increase in expense on account of other adjustments Overall. Presented below is the • Reduction in tax expense: 0.7% percentage impact of certain key accounting areas on the • 5HWLUHPHQWEHQHğWREOLJDWLRQVGHFUHDVHLQ UHSRUWHGQHWLQFRPHIRUWKHSUHYLRXVTXDUWHUHQGHG net income June 2015 under Ind AS vis-à-vis previous Indian GAAP. the Ind AS adjustments have resulted in an LQFOXGLQJWKHLPSDFWRIIRUHLJQH[FKDQJHĠXFWXDWLRQ increase in the reported net income of companies by DQGFODVVLğFDWLRQRIH[FLVHGXW\DVDQH[SHQVH.

5% net of tax.3)% Profit as Revenue Financial Business Share-based Taxes Retirement Other Profit per IGAAP instruments combinations/ payments benefit adjustments as per (including consolidation obligations Ind AS derivatives) (Amounts in crore INR) Industry sector: Range of impact on net income upon Ind AS adoption Other than the 120% pharmaceuticals. in net income Reported net income for 30 June 2015 increased by 0.5% 0. telecom and Telecom capital projects and -142% infrastructure sectors Metals have reported the maximum average decrease in net income upon Ind AS adoption. • Net increase in revenues: 26. approximately 297 crore INR (0. Oil and gas Automotive -42% -40% Technology Others Capital projects and infrastructure Retail and consumer Power mining -71% Metals.6% in detail for each area of impact in subsequent sections of • Business combinations/consolidation: 0.685 (1. life sciences and healthcare decrease in net income.982 (25. • 1HWIDLUYDOXHORVVRQDFFRXQWRIğQDQFLDO The change in net income is shown below and explained instruments (including derivatives): 1.4% upon Ind AS adoption.7% 74.4%). 2% 3% 4% 12% 5% -1% -4% -3% -8% all the sectors have -5% -4% 0% -9% -19% -8% reported an average -15% -28% -27% Industrial manufacturing -31% Pharmaceuticals.9% 0.6)% 74. 26. life 89% sciences and healthcare. 49% industrial manufacturing 45% 32% 26% and automotive sectors.2)% (0.9% increase this report.6)% (0. This comprises: Some companies have reported Ind AS adjustments. Maximum Weighted average Minimum PwC Ind AS impact analysis 5 .

15 .Adoption of Ind AS: Changes to reported net income Companies with +/.8%) There was a positive impact on the reported net income of 41 companies (55%) under Ind AS for the quarter HQGHG-XQH7KHWRWDOLQFUHDVHLQ.QG$6QHWLQFRPHZDVDSSUR[LPDWHO\FURUH.impact on net income upon Ind AS adoption 5.2% 45% Positive impact 55% Negative impact Decrease in Increase in net income net income (4.

 7KHUHZDVDQHJDWLYHLPSDFWRQWKHUHSRUWHGQHWLQFRPHRIFRPSDQLHV .

15 .XQGHU.QG$67KHWRWDO GHFUHDVHLQQHWLQFRPHZDVDSSUR[LPDWHO\FURUH.

2% weighted average decrease in net income.UHVXOWLQJLQDQRYHUDOOQHWLQFUHDVHRI approximately 297 crore INR (0.9% of the previously reported net income under Indian GAAP.2% to 88. the increase in net income has been 15. resulting in a 4. )RUWKHFRPSDQLHVWKHQHJDWLYHLPSDFWRQWKHLUUHSRUWHGQHWLQFRPHUDQJHGIURPWRRI the previously reported net income under Indian GAAP.2%) in net income* +15. 6 PwC .9%. the positive impact on their reported net income ranged from 0.2% (*Weighted average) For the 41 companies.9% (4.9% increase in net income* (141. 88.4%).5%) 0. On a weighted average basis.2%) reduction (0.

8%. thereby reducing tax credits Increase in WKHWD[H[SHQVHE\)XUWKHUUHSRUWHG tax expenses an increase in tax expense of 752 crore INR (1. resulting in a weighted average increase in tax credits of 4.1%) in tax expense* 4.0%. the lower recognition threshold under Ind AS compared to the virtual certainty supported by convincing evidence presently required to recognise deferred tax assets on carried forward losses under Indian GAAP has also resulted in the reporting of increased deferred tax assets/tax credits under Ind AS. This approach under Ind AS is broader and results in deferred taxes on more items. Under Ind AS.268 crore INR.2%) increase (0. Our analysis UHĠHFWVWKHFKDQJHVLQUHSRUWHGQHWLQFRPHIRUWKHTXDUWHUHQGHG-XQHXQGHU. 47% reported an increase in Increase in tax credits of 1. including the impact by industry sector. Key • Deferred tax liability on undistributed earnings from subsidiaries and joint ventures (JVs) adjustments • Deferred tax asset on carried forward business and long-term capital losses • Deferred taxes on unrealised profits on intra-group transactions 52.4% increase in tax credits* 0. There was an overall decrease in reported tax expenses of 516 1. and also additional deferred taxes on some items.7%).1% to 52. PwC Ind AS impact analysis 7 .0%) resulting from Ind AS adoption.1% (25. Of these companies. The increase in tax expense ranges from 0.4%.2%. which has been analysed at the respective line item level. the reported tax amounts of 88% of the companies were impacted. resulting in a weighted average increase in tax expense of 2.8%) (*Weighted average) Companies have reported an increase in tax credits ranging from 0.QGLDQ*$$3YLV¿YLV.QG AS. except revenue. deferred taxes are recorded based on the temporary difference (as opposed to timing differences under Indian GAAP).1% to 25. Moreover.0%) (1. Taxes Percentage impact on reported net income Of the population.7% crore INR (0.In-depth: Top impact areas :HDQDO\VHGWKHTXDUWHUO\ğQDQFLDOUHVXOWVDVDW-XQHWRXQGHUVWDQGERWKWKHSRVLWLYHDQGQHJDWLYH impacts of key accounting areas on the reported net income.0% (2.

