Ind AS – ITFG interpretations and application issues

1 AS ITFG interpretations and application issuesFebruary 2018 About Ind AS implementation in India Indian financial reporting has undergone a paradigm shift with the introduction of Indian Accounting Standards (Ind AS). These involve application of several new and complex concepts, which require a significant level of judgement and estimation, accompanied by detailed qualitative and quantitative disclosures. However, this is just the beginning. The recent key amendments to the Companies Act, 2013 (2013 Act) and other Ind ASs that are on the verge of implementation (Ind AS 115, Revenue from Contracts with Customers and Ind AS 116, Leases), are expected to have a further impact on compliance as well as other accounting and reporting requirements across industries.

2 India Inc. is about to complete phase II of the Ind AS implementation. Our experience is that the real success of the convergence initiatives depends on how well these standards are implemented and how effectively companies embrace this change in both spirit and form. The Ind AS Transition and Facilitation Group (ITFG)In the context of the above developments, the Accounting Standards Board (ASB) and the Ind AS Implementation Committee of the Institute of Chartered Accountants of India (ICAI) constituted the ITFG to provide clarifications on various issues related to the applicability of Ind AS and its implementation.

3 These issues are being raised by preparers, users and other stakeholders. Till date, ITFG has issued 14 bulletins covering implementation issues on various Ind AS such as, consolidation, financial instruments, business combinations, the publicationInd AS provide extensive guidance and entail a significant change in the financial reporting framework applied by Indian companies to report their financial results. Their adoption requires a detailed level of analysis and companies will need to invest substantial time to ensure compliance.

4 Our publication Ind AS ITFG interpretations and application issues is designed to assist companies in understanding this guidance when preparing financial statements in accordance with Ind AS. The publication provides a brief overview of the Ind AS and highlights the key differences from the respective IFRS. Further, the publication summarises the clarification and recommendations provided by ITFG with respect to various implementation and interpretation issues pertaining to Ind AS (including certain frequently asked questions issued by ICAI).

5 The publication is based on the Ind AS notified by the Ministry of Corporate Affairs (MCA), including amendments up to 15 February 2018. It also includes the 14 clarifications bulletins that have been issued by ITFG till 15 February 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights the publicationThe publication on Ind AS summarises the key principles and guidelines prescribed by the Ind AS.

6 It contains 10 chapters, which provide an essence of the principles within Ind AS pertaining to each topic. Further, some chapters may contain multiple topics/Ind AS application issues . Each chapter includes the following sections:OverviewThis section provides a brief overview of the significant principles prescribed within Ind AS covered by the chapter. It highlights key principles articulated in the specific Ind AS to assist preparers and other users of financial statements in understanding the significant requirements related to the topics covered in each differences from IFRSW hile Ind AS is largely converged with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB)

7 , there are certain additional requirements/exemptions provided in Ind AS, or certain requirements/exemptions provided in IFRS that have been excluded from Ind AS, known as carve-outs from IFRS. These divergences from IFRS are intended to smoothen the implementation and applicability of the standards from an Indian implementation of Ind AS, many corporates may continue to report internationally under the IFRS framework. This publication therefore highlights the significant differences from IFRS in each implementations arising out of ITFG clarifications This section summarises the various Ind AS clarifications issued by the ITFG in simple and easy to understand language.

8 Our publication captures their essence by highlighting the key principles that emerge from the ITFG clarifications. These are expected to assist companies in effective implementation of Ind AS and provide a context for users of financial statements to better understand the information reported by companies under Ind for judgementThis publication intends to highlight some of the practical application issues with the help of certain facts and circumstances detailed in the examples used. In practice, transactions or arrangements involving Ind AS may be complex.

9 Therefore, further interpretation and significant use of judgement may be required for an entity to apply Ind AS to its facts, circumstances and individual transactions. Further, some information contained in this publication may change as practice and implementation guidance continue to develop. Users are advised to read this publication in conjunction with the actual text of the standards and implementation guidance issued, and to consult their professional advisors before concluding on accounting treatments for their to relevant guidance and abbreviations, when used, are defined within the text of this publication.

10 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights VenkateshwaranPartner and HeadAccounting Advisory Services KPMG in IndiaRuchi RastogiExecutive DirectorAssuranceKPMG in IndiaKavita GunderiaTechnical DirectorAssuranceKPMG in IndiaAjit ViswanathDirectorAccounting Advisory Services KPMG in India 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.