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plant and equipment (PPE) and investment property may be revalued. Derivatives, biological assets and most securities must be revalued. In Indian GAAP accounting is also based upon Historical cost concept, but fixed assets, other than intangibles, may be revalued. Adoption of accounting frameworks first-time: Full retrospective application of all IFRS’s effective at the reporting date for an entity’s first IFRS financial statements, with some optional exemptions and limited mandatory exceptions. While in Indian GAAP, the accounting standard on Disclosure of Accounting Policies addresses the issue of adoption of accounting policies. Also, particular standards specify the transitional treatment upon the first-time application of those standards FINANCIAL STATEMENTS
accounting policies and notes are maintained. income statements. changes in equity. Certain items must be presented on the face of the balance sheet. an entity uses a liquidity presentation of assets and liabilities. (Financial Statements should also include cash flow statements in certain cases) Balance Sheet: IFRS does not prescribe a particular format. accounting policies and notes are required to be maintained. The Indian Companies Act and other industry-specific laws like . Listed entities are required to give their consolidated financial statements and the related notes along with the standalone financial statements. While in Indian GAAP. Two years’ balance sheets. instead of a current/non-current presentation. profit and loss accounts. cash-flow statements.Contents of financial statements: In IFRS. Two years’ balance sheets. In Indian GAAP. only when a liquidity presentation provides more relevant and reliable information.
However. For certain industries. specify respective formats of balance sheet. . the Indian Companies Act does not prescribe a particular format. In Indian GAAP Schedule VI to the Companies Act. Reporting currency: IFRS requires the measurement of profit using the functional currency. insurance. 1956 specifies Indian Rupees as the reporting currency. Certain items must be presented on the face of the income statement. The Company law and accounting standards however. expenditure must be presented in one of two formats (function or nature). prescribes certain disclosure norms for income and expenditures. industry specific laws specify formats. present financial statements in a different currency. etc. In Indian GAAP. however. Entities may.banking. Income Statements: IFRS does not prescribe a particular format.
While Indian GAAP does not prescribed such kind of statements Accounting Practice Differences: There are several areas of difference for accounting practices between Indian GAAP and IFRS. The statement must be presented as a primary statement. In Indian GAAP. Statement of recognised gains and losses / other comprehensive income: IFRS provide a statement of recognised gains and losses either as a separate primary statement or highlight it separately in the primary statement of changes in shareholder’s equity.Statement of changes in shareholders’ equity: In IFRS Statement showing capital transactions with owners. the movement in accumulated profit and a reconciliation of all other components of equity. These differences are being shown in following table: . Changes in shareholders’ equity are disclosed by way of a schedule.
Non-consolidation of Activities of subsidiaries Dissimilar nature or temporary control are not a justification for nonconsolidation. Combinations of Here all business Business combinations are acquisitions. All business . Indian GAAP No specific guidance is available in Indian GAAP. There is no comprehensive accounting standard on business combinations.Table 1: Accounting Differences between IFRS Indian GAAP Subject IFRS Special Purposes In IFRS there is entities/organisation provision for s (SPEs) consolidation where the substantial evidence indicates that control is required on SPEs. Only if acquired and held for resale or there are severe long-term restrictions to transfer funds to the parent.
Here it is Required for certain amalgamations when all the specified conditions are met. It is capitalising if recognition criteria are met. else accounted under the purchase method.Uniting of interests It is Prohibited. intangible assets must be amortised over useful life . however. intangible assets must be amortised over combinations are acquisition. method Acquisition intangible assets of It is capitalising if recognition criteria are met. required use of pooling of interests method in certain amalgamations [when all the specified conditions are met].
Revaluations are permitted in rare circumstances.useful life. . no requirement on frequency of revaluation. Revaluations of such assets are not permitted. Use historical cost. however. On revaluation. with a rebuttable presumption of not exceeding 10 years. or selection of assets is made on a systematic basis. Intangibles assigned an indefinite useful life must not be amortised but reviewed annually for impairment. an entire class of assets is revalued. Regular valuations of entire classes of assets are required when revaluation option is chosen. Accounting of plant. Revaluations are permitted. Use historical property. and cost or revalued equipment amounts.