15UHSUHVHQWLQJ of the total net increase in tax credits across industries.15 .Pharmaceuticals.15UHSUHVHQWLQJ 44% of the total net increase in tax expense across Capital projects 9% and infrastructure LQGXVWULHVIROORZHGE\DXWRPRWLYHDWDURXQGFURUH. Pharmaceuticals. Automotive 24% Metals and capital projects and infrastructure also showed a net increase in tax credits at approximately 172 crore INR Power and mining 44% (21 %) and 75 crore INR (9%) respectively. life sciences and healthcare had the Technology 10% KLJKHVWQHWWD[FUHGLWVRIFURUH. life 63% sciences and healthcare Power and mining had the highest net increase in tax Metals 21% H[SHQVHRIDSSUR[LPDWHO\FURUH.

DQGWHFKQRORJ\DWDURXQGFURUH.15 .

QGLDQ*$$3LQYHVWPHQWVDUHFODVVLğHGDVFXUUHQW Ind AS 109 also introduces a new model for the or long-term.179 crore INR (1. redemption premium on debentures.15UHGXFLQJ (3. 48% have reported a gain of approximately 1.5% Of these companies.QGLDQ*$$3ğQDQFLDOOLDELOLWLHVDUHJHQHUDOO\ make an irrevocable election on the initial recognition.6%) on account of ğQDQFLDOLQVWUXPHQWV 1. an entity will have to determine 2&. The standard contains a ‘three stage’ value. Under Ind AS. Current investments are carried at lower recognition of impairment losses—the ECL model as of cost and fair value.151 crore INR on account of fair Gain on Loss on financial financial YDOXDWLRQRIğQDQFLDOLQVWUXPHQWVLQFUHDVLQJQHW instruments instruments income by 1. preference dividend • Long-term interest-free security deposits and employee loans measured at fair value • Notional income from corporate guarantees given to subsidiaries 8QGHU. investments in equity instruments approach which is based on the change in credit quality held for trading will always be measured at FVPL. changes in fair value in other comprehensive income Under Ind AS. 85% of the companies were impacted Percentage impact on GXHWRIDLUYDOXDWLRQRIğQDQFLDOLQVWUXPHQWV LQFOXGLQJ net income derivatives). the management has the ability to 8QGHU.1)% QHWLQFRPHE\ • Measurement of financial assets such as investments in equity instruments/mutual funds at fair value through profit and loss (FVPL) • Use of amortised cost.5%. fair value through other comprehensive income (FVOCI) and FVPL for debt instruments • Recognition of impairment losses—expected credit losses (ECL) Key adjustments: • Changes in fair value of derivatives • Fair value of compound instruments such as convertible debentures and preference shares • Use of effective interest rate (EIR) method—transaction costs related to borrowing. whereas long-term investments compared to the ‘incurred losses’ model under Indian are carried at cost less impairment. The ECL model seeks to address the criticisms VLJQLğFDQWO\FKDQJHVWKLVZKHUHH[FHSWIRUFHUWDLQ of the incurred loss model which arose during the GHEWLQVWUXPHQWVğQDQFLDODVVHWVDUHUHFRUGHGDWIDLU economic crisis. Increase in tax credits Increase in tax expense Financial instruments (including derivatives) Of the population. For RIğQDQFLDODVVHWVVLQFHLQLWLDOUHFRJQLWLRQ all other equities. UHFRUGHGDWIDFHYDOXHDQGFODVVLğHGRQWKHEDVLV on an instrument-by-instrument basis. if any. Further. Ind AS GAAP. There was an overall decrease in reported net income of 1. 52% of the companies have UHSRUWHGDORVVRIDURXQGFURUH. to present the of legal form rather than underlying substance.

will be included in OCI. There will contractual arrangement. RUDQRWKHUğQDQFLDODVVHW)RUH[DPSOHPDQGDWRU\ 8 PwC . the entity the issuer is required to settle the obligation in cash might transfer the cumulative gain or loss within equity. rather than its legal form. excluding dividends that are a a liability or equity based on the substance of the return on investment. nor are LQVWUXPHQWWREHFODVVLğHGDVDğQDQFLDOOLDELOLW\LI there any impairment requirements.IWKLVHOHFWLRQLVPDGH WKHDSSURSULDWHFODVVLğFDWLRQRIDQLQVWUXPHQWDV all fair value changes. on sale of an equity investment). However. EHQRUHF\FOLQJRIDPRXQWVIURP2&.WRSURğWDQGORVV $VDQRYHUULGLQJSULQFLSOH.QG$6UHTXLUHVDğQDQFLDO (for example.UDWKHUWKDQSURğWRUORVV.

