ACCOUNTING FRAMEWORK
Historical cost
IFRS:
Historical cost, but intangible assets, property plant and equipment (PPE) and
investment property may be revalued. Derivatives, biological assets and most
securities must be revalued.
Indian GAAP:
Historical cost, but fixed assets, other than intangibles, may be revalued.
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ACCOUNTING FRAMEWORK
First-time adoption of accounting frameworks
IFRS:
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.
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
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FINANCIAL STATEMENTS
Contents of financial statements
IFRS:
Two years’ balance sheets, income statements, cash-flow statements,
changes in equity, accounting policies and notes.
Indian GAAP:
Two years’ balance sheets, profit and loss accounts, accounting policies and
notes. Listed entities are required to give their consolidated financial
statements and the related notes along with the standalone financial
statements. (Financial Statements should also include cash flow statements
in certain cases)
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IFRS:
Does not prescribe a particular format; an entity uses a liquidity presentation
of assets and liabilities, instead of a current/non-current presentation, only
when a liquidity presentation provides more relevant and reliable information.
Certain items must be presented on the face of the balance sheet
Indian GAAP:
The Indian Companies Act and other industry-specific laws like banking,
insurance, etc. specify respective formats
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FINANCIAL STATEMENTS
Income Statements
IFRS
Does not prescribe a particular format. However, expenditure must be presented in
one of two formats (function or nature). Certain items must be presented on the face
of the income statement.
Indian GAAP
The Indian Companies Act does not prescribe a particular format. The Company law
and accounting standards however, prescribes certain disclosure norms for income
and expenditures. For certain industries, industry specific laws specify formats.
Reporting currency
IFRS:
Requires the measurement of profit using the functional currency. Entities may,
however, present financial statements in a different currency.
Indian GAAP:
Schedule VI to the Companies Act, 1956 specifies Indian Rupees as the reporting
currency.
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FINANCIAL STATEMENTS
Accounting Differences
Accounting Differences
Accounting Differences
Accounting Differences
Preliminary expenses Charged to income statement. Deferred and written off over the
period of 5 years.
loans Origination Cost Origination cost is amortized Charged to Profit and loss
account
Employee benefits - Must use the projected unit Provision in the accounts is
Pension costs defined credit method to determine normally made on the basis of
benefit plans benefit obligation actuarial valuation – no specific
method is prescribed
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Capitalisation of Permitted, but not required for Compulsory when relates to the construction
borrowing costs qualifying assets. of certain assets.
Foreign exchange Under IAS such gains or losses Indian GAAP requires that any profit/loss
fluctuation are required to be expensed arising on the restatement of foreign
exchange liabilities incurred for the acquisition
of imported fixed assets as a result of change
in exchange rates is capitalized as part of the
original cost of the assets.
Impairment of IAS require that assets be Indian GAAP also has adopted the provisions
long lived assets reviewed for impairment and of IFRS with effect from 1.4 2004 for listed
impairment losses recognized in companies and commercial enterprise with a
the accounts turnover > 50 crores
Leasehold Land Disclosed as prepaid assets and Disclosed as a part of fixed assets.
accounting treatment is similar
to operating leases.
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Deferred Taxes Use full provision method (some Deferred tax assets and liabilities
exceptions), driven by balance should be recognised for all timing
sheet temporary differences . differences subject to consideration of
Recognise deferred tax assets if prudence in respect of deferred tax
recovery is probable. assets.
Lease Accounting Has been in place for a much Applicable since 2001
longer time.
Asset Retirement Obligations that are legally No such guidance available.
Obligation (ARO) enforceable and unavoidable, and
are associated with the retirement
of tangible long-lived assets, be
recorded as liabilities when those
obligations are incurred and
recorded at fair value.
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IFRS:
Measure derivatives and hedge instrument at fair value. Recognise the
changes in fair value in the income statement, except for effective cash flow
hedges, where the changes are deferred in equity until effect of the
underlying transaction is recognised in the income statement.
Gains / losses on hedge instrument used to hedge forecast transaction,
included in the cost of asset/liability (basis adjustment).
Indian GAAP:
No comprehensive guidelines currently. Accounting treatment for forward
contracts and equity index and equity stock futures and option is prescribed.
Guidance prescribed for banking companies.