Introduction to Accounting Standards, its objective, basis

of accounting, Accounting Standards issued by ICAI and

IPSAS Standards (Accrual basis and Cash Basis) with their
objective, Revisiting Accounting Framework,
International efforts and reforms made in India. TFC and
formation of GASAB, Operational Framework issued by
GASAB, Progress of GASAB so far, list of IGASs and IGFRSs
with their objectives.
Session Structure:
• 1. Introduction to Accounting Standards.
• 2. Objective of Accounting Standards.
• 3. TFC, 13th Finance Commission, 14th report of 2nd
Administrative Reforms Commission recommendations
and formation of GASAB
• 4. Road map and Operational Framework of GASAB.
• 5. Accounting treatment and measurement procedures
proposed by GASAB.
• 6. ICAI Accounting Standards and IPSAS
• 7. IGASs and IGFRS (Notified/Under Notification/
prepared/ Proposed by GASAB)
Introduction:
 Financial Statements specially Appropriation and Finance
Accounts of governments are prepared to summarize the end-
result of all the activities by the government during an accounting
period in monetary terms.
 Combined Finance Accounts compares the financial results of
different state governments and union government.
 The government accounting in India are on cash basis and
accounting follows the rule based.
 Though there is standardized classification structure (List of Major
and Minor heads) of government activities are available, but
reporting governments may adopt divergent policies in methods
and principles in their financial reporting.
 In order to make accounting methods and principles uniform and
comparable and financial reporting show true and fair view of all
the activities of the government, to the extent possible, Standards
are necessary to be evolved.
What is Accounting Standards?
i. Accounting Standards are the statements of code of practices of regulatory
accounting bodies (C&AG, CGA for government accounting) that are to be
observed in preparation and presentation of financial statements.
ii. that Accounting Standards are rules according to which accounts have to be
drawn up.
iii. In layman terms, accounting standards are written documents issued by
experts, institutes or other regulatory bodies covering various aspects of
measurement, treatment, presentation and disclosure of accounting
transactions, whether it is based on single entry cash basis or double entry
accrual basis.
What are the objectives of Accounting Standards?
(i) The basic objective of Accounting Standards is to remove variations in the
treatment of several accounting aspects and to bring about standardization
in accounting and its presentation.
(ii) They intent to harmonize the diverse accounting policies followed in the
preparation and presentation of financial statements by different reporting
entities.
Accounting Standards issued by various authorities:
(A) Accounting Standards (Accrual basis) issued by the Institute of Chartered
Accountant of India (ICAI) are as follows:

Accounting Accounting Objectives of the Standards

Standards Standards on
(ASs) No.
AS 1 Disclosure of in preparation and presentation of the
Accounting Policies financial statements
AS2 Valuation of to formulate the method of computation of
Inventories cost of inventories / stock, determine the
value of closing stock / inventory at which
the inventory is to be shown in balance
sheet till it is not sold and recognized as
revenue
AS3 Cash Flow This statement exhibits the flow of incoming
Statements and outgoing cash.
AS4 Contingencies and The Accounting Standard deals with
Events occurring Contingencies and Events occuring after the
after the Balance balance sheet date
Sheet Date
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS5 Net Profit or Loss to prescribe the criteria for certain items in the
for the period, profit and loss account so that comparability of
Prior Period items the financial statement can be enhanced. Profit
and changes in and loss account being a period statement
Accounting covers the items of the income and expenditure
Policies. of the particular period. This also deals with
change in accounting policy, accounting
estimates and extraordinary items.
AS6 Depreciation It is a measure of wearing out, consumption or
Accounting other loss of value of a depreciable asset
arising from use, passage of time. Depreciation
is nothing but distribution of total cost of asset
over its useful life
AS7 Construction As the period of construction contract is long,
Contracts work of construction starts in one year and is
completed in another year or after 4-5 years or
so. There may be following two ways to
determine profit or loss: On year-to-year basis
based on percentage of completion or On
completion of the contract.
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS8 Accounting for This deals with accounting for research and development
Research and
Development
AS9 Revenue The standard explains as to when the revenue should be
Recognition recognized in profit and loss account and also states the
circumstances in which revenue recognition can be
postponed.
AS10 Accounting for It is an asset, which is:- Held with intention of being used for
Fixed Assets the purpose of producing or providing goods and services.

AS11 The effects of This accounting Standard applicable to accounting for

Changes in transaction in Foreign currencies in translating in the
Foreign Financial Statement Of foreign operation Integral as well as
Exchange non- integral and also accounting for For forward exchange.
Rates (Revised Effect of Changes in Foreign Exchange Rate, an enterprises
2003) should disclose following aspects:
•Amount Exchange Difference included in Net profit or Loss;
•Amount accumulated in foreign exchange translation
reserve;
•Reconciliation of opening and closing balance of Foreign
Exchange translation reserve;
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS12 Accounting Government Grants are assistance by the Govt. in the
for form of cash or kind to an enterprise in return for past
Government or future compliance with certain conditions.
grants
AS13 Accounting It is the assets held for earning income by way of
for dividend, interest and rentals, for capital appreciation
investments or for other benefits.

AS14 Accounting for It deals with accounting to be made in books of

Amalgamation Transferee company in case of amalgamation

AS15 Employees The scope of the accounting standard has

Benefit been enlarged, to include accounting for short-term
(Revised employee benefits and termination benefits
2005)
AS16 Borrowing It prescribe the treatment of borrowing cost
costs (interest + other cost) in accounting, whether the cost
of borrowing should be included in the cost of assets
or not
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS17 Segment Disclosure of information regarding multiple
Reporting products/services and their operations is called
segment reporting
AS!8 Related Party disclosure of related party transaction is essential for
Disclosures proper understanding of financial performance and
financial position of enterprise

AS19 Leases Lease is an arrangement by which the lesser gives the

right to use an asset for given period of time to the
lessee on rent. It involves two parties,
AS20 Earning Per The statement is applicable to the enterprise whose
share equity shares or potential equity shares are listed in
stock exchange.

AS21 Consolidated the consolidated balance sheet if prepared should be

Financial prepared in the manner prescribed by this statement.
Statements
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS22 Accounting This accounting standard prescribes the accounting
for taxes on treatment for taxes on income.
Income
AS23 Accounting It set out the principles and procedures for
for recognizing the investment in associates in the
Investments consolidated financial statements of the investor,
in Associates
in
Consolidated
financial
statements
AS24 Discontinuing The objective of this standard is to establish principles
operations for reporting information about discontinuing
operations.
AS25 Interim As per clause 41 of listing agreement the companies
Financial are required to publish the financial results on a
Reporting quarterly basis
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS26 Intangible An Intangible Asset is an Identifiable non-monetary
Assets Asset without physical substance held for use in the
production or supplying of goods or services for
rentals to others or for administrative purpose
AS27 Financial 'Joint control' is the contractually agreed sharing of
Reporting of control over economic activity.
Interests in
Joint
Ventures
AS28 Impairment As per AS-28 asset is said to be impaired when
of Assets carrying amount of asset is more than its recoverable
amount.
AS29 Provisions, Objective of this standard is to prescribe the
Contingent accounting for Provisions, Contingent Liabilities,
Liabilities and Contingent Assets, Provision for restructuring cost
Contingent
Assets
Accounting Accounting Objectives of the Standards
Standards Standards on
(ASs) No.
AS30 Financial Instruments : this Standard is to establish principles for recognizing
Recognition and and measuring Financial assets, financial liabilities
Measurement and and some contracts to buy or sell non-financial items
Limited Revisions to AS
2, AS 11 (revised
2003), AS 21, As 23,
AS 26, AS 27, AS 28,
and AS 29
AS31 Financial Instruments: This Standard is to establish principles for presenting
Presentation financial instruments as liabilities or equity and for
offsetting financial assets and financial liabilities.

AS32 Financial Instruments: The objective of this Standard is to require entities to

Disclosures, and provide disclosures in their financial statements that
Limited Revision to enable users to evaluate:
Accounting •the significance of financial instruments for the
Standards(AS) 19 , entity’s financial position and performance; and
leases •the nature and extent of risks arising from financial
instruments to which the entity is exposed during the
period and at the reporting date, and how the entity
manages those risks
(B) International Public Sector Accounting Standards (IPSAS) issued
by International Federation of Accountings (IFAC)[Effective from
01.01.2004]
•The International Federation of Accountants — International
Public Sector Accounting Standards Board (the IPSASB) develops
accounting standards for public sector entities referred to as
International Public Sector Accounting Standards (IPSASs).
• The IPSASB recognizes the significant benefits of achieving
consistent and comparable financial information across
jurisdictions and it believes that the IPSASs will play a key role in
enabling these benefits to be realized.
• The adoption of IPSASs by governments will improve both the
quality and comparability of financial information reported by
public sector entities around the world.
•IPSASs are being prepared for application by entities adopting the
accrual basis of accounting and for application by entities
adopting the cash basis of accounting.
(a) Accrual Basis

Accounting Accounting Objectives of the Standards

Standards Standards on
IPSAS No.
IPSAS 1 Presentation of The objective of this Standard is to prescribe the
Financial manner in which general purpose financial
Statements statements should be presented in order to
ensure comparability both with the entity’s own
financial statements of previous periods and with
the financial Statements of other entities.
IPSAS2 Cash Flow It sets out requirements for the presentation of
Statements the cash flow statement and related disclosures.

IPSAS3 Net Surplus or The objective of this Standard is to prescribe the

Deficit for the classification, disclosure and accounting treatment
period, of certain items in the financial statements so that
Fundamental all entities prepare and present these items on a
Errors and
consistent basis.
changes in
Accounting
Policies
Accounting Accounting Objectives of the Standards
Standards Standards on
IPSAS No.

