KEY DIFFERENCES- AS VS. IND AS

Transcription

1 KEY DIFFERENCES- AS VS. IND AS October Titre de la présentation

2 AGENDA Property, Plant and Equipment (PP&E) Intangible Assets Investment Property Non-current Assets Held for Sale and Discontinued Operations Impairment of Assets

3 IND AS 16 PROPERTY, PLANT AND EQUIPMENTS Titre de la présentation

4 AS VS. IND AS Topic AS 6, AS 10 Ind AS 16 Change in method of depreciatio n Requires retrospective recomputation of depreciation and accounted for prospectively. Treated as a change in accounting policy. Considered as change in accounting estimate and applied prospectively. Review of residual value Reassessm ent of useful life Frequency of revaluation Estimates with respect to RV are not required to be reviewed and updated. Reviewed periodically. Prospective application. No equivalent guidance The RV should be reviewed at least at each financial year-end and, the change(s) shall be accounted for as a change in an accounting estimate in accordance with Ind AS 8. Reviewed at least at each financial yearend. Prospective application. Revaluations are required to be made with sufficient regularity to ensure that the CV does not differ materially from the FV at the end of the previous reporting period. 4 Titre de la présentation

5 AS VS. IND AS Topic AS 6, AS 10 Ind AS 16 Component ization of assets Governmen t grant received for PPE Cost of major Inspections There is a slight discussion of the same under AS 10. Further, Schedule II to the Companies Act, 2013 specifically mandates FA to be componentised for depreciation purposes. AS 12 provides an option of reducing the grant received from the gross value of the asset concerned. Costs of major inspections are generally expensed when incurred. Componentization approach mandatory for PPE. Accordingly, these are depreciated separately. Ind AS 20 does not allow the same. Cost of major inspections is recognised in the carrying amount of PPE, if recognition criteria are satisfied and any remaining carrying amount of the cost of previous inspection is derecognised. 5 Titre de la présentation

6 AS VS. IND AS Topic AS 6, AS 10 Ind AS 16 Estimated costs of dismantling, removing or restoring items of PPE No specific guidance in AS 10. However, as per AS 29, an enterprise recognizes a provision for the decommissioning cost of an oil installation to the extent that there is an obligation to rectify damage already caused. These provisions are not required to be discounted. The initial estimate of the costs of with respect to dismantling and removing an item of PPE restoring the site is required to be included in the cost of the respective item of PPE. Further, GN on Accounting For Oil & Gas producing Activities provides some guidance on the same. 6 Titre de la présentation

7 AS VS. IND AS Topic AS 6, AS 10 Ind AS 16 Spare parts and servicing equipments Normally, standby equipments and servicing equipment are capitalized. Machinery spares are generally charged to P&L as and when these are consumed. However, if such spares can be used only in connection with an item of fixed asset and their use is expected to be irregular, it would be capitalized & depreciated (not exceeding the useful life of the principal item). Generally carried as inventory. Once consumed-recognized in P&L major spare parts and stand-by equipment qualify as PP&E only (either): when it is expected to be used during more than one period. it can be used only in with an item of PP&E. 7 Titre de la présentation

8 IND-AS 38 INTANGIBLE ASSETS Titre de la présentation

9 AS AND IND-AS COMPARISON Topic AS 28 Ind-AS 38 Goodwill Rebuttable presumption Measuremen t after recognition Goodwill arising on an amalgamation in the nature of purchase is amortized over the useful life (upto 5 years, unless longer period can be justified). Goodwill arising on consolidation is not amortized but tested for impairment Rebuttable presumption that the useful life does not exceed 10 years. An intangible asset cannot have indefinite life. Accounted for using the Cost model. Revaluation of intangible assets is not permitted. Goodwill not to be amortized but tested for annual impairment. No similar rebuttable presumption. Recognizes that an intangible asset may have finite or indefinite life. May be accounted for using Cost model or Revaluation model Review of the residual value No requirement to review the RV. The RV is not increased subsequently for changes in prices or value. The RV should be reviewed at least at each financial yearend. A change in the RV is accounted for as a change in an accounting estimate. 9 Titre de la présentation

10 AS AND IND-AS COMPARISON Topic AS 28 Ind-AS 38 Change in the useful life and amortization method Intangible assets acquired as part of business combination Asset acquired from government grant Expected useful life of the asset can be changed. (change in accounting estimate). Amortisation method can also be changed. (Change in accounting policy) Intangible asset is acquired in amalgamation in the nature of purchase should be accounted at cost or fair value. If it is not reliably measurable, it is included as a part of goodwill. In this case, intangible asset is recognised at nominal value or at the acquisition cost. Expected useful life of the asset can be changed. (change in accounting estimate) Amortisation method can also be changed. (change in accounting estimate) Per Ind AS 103, an intangible asset acquired in a business combination is recorded at its FV. Intangible asset is recorded even if that intangible asset had not been recognised in the FS of the transferor. Only fair value is allowed for intangible asset and grant in accordance with Ind AS Titre de la présentation