all derivatives are recorded at fair value SDUWRIHTXLW\XQGHU. it would result in the recognition of also includes items such as premium on redemption DğQDQFLDOOLDELOLW\DQGVXEVHTXHQWLQFRPHDPRUWLVDWLRQ of debentures. metals had the highest net loss of and infrastructure 9% DURXQGFURUH. which were shown as Under Ind AS. Telecom had a net ORVVRIDSSUR[LPDWHO\FURUH. Further. EHQHğWH[SHQVHDVDSSOLFDEOH 52.15 .08% (*Weighted average) &RPSDQLHVKDYHUHSRUWHGDJDLQRQDFFRXQWRIğQDQFLDOLQVWUXPHQWVUDQJLQJIURPWRRIWKHQHW LQFRPHZLWKWKHZHLJKWHGDYHUDJHJDLQEHLQJ 7KHORVVRQDFFRXQWRIğQDQFLDOLQVWUXPHQWVUDQJHGIURPWRZLWKEHLQJWKHZHLJKWHGDYHUDJH decrease in net income.QGLDQ*$$3DUHFODVVLğHGDVD with recognition of both gains and losses. Capital projects By industry sector.4% increase (105.2% (6. Also.redeemable preference shares. fair value losses were recognised but not distribution tax on such capital gets recorded through gains (except when hedge accounting was applied). the dividend and dividend Indian GAAP. This its group company. Also.1%) in net income* 3. deposits and employee loans are also recorded at fair All of this results in higher interest expense and lower value with corresponding adjustment to costs/employee net equity under Ind AS. the income statement as a borrowing expense using where a parent has issued a guarantee for a loan taken by the effective interest method instead of equity. reducing net income. Ind AS requires certain by the parent under Ind AS vis-à-vis generally only a FRPSRXQGğQDQFLDOLQVWUXPHQWVVXFKDVRSWLRQDOO\ disclosure under Indian GAAP. whereas under liability under Ind AS.2%) in net income* 0.15 RIWKHWRWDOQHWORVVDFURVV Telecom 36% industries). convertible debentures/preference shares to be )LQDOO\ORQJWHUPğQDQFLDODVVHWVVXFKDVLQWHUHVWIUHH separated into their liability and equity components.2%) decrease (0.

PwC Ind AS impact analysis 9 . followed by power and mining and industrial manufacturing manufacturing at around 120 crore INR (21%) and 40 Gain on financial instruments Loss on financial instruments crore INR (7%) respectively. Power and mining 21% $XWRPRWLYHKDGWKHKLJKHVWQHWJDLQRIDURXQGFURUH Industrial 7% (64%).DQGFDSLWDO Metals 42% projects and infrastructure had a net loss of around 157 Automotive 64% crore INR (9%).

28 companies (44%) have reported revenue UHSRUWHGDQLQFUHDVHDQGFRPSDQLHV . In particular.Revenue Of the population. 84% companies had an adjustment Percentage impact on on revenue.

15 .270 around 19. There was an overall increase in reported revenues of +3.761 crore INR (2.KDYH reported a decrease in revenue.5%) under Ind AS.9% 815. 795.3% Excluding the impact of revenue gross up due to excise GXW\SUHVHQWDWLRQRIDURXQGFURUH.509 +0.

4 %) on account of Ind AS adjustments.15 .7)% revenues decreased by approximately 11. The total Revenue Increase Decrease Excise Revenue increase and decrease in revenue (other than excise duty) under Indian in in duty under GAAP revenue revenue gross up Ind AS KDVEHHQDURXQGFURUH.497 crore INR (1. (1.

The outcome of a transaction can be estimated WUDQVDFWLRQLVDğQDQFLQJDUUDQJHPHQWDQGGRHV reliably when the amount of revenue can be measured not give rise to revenue. be recognised. 10 PwC . There are also other areas which have resulted . being netted from revenue • Service concession arrangements • Provision for rebates/expected sales returns Under Ind AS. • Deferral of revenue on customer contracts where revenue recognition criteria has not been met—service arrangements. when two or more transactions entity is acting in the capacity of a principal or are linked in such a way that the commercial effect agent.7%) respectively. usually associated with ownership or single transaction.DQG crore INR (1. FRQWUROLIHFRQRPLFEHQHğWVDUHOLNHO\WRĠRZWRWKH When such a sale and repurchase agreement is entity and the amount of revenue and costs can be entered into. the contracts. carefully analysed to ascertain whether. When the completion of the transaction at the balance sheet date.QG$6UHTXLUHVDFFRXQWLQJWRUHĠHFWWKHHFRQRPLF in adjustment to revenue. This results in deferral UHOLDEO\LWLVSUREDEOHWKDWHFRQRPLFEHQHğWVZLOOĠRZ of revenue. such as gross vs net substance of transactions and not merely their legal presentation of revenue based on whether the form. It states that. the risks and rewards of ownership and gives up managerial two transactions should be dealt with together as a involvement. the agreement’s terms need to be measured reliably. which provides detailed principles for enters into an agreement to repurchase the goods at a recognising revenue in respect of such transactions. then the two or arrangements. Ind AS 18. cash discounts etc. with the inventory continuing to be to the entity. the stage of completion can be measured recognised on the balance sheet and sales proceeds reliably. upfront signing fees • Linked arrangements—sale and subsequent repurchase agreements Key • Determination of principal vs agent relationships in an arrangement adjustments: • Awards and incentives to customers. Ind AS 18 gives the example of a situation has resulted in diversity in practice as compared to where an entity sells goods but. in substance. Revenue from the rendering of services is recognised WKHVHOOHUKDVWUDQVIHUUHGWKHVLJQLğFDQWULVNVDQG when the outcome of the transaction can be estimated rewards of ownership to the buyer and whether reliably. at the same time. Absence of comprehensive guidance more transactions are linked and treated as a single under Indian GAAP in respect of some of these areas transaction. maintenance contracts. promotional expenses/customer reimbursements. and the costs incurred and costs to complete DFFRXQWHGDVğQDQFLDOOLDELOLW\ can be reliably measured. thus negating the substantive effect of the LVUHFRJQLVHGZKHQDQHQWLW\WUDQVIHUVWKHVLJQLğFDQW original sale. seller has retained the risks and rewards of ownership. therefore. consideration/incentives paid to customers cannot be understood without reference to the being netted from revenue. using requirements similar to those for construction even though legal title has been transferred. As a result. and service concession series of transaction as a whole. This is done by reference to the stage of revenue should. revenue arising from the sale of goods later date. in such a situation.