IPSAS4 The effect of The principal issues in accounting for foreign

changes in currency transactions and foreign operations are
Foreign to decide which exchange rate to use and how to
Exchange recognize in the financial statements the financial
Rates effect of changes in exchange rates.
IPSAS 5 Borrowing This Standard generally requires the immediate
Costs expensing of borrowing costs.

IPSAS 6 Consolidated This Standard establishes requirements for the

Financial preparation and presentation of consolidated
Statements financial statements, and for accounting for
and controlled entities in the separate financial
Accounting for statements of the controlling entity.
Controlled
entities
Accounting Accounting Objectives of the Standards
Standards Standards on
IPSAS No.

IPSAS 7 Accounting for This Standard provides the basis for accounting
Investments in for ownership interests in associates.
Associates
IPSAS 8 Financial This Standard provides the basis for accounting
Reporting of for interests in joint ventures
Interests in
Joint Ventures
IPSAS 9 Revenue from The objective of this Standard is to prescribe the
Exchange accounting treatment of revenue arising from
Transactions exchange transactions and events.
IPSAS 10 Financial In a hyperinflationary economy, reporting of
Reporting in operating results and financial position in the local
Hyperinflationa currency without restatement is not useful.
ry Economics
Accounting Accounting Objectives of the Standards
Standards Standards on
IPSAS No.

IPSAS 11 Construction The objective of this Standard is to prescribe the

Contracts accounting treatment of costs and revenue
associated with construction contracts.
IPSAS 12 Inventories The objective of this Standard is to prescribe the
accounting treatment for inventories under the
historical cost system.
IPSAS 13 Leases The objective of this Standard is to prescribe, for
lessees and lessors, the appropriate accounting
policies and disclosures to apply in relation to
finance and operating leases.
IPSAS 14 Events after The objective of this Standard is to prescribe:
the Reporting (a) When an entity should adjust its financial
Date statements for events after the reporting date;
and
(b) The disclosures that an entity should give
about the date when the financial statements
were authorized for issue and about events after
the reporting date.
Accounting Accounting Objectives of the Standards
Standards Standards on
IPSAS No.
IPSAS 15 Financial he objective of this Standard is to enhance
Instruments: financial statement users’ understanding of the
Disclosure and significance of on-balance-sheet and off-balance-
Presentation sheet financial instruments to a government’s or
other public sector entity’s financial position,
performance and cash flows. In this Standard,
references to “balance sheet” in the context of
“on-balance- sheet” and “off-balance-sheet” have
the same meaning as “statement of financial
position.”
IPSAS 16 Investment The objective of this Standard is to prescribe the
Property accounting treatment for investment property and
related disclosure requirements
IPSAS 17 Property, Plant The principal issues in accounting for property,
and plant and equipment are the timing of recognition
Investment of the assets, the determination of their carrying
amounts and the depreciation charges to be
recognized in relation to them.
Accountin Accountin Objectives of the Standards
g g
Standards Standard
IPSAS No. s on
IPSAS 18 Segment The objective of this Standard is to establish principles
Reporting for reporting financial information by segments. The disclosure
of this information will:
(a) Help users of the financial statements to better understand
the entity’s past performance and to identify the resources
allocated to support the major activities of the entity; and
(b) Enhance the transparency of financial reporting and enable
the entity to better discharge its accountability obligations.
IPSAS 19 Provisions, The objective of this Standard is to define provisions, contingent
Contingent liabilities and contingent assets, identify the circumstances in
Liabilities which provisions should be recognized, how they should be
and measured and the disclosures that should be made about them.
Contingent
Assets
IPSAS 20 Related The objective of this Standard is to require the disclosure of the
Party existence of related party relationships where control exists and
Disclosures the disclosure of information about transactions between the
entity and its related parties in certain circumstances.
(b) Cash Basis IPSAS
Section Accounting Objectives of the Standards
Standards on
PART 1 REQUIREMENT The purpose of this Standard is to prescribe the
manner in which general purpose financial
statements should be presented under the cash
basis of accounting..

1.1 Scope of the An entity which prepares and presents financial

requirement statements under the cash basis of accounting, as
defined in this Standard, should apply the
requirements of Part 1 of this Standard in the
presentation of its general purpose annual financial
statements
1.2 Cash Basis The cash basis of accounting recognizes
transactions and events only when cash (including
cash equivalents) is received or paid by the entity.
Section Accounting Objectives of the Standards
Standards on

1.3 Presentation The specific disclosure requirements of International

and Disclosure Public Sector Accounting Standards need not be met
Requirement if the resulting information is not material.

1.4 General It consists standards on

Consideration •Reporting Period
•Timeliness
•Authorization Date
•Information about the entity
•Restrictions on cash balances and access to
borrowings
1.5 Correction of When an error arises in relation to a cash balance
errors reported in the financial statements, the amount of
the error that relates to prior periods should be
reported by adjusting the cash at the beginning of
the period.
Section Accounting Objectives of the Standards
Standards on
1.6 Consolidated consolidated financial statements which present financial
Financial information about the economic entity as a single entity
Statements without regard for the legal boundaries of the separate legal
entities.
1.7 Foreign Governments and government entities may have transactions
Currency in foreign currencies such as borrowing an amount of foreign
currency or purchasing goods and services where the
purchase price is designated as a foreign currency amount.
They may also have foreign operations and transfer cash to
and receive cash from those foreign operations. In order to
include foreign currency transactions and foreign operations
in financial statements the entity must express cash receipts,
payments and balances in reporting currency terms
1.8 Effective date Sections 1 to 7 of Part 1 of this International Public Sector
of Sections 1.1 Accounting Standard become effective for annual financial
to 1.7 of Part 1 statements covering periods beginning on or after 1 January
and 2004.
Transitional
Provisions
Section Accounting Objectives of the Standards
Standards on
1.9 Presentation An approved budget as defined by this Standard
of Budget reflects the anticipated revenues or receipts expected
Information to arise in the annual or multi-year budget period
in Financial based on current plans and the anticipated economic
Statements conditions during that budget period, and expenses or
expenditures approved by a legislative body, being the
legislature or other relevant authority.
1.10 Recipients of The entity should disclose separately on the face of
External the Statement of Cash Receipts and Payments, total
Assistance external assistance received in cash during the period.
PART 2 ENCOURAGE It sets out encouraged additional disclosures for
D reporting under the cash basis. It should be read
ADDITIONAL together with Part 1 of this Standard, which sets out
DISCLOSURE the requirements for reporting under the cash basis of
S accounting.
Section Accounting Objectives of the Standards
Standards on
2.1.2 Future Assets that are used to generate net cash inflows are
Economic often described as embodying “future economic
Benefits and benefits”.
Service
Potential
2.1.3 to Going When preparing the financial statements of an
2.1.5 Concern entity, those responsible for the preparation of
the financial statements are encouraged to
make an assessment of the entity’s ability to
continue as a going concern
2.1.6 to Extraordinar An entity is encouraged to separately disclose the
2.1.7 y items nature and amount of each extraordinary item. The
disclosure may be made on the face of the statement
of cash receipts and payments, or in other financial
statements or in the notes to the financial statements
Section Accounting Objectives of the Standards
Standards on
2.1.8 Distinct from Whether an event or transaction is clearly distinct
ordinary from the ordinary activities of the entity is determined
activities by the nature of the event or transaction in relation to
the activities ordinarily carried on by the entity rather
than by the frequency with which such events are
expected to occur.
2.1.9 Not Expected The event or transaction will be of a type that
to Recur in would not reasonably be expected to recur in
the the foreseeable future, taking into account the
Foreseeable environment in which the entity operates
Future
2.1.10 Outside the A transaction or event is presumed to be outside the
Control or control or influence of an entity if the decisions or
Influence of determinations of the entity do not normally influence
the Entity the occurrence of that transaction or event.
Section Accounting Objectives of the Standards
Standards on
2.1.11 Identifying Whether or not an item is extraordinary will be
to Extraordinar considered in the context of the entity’s operating
2.1.14 y Items environment and the level of government within which
it operates.
2.1.15 Administered An entity is encouraged to disclose in the notes to the
to Transactions financial statements, the amount and nature of cash
2.1.17 flows and cash balances resulting from transactions
administered by the entity as an agent on behalf of
others where those amounts are outside the control of
the entity.
2.1.18 Revenue Public sector entities may control cash or administer
to Collection cash receipts or payments on behalf of the
2.1.20 government or other governments or government
entities.
2.1.21 “Pass- Cash flows arising as a consequence of transactions as
through” administrative arrangements where government entity
Cash Flows undertakes as an agent of another party are
sometimes termed “pass-through” cash flows.
Section Accounting Objectives of the Standards
Standards
on
2.1.22 Transfer amounts appropriated to a government entity (a department,
Payments agency or similar) may include amounts to be transferred to third
parties in respect of, for example, unemployment benefits, age
or invalid pensions, family allowances and other social security
and community benefit payments. Where this occurs, the entity
will recognize the cash appropriated for transfer during the
reporting period as a cash receipt, the amounts transferred
during that reporting period as a cash payment and any amounts
held at the end of the reporting period for transfer in the future
as part of closing balance of cash.
2.1.23 to Disclosure of An entity is encouraged to disclose, either on the face of the
2.1.30 Major Classes statement of cash receipts and payments or other financial
of Cash Flows statements or in the notes to those statements: (a) an analysis
of total cash payments and payments by third parties using a
classification based on either the nature of the payments or their
function within the entity, as appropriate; and (b) proceeds from
borrowings. In addition, the amount of borrowings may be
further classified into type and source
2.1.31 to Related Party An entity is encouraged to disclose in the notes to the financial
2.1.32 Disclosures statements information required by IPSAS 20 Related Party
Disclosures
Section Accounting Objectives of the Standards
Standards
on
2.1.33 to Disclosure An entity is encouraged to disclose in the notes to the financial
2.1.35 of Assets, statements: (a) information about the assets and liabilities of the
Liabilities entity; and (b) if the entity does not make publicly available its
approved budget, a comparison with budgets