11 AS AND IND-AS COMPARISON Topic AS 28 Ind-AS 38 No equivalent guidance. Deferred Payment terms Intangible assets retired from active use and held for sale An intangible asset that is retired from active use and held for disposal is carried at its carrying amount. Tested for impairment annually. In this case, its cost is the cash price equivalent. The difference between this amount and the total payments is recognised as interest expense over the period of credit unless it is capitalised in accordance with Ind AS 23, Borrowing Costs. These assets are covered under Ind AS Titre de la présentation

12 IND-AS 40 INVESTMENT PROPERTY Titre de la présentation

13 COMPARISON WITH AS Definition- Investment property Topic AS 13 Ind AS 40 No equivalent guidance. Covered by AS 13, which defines investment property as an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise. Separate and complete guidance is available 13 Titre de la présentation

14 COMPARISON WITH AS Topic AS 13 Ind AS 40 Measurement Initial measurement Initial measurement No detailed guidance; however, classified as non-current investments. As per Sch III to the Companies Act, 2013 also, these are classified as non-current investments. An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement. Fair value model is not permitted. Detailed disclosures pertaining to fair value have to be given. Subsequent measurement Permits both cost model and fair value model. Subsequent measurement Only cost model is permitted. 14 Titre de la présentation

15 IND-AS 105 NON CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Titre de la présentation

16 AS 24 VS. IND AS 105 Topic AS 24 Ind AS 105 Scope Establishes principles for reporting information about discontinuing operations. It does not deal with the noncurrent assets held for sale; fixed assets retired from active used and held for sale, Specifies the accounting for non- current assets held for sale, and the presentation and disclosure of discontinued operations.

17 AS 24 VS. IND AS 105 Topic AS 24 Ind AS 105 Non-current assets (or disposal groups) as held for sale or as held for distribution to owners. This standard does not deal with non-current assets held for sale; though AS 10 deals with assets held for disposal. As per AS 10, items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their NBV and NRV and are shown separately in the FS. Any expected loss is recognised immediately in the P&L. An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. Thus, an asset (or disposal group) cannot be classified as a noncurrent asset (or disposal group) held for sale, if the entity intends to sell it in a distant future.

18 AS 24 VS. IND AS 105 Topic AS 24 Ind AS 105 Discontinued Operations Length of time period for sale recognition There is no concept of discontinued operations but it deals with discontinuing operations Does not specify any time period in this regard as it relates to discontinuing operations Discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale. The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification with certain exceptions

19 AS 24 VS. IND AS 105 Topic AS 24 Ind AS 105 Changes to a plan of sale Initial Disclosure No equivalent guidance. The initial disclosure event with respect to a discontinuing operation, is the occurrence of one of the following, whichever occurs earlier: Provides guidance with respect to changes to a plan asset. If the criteria for classification of non-current assets (or disposal groups) as held for sale are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale. No equivalent guidance.

20 AS 24 VS. IND AS 105 Topic AS 24 Ind AS 105 Initial Disclosure(Co nt d) a. the enterprise has entered into a binding sale agreement for substantially all of the assets attributable to the discontinuing operation; or b. the enterprise's board of directors or similar governing body has both: i. approved a detailed, formal plan for the discontinuance and ii. made an announcement of the plan. No equivalent guidance.

21 IND-AS 36 IMPAIRMENT OF ASSETS Titre de la présentation

22 AS 28 VS. IND AS 36 Topic AS 28 Ind AS 36 Goodwill Goodwill and other intangibles are tested for impairment only when there is an indication that they may be impaired. However, intangible assets that are not available for use and intangible assets that are amortised over a period exceeding ten years are to be assessed for impairment at least at each financial year end even if there is no indication that the asset is impaired. Goodwill, intangible assets not available for use and indefinite life intangible assets are required to be tested for impairment at least on an annual basis or earlier if there is an indication of impairment. Goodwill is allocated to cash generating units that are expected to benefit from the synergies of business combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or group of units.

23 AS 28 VS. IND AS 36 Topic AS 28 Ind AS 36 Goodwill (Cont d) There is no concept of intangible assets with indefinite useful life. Goodwill to be tested for impairment using the bottom-up/top-down approach under which the goodwill is, in effect, tested for impairment by allocating its carrying amount to each cashgenerating unit or smallest group of cash-generating units to which a portion of that carrying amount can be allocated on a reasonable and consistent basis. It is allocated to the lowest level at which goodwill is internally monitored by management which should not be larger than an operating segment before aggregation of segments as defined in Ind AS 108. There is no bottom-up approach or top down approach for allocation of goodwill.

24 AS 28 VS. IND AS 36 Topic AS 28 Ind AS 36 Impairment loss for Goodwill- Recognition Requires that the impairment loss recognised for goodwill should be reversed in a subsequent period when it was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events that have occurred that reverses the effect of that event Prohibits the recognition of reversals of impairment loss for goodwill.

25 AS 28 VS. IND AS 36 Topic AS 28 Ind AS 36 Guidance No such guidance available. Gives additional guidance on the following aspects estimating the value in use of an asset; for managements to assess the reasonableness of the assumptions on which cash flows are based; and using present value techniques in measuring an asset s value in use.