1% to 62.2%.4%) (*Weighted average) Companies have reported an increase in revenue ranging from 0.4% (0. with 4 % being the weighted average decrease in revenue.0%) decrease in revenue* +8. 42.4%.668 crore INR (84% of the total net increase in revenue across Telecom 27% industries). with the weighted average increase being 8.4%. Retail and consumer and technology had Power and mining 35% a net increase of around 2. Oil and gas had the highest net Metals 20% increase in revenue of approximately 21.15 .1% to 42.1% (62. The reduction in revenue ranges from 0. By industry sector.974 crore INR (12%) and FURUH.2% increase in revenue* 0.1%) (4.

15 .UHVSHFWLYHO\ Oil and gas 84% Power and mining had the highest net decrease Retail and consumer 12% LQUHYHQXHRIDURXQGFURUH.

622 crore INR (27%) and 1. Telecom and metals had a net decrease in revenue of Technology 3% approximately 1. Decrease in revenue Increase in revenue PwC Ind AS impact analysis 11 .164 crore INR (20%) respectively.

15 . Technology had the highest increase Power and mining 18% in revenue of approximately 748 crore INR (85% of the total increase in revenue across industries) followed Automotive 25% by Pharmaceuticals.4%) 0. Percentage impact excluding excise duty on reported revenue 7.01% to 62. companies have reported an increase in revenue ranging from 0.1% (0.01%) (2. life sciences and healthcare of Metals 28% 72 crore INR (8%).8% being the weighted average decrease in revenue.Excluding for the impact of excise duty gross up.4%. with 2. with the weighted average increase being 1. Technology 85% Metals had the highest decrease in revenue of around FURUH.1%.01% to 7.8%) decrease in revenue* 1.0%.01% (*Weighted average) By industry sector.0% increase in revenue* (62. The reduction in revenue ranges from 0.

15 .$XWRPRWLYHDQG3RZHU PLQLQJ Pharmaceuticals. life 8% KDGDGHFUHDVHLQUHYHQXHRIDSSUR[LPDWHO\FURUH sciences and healthcare .

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UHVSHFWLYHO\ Decrease in revenue Increase in revenue 12 PwC .

0%).4% increase in net income.QG$6 0.1% By industry sector.8% The increase in revenue on impact of excise duty 8.6%) on account of actuarial JDLQDQGORVVHVEHLQJUHFODVVLğHGWR2&.QGLDQ*$$3 Also. PwC Ind AS impact analysis 13 . Retail and consumer and Automotive KDGDQLQFUHDVHLQUHYHQXHRIDURXQGFURUH. 70% of the companies reported a decrease in actuarial Decrease in Decrease in actuarial losses actuarial gains losses of around 265 crore INR. 67% companies had an adjustment on DFFRXQWRIUHWLUHPHQWEHQHğWREOLJDWLRQV Percentage impact on net income There was an overall decrease in reported net income of approximately 411 crore INR (0.564 crore INR (8%). Increase in revenue on excise duty gross up 5HWLUHPHQWEHQHğWREOLJDWLRQV Of the population.15 Automotive 8% (11%) and 2. Oil and gas had the highest increase Oil and gas 72% in revenue on account of excise duty gross up of approximately 22. )XUWKHUFRPSDQLHVUHSRUWHGDGHFUHDVHLQDFWXDULDOJDLQV (1.4% FRPSDUHGWRWKHSURğWDQGORVVDFFRXQWXQGHU.XQGHU. respectively.0)% of around 676 crore INR (1.3% increase UDQJHGIURPWRZLWKWKHZHLJKWHG in revenue DYHUDJHLQFUHDVHEHLQJ 0.461 crore INR (72% of the total Retail and consumer 11% increase in revenue across industries on account of excise duty adjustments). resulting in a 0. thereby reducing net income. Impact of excises duty gross up adjustments on reported revenue 35.

with 5.1% to 55. with the weighted average increase being 0.8%) decrease in net income* +0. The reduction in net income on this account ranges from 0. where net income reduced by approximately 408 crore and infrastructure 3% INR (68% of the total reduction in net income on account Power and mining 28% RIUHWLUHPHQWEHQHğWREOLJDWLRQVDFURVVLQGXVWULHV.8% being the weighted average decrease.4%.1%) (5. the highest impact on net income was in Capital projects metals.9% increase 0.6%.4%) (*Weighted average) &RPSDQLHVKDYHUHSRUWHGDQLQFUHDVHLQQHWLQFRPHRQDFFRXQWRIUHWLUHPHQWEHQHğWREOLJDWLRQVUDQJLQJIURPWR 80. By industry sector.9%.1% in net income* (55. 80.6% (0.

where the net reduction was around FURUH.WZDV followed by the power and mining and capital projects and Metals 68% infrastructure sectors.15 ..