2.1.36 Comparison Public sector entities are typically subject to budgetary limits in the
2.1.40 with form of appropriations or other budgetary authority which may be
Budgets given effect through authorizing legislation
2.1.41 to Consolidate An entity is encouraged to disclose in the notes to the financial
2.1.43 d Financial statements:
Statements (a) the proportion of ownership interest in controlled entities and,
where that interest is in the form of shares, the proportion of voting
power held (only where this is different from the proportionate
ownership interest); (b) where applicable:
(i) the name of any controlled entity in which the controlling entity
holds an ownership interest and/or voting rights of 50% or less,
together with an explanation of how control exists; and
(ii) the name of any entity in which an ownership interest of more than
50% is held but which is not a controlled entity, together with an
explanation of why control does not exist; and
(c) in the controlling entity’s separate financial statements, a
description of the method used to account for controlled entities.
Section Accountin Objectives of the Standards
g
Standards
on
2.1.44 Acquisitions An entity is encouraged to disclose and present separately
to and the aggregate cash flows arising from acquisitions and
2.1.48 Disposals of from disposals of controlled entities or other operating
Controlled
units.
Entities and
Other
Operating
Units
2.1.49 Joint An entity is encouraged to make disclosures about joint
to Ventures ventures which are necessary for a fair presentation of the
2.1.50 cash receipts and payments of the entity during the period
and the balances of cash as at reporting date
2.1.51t Financial In a hyperinflationary economy, the presentation of the
o 2.1.52 Reporting financial statements in the local currency without
in restatement is not useful.
Hyperinfla
tionary
Economies
Section Accounting Objectives of the Standards
Standards on

2.1.53 to The An entity that reports in the currency of a hyperinflationary economy is

2.1.58 Restatement encouraged to:
of Financial (a) restate its statement of cash receipts and payments and other
Statements financial statements in terms of the measuring unit current at the
reporting date;
(b) restate the comparative information for the previous period, and
any information in respect of earlier periods in terms of the measuring
unit current at the reporting date; and
(c) use a general price index that reflects changes in general
purchasing power. It is preferable that all entities that report in the
currency of the same economy use the same index
2.1.59 Comparative If comparisons with previous periods are to be meaningful,
Information comparative information for the previous reporting period will be
restated by applying a general price index so that the comparative
financial statements are presented in terms of the measurement unit
current at the end of the reporting period.
2.1.60 to Consolidated If the statement of cash receipts and payments and other financial
2.1.61 Financial statements are to be prepared on a consistent basis, the financial
Statements statements of any such controlled entity will be restated by applying a
general price index of the country in whose currency it reports before
they are included in the consolidated financial statements issued by its
controlling entity.
Section Accounting Objectives of the Standards
Standards on

2.1.62 to Selection The restatement of financial statements in accordance with the

2.1.63 and Use of approach encouraged by this Standard requires the use of a
the General general price index that reflects changes in general purchasing
Price Index power. It is preferable that all entities that report in the currency
of the same economy use the same index.
2.1.64 to Assistance Where practicable, an entity is encouraged to apply to assistance
2.1.65 Received received from non-governmental organizations (NGOs), the
From Non- required disclosures identified in paragraphs 1.10.1 to 1.10.27 of
Government Part 1 of this Standard and the encouraged disclosures identified
al in paragraphs 2.1.66 to 2.1.93.
Organization
s (NGOs)
2.1.66 to Recipients An entity is encouraged to disclose by significant class in notes to
2.1.93 of External the financial statements:
Assistance (a) the purposes for which external assistance was received during
the reporting period, showing separately amounts provided by way
of loans and grants; and
(b) the purposes for which external assistance payments were
made during the reporting period
Section Accounting Objectives of the Standards
Standards on

2.2 Governments and Other Public Sector Entities Intending to

Migrate to the Accrual Basis of Accounting
2.2.1 to Presentatio An entity which intends to migrate to the accrual basis of
2.2.2 n of the accounting is encouraged to present a statement of cash receipts
Statement and payments in the same format as that required by International
of Cash Public Sector Accounting Standard IPSAS 2 Cash Flow Statements.
Receipts
and
Payments
2.2.3 to Scope of When an entity adopts the accrual basis of accounting in
2.2.6 Consolidate accordance with the accrual IPSASs, it will not consolidate entities
d in which control is intended to be temporary because the
Statements controlled entity is acquired and held exclusively with a view to its
– Exclusions subsequent disposal in the near future.
from the Temporary control may occur where, for example, a national
Economic government intends to transfer its interest in a controlled entity to
Entity a local government.
REVISITING ACCOUNTING FRAMEWORK:
International efforts on Standard setting:
(1) In 1980’s INTOSAI emphasized standard setting for governments and in early
1990’s INTOSAI’s Accounting Standards Committee issued “Accounting
Standards Framework”.
(2) Similarly several national governments set up accounting standard boards/
committees
(3) IFAC- Public Sector Committee takes lead in issuing IPSAS (Cash based and
Accrual basis)
(4) IMF issued Government Financial Standards (GFS) laying down statistical
reporting standards for governments
(5) In USA, FASAB (Federal Accounting Standard Advisory Board) framed SFFAS
(Statement of Federal Financial Accounting Standards), GASAB(Governmental
Accounting Standard Board) (State & Local as well as agencies)
(6) In Canada, CICA’s (Canadian Institute of Chartered Accountant) & FSAB sets
standards for government.
(7) In Australia and New Zealand, AASB( Australian Accounting Standard Boards)
framed FRS.( Financial Reporting Standards)
(8) In India:
(i) Report of Admn. Reform commission on Accounts and Audit (1968).
(ii)Multi-tier Classification System introduced ([Link] Committee)
(iii) Management Accounting at the Union Government ( 1976 Budget speech of
the Finance Minister)
(iv) Departmentalization scheme of Union Government introduced in 1976.
(v) Financial Advisory Unit (FA System) introduced in 1980.
(vi) Classification system rationalized ([Link] Committee) in 1987
(vii) EAS Sarma Committee report on FRBM in 2000
(viii) Ahuwalia Committee, 2004 (RBI) on
Medium term fiscal policy ( 3 year rolling target – receipts, payments, borrowing
etc)
Fiscal Policy Strategy Statement (Taxation, Borrowings, Pricing, Guarantees,
Subsidy etc.)
Macro economic framework statement (GDF, Fiscal balance, BOP etc)
(ix) Lahiri Committee (2004) introduced Multidimensional classification) on
functional and economic classification
(x) Twelfth Finance Commission (TFC) recommends Accrual Accounting.
(xi) New GFR (General Financial Rules) was introduced in 2005.
The Twelfth Finance Commission TFC (2004) – Transition to Accrual Based
Accounting and formation of GASAB:

1. The Twelfth Finance Commission (TFC) recommended Accrual Accounting for

the Union and the State Governments. The Central Government has accepted
the recommendation in Principle. At the same time, TFC recognized that
transition to accrual based accounting is a time consuming process and
suggested changeover only in medium term.
2. In the Interim period, TFC suggested to add some additional information to
the present system of accounting to enable more informed decision making.
TFC has suggested standardization of accounting classification upto object
head level for all States to improve fiscal management. Additional eight
statements relating to subsidies, expenditure on salaries, expenditure on
pensions, committed liabilities, maintenance expenditure, segregation of salary
and non-salary portions and liabilities and repayment schedule on outstanding
debts. The TFC has also suggested that definition of revenue and fiscal deficits
be standardized.
3. Accepting the recommendations in Principle, the GASAB in the office of the
C&AG (2002) was set up to recommend an operational framework and detailed
roadmap for its implementation. Apart from the Central Government, so far 23
State Governments have accepted the idea of accrual accounting in principle.
The Twelfth Finance Commission TFC (2004) – Transition to Accrual Based
Accounting and formation of GASAB: (cont…)

4. There are two fold mandate of GASAB:

(i) To establish and improve standards of governmental accounting
and financial reporting and formulate and propose standards that
improve the usefulness of financial reports based on the needs of
the users.
(ii) Since the principles of accrual accounting being followed in
commercial entities cannot be transposed in their entirely in
Government accounting, GASAB was entrusted with preparation
of a Roadmap for transition to Accrual Accounting System and
Operational Framework of such a system that will prevail in
Government.
The Twelfth Finance Commission TFC (2004) – Transition to Accrual Based
Accounting and formation of GASAB: (cont…)

5. The Operational Framework developed / to be improved by GASAB

would detailed out the broad accounting heads and treatment of
transactions relating to:
Revenues and Expenditure Accounting
Fixed Assets Accounting
Long term Liability Accounting.
Accounting for current Assets and Liabilities
Accounting for period costs – Interest and Depreciation.
Non-financial and Contingent Liabilities.
6. The design of framework suggested by GASAB indicates broad
deviations from the conventional basis of accrual accounting due
specific requirements emerging from the nature of transitions of the
Government. The framework for transition spread over across five
stages depending upon the recognition on accrual basis given to –
expenses, revenue, assets and liabilities at different point of time.
A broad framework for transition to the accrual accounting is as
under:
Stages Expenses Revenues Assets Liabilities Contingent
Liabilities
Current Stage Exp- Receipts Financial Stock of Public Debt Guarantees
Current and Assets and Borrowings on
Capital Public Account

Stage I Current Receipts Financial Stock of Public debt Guarantees

Expense on Assets and Borrowing on
accrual Public Account +
basis and Payables
Capital
Expenditure
on cash
basis
Stages Expenses Revenues Assets Liabilities Continge
nt
Liabilitie
s
Stage II Current Non Tax Financial Stock of Public Debt Guarantee
Expenses on Revenues Assets and Borrowing on s
Accrual on Public Account
+
basis and Accrual +
Receivable Payables
Capital Basis s
Expenditur +
+ +
e on Cash All other Liabilities
Receivables Military
Basis ( (Except Superannuation
Excluding + Assets benefits. Compensated
Expenditur Tax leaves, provisions and
Revenue social security)
e on
Military on Cash
Assets) Basis

