IND AS!! The hot topic everywhere specially for the listed companies! and for all the companies whose net worth exceeds Rs. 500 cr for FY 2016-17 and Rs. 250 cr for FY 2017-18.
Why Ind AS is so hot topic and Companies are ready to pay good to professionals to carry out Ind AS transition project? The reason is, it is not a so quick exercise for anyone.
The basic idea of introducing Ind AS in India is to make enable Indian Companies financial statements comparable at international level. Ind AS is adopted from IFRS though there are few carve outs.
Ind AS and IFRS speaks about fair value everywhere. The Ind AS balance sheet now has a little different presentation and line items. MCA has published a circular related thereto dated 7 April 2016. As you'll go through, you'll find assets are now shown at the top followed by liabilities. There is a concept of financial assets and liabilities. Some more disclosures in notes related to interest risk, commodity risk, liquidity risk, market risk, sensitivity analysis are required to be given.
What are financial liabilities and assets?
For a simple understanding, where there is an establishment of contractual obligations or rights against cash or equity are financial liabilities or assets.
Practical Issues
There are some more practical impacts by introducing Ind AS such as for Toll road companies, the contractual right to use or operate a toll to be shown as intangible assets or financial assets. Though MCA and ICAI have not issued guidance notes related to all the areas and industries, there are some available on which call can be taken on practical issues faced by the Companies while implementing Ind AS.
Exemptions
There are certain exemptions available in Ind AS 101 for first time adoption of Ind AS, the Companies may avail. In such case, the cost of the assets shall be considered as deemed cost. These exemptions mentioned in relevant paragraphs of Ind AS 101 exempts retrospective effect of the specified cases.
How many comparable figures we have to present in Ind AS financials?
The Companies alongwith presenting the Ind AS figures as at the balance sheet date in the year of adoption shall also present comparative figures (Ind AS) of previous year and opening figures (Ind AS) of preceding year. For example, for the Companies adopting Ind AS in the FY 2016-17 (31 March 2017) shall give comparative figures as at 31 March 2016 and opening figures as at 1 April 2015 (Closing as at 31 March 2015)
Fair value impact
The recognition and de-recognition of assets and liabilities resulting from the fair value done will have more impact on the statement of profit or loss, other comprehensive income and equity component of financial instruments. Though there can be a great fluctuation on the profit and loss figures.
Implementation of Ind AS is a great step for Indian economy to compare the Indian Companies financial statements at the international level. They will provide a more fair idea to the users of financial statements about the value of assets and liabilities of the Company.
For any questions or queries, e-mail me on urvashimaharshi@gmail.com
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