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2%. life sciences and Pharmaceuticals. Industrial manufacturing manufacturing and pharmaceuticals. reducing net income by 0. payment payment charge charge A majority (65%) of the companies reported an increase in share-based payments expense of around 174 crore INR. Decrease in net income Increase in net income Share-based payments Percentage impact on net income Accounting of share-based payments expense was LPSDFWHGLQRIWKHFRPSDQLHV7KHUHZDVDQRYHUDOO 0.01% decrease in reported net income of approximately 169 Decrease in Increase in crore INR (0. )RXUFRPSDQLHV .2% of reported net income) on account of share-based share-based share-based payments. life 12% healthcare also increased their net income by around sciences and healthcare 47 crore INR (24%) and 22 crore INR (12%) respectively.UHVSHFWLYHO\ Technology 52% Technology showed the highest net increase in reported Industrial 24% income of approximately 100 crore INR (52%).

However. This whereas the parent would generally debit the will also include awards granted by the parent company subsidiary investment account instead of its own to the employees of its subsidiary. employees. This has resulted in LQSDUHQWłVVHSDUDWHğQDQFLDOVWDWHPHQWV reporting of higher expenses under Ind AS. which may be due to group share-based employees and others. Additionally. and recognised as expense over the vesting period.01%).UHSRUWHGDGHFUHDVHLQVKDUH based payments charge of around 5 crore INR (0. a company payment arrangements. 14 PwC . (0.2%) • Fair value method for share-based grants vs intrinsic value method Key adjustments: • Accelerated vs straight-line method of expense attribution in respect of graded awards • Group share-based arrangements Ind AS 102 provides comprehensive guidance for We also noted a decrease in the share-based payment accounting for all types of share-based arrangements to charge. When the parent company could have used the intrinsic value method or the fair grants share-based awards to the subsidiary’s value method. costs income statement in its stand-alone accounts— with respect to awards granted with graded vesting get resulting in a lower expense compared to Indian GAAP recognised on an accelerated basis. the charge is recognised in the subsidiary’s based payment arrangements to be measured at fair value stand-alone and parent’s consolidated accounts. Ind AS requires all types of share. Under Indian GAAP.

1% (0.0%) (*Weighted average) Companies have reported an increase in net income on account of share-based payments ranging from 0.1%. with 2.15 .1%) decrease +0. of the Technology 13% WHFKQRORJ\VHFWRUE\FURUH.0%.1% being the weighted average decrease in net income.1% (5.2% to 5.2%) (2. By industry sector. 1. the net income of the retail and Retail and 72% consumer sector decreased by around 122 crore INR consumer (72% of the total decrease in net income on account of share based payments across industries).1% to 1.3% increase in net income* in net income* 0. ZLWKWKHZHLJKWHGDYHUDJHLQFUHDVHEHLQJ The reduction in net income ranged from 0.

and healthcare Reduction in net income Business combinations and consolidation Business combination and consolidation was another area ZKHUHVLJQLğFDQW. such investments have been accounted using the equity method. whereas under Ind AS.QG$6DGMXVWPHQWVZHUHQRWHG2IWKH population. Under Ind AS. • Fair valuation of deferred and contingent consideration in business combinations. • 'HğQLWLRQRIFRQWUROKDVXQGHUJRQHDVLJQLğFDQW change under Ind AS.QG$6UHVXOWHGLQLQFUHDVHG amounts of tangible/intangible assets due to fair valuation and a consequential impact on subsequent depreciation/amortisation.e. Indian GAAP does not prescribe discounting of liabilities/provisions. Some of the key reasons for adjustments were: • Reversal of amortisation of goodwill recorded under previous Indian GAAP. JVs were proportionately consolidated. life sciences and healthcare sector. This has resulted in the consolidation of the results of certain HQWLWLHVQRZEHLQJFODVVLğHGDVVXEVLGLDULHVDQGHTXLW\ accounting of other investments as associates and JVs which were previously consolidated under Indian GAAP (i. • Under Indian GAAP.9%) under Ind AS.DQGRIWKH Pharmaceuticals. • Retrospective application of business combination SULQFLSOHVXQGHU. PwC Ind AS impact analysis 15 . being DQLQGHğQLWHOLIHLQWDQJLEOHDVVHWJRRGZLOOLVQRW amortised but tested for impairment annually. resulting in companies re- assessing relationships with their investees. by life sciences 7% 11 crore INR (7 %). 16% of the companies had an adjustment in this area. de-consolidation). pharmaceuticals. • Recognition of business acquisition related costs in the income statement vis-à-vis cost of investment/ goodwill under Indian GAAP. There was an overall increase in reported net income of around 690 crore INR (0.