Stage III All expenses ---do--- All Assets All liabilities (except All
on accrual (Excluding super- annuation explicit
basis infrastructure, benefits, continge
+ land, heritage,
intangible assets) compensated leaves, nt
Depreciatio provisions and social liabilities
n security)
Stages Expenses Revenues Assets Liabilities Continge
nt
Liabilitie
s
Stage IV All expenses Non Tax All Assets All Assets All
on accrual Revenues on including including explicit
basis Accrual infrastructur infrastructure continge
+ Basis e and land and land nt
Depreciation + (excluding (excluding liabilities
+ Receivables heritage and heritage and
+ intangible) intangible)
Provisions
Tax Revenue
on Cash Basis
Stage V All All Revenues All Assets All Liabilities All
Expenses on accrual explicit
basis continge
nt
liabilities
7. Transition through these stages is likely to happen at varying
pace in different departments of government entities. GASAB
suggests that Stage I depicted in Table above should be the
starting point for introduction of accrual basis of accounting in
Governments. Accounting reforms should incrementally graduate
to Stage V, which represents full accrual accounting. It is, however,
noted that there could be certain entities within the Government,
e.g. the Railways, which may like to straightaway adopt full
accrual due to their preparedness and nature of activities
(i) Stage-I introduces accrual based recognition principle for
current expenses. Capital expenditures, as well as all revenues,
will continue to be accounted for on cash basis as at present.
Recognition of current expenses on accrual basis would lead to
recognition of payables, which will be shown as a liability.
(ii) Stage-II introduces accrual recognition of non-tax revenues. Tax
revenues will continue to be recognized on cash basis. Recognition of
non-tax revenues on accrual basis would lead to recognition of
receivables, which will be included in assets. Military assets will also be
recognized on accrual basis at this stage and included in assets shown in
the Statement of Financial Position. The remaining capital expenditure
will continue to be shown on cash basis. Another change would be
inclusion of all other liabilities except those on account of
superannuation benefits, compensated leaves, provisions and social
security
(iii) Stage-III requires recognition of all expenses on accrual basis
including recognition of depreciation. No provisions will be recognized
at this stage. Assets recognized at this stage on accrual basis would
include all financial and physical assets [with the exception of
infrastructure, land, heritage, and intangibles] and inventories. Tax
Revenue continues to be recognized on cash basis. There is no change in
terms of liability over Stage-II. Disclosure of all explicit contingent
liability is made.
(iv) Stage IV requires inclusion of provisions as expense and extension of
physical assets to cover infrastructure and land on accrual basis. Other
elements are same as that in the previous stage.
(v) Stage V is introduction of full accrual accounting for all the four
elements – expense, revenues, assets and liabilities. All expenses, all
revenues, all assets and all liabilities are recognized on accrual principles
and presented.
(8) In the Road Map, the proposed transition was envisaged in three
stages namely
(i) Value addition within the existing system by additional statements –
short term activity;
(ii) Value addition in the existing system with minor modifications to
enable greater disclosures such as arrears in revenue, committed
liabilities, etc. This is a medium term activity; and
(iii) Achieving the desired accounting system in the long-term based on
accrual system.
Note: Other modalities of Road Map have already been discussed in
Session III.
(9) As the Operational Framework provides the overall architecture of the
accounting model, these guidelines also aim at laying down the principles for
recognition and measurement for General Purpose Financial Reporting (GPFR).
(i) Objectives of General Purpose Financial Reporting:
Provide financial information about the reporting entity which would be useful in
making decisions about providing resources to the entity and in assessing
whether the government has made efficient and effective use of the resources.
Make financial reporting more transparent.
Improve understandability of financial statement by users.
Make financial statements more relevant.
Improve performance reporting in keeping with Results Framework Document
(RFD)
(ii) Components of GPFR:
GPFS + MDA = GPFR
GPFS : General Purpose Financial Statements
(a) The Conceptual Framework of International Accounting Standards (IPSAS)
• On General Purpose Financial Statements (GPFS) provides guidance for the
structure and minimum requirement for the contents of financial statements
prepared under accrual basis of accounting.
(i) The complete set of financial statements, keeping in view the requirement as
prescribed by the Government of India, may include the following statements:

GPFS

Statement Statement Statement Cash Appro- Accoun

of of of Flow priation ting
Financial Financial changes in Stateme Account Policies
Position Performan Net Assets nts s and
ce Notes
to the
Financi
al
Statem
ents

MDA : Management and Discussion Analysis

• A management report commenting on financial statements highlighting key
performance indicators
• To be signed by the Chief Accounting Authority as prescribed in GFR 64
(ii) For a complete set of General Purpose Financial Reporting (GPFR),
Management Discussion and Analysis report is essential.
(iii) Statement of Financial Position: The Statement of Financial Position
exhibits the balance of assets and liabilities as on a particular date. The assets
and liabilities may be further classified into current and non current categories.
Statement of Financial Position must include the following:
• Assets – This should include all physical and financial assets, cash and cash
equivalents, investment, inventories, receivables from exchange and non
exchange transactions, capital work in progress.
• Liabilities – This should include all debts and borrowings of the government,
payables, and benefits payables to employees.
• The progressive total of capital expenditure available in Finance Accounts
should reconcile with lump sum figure in the Statement of Financial Position
after making adjustment for valuation of historical assets.
(iv) Statement of Financial Performance: The Statement of
Financial Performance exhibits the revenue and expenses for an
accounting period and the excess/deficit of revenue over
expenses. The Statement of Financial Performance must include
the following:
•Revenue from exchange transactions
•Revenue from non exchange transactions
•Expenditure by function and nature.
•Surplus/Deficit
•Appropriation to earmarked funds
•Cost of borrowings
(v) Statement of Changes in Net Assets: The Statement of Changes
in Net Assets represents the changes between two reporting
dates reflecting the increase or decrease in its assets during the
period.
(vi) Cash Flow Statements
The Cash Flow Statement should provide cash flows during the period
classifying them into operating, investing and financing activities.
1. Cash flows from operating activities are primarily derived from the
principal cash-generating activities. This includes cash receipts from
taxes, from non-tax revenues, cash payments to suppliers/contractors,
grants in aid received or given.
2. Cash flows from investing activities are derived from acquisition and
disposal of long term assets and other investments not included in cash
equivalents. This includes cash payments to acquire or construct
property, cash advances and loans made, etc.
3. Cash flow from financing activities represents the changes in the size
and composition of the contributed capital and borrowings.
(vii) Appropriation Accounts
As part of GPFS, Appropriation Accounts would continue to reflect
1. Comparison of budget with actual
2. Original with final budget
3. Detailed reason for variations of actual with final budget
(viii) Accounting Policies and notes to the Financial Statements:
1. Accounting policies, rules and practices applied by an entity in
preparing and presenting financial statements be stated
2. Use of reasonable estimates and valuation methods for assets
and liabilities be stated
3. Stages and period of transition be stated
(b) Various stages of Operational Framework highlight maintenance
and recognition of Assets and Liabilities, recognition principles for
Current Expenses and Receipts new head 'Payables', Revenue
receipts and new head 'Receivables'.
(ii) Provision for depreciation:
1. Provision of depreciation should be made by allocating the value of assets
category wise.
2. Capital assets may be depreciated over their estimated useful lives unless they
are either inexhaustible or infrastructure assets.
3. The provision should be estimated on a realistic basis and only revised where
justified in the light of further experience.
4. The provision of depreciation should be made each year and put away in a
sinking fund.
5. As is the accepted principle, land is not depreciated.
(iii) Liabilities:
[Link] first step towards accrual based accounting system is identification and
categorization of liabilities into distinct groups eg. short term, long term and
contingent liabilities.
2. Guarantees should be disclosed in accordance with Indian Government
Accounting Standard (IGAS 1) on 'Guarantees given by Governments: a
disclosure requirement' notified by Government of India in December 2010.
3. Accounting and classification of Grants-in-Aid should be disclosed in
accordance with Indian Government Accounting Standard (IGAS 2) notified by
Government in May 2011
4. Liabilities of the Government including Stock of Public
Debt and Borrowings on Public Account and Liabilities
on account of superannuation benefits,
compensated leave, provisions and social security are to
be provided for on accrual basis.
5. Recognition of expenses relating to superannuation
benefits, compensated leaves, provisions and social
security may be taken after actuarial valuation.
6. Contingent liabilities other than guarantees, Claims
made by third parties against the Government should
also be disclosed.
(iv) Recognition of all expenses and payables:
Recognition of all expenses on accrual basis would lead to
recognition of payables, which will be shown as a
liability.
(c) The following table shows the accounting treatment and
measurement to be followed in case of common expenses.
Item of Realization Measure Recommended basis of
Expenditure Criteria ment Accounting (Accrual)

Salaries, Wages, Obligation Agreed Full cost should be charged to the

Dearness Allowance, established in amount accounts of the relevant period e.g.'
Traveling Allowance, the period of within the period in which the
office expenses, etc utilization of employees work. Material amounts
service earned but unpaid at the end of the
period should be accrued and placed
under the head payables
Interest Obligation Multiple of Liability to be recognized periodically on
established at loan value, the due date for payment. Expense
the time of period, and recognition to be in the period for
entering into rate of which it is charged under the head
the loan interest payable, regardless of when the
agreement. payment is made.
Item of Realization Measure Recommended basis of
Expenditure Criteria ment Accounting (Accrual)

Contribution to PF Obligation Agreed To be accounted on accrual basis.

and defined established amount
contribution to when an
Superanuation employee
Funds enters service
Gratuity and Obligation To be To be accounted to the extent of
Superanuation established determined contribution made to recognized funds
liabilities when an on the – accrual basis
employee basis of
enters service actuarial
valuation
Leave encashment Obligation To be To be accounted when it is due- accrual
benefit established determined basis (except when leave encashment
when an based on is permitted within the reporting
employee service period)
enters service rules
The following table shows the accounting treatment and measurement to be
followed in case of common expenses.

