1-Accounting and Auditing - 1-22

Accounting Standards

Accounting Standards

What are Generally Accepted Accounting Principles in India?
Generally Accepted Accounting Principles (GAAP) are basic accounting principles and guidelines which provide
the framework for more detailed and comprehensive accounting rules, standards and other industry-specific
accounting practices.

In India, the GAAP includes Accounting Standards issued by the Institute of Chartered Accountants of India
(ICAI) / Ministry of Corporate Affairs (MCA) and the law laid down in the respective applicable acts (for example,
Schedule III to Companies Act, 2013, which should be compulsorily followed by all companies). The ICAI also
releases Guidance Notes from time to time on various topics to help in the accounting process and provide
clarity. Indian GAAP also includes opinions issued by Expert Advisory Committee (EAC) and Ind AS Technical
Facilitation Group (ITFG) of ICAI.

Applicability of Various Accounting Standards
Under Indian GAAP, there are three different sets of Accounting Standards applicable to different kinds of entities
which is summarised as follows:

Accounting Standards Applicable to

Indian Accounting Standards (Ind-AS) notified under Companies including NBFCs but excluding Banks and

Companies Act, 2013 Insurance Companies:

[converged in line with IFRS subject to certain (i) Listed Companies

exemptions/exceptions] (ii) Companies having net worth in excess of 250

crore

(iii) Subsidiaries, Associates and Joint Ventures of
Companies covered in (i) & (ii) above.

(iv) Companies voluntarily adopting Ind-AS

Accounting Standards notified under Companies Act, All the Companies other than those Companies

2013 to whom Ind-AS is applicable. [For detailed

applicability refer table below].

Accounting Standards issued by ICAI Non-Corporate Entities. [For detailed applicability refer
table below].

Applicability of Accounting Standards to Various Entities

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
SMCs (SMEs) (SMEs)

AS 1 Disclosure of Accounting   
AS 2 Policies
AS 3   
Valuation of Inventories
(Refer Note 4)  Not Applicable A Not Not
in entirety,
Cash Flow Statements
i.e., Optional
Applicable Applicable

in entirety, in entirety,

i.e., Optional i.e.,

Optional

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2020-2021

Accounting and Auditing

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
SMCs (SMEs) (SMEs)

AS 4 Contingencies and   

AS 5 Events Occurring After

AS 6 the Balance Sheet Date
AS 7
AS 9 (Refer Note 4)
AS 10
AS 11 Net Profit or Loss for    
the Period, Prior Period
AS 12 Items and Changes in
AS 13 Accounting Policies
AS 14
AS 15 Depreciation Accounting Withdrawn

Construction Contracts    
(revised 2002)

Revenue Recognition    

Property, Plant and    
Equipment (Refer Note 4)

The Effects of Changes in    
Foreign Exchange Rates
(Revised 2003) (Refer
Note 5)

Accounting for    

Government Grants

Accounting for   

Investments (Refer Note

4)

Accounting for    

Amalgamations (Refer

Note 4)

Employees Benefits  Relaxations  Relaxations from certain
(Revised 2005) from certain requirements have been
requirements given to Non-corporate
AS 16 Borrowing Costs have been Entities falling in Level
given to II and Level III (SMEs)
SMCs
(Refer Note (Refer Note 2)
2)

 

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Accounting Standards

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
SMCs (SMEs) (SMEs)

AS 17 Segment Reporting  Not Applicable  Not Not
in entirety,
Applicable Applicable
i.e., Optional
in entirety, in entirety,

i.e. Optional i.e.,

Optional

AS 18 Related Party Disclosures    Not
AS 19 Leases Applicable

in entirety,
i.e. Optional

 Relaxations  Relaxations from certain
from certain
requirements requirements have been
have been given to Non-corporate
given to Entities falling in Level
SMCs
AS 20 Earnings Per Share II and Level III (SMEs)
AS 21  (Refer Note
Consolidated Financial 2) (Refer Note 2)
Statements (Refer Note 4)  Same as Same as
 Not applicable
to SMCs above above

since relevant  Not applicable to all
Regulators
require Non-corporate Entities
compliance since the relevant
with them
only by Regulators require
certain Non- compliance with them only
SMCs
(Refer Note by certain Level I entities
1) (Refer Note 1)

AS 22 Accounting for Taxes on   
AS 23
Income  Not applicable
to SMCs
Accounting for since the  Not applicable to all
relevant Non-corporate Entities
Investments in Associates Regulators since the relevant
require Regulators require
in Consolidated Financial
compliance compliance with them only
Statements with them by certain Level I entities

only by (Refer Note 1)
certain Non-

SMCs
(Refer Note

1)

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Accounting and Auditing

Accounting Title of AS Companies Non Corporates
Standard Discontinuing Operations
AS 24 Non SMCs Level I Level II Level III
AS 25 SMCs 
 (SMEs) (SMEs)
AS 26 
AS 27 Applicable Applicable Not
to some
AS 28 Applicable
AS 29 non-SMCs
where in entirety,

regulators i.e. Optional
require to
Interim Financial  (Refer Note present (Refer Note 3)

Reporting Applicable 3) interim
financial
to some statements

non-SMCs

where

regulators

require to

present

interim

financial

statements

Intangible Assets   

Financial Reporting of  Not applicable  Not applicable to all

Interests in Joint Ventures to SMCs Non-corporate Entities

since the since the relevant

relevant Regulators require

Regulators compliance with them only

require by certain Level I entities

compliance (Refer Note 1)

with them

only by

certain

Non-SMCs

(Refer Note

1)

Impairment of Assets  Relaxations  Relaxations from certain
 requirements have been
Provisions, Contingent  from certain
given to Non-corporate
Liabilities and Contingent requirements Entities falling in Level
II and Level III (SMEs)