certain grants We note that companies have recorded a reversal could have been directly recognised in reserves. capital or income grants. of previously recognised amortisation under Indian which is not permissible under Ind AS. DUHFODVVLğHGDVLQWHJUDORUQRQLQWHJUDOEDVHGRQ • 5HFODVVLğFDWLRQRIFDSLWDOVSDUHVIURPLQYHQWRU\WR which accounting for foreign currency transactions property. there is a rebuttable presumption that the useful life of an intangible asset Others include: will not exceed 10 years. • Componentisation and revision of estimated useful • Discounting of asset retirement obligations. foreign currency accounting is based on the functional currency of operations—a new concept. • Change in the method for depreciation from full cost method (FCM) to successful efforts method (SEM) • Recognition of provisions related to constructive VSHFLğFDOO\IRUWKHRLODQGJDVVHFWRU. They have opted Indian GAAP. life of tangible and intangible assets. Ind AS do not have these concepts. depreciation impact. Ind AS *$$3LQUHVSHFWRILQGHğQLWHOLYHGLQWDQJLEOHDVVHWV requires government grants to be accounted as thereby increasing Ind AS net income. the • Recognition of government grants on a deferred OLIHRIDQLQWDQJLEOHDVVHWFDQEHğQLWHRULQGHğQLWH income basis. foreign operations depreciation and amortisation. Indian GAAP area were: does not include such guidance.Other adjustments Depreciation and amortisation • Recognition of arrangements that may not have been legally termed as leases but in substance are adjustments right to use underlying assets have been accounted Some of the key reasons for adjustments noted in this as embedded leases under Ind AS. instead. Such provisions of using previous Indian GAAP cost as deemed cost were recorded on an undiscounted basis under of tangible and intangible assets. resulting in an impact on operations. Under Indian GAAP. • Under Indian GAAP. plant and equipment. Under Indian GAAP. decommissioning and site restoration liabilities and • Some companies have not availed of the exemption long-term provisions under Ind AS. to use fair value as the carrying value of such assets • Exchange differences on translation of foreign at the transition date. and consequential is determined. whereas under Ind AS.

escalation of operating lease rentals under Ind AS. LQĠDWLRQDU\FRVWLVQRWUHFRJQLVHGDVDQH[SHQVHRQ • Increase in expense due to gross up of excise a straight-line basis. provisions were generally accounted when there is a past Leases (including embedded leases) legal obligation. VLJQLğFDQWDGMXVWPHQW 16 PwC . This is not possible • Under Ind AS. Some of the key reasons for adjustments noted in this • Reversal of capitalised foreign exchange gain or area were: loss on long-term loans. obligations. Under Indian GAAP. unless certain hedge accounting ZKLFKLVLQOLQHZLWKWKHH[SHFWHGJHQHUDOLQĠDWLRQ UHODWLRQVKLSVDUHLGHQWLğHGDQGDFFRXQWHGRQWKH so as to compensate the lessor for expected basis of Ind AS 109. this was one of the most Ind AS and IFRS. This is also a difference between duty on revenue.

RIWKH &RPSDQLHV$FWZKLFKSUHVFULEHVWKHJURVVSUHVHQWDWLRQRI Gross Net Not applicable excise duty as part of revenue and expense.. presenting revenue net of excise duty. 'LVFORVXUHRILQWHULPğQDQFLDOLQIRUPDWLRQ Were the June 2015 comparatives Were the quarter ended and year reviewed or audited? ended March 2016 results presented We noted that 4% of the companies presented under Ind AS? audited results and 12% presented reviewed results )RUW\ğYHSHUFHQWRIWKHFRPSDQLHVSXEOLVKHG IRUWKHFRPSDUDWLYHTXDUWHUHQGHG-XQH FRPSDUDWLYHVIRUWKHTXDUWHUHQGHG0DUFK A majority (84%) of the companies appear to have 2016 and year ended March 2016.QG$6ğQDQFLDOVWDWHPHQWVSHU6FKHGXOH. Under Ind AS. The rest of the WDNHQWKHEHQHğWRIWKHUHOD[DWLRQVSURYLGHGE\6(%. revenue is to be reported gross of excise duty. with a corresponding adjustment to expense. in its recent circular dated 5 July 2016. This is expected to change as companies prepare WKHLUDQQXDO.QGLDQ 17% GAAP).Adoption of Ind AS: Presentation and disclosure matters Presentation of excise duty: Gross vs net Twenty companies (27%) have presented their revenue gross of excise duty. Excise duty was not applicable to 17% of the companies in the population. This resulted in an increase in their reported revenue by DURXQGFURUH RIWKHLUUHSRUWHGUHYHQXHVXQGHU.. companies availed of SEBI’s relaxations. 27% It appears that 56% of the companies have continued with the 56% existing SEBI format for quarterly results. 4% 12% 45% 55% 84% Audited Reviewed Management reviewed Yes No PwC Ind AS impact analysis 17 .

June 2015 and March 2016 equity reconciliations presented? 2QO\DQGRIWKHFRPSDQLHVKDYHSXEOLVKHGHTXLW\UHFRQFLOLDWLRQDVDW$SULO-XQHDQG0DUFK 2016. A majority of them have availed of SEBI’s relaxations.QGLDQ*$$3HTXLW\DVDW 0DUFK. (LJKWFRPSDQLHVUHSRUWHGDQRYHUDOOLQFUHDVHLQHTXLW\RIFURUH.1%.15 RIWKH. 3% 1% 13% April 2015 June 2015 March 2016 87% 97% 99% Yes No Yes No Yes No The entities that disclosed equity reconciliations in March 2016 showed a net increase in their net worth of around 9.Were the April 2015. respectively.

15 .DQGWZRFRPSDQLHVUHSRUWHGDGHFUHDVHLQHTXLW\RIFURUH.