Item of Realization Measureme Recommended basis of Accounting

Expendit Criteria nt (Accrual)
ure

Rents Right to charge rent Agreed To be accounted for in the accounting

established at the amount period to which it is realizable – Accrual
time of entering into basis. If rent becomes overdue, income
agreement, should be recognized and a provision
realizable on due should be made.
date for payment of
rent.
Hire Right established at Agreed To be accrued and accounted for in the
charges the time of entering amount accounting period to which it relates –
of the contract accrual basis
machiner
y
Interest Realizable on the Function of Interest income to be accounted on
due dates for the loan value, accrual basis on the due dates. If interest
interest payment period and becomes overdue, income should be
rate of recognized & provided for.
interest
Note: revenue from taxes, Stamps and registration, at this satge , is recommended on
cash basis for conservative approach so as not to inflate revenue.
(e) The Way Forward:
(i) 1st Phase: (2011-12 to 2012-13)
• Formation of an apex body at Ministry of Finance level with representation from key
stakeholders at Union and State level for coordination, monitoring, decision making and
overseeing implementation issues
• Formation of task based groups in each entity to initiate the transition process in a time
bound manner
• Revision of Chart of Accounts to integrate accrual accounting needs
• Development of an IT enabled Integrated Financial Management System
• Centrally Sponsored Scheme for Treasury Modernization issued by MoF mention
developing of an Accounts Module and budget module. The benefits of these modules
can be greatly enhanced to include revision in account code classification/ chart of
accounts, building into it features of asset management, liabilities and other key
features of accrual accounting.
• Capacity building in terms of human resources
• Identification and consolidation of assets category wise at DDO level
• Valuation of all assets except historical assets
• Valuation of asset with historical cost after determination of a cut off date to ensure no
backlog accumulates
• Identification of liability and their valuation
(ii) 2nd Phase (2013-14 to 2014-15)
Valuation of historical assets
Provision of depreciation
Recognition of all expenses and payables
Recognition of revenues and receivables
(iii) 3rd Phase- Preparation of Statements of General Purpose
Financial Reporting (GPFS) including the following (2015
onwards)
Statement of Financial Position
Statement of Financial Performance
Statement of Changes in assets/liabilities
Cash flow Statements
Appropriation Accounts
Accounting policies and Notes to the Financial Statements
Management and Discussion Analysis
(iv) Indian Government Accounting Standards (IGASs) and Indian Government Financial
Reporting Standard (IGFRS) so far notified/under consideration of GOI/approved/proposed

by GASAB :

Standar Standard on: Notified/pre Objective of the standards

ds pared/draft
stage
IGAS 1 “Guarantees given by Notified on The objective of this standard is to set
Governments: 20th out disclosure norms in respect of
Disclosure December Guarantees given by the Union, the
Requirements” relating 2010 State Governments and Union Territory
to the form of accounts Governments (with legislature) in their
of the Union, States respective Financial Statements to
and Union Territory ensure uniform and complete
Governments (with disclosure of such Guarantees.
legislatures)
IGAS 2 Accounting and Prepared & To prescribe the principles for
classification of Grants- notified by accounting and classification of
in -Aid GOI Grants-in-aid in the Financial
Statements of the Government both as
a grantor as well as grantee. And their
appropriate disclosure.
Standar Standard on: Notified/prepar Objective of the standards
ds ed/draft stage

IGAS 3 Cash Flow Under To provide information about the historical

Statements consideration of changes in cash and cash equivalents of
Government of the Government by means of a cash flow
India for statement, which classifies cash flows
notification during the period into operating, investing
and financing activities.
IGAS 4 General Under •To lay down the principles to be followed
Purpose consideration of in presentation of general purpose
Financial Government of financial reports of Governments and to
Statements of India for prescribe the minimum requirements
Governments notification relating to structure and contents of
financial statements of government
prepared under cash basis of accounting.
•General Purpose Financial Statements
(GPFS) essentially consists of Finance
Accounts and Appropriation Accounts. The
Financial Statements referred to in this
standard are the General Purpose
Financial Reports (GPFR).
Standar Standard on: Notified/prepar Objective of the standards
ds ed/draft stage

IGAS 5 Loans and Under To lay down the norms for Recognition,
Advances Made consideration of Measurement, Valuation and Reporting in
by Government of respect of Loans and Advances made by
Governments India for the Union and the State Governments in
notification their respective Financial Statements to
ensure complete, accurate, realistic and
uniform accounting practices, and to
ensure adequate disclosure on Loans and
Advances made by the Governments
consistent with best international
practices.
IGAS 6 Under preparation by GASAB
IGAS 7 Foreign Under The objective of this standard is to
Currency consideration of provide accounting and disclosure
transactions Government of requirements of foreign currency
and Loss or India for transactions and financial effects of
Gain by notification exchange rate variations in terms of loss
Exchange Rate or gain in the financial statements. It also
Variation deals with the requirements of disclosure
of foreign currency external debts and the
rate applied for disclosure
Standar Standard on: Notified/prepar Objective of the standards
ds ed/draft stage

IGAS 8 Contingent Proposed The objective of the proposed IGAS on the

Liabilities (other subject is to lay down the principles for
than disclosure requirements of Contingent
Guarantees) and Liabilities (other than guarantees) and
Contingent Continent Assets of both the Union and the
Assets: State Governments including Union
Disclosure Territories with Legislatures, in their
Requirements respective Financial Statements in order to
ensure uniform and appropriate disclosure of
such liabilities and assets.
IGAS 9 ‘Government Proposed The objective of the Standard is to lay down
Investment in the norms for Recognition, Measurement and
Equity’ Reporting in respect of Investments made by
the Union Government, the State
Governments and Governments of Union
Territories with Legislatures in their
respective
IGAS 10 Public Debt and Under consideration To lay down the principles for identification,
other Liabilities of Government of measurement and disclosure of public debt
of Governments: India for and other obligation of Union and the State
Disclosure notification Governments including Union Territories with
Requirements legislatures in their respective financial
statements.
Indian Government Financial Reporting Standards (IGFRS)

Standar Standard Notified/p Objective of the standards

ds on: repared/d
raft stage
IGFRS Inventories Proposed To prescribe the accounting treatment for inventories.
This standard aims at using accrual principles of
accounting for Inventories – both at the stage of
charging as expenditure and depicting the closing
stocks in the financial statements at the end of
reporting period.
IGFRS 2 Property, Prepared To prescribe the accounting treatment for property,
Plant and plant and equipment (PPE) so that users of financial
Equipment statements can obtain information regarding an
entity’s investment in its property, plant and
equipment and any changes in such investment.
IGFRS Revenue Proposed This standard lays down the principles to be followed
from for recognition of revenue by Governments under
Exchange accrual basis accounting. This standard excludes from
Transaction its scope revenue recognition principles relating to
s specific items (eg: Income from sale of Plant,
Property and equipment) which are covered in other
standards.
Importance of Accounting Standards

• The users of the financial statements need an assurance that the

entities preparing their financial statements follow the accepted
standards while presenting their financial information in the financial
statements.

62
LIST OF ACCOUNTING STANDARDS ISSUED
SO FAR
• Institute of Chartered Accountants of India has so far issued 29
Accounting Standards on the advise of the accounting Standards
Board

63
LIST OF ACCOUNTING STANDARDS ISSUED
SO FAR
• AS 1-Disclosure of Accounting Policies
• AS 2-Valuation of Inventories
• AS 3-Cash flow Statements
• AS 4-Contingencies and Events Occurring After the
Balance Sheet Date
• AS 5 -Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies
• AS 6-Depreciation Accounting

64
LIST OF ACCOUNTING STANDARDS ISSUED
SO FAR
• AS 7-Accounting for Construction Contracts
• AS 8-Accounting for Research and Development
• AS 9-Revenue Recognition
• AS 10-Accounting for Fixed Assets
• AS 11-Accounting for the Effects of Changes in
Foreign Exchange Rates
• AS 12-Accounting for Government Grants

65
LIST OF ACCOUNTING STANDARDS ISSUED
SO FAR
• AS 13-Accounting for Investments
• AS 14-Accounting for Amalgamations
• AS 15-Accounting for Retirement Benefits in the
financial Statements of Employers
• AS 16-Borrowing Costs
• AS 17-Segment Reporting
• AS 18-Related Party Disclosures
• AS 19-Leases

66
LIST OF ACCOUNTING STANDARDS ISSUED
SO FAR
• AS 20-Earnings Per Share
• AS 21-Consolidated Financial Statements
• AS 22-Accounting for Taxes on Income
• AS 23-Accounting for Investments in Associates in Consolidated
Financial Statements
• AS 24-Discontinuing Operations
• AS 25-Interim Financial Reporting

67
LIST OF ACCOUNTING STANDARDS ISSUED
SO FAR
• AS 26-Intangible Assets
• AS 27-Financial Reporting of Interests in Joint Ventures
• AS 28-Impairment of Assets
• AS 29-Provisions, contingent Liabilities and Contingent Assets

68
 Accounting Standard (AS 1) –
Disclosure of Accounting Policies

69
AS 1 – Disclosure of Accounting Policies

• Fundamental Accounting Assumptions

• Accounting Policies

70
Fundamental Accounting Assumptions

• Going concern
• Consistency
• Accrual

71
Areas in which differing accounting Policies are
encountered
Methods of depreciation, depletion and amortization;
Treatment of expenditure during construction;

Conversion or translation of foreign currency items;

72
Areas in which differing accounting Policies are
encountered
Valuation of inventories;

Treatment of goodwill;

Valuation of investments;

Treatment of retirement benefits;

73
Areas in which differing accounting Policies are
encountered
Recognition of profit on long-term contracts;

Valuation of fixed assets;

Treatment of contingent liabilities.