Depreciation Depreciation Accounting methods Allocated on a systematic basis to each accounting period over the useful life of the asset. Recognise tax effect of timing difference as deferred tax asset or liability. Deferred taxes Income Use full provision method (some exceptions) driven by balance sheet temporary differences. whereas (b) for entities with no . Recognise deferred tax assets if recovery is probable. Recognise deferred tax assets (a) for entities with tax losses carry forward. if realisation is virtually certain. the depreciation is computed by applying a higher rate. Methods are similar to IFRS. except where the useful life is shorter than that envisaged under the Companies Act or the relevant statute.
Convertible debt is recognised as a liability based on legal form without any split. Compensated Provision on absences actual cost to the company basis tax losses carry forward. Provision based on actuarial valuation . Does not define functional currency. allocating proceeds between equity and debt Functional currency Currency of primary economic environment in which entity operates. A number of other specific differences.Fringe benefits tax Included as part of related expense (fringe benefit) which gives rise to incurrence of the tax. if realisation is reasonably certain. Disclosed as a separate item after profit before tax on the face of the income statement. Convertible debt Account for convertible debt on split basis.
This is but not required compulsory when for qualifying relates to the assets. It is permitted. Origination cost Charged to Profit is amortized in and loss account IFRS Mandatory All preference redeemable shares are preference shares classified as are classified as shareholders’ liabilities.Preliminary expenses loans Cost Origination Charged income statement. funds. Financial liabilities classification Capitalisation borrowing costs of Foreign exchange fluctuation to Deferred and written off over the period of 5 years. Under IAS such Indian GAAP gains or losses requires that any are required to be profit/loss arising expensed on the restatement of foreign exchange liabilities incurred for the acquisition of imported fixed assets as a result of change in . construction of certain assets.
Indian GAAP also has adopted the provisions of IFRS with effect from 1. Include effect in the income statement of the period in which the change is made except as specified in certain standards .Impairment of long IAS require that lived assets assets be reviewed for impairment and impairment losses recognized in the accounts Leasehold Land Disclosed as prepaid assets and accounting treatment is similar to operating leases. exchange rates is capitalized as part of the original cost of the assets. Changes in Restate accounting policies comparatives and prior-year opening retained earnings.4 2004 for listed companies and commercial enterprise with a turnover > 50 crores Disclosed as a part of fixed assets.
Has been in place for a much longer time. Deferred Taxes of is Use full provision method (some exceptions). Applicable since 2001 .Correction of Restatement fundamental errors comparatives mandatory. Include effect in the current year income statement with appropriate disclosure Deferred tax assets and liabilities should be recognised for all timing differences subject to consideration of prudence in respect of deferred tax assets. Recognise deferred tax assets if recovery is probable. Lease Accounting where the change resulting from adoption of the standard has to be adjusted against opening retained earnings. driven by balance sheet temporary differences.
In Indian GAAP long-term investments are recorded at cost (with provision for other than temporary diminution in value) and current investments are recorded at lower of cost or fair value as determined on individual basis or by category of investment but they are not recorded on overall (or global) basis. If it is held up to maturity of loan or receivable. . Unrealized gains/losses on fair value through profit or loss classification (including trading securities) are recognized in the income statement and on available-forsale investments recognized in equity1. It must be noted that it is an irrevocable option to classify a financial asset at fair value through profit or loss. These differences in the treatment of investment need special attention while convergence of Indian GAAP with IFRS. then carry at amortized cost.Investments: IFRS depends on the classification of investment. 1 There is an option in IFRS to classify any financial asset ‘at fair value through profit or loss’. Changes in fair values in respect of such securities are recognized in the income statement. otherwise at fair value.
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