5% 687.7% 0.1% (0.928 4.03%) 630. • Reversal of previously amortised goodwill on account of retrospective application of business combination accounting principles • Reversal of proposed dividend liability and distribution of tax Key • Re-measurement of de-commissioning liability adjustments: • Fair valuation of financial assets including derivatives.8% 3.0%) Equity under Business Taxes Financial Proposed Revenue Other Equity under Indian GAAP combination/ instruments dividend adjustments Ind AS consolidation (including derivatives) Were consolidated or stand-alone Ind AS Was an analysis of OCI presented? results presented? 6LJQLğFDQWO\IHZHU . impairment losses on financial assets • De-recognition of deferred lease rentals obligation on operating lease • Deferred tax impacts including deferred tax liabilities on undisturbed earnings of the subsidiaries Percentage impact on reported equity 2. accounting for investments/borrowings at amortised cost.638 (2.

FRQVROLGDWHGğQDQFLDOVDORQJZLWKVWDQGDORQHğQDQFLDOV 4% This was not applicable to 1% of the companies as they do not have subsidiaries/associates or JVs.FRPSDQLHVSUHVHQWHG Fifty-six per cent of the companies have opted to publish an analysis of items in OCI in the results. 16% 1% F 80% 43% 56% Yes No Not applicable Yes No Not applicable 18 PwC .

This was mainly from companies published their items. reporting on Ind AS adoption. 1% 12% 21% 32% 52% 87% 16% 79% Yes No Not applicable Yes No Not applicable Yes No PwC Ind AS impact analysis 19 . sale of land them disclosed no change in segment of the companies. impairment. items included change in VHJPHQWDQGLGHQWLğFDWLRQRI whereas sixteen per cent did not. The nature of exceptional the geographical segment to business segment assets and liabilities. and restructuring costs.Segment and other disclosures Did segment disclosures Were segment Were exceptional change on Ind AS adoption? assets and liabilities items disclosed? Twelve per cent of the companies presented? Twenty-one per cent of the changed their segment reporting Fifty-two per cent of the companies reported exceptional disclosures. estimates of useful lives of additional segments. A majority of 7KLVZDVQRWDSSOLFDEOHWR assets.

industrial manufacturing. On the other hand. the impact of adoption has been pervasive and not restricted to only one sector or industry. Sectors such as pharmaceuticals. WD[HVğQDQFLDOLQVWUXPHQWV LQFOXGLQJGHULYDWLYHV. life sciences and healthcare. metals and capital projects and infrastructure were negatively impacted. thereby impacting every company and industry sector.In summary Transition to Ind AS has been one of the most widely discussed topics across the boardrooms in corporate India for some time now. automotive were positively impacted. As is evident from the Ind AS results reported by various companies. whereas telecom. This is mainly due to DIXQGDPHQWDOFKDQJHLQWKHğQDQFLDOUHSRUWLQJIUDPHZRUN general shift from the historical cost convention to increased use of fair value and increased focus over substance rather than the legal form of the underlying transaction.

marking the Ind AS transition journey by corporate India VXFFHVVIXO2QWKHRWKHUKDQGFRQVLGHULQJWKDWRQO\ DQGRIWKHFRPSDQLHVSXEOLVKHGHTXLW\UHFRQFLOLDWLRQ as at April 2015. the impact of Ind AS adoption has been beyond accounting. including banks. Investors. respectively. based on our experience. suppliers. only 24% of the companies (per this analysis) have availed of the extension provided by SEBI. stakeholders and other users will see additional GLVFORVXUHVRIğQDQFLDOLQIRUPDWLRQFRPSULVLQJ. It is also noted that corporate India has embraced various disclosure reliefs provided by SEBI—a welcome move from our regulator. In spite of the relaxation in timelines provided by SEBI. Finally.QG$6EDODQFH sheet information as companies complete the second quarter September 2016 results under Ind AS. including requiring timely communication with various stakeholders. June 2015 and March 2016. contractual arrangements with customers. NBFCs and insurance FRPSDQLHVDVWKH\FDQEHQHğWIURPWKHWUDQVLWLRQH[SHULHQFH and journey of Phase I companies.DQG UHYHQXHUHFRJQLWLRQFRQWLQXHWREHWKHWRSVLJQLğFDQWDUHDV of adjustment arising from Ind AS adoption. it appears that though Ind AS adjustments impacting the income VWDWHPHQWVKDYHEHHQğQDOLVHGVRPHPRUHZRUNPD\QHHG to be done to complete the impact of Ind AS adjustments on balance sheets and equity. 20 PwC . IT systems and controls. We hope this publication provides some helpful insights into how Ind AS adoption has impacted corporate India. This phased Ind AS transition process is helpful especially for Phase II companies. HR and incentive policies. This will help better XQGHUVWDQGWKHFRPSDQ\łVSHUIRUPDQFHDQGğQDQFLDOSRVLWLRQ under Ind AS. cutting across organisation and various functions/areas such as direct and indirect taxes. This is surely a positive indicator. lenders.

PwC Ind AS impact analysis 21 .