74
Considerations in the selection of Accounting
Policies
Prudence
Substance over form
Materiality

75
Accounting Standard-1

• All significant accounting policies adopted in

preparation and presentation of financial
statements should be disclosed.

• he disclosure of significant accounting policies

as such should form part of the financial statement
and the significant accounting policies should
normally be disclosed in one place.

76
Accounting Standard-1

• If the fundamental accounting assumptions, viz., going

concern, consistency and accrual are followed in financial
statements, specific disclosure is not required. If a fundamental
accounting assumption is not followed, the fact should be disclosed.

77
 Accounting Standard (AS) 4 -
Contingencies and Events Occurring
After the Balance Sheet Date

78
Accounting Standard-4

• This standard deals with treatment in financial statements of:

Contingencies; and

Events occurring after the balance sheet date.

79
Accounting Standard-4

• Does not apply to:

• (a) Liabilities of life assurance and general
insurance enterprises arising from policies issued;
• (b) Obligations under retirement benefit plans; and
• © Commitments arising from long-term lease
contracts.
•

80
Definitions
 A contingency is a condition or  Events after the balance
situation, the ultimate outcome sheet date are those
of which, gain or loss, will be significant events, both
known or determined only on
the occurrence or non- favourable and
occurrence of one or more unfavourable, that occur
uncertain future events. between the balance sheet
date and the date on which
the financial statements are
approved by the Board of
Directors
 represent material changes
and commitments affecting
the financial position of the
enterprise
81
WHY
IND AS
2007
CONCEPT PAPER –
01/04/2011 ROADMAP OF
2010 IND AS
2010 MCA
SEBI- RM
CFS 01/04/2
012
2011 &
35 IND TASC
AS

2011
SCH VI
 2012
TAS -
2015 14
RM –IND
AS
2016 14/12/10
IND AS ICDS?
40
2015
IND AS
39 ROADMAP OF
16/19 IND AS
FEB
2016
SCH III
 IFRS /IAS
FRAMEWORK/CF
ADOPT/CONVERG
E

FINANCIAL STATEMENTS
Number
Elements

MEASUREMENT PRINCIPLE
NOTIFICATION

CF

BASIS OF
CONCLUSIONS

IGs/AGs

IEs

DISSENTING OPINIONs
 APPLICABILITY

YEAR CONDITION
2015-16 VOLUNTARY

2016-17 ALL COMPANIES HAVING NET WORTH ≤ ` 500 CR.

& H/S/J/A

2017-18 COMPANIES HAVING NET WORTH ≤ ` 250CR

&
ALL LISTED COMPANIES & H/S/J/A
 APPLICABILITY
YEAR CONDITION
2018-19 NBFCs HAVING NET WORTH ≤ ` 500CR
& H/S/JV/A
BANKS, INSURANCE AND ITS ARMS
2019-20 NBFCs HAVING NET WORTH ≤ ` 250CR
ALL LISTED NBFCs
& H/S/JV/A

LISTED OTHER THAN SME EXCHANGE

V PERMIT
BANKS RRBs & UCBs
NET WORTH 31-03-2014
31-03-2016
 APPLICABILITY

IAS/IFRS: 44 [28+16] IND AS: 40

IAS 26 – Reporting by Retirement Benefit Plans
IAS 39 – Financial Instruments – Recog & Measure
IFRS 115 – Revenue from contract with Customers
IFRS 116 – Leases

IFRIC: 16 IFRIC: 15
IFRIC 2 - Member’s Share in Co-operative Entities & Similar
Instruments

SIC: 8 SIC: 7
SIC 7 - Introduction of Euro

* NO IG, BCs & IE HAVE BEEN INCORPORATED

 Issues
NBFC is a parent company requiring consolidation and its H/S/JV/A
are under Ind AS from 2015-16?

A non-NBFC parent company having net worth more than INR 500
CR and its H/S/JV/A are NBFCs?

NBFCs having net worth < INR 250 or unlisted –status of V. IND AS-
X
Status of companies listed in SME exchange? Y

Are RRBs or UCBs permitted for IND AS voluntary implementation?

 Scope of NBFCs
Companies as defined under section 45(I) (f) of the RBI Act,
1934
Housing Finance Companies
Merchant Banking Companies
Micro Finance Companies
Mutual Benefit Companies, Venture capital Funds
Stock Broker/sub broker
Nidhi , Chit Fund, Securitisation & Reconstruction
Mortgage Guarantee
Pension fund, Asset Management & Core Investment
 Issues
Applicability – Standalone Vs CFS R4:3

Status of overseas S/JV/A?

Status of overseas parent?

Which Ind AS- 01/04/2016 or 31/03/2017?

Role of Appendix 1 to each IND AS?

 Issues
A company gets itself unlisted after being covered under IND AS?

Net worth as at March 31, 2014 or 2016 (Standalone Vs CFS)

Carve out Vs. Carve In

 Terminology

Balance Sheet Vs. Statement of Financial

position

Statement of P&L Vs. Statement of Comprehensive

Income

True & Fair Vs. Fair Presentation

Approved the FSs for issue Vs. Authorized the FSs for issue
 IND AS IMPROVES IFRS APPROACH……

IAS 20 Government grant for specified assets-

deduction
Non Monetary Government grant –nominal or fair
value

IAS 12 Acquired deferred tax benefits deducted from

goodwill if goodwill reduced to Zero- Recognize in P &
L

IAS 40 Option to measure Invest. Property at cost/FV

(through P & L)

IAS 103 Bargain purchase gain-Business Combination –

P&L/OCI
 EXCELLANCE
IN
FINANCIAL REPORTING
 REVIEW BOARDS IN EXISTENCE

1. PEER REVIEW BOARD [PRB]

2. FINANCIAL REPORTING REVIEW BOARD [FRRB]
3. QUALITY REVIEW BOARD[QRB]
4. QUALIFIED AUDIT REVIEW COMMITTEE [QARC] 2012

ABOVE ALL THE 4 BOARDS

NATIONAL FINANCIAL REPORTING AUTHORITY [2014]
 FRRB OBSERATIONS

1. AUDITORS’ REPORT 2/15

2. CARO 15/37
3. SCHEDULE VI/III 41
4. AS
158/211
AS 1 [Link] AS 1

RELEVANCE OF
ACCOUNTING
STANDARDS
FOR IND AS
 AS -1 – DISCLOSURE OF APs
Fundamental Accounting Assumptions
1. Going Concern
2. Consistency
3. Accrual

Selection of Accounting Policies

1. Prudence
2. Substance over form
3. Materiality
 IND AS -1 – PRESENATION OF FSs
Objective
Comparability
Structure & Contents
Information –financial position, performance and cash flows

Scope
GPFSs (Standalone and CFS)
Interim FSs (IAS 34)
Profit oriented entities
 IND AS -1 – PRESENATION OF FSs
IND AS V. IFRS
IFRS
IAS
IFRIC
SIC

Materiality defined
 IND AS -1 – PRESENATION OF FSs
OCI – Income or expenses not recognized in P&L –Per IND AS
with its tax effect of each item of OCI

1. Change in revaluation surplus (Ind AS 16 & 38)

2. Re-measurement of defined benefits plans (Ind AS 19)
3. Gains/losses from translation of a foreign operation (Ind AS
21)
4. Gains/losses from investment in equity instruments
designated at fair value through OCI (Ind AS 109)
 IND AS -1 – PRESENATION OF FSs
Complete set of financial statements
1. Balance Sheet {Statement of financial position}
2. Statement of Profit & Loss {Single statement}
3. Statement of changes in Equity
4. Statement of cash flows
5. Notes – Significant Accounting Policies, & other explanatory
information
6. Comparative information
7. Balance sheet at the beginning of the preceding period (Notes)-
Material
Retrospective Accounting Policies/Restatement of items
in FSs
Reclassification of items in FSs –nature, reason & amount
 IND AS -1 – PRESENATION OF FSs
True & Fair View {Fair Presentation}, compliance with Ind AS

An explicit and unreserved statement of compliance

Selection of Accounting Policies as per Ind AS 8
QC- relevant, reliable, comparable and understandable
Additional Disclosures

Inappropriate policy –disclosure in Notes etc?

Departure from the requirements of Ind AS –conflict with objective of

(F)
(Detailed disclosure required)
 IND AS -1 – PRESENATION OF FSs
Going Concern
Intention to liquidate
Cease trading
No realistic alternate for GC
Accrual
Exception – CF
Materiality & aggregation
Material class of similar items –separately
Dissimilar items of immaterial amount –aggregate
Unless required by law otherwise (1.32)
 IND AS -1 – PRESENATION OF FSs
Offsetting of assets/liabilities & income/expenses
Not permitted unless required or permitted by Ind AS

Frequency of reporting (annually)

Longer or shorter for one year-disclose
Reason
Not entirely comparable

Comparative for preceding year (addl. Information)

for narrative and descriptive information, if relevant
 IND AS -1 – PRESENATION OF FSs
Consistency in presentation and classification unless:
Significant Change in nature of operation
In compliance of Ind AS

Structure and Content

Required by Ind AS 1 & other Ind AS
Line items specified for BS/P&L
Classification in Current & Non Current
Not more than 12 M & more than 12M
DTA & DTL – non current
 IND AS -1 – PRESENATION OF FSs
Identification of FSs
Identify FSs and make distinction from other information
Name of the entity, standalone or CFS, period, currency,
R/off

Extraordinary items
Not permitted

Expenses to be classified as per nature not function wise

 IND AS -1 – PRESENATION OF FSs
Statement of changes in Equity
Total comprehensive income attributable to owners of the
parent and non controlling interest(Owners are holders of
instrument classified as equity.)

