IFRS in India - jb nagar cpe study circle of wirc of icai

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IFRS in India – Its Status, Overview of Concepts and Impact in IndiaIFRS Desk Top for DiscussionABC Limited - Consolidated financial statementsIFRS Desktop for the year ended March 31, 2010Sr. No. Nature of adjustments Impact Accuracy Rs. Crs. Rs. Crs. Notes(L/M/H) Net Worth PATAmount as per Indian GAAP 558.09 116.81 Audited financial statementsA Adjustments - Indian GAAP to IFRS Computation neededAdvisor’s IFRS implementation services1 Fixed assets, intangibles and leaseaccountingM-H Gestimate (25.00) (25.00) Around 5% of the net assetbase2 Derivatives M Gestimate (70.00) (70.00) Actual loss as per the auditedfinancial statements3 Functional currency of subsidiaries, JVs andbranchesL Dummy 50.00 50.004 Dividends (net impact zero) L Actual - - Dividend for 2008-09 and2007-08 is the same5 Debt vs equity classification M Dummy (5.00) (5.00)6 Deferred taxes on above L Estimate (17.00) (17.00)B IFRS 1 (1 exemption out of 15 more relevant)7 Business combinations L Dummy - - To be concludedC Transactions with Parent/Group8 Group transactions and tax thereon L Dummy - - To be concludedTotal of all adjustments (67.00) (67.00)Amount as per IFRS 491.09 49.81Rakesh Agarwal Slide 28
IFRS in India – Its Status, Overview of Concepts and Impact in IndiaPreparation of IFRS financial statementIssue log Template financial Sketch financialABC LimitedIssues LogAdvisor’s IFRS implementation servicesSr Type of Issue Issue Requirements under IFRS TechnicalReferenceProperty, plant and equipment1 Measurement Component Approach The Company is required to depreciate eachsignificant component of an item of PPEseparately, if they have significantly differentuseful life.2 Measurement Major overhaul expenses The cost of major overhaul occurring at regularintervals to be capitalized.3 Measurement Subsequent expenditure Subsequent costs should be capitalized, thatis recognized as an asset, only if they meetthe recognition criteria that:a) It is probable that future economic benefitsassociated with the item will flow to the entity;andb) The cost of the item can be measuredreliably4 Measurement Deferred term basis If the Company has acquired a PPE ondeferred term basis and terms are beyondnormal credit terms, PPE will be recognizedon cash price equivalent, i.e. discountedamount.5 Recognition Environmental obligation and Asset Costs of dismantling and removing the item orretirement obligationrestoring the site on which it is located berecorded when an obligation exists. A liabilityfor the present value of the costs ofdismantling, removal or restoration as a resultof a legal or constructive obligation isrecognized and the corresponding costincluded as part of the related PPE.6 Measurement Expenditure during construction Indirect expenses during construction periodperiodwhich are not required to bring the asset inthe condition for its intended use areexpensed off as incurred.7 Measurement Change in method of depreciation Change in method of depreciation isconsidered as change in accounting estimateand thereby accounted for prospectively.8 Recognition Borrowing Cost General borrowings shall include workingcapital loan amount9 Recognition Borrowing Cost The borrowing cost shall be capitalized forexchange differences on the amount ofprincipal of the foreign currency borrowings tothe extent of difference between interest onlocal currency borrowings and interest onforeign currency borrowings.10 Classification Leasehold land The land is normally classified as anoperating lease unless title passes to thelessee at the end of the lease term.Accordingly leasehold land is classified asoperating lease and disclosed as prepaidassets.11 Measurement Periodic Review Residual value, residual life and method ofdepreciation of the asset is required to beassessed at each balance sheet.Requirements under Indian Priority Enquiries / Discussion withGAAP(H, M, L) management during the workshopIAS 16 There is no specific requirement. H To assess whether any significantcomponent of an item of PPE havingsignificantly different useful life.IAS 16 The cost of major overhaulM Subsequent expenditure incurred for everyoccurring at regular intervals isseven years in rayon plant (spinningcharged to Profit and loss A/cmachine) needs to capitalisedIAS 16 Subsequent maintenanceL No such cases were reportedexpenditure will be capitalized aspart of PPE, if they increase the lifeof the plant or increase capacity orhas a benefit for more than a year.IAS 16 PPE is recorded on purchase price. L No, any purchases are done on deferredterm basisIAS 16 No provision has been made for L As discuss the amount is not materialenvironment and asset retirementobligation.IAS 16 Indian GAAP allows pre-operative L No such cases were reportedexpenses to be generallycapitalized as part of PPE.IAS 16 Change in depreciation method is L The Company has not changed its methodconsidered as change inof depreciation in past.accounting policy, the impact ofchange in depreciation method isdetermined retrospectively;computing depreciation under thenew method.IAS 23R Similar to IFRS L To assess whether working capital loan hasbeen included in the general borrowing forthe purpose of calculation of WACC.IAS 23R Similar to IFRS L To assess whether difference in exchangefluctuation of foreign currency borrowingcost has been capitalized.IAS 17 Leasehold land is classified as a M To assess whether the title would pass topart of fixed assetsthe company at the end of the lease term.Cost of leasehold land is amortised over thelease period.IAS 16 No specific requirement. M Whether the current SLM reflects the usefullife of the assets?There are some PPE which are still in usebut they are fully depreciated viz. cementplant, paper plant etc.To assess further any such case where thelife of the PPE has been fully depreciatedABC Limited -
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IFRS in India - jb nagar cpe study circle of wirc of icai

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