LVKHUH /$FFRXQWLQJIRUEXVLQHVVFRPELQDWLRQV p8 Ind AS: India’s accounting standards converged with IFRS are here! p4/An in-depth analysis: Examining XQGHU.Publications Previous publications Contents p4 Special Edition: March 2015 .QWHUQDOğQDQFLDOFRQWUROV*XLGDQFHIURPWKH.QG$6IRUEDQNVDQGQRQEDQNLQJğQDQFLDOFRPSDQLHV S S the implications p7/What is changing from current Indian GAAP? p8/ Ind AS and IFRS: A comparison p18/ 1%)&V.&$.QG$6)DLUYDOXHDOOWKHZD\ / .

pwc.in www.in 22 PwC .QG$67UDQVLWLRQ)DFLOLWDWLRQ*URXS p18/ Update on changes to accounting p17 standards p20/ SEBI update: Ind AS applicability to information in offer documents p23/ IRDA and SEBI /High Level Committee’s recommendations on measures to improve p19 Recent technical updates p24 monitoring and implementation of CSR policies /BEPS project: A new way to look at p24 p29 p38 cross-border taxation /AICPA National Conference /Recent technical updates PwC ReportingPerspectives PwC ReportingPerspectives April 2016 www.in Contents January 2016 p4 A fresh look at Ind AS 108.pwc. &ODULğFDWLRQVIURP. 2016 p12 / Depreciation under Schedule II of the Companies Act.in www. / . ‘Operating segments’ p4/Changes to the code: The Companies A primer on accounting for share-based payments under Ind AS /Leasing: ‘Off balance (Amendment) Bill.QWHJUDWHGUHSRUWLQJ$QHZFRUSRUDWHUHSRUWLQJPRGHO / 0HDVXULQJTXDOLW\LQ S S First-time adoption and transition to Ind AS p20/ What this means for your business: A call to action p22 DXGLWV / 5HFHQWWHFKQLFDOXSGDWHV PwC ReportingPerspectives PwC ReportingPerspectives Ind AS: India’s accounting standards October 2015 converged with IFRS are here! www.pwc.pwc. 2013 p15/ p14 sheet’ to ‘on balance sheet’ /Implementation of Ind AS: Updates from regulators—RBI.

in PwC Ind AS impact analysis 23 .pwc.3Z&5HSRUWLQJInBrief Continuous disclosures by infrastructure PwC ReportingInBrief investment trusts registered under SEBI FAQs on the SEBI circular on the July 2016 UHYLVHGIRUPDWIRUğQDQFLDOUHVXOWVDQG implementation of Ind AS July 2016 www.in Ind AS pocket Contents Ind AS: Convergence with IFRS p4/ About the survey p7/ Survey results p8/ Convergence and carve-outs p9/ guide 2016 %HQHğWVDQGFKDOOHQJHVRI.pwc.pwc.QG$6 p14/ Impact on net worth/net income p16/ .PSDFWRQğQDQFLDOUHSRUWLQJUHTXLUHPHQWV p185HYHQXHIURPFRQWUDFWVZLWKFXVWRPHUV p32/ Impact across the board p33 / Non-GAAP measures p34/ Investor/stakeholder analysis p357KHZD\IRUZDUG p36/ About PwC p37 Concepts and principles of Ind AS in a nutshell PwC Ind AS Outlook Survey www.QG$6 p126WDWHRIUHDGLQHVVIRU.in www.

122002. Haryana Phone: +91 44 4228 5000 Phone: +91 124 4620000 Hyderabad Pune Plot No. Airport Road +\GHUDEDG7HODQJDQD Yerwada.600 006 Gurgaon . 5th Floor. Salt Lake $KPHGDEDG Kolkata .411 006 Phone: +91 40 4424 6000 Phone: +91 20 41004444 . Opp: Karnavati Club. Pune . Veer Savarkar Marg  0XUSK\5RDG8OVRRU Shivaji Park.Y-14. Sector-V. Chennai . Millenia Tower ‘D’ 252. Shapath V Plot No. 77/A. 17th Floor.2XURIğFHV Ahmedabad Kolkata 1701. Tower A – Wing 1 Road No. 8-2-624/A/1 7th Floor. Greams Road DLF Cyber City. 10. Banjara Hills Business Bay. Dadar Bangalore . 10. S G Road Block-EP.560 008 Mumbai .700 091. Tower C. West Bengal 3KRQH 3KRQH Bengaluru Mumbai 6th Floor. 17th Prestige Palladium Bayan and 18th Floor 129-140.400 028 Phone: +91 80 4079 6000 Phone: +91 22 66691000 Chennai New Delhi/Gurgaon 8th Floor Building No.

QWHUQDWLRQDOQHWZRUNDQGRURQHRUPRUHRILWVPHPEHUğUPV each of which is a separate. Find out more and tell us what matters to you by visiting us at www.com/pwc . Kolkata.com . visit www. All rights reserved You can connect with us on: facebook. independent and distinct legal entity in separate lines of service.com/PwC_IN linkedin.About PwC At PwC.pwc.pwc.pwc.com/PwCIndia twitter. Please see www.com/company/pwc-india youtube.com/structure for further details. ©2016 PwC. For more information about PwC India’s service offerings.com/in 3Z&UHIHUVWRWKH3Z&.Q. Mumbai and Pune.QGLD3Z&KDVRIğFHVLQWKHVHFLWLHV$KPHGDEDG%HQJDOXUX&KHQQDL'HOKL1&5 Hyderabad. advisory and tax services. We’re a QHWZRUNRIğUPVLQFRXQWULHVZLWKPRUHWKDQSHRSOHZKRDUHFRPPLWWHGWR delivering quality in assurance. our purpose is to build trust in society and solve important problems.

in Data Classification: DC0 This document does not constitute professional advice. which is a member firm of PricewaterhouseCoopers International Limited (PwCIL). The information in this document has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this document represent the judgment of PwCPL at this time and are subject to change without notice. All rights reserved. for which they are entirely responsible. “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093). based on the contents of this publication. In this document. © 2016 PricewaterhouseCoopers Private Limited. PwCPL neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. each member firm of which is a separate legal entity. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision.pwc. SUS/V9/September2016-7260 .