Effect of retrospective application/restatement

Transactions with owners showing separately contribution by

and distribution to owners
Analysis of OCI
 IND AS -1 – PRESENATION OF FSs
Notes in Systematic Manner
Basis of preparation of FSs with A/Policies
Rest disclosures as per Ind AS
Additional information relevant for understanding FSs

Judgments in the process of applying A/policies having most

significant effect

Sources of estimation uncertainty for most difficult, subjective and

complex judgments (no budget or forecast required)
 IND AS -1 – PRESENATION OF FSs
Capital management disclosure

Other disclosures

Domicile, legal form, country of incorporation, address of RO

etc
Nature of operations and principal activities
Name of the Parent and ultimate parent
If limited life entity, length of its life
 FOLLOWING POINTS NOT TO BE CONSIDERED AS CARVE OUTS

 Statement of Profit & Loss

 Different Terminology
 Periodicity
 Analysis / Classification of Expenses
 Materiality (unless required by law)
IND AS 8

CHANGE IN ACCOUNTING
POLICIES & ACCOUNTING
ESTIMATES & ERRORS
 IND AS -8
Objective & Scope
Criteria for selection and changing in Accounting polocies
Changes in Accounting Estimates
Correction of errors
Enhancement the relevance, reliability and comparability
Tax Effects to be dealt with as per Ind AS 12

A/policies are the specific principles, bases, conventions, rules and

practices applied by an entity in preparing and presenting the FSs.
 IND AS -8
Accounting Policies – transactions, conditions or events
To be selected and applied as per Ind AS

In the absence of Ind AS

Requirement of Ind AS dealing with similar and related
issues
Definitions, recognition and measurement as per Framework
Most recent announcement of IASB and in absence, other
Standard Setters that use similar CF
Other Accounting literature and accepted industry practices
Consistency
 IND AS -8
Change in Accounting Policies
Required by an Ind AS
Results in FSs providing reliable and more relevant
information

Revaluation of assets only in accordance with Ind As 16 and Ind

AS 38

Changes in AP
Per Ind AS transitional provisions else
Voluntary, retrospectively
Early application of Ind AS is not change in AP.
 IND AS -8
Change in Accounting Estimate
Change is applied prospectively
Disclose the nature and change in amount of estimate

Errors
Restating the comparative amount of the prior period or
Restating the opening balances of assets, liabilities and
equity
Disclose
Nature of error, each line items affected, EPS (both)
The amount of correction
Accounting Standards in India

• The ICAI, established Accounting Standards Board (ASB) in 1977, to

issue Accounting Standards (AS) in India
• Initially, AS were mandatory for members of the ICAI acting as auditors
• In the year 1999, the Companies Act 1956, was amended to make AS
mandatory to companies
• In 2006, Central Government notified 28 Accounting Standards, as
recommended by ICAI under Companies (Accounting Standards) Rules 2006
with recommendation of NACAS.

120
Need for convergence towards Global
Standards
• International Accounting Standards (IAS)/International Financial
Reporting Standards (IFRS) (collectively referred to as IFRS), issued by
International Accounting Standards Board (IASB) in 1973 are now
widely recognised as Global Accounting Standards.
• More than 130 countries and reporting jurisdictions currently require
or permit the use of or have a policy of convergence/adoption of
IFRS.

121
Convergence Process

• The Ministry of Corporate Affairs, Government of India, in

consultation with the ICAI, decided to converge and not to adopt
IFRSs issued by the IASB.
• The ICAI has formulated IFRS-converged standards, known as Indian
Accounting Standards (Ind AS), which have been notified by the MCA
under Companies (Indian Accounting Standards) Rules, 2015 vide
Notification dated February 16, 2015, after recommendation of the
National Advisory Committee on Accounting Standards (NACAS).

122
Roadmap for Implementation on Ind ASs

123
Roadmap for Implementation on Ind ASs
(Contd.)

Phase I
1st April 2015 or thereafter: Voluntary Basis for all companies
1st April 2016: Mandatory Basis
• Companies listed on Stock Exchange having net worth > Rs. 500
Crore
• Unlisted Companies having net worth > Rs. 500 Crore
• Parent, Subsidiary, Associate and J. V of Above

124
 Roadmap for Implementation on Ind ASs
(Contd.)
Phase II 1st April 2017 (Mandatory basis)
• All Listed Companies not covered in Phase I
• Unlisted Companies having net worth Rs. 500 Crore > Rs. 250 crore
• Parent, Subsidiary, Associate and J. V of Above
• Other companies will continue to follow existing AS
• Roadmap for banks, NBFCs and insurance companies still to be decided
• Banks, Insurance Companies, MBFC’s, RRB’s not yet covered in Phase I and
Phase II. Roadmap is yet to be notified.

125
 Salient Features of IFRS-converged Ind AS

• Principle-based Standards
• Applicable on separate as well as consolidated financial statements.
• Give more importance to concept of ‘substance over form’, i.e.,
economic reality of a transaction.
• Rely more on fair valuation approach, and measurements based on
time value of money.
• Require more disclosures of all the relevant information and
assumptions used.
• Require higher degree of judgment and estimates.

126
Understanding Ind AS from AS

• Ind AS are based more on substance over form

• Sale of Goods on Extended Credit Terms, i.e., goods sold on terms
extending more than normal credit period.
• Financing element inbuilt in price is segregated and considered as ‘interest’
income.
• Say, goods normally sold at price at Rs. 100 for 3 months credit
• If sold for Rs. 110 for 15 months credit: Rs. 10 considered as ‘interest’ income
• This has VAT and TDS implications

127
Substance over form (Contd.)

• Fixed assets or inventories purchased on deferred credit terms

having financing element:
• Financing element, viz., ‘interest’ to be segregated from the ‘purchase price’
• Implications: What would be the original cost of the fixed
asset/inventories for tax?

128
Substance over form (Contd.)

• Unbundling of multiple elements from the sale price where

required: Sale of Automobile on Extended Warranty
• An automobile dealer sells a car for extended warranty of 3 years instead of
normal 1 year
• Extended warranty element of 2 years required to be separated under Ind AS
from the selling price based on Fair Value of warranty.
• Revenue from warranty service recognised in the year when the service is
rendered, i.e., revenue recognition is deferred.

129
Substance over form (Contd.)

• Implications:
• Tax: Income from sale of car to be recognised when car sold
• VAT: To be levied on invoice price exclusive of value of extended warranty
• Service Tax: To be levied on value of extended warranty

130
Substance over form (Contd.)

• Redeemable preference shares carrying fixed rate of dividend

considered a liability under Ind AS
• Dividend paid/payable considered as ‘interest’
• Charged to statement of profit and loss and not to be considered as an
appropriation of profit as at present
• Implications:
• TDS on interest
• MAT implication as Book Profit

131
Substance over form (Contd.)

• Certain transfers in substance considered as finance lease under Ind

AS
• Accordingly, only receivable is recognised in the Balance Sheet by the
transferor
• Presently, the transferor recognises it as its fixed asset and charges
depreciation
• Implications:
• MAT implication as Book Profit
• Where lease more than 12 years, will be considered as sale for VAT purpose

132
 Time value of money as a measurement basis

• Measurement of interest at Effective Interest Rate rather than the

contracted rate to recognise interest income and expense
• Illustration:
• A company issues bond of Rs. 100 carrying interest rate at 10% to be
redeemed at Rs. 110 after five years.
• Presently , interest expense recognised at Rs. 10 per year and Rs. 10
premium paid at the time of redemption recognised in the year of
redemption (though some companies amortise this Rs. 10 over the five year
term on straight line basis)

133
Time value of money as a measurement basis

• Under Ind AS, interest rate is recomputed to recognise Rs. 10 premium

payable at the end of the term of the bond. Accordingly, interest is
recognised every year, at the effective rate of 11.43%
• Implications:
• TDS
• MAT on account of change in Book Profit

134
Greater use of Fair Value (FV) as
Measurement Basis
• Certain investments (e.g., held for trading in normal course of
business) required under Ind AS to be measured at FV and changes
in FV, gains and losses, recognised in profit or loss.
• Presently, only FV changes resulting in losses recognised in profit or
loss; gains ignored
• Implications:
• MAT implications on Book Profit

135
Fair Value as Measurement Basis (Contd.)

• Service Concession Arrangement, e.g., Build-Operate-Transfer

arrangement of a road
• Revenue is required to be recognised at FV of the construction services
rendered during construction period
• Even though actual receipts start when the road is put under operation, i.e.,
toll is collected
• Implications:
• Should the income be taxed during construction period?
• MAT implications on Book Profit

136
Other significant differences

• Component approach and concept of useful life of charging

depreciation
• Ind AS require depreciation to be charged on significant parts of a fixed asset
where useful lives of the parts and the remaining asset are different
• Presently, depreciation required to be charged on the complete asset at a single rate
• Ind AS also confer primacy to useful life concept for charging depreciation, rather than
statutory minimum depreciation concept hitherto followed
• Implications: MAT on Book Profit

137
 Other significant differences (Contd.)
• Effects of Changes in Foreign Exchange Rates
• Ind AS based on ‘functional currency’ concept, existing AS is not
• Where functional currency of an entity other than INR, impact on profit or loss different from
existing AS
• Consequential tax impact
• After transitioning to Ind AS, option of capitalising/deferring foreign
exchange differences under existing AS no longer available,
• Such differences would be recognised in profit or loss
• Implications: Consequential tax impact on Book Profit

138
Ind AS use ‘Other Comprehensive Income’
(OCI) concept
• Reason: Definition of Income
• Enhancement of an Asset or reduction of a Liability (other than transactions
with owners)
• Accordingly, any increase in asset, e.g., upward revaluation of asset, is an
‘income’ even though not realised
• Earlier, such increase transferred directly to Revaluation Reserve in Balance
Sheet
• Now, transferred to Reserve through OCI

139
OCI concept (Contd.)

• Statement of profit and loss is, therefore, divided into two sections:
• Profit or loss section: Containing items of revenue/income and expenses
which are hitherto normally included in the statement of profit and loss with
a few exceptions (e.g. actuarial gains & losses on measurement of defined
benefit obligations now not included)
• Other Comprehensive Income (OCI) section: containing, e.g.,
• Revaluation surplus
• Actuarial gains & losses
• Fair value changes in equity instruments opted to be measured through OCI

140
OCI concept (Contd.)

• OCI section contains generally unrealised gains and losses arising

from re-measurements of assets & liabilities
• On realisation, with few exceptions, gains & losses are recognised in
profit or loss section
• Exceptions:
• Sale of revalued assets
• Equity Instruments opted to be measured at Fair Value through OCI

141
OCI concept (Contd.)

• For MAT purposes ‘profit or loss’ as per that section may be

considered for the sake of simplicity as
• Since OCI mostly comprises unrealised gains & losses, may be
ignored
• profit or loss section also includes certain unrealised gains and losses on
operating items, e.g., fair value changes in held for trading investments;
should be tax neutral, i.e., if unrealised gains included for MAT then
unrealised losses also should be allowed as deduction

142
 Why IFRS has been converged?
• A single set of accounting standards would enable internationally to
standardize training and assure better quality on a global screen.
• It would also permit international capital to flow more freely, enabling
companies to develop consistent global practices on accounting problems.
• It would be beneficial to regulators too, as complexity associated with
understanding various reporting regimes would be reduced.

143
 Convergence with IFRS
• Convergence means to achieve harmony with IFRSs. In precise terms
convergence can be considered “to design and maintain national
accounting standards in a way that financial statements prepared in
accordance with national accounting standards complying all the
requirements of IFRS and draw unreserved statement of compliance with
IFRSs”.
• Convergence doesn’t mean that IFRS should be adopted word by word,
e.g., replacing the term ‘true & fair’ for ‘present fairly’, in IAS 1,
‘Presentation of Financial Statements’. Such changes do not lead to non-
convergence with IFRS.

144
Convergence with IFRS

• The IASB accepts in its ‘Statement of Best Practice: Working

Relationships between the IASB and other Accounting Standards-
Setters’ that “Adding disclosure requirements or removing optional
treatments” do not create non compliance with IFRSs.
• Additional disclosures or removing of optional treatment should
however be made clear so that users of the IFRS are aware of the
changes.

145
 Converged Indian Accounting Standards
• Government of India in consultation with NACAS and ICAI has decided not
to adopt but to Converge IFRS with the following changes-
• Additional disclosures
• More Options
• Different Terminologies

• Further India has reserved a right to frame that AS shall not overrule the
local laws and law will override the AS.

146
 IFRS Composition
• IAS : International Accounting Standards
issued before April 2001
• IFRS : International Financial reporting
Standards issued after April 2001
• SIC : Interpretations by Standing Interpretation
Committee on IAS.
• IFRIC : Interpretations by International Financial
Reporting Interpretation Committee on
IFRS.

147
 International
Financial
reporting
Standard (IFRS)

International
Financial International
Reporting IFRS Accounting
Interpretations Standard (IAS)
Committee (IFRIC)

Standing
Interpretations
Committee (SIC)

148
 Comparative Summary of Indian Accounting
Standards & IFRS
Existing Indian IFRS Ind AS
AS No. Converged IFRS
Standard No. No.
AS 1 Disclosure of IAS 1 Ind AS 1 Presentation of
Accounting Financial
Policies Statements
AS 2 Valuation of IAS 2 Ind AS 2 Inventories
Inventories
AS 3 Cash Flow IAS 7 Ind AS 7 Statements of Cash
Statements Flows
AS 4 Events Occurring IAS 10 Ind AS 10 Events after the
after the Balance Reporting Period
Sheet Date
149
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 5 Net Profit or Loss for IAS 8 Ind AS 8 Accounting Policies,
the Period, Prior Changes in
Period Items and Accounting
Changes in Estimates and
Accounting Policies Errors
AS 6 Depreciation - - -
Accounting
AS 7 Construction IAS 11 Ind AS Revenue
Contracts 115

150
 Comparative Summary of Indian
Accounting Standards & IFRS

IFRS Ind-AS
AS No. Indian Standard IFRS
No. No.
AS 9 Revenue IAS 18 Ind AS Revenue
Recognition 115
AS 10 Accounting for IAS 16 Ind AS Property, Plant and
Fixed Assets 16 Equipment
AS 11 The Effects of IAS 21 Ind AS The Effects of
Changes in Foreign 21 Changes in Foreign
Exchange Rates Exchange Rates

151
 Comparative Summary of Indian
Accounting Standards & IFRS
IFRS Ind-AS
AS No. Indian Standard IFRS
No. No.
AS 12 Accounting for IAS 20 Ind AS Accounting for
Government 20 Government Grants
Grants and Disclosure of
Government
Assistance
AS 13 Accounting for IAS 40 Ind AS Investment Property
Investments 40
IAS 27 Ind AS Separate Financial
27 Statements

152
 Comparative Summary of Indian
Accounting Standards & IFRS
IFRS Ind-AS
AS No. Indian Standard IFRS
No. No.
AS 14 Accounting for IFRS 3 Ind AS Business
amalgamations 103 combinations
AS 15 Employee Benefits IAS 19 Ind AS Employee
19 Benefits
AS 16 Borrowing costs IAS 23 Ind AS Borrowing costs
23
AS 17 Segment Reporting IFRS 8 Ind AS Operating
108 Segments

153
 Comparative Summary of Indian
Accounting Standards & IFRS

AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 18 Related Party IFRS Ind AS Disclosure of Interests
Disclosures 12 24 in other Entities
AS 19 Leases IAS 17 Ind AS Leases
17
AS 20 Earnings Per Share IAS 33 Ind AS Earnings Per Share
33

154
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 21 Consolidated IFRS Ind AS Consolidated
Financial 10 110 Financial Statements
Statements
IAS 27 Ind AS Separate Financial
27 Statements

IFRS Ind AS Disclosure of Interest

12 112 in other entities
AS 22 Accounting for IAS 12 Ind AS Income taxes
Taxes on Income 12

155
 Comparative Summary of Indian
Accounting Standards & IFRS
IFRS Ind-AS
AS No. Indian Standard IFRS
No. No.
AS 23 Accounting for IAS Ind AS Investments in
Investments in 28 28 Associates and
Associates in Joint Ventures
Consolidated Financial
Statements
AS 24 Discontinuing IFRS Ind AS Non Current Assets
operations 5 105 Held for Sale and
Discontinued
operations
AS 25 Interim financial IAS Ind AS Interim Financial
reporting 34 34 Reporting
156
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 26 Intangible assets IAS 38 Ind AS Intangible
38 Assets

157
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 27 Financial Reporting of IAS 28 Ind AS Investments in
Interests in Joint 28 Associates and
Ventures Joint Ventures

IAS 27 Ind AS Separate

Financial
27
Statements

IFRS 11 Ind AS Joint

111 Arrangements

IFRS 12 Ind AS Disclosure of

112 Interest in
other entities
158
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 28 Impairment of assets IAS 36 Ind AS Impairment of
36 assets
AS 29 Provisions, Contingent IAS 37 Ind AS Provisions,
Liabilities and 37 Contingent
Contingent Assets Liabilities and
Contingent Assets

AS 30 Financial Instruments IAS 39 Ind AS Financial

Accounting 109 Instruments
AS 31 Financial Instruments IAS 32 Ind AS Financial
Presentation 32 Instruments –
Presentation
159
 Comparative Summary of Indian
Accounting Standards & IFRS
IFRS Ind-AS
AS No. Indian Standard IFRS
No. No.
AS 32 Financial IFRS 7 Ind AS Financial Instruments:
Instruments- 107 Disclosures
Disclosures
- - IFRS 2 Ind AS Share based payment
102
- - IAS 29 Ind AS Financial Reporting in
29 hyperinflationary
Economies
- - IFRS 6 Ind AS Exploration for and
106 Evaluation of Mineral
Resources
160
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
- - IAS 26 Ind AS Accounting and Reporting
26 of Retirement Benefit
Plans*
- - IAS 41 Ind AS Agriculture
41
- - IFR S4 Ind AS Insurance Contracts
104
- - IFRS 1 Ind AS First Time Adoption
101 of Indian Accounting
Standards
* Exposure drafts issued
161
 Comparative Summary of Indian
Accounting Standards & IFRS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
- - IFRS 12 Ind AS Regulatory Deferral
114 Accounts
- - IFRS 13 Ind AS Fair Value
113 Measurement

162
 Enter Fair Value Accounting-
Income is change in wealth - Hicksian
• Fair value accounting is need of the time, because it brings economic
reality and better representation of Net worth.
• Fair value is market driven measure that is not affected by the factors
specific to a particular entity.
• Fair value is a solution to the accountants problem of income
measurement. As per widely accepted definition of Hicksian “ income is
change in wealth.”

163
 How to arrive at fair value?

• There are various approaches for arriving at fair values. Namely

• Cost approach
• Market approach
• Income approach
• Present value approach
• An enterprise should select the method which suits to its business
environment from sustainability point of view.

164
Impact of Ind AS

• Features:
• Time Value of Money
• Fair Value approach
• More disclosures
• Application:
• Separate as well as CFS
• Presentation of Financial Statements

165
 Impact of Ind AS
• Impact:
• ERP- SAP/Oracle/ERP
• Financial Analysis and Ratio workings
• Bonus to employees
• Managerial Remuneration- Remuneration based on profit
• Share valuation and market response
• Dividend distribution
• Taxation Issues-
• MAT  VAT
• Excise  Service Tax
• TDS

166
 Ind AS is a qualitative way of Accounting

• Ind AS Framework is relevant, honest and faithful representation

of Financial statements.
• The qualitative characteristics are expected to enhance the value
of Financial statements
• Time will prove that Ind AS will result into qualitative way of
Accounting.
• Can it be said?
“I love today more than yesterday but less than tomorrow. Lets dream
for the better future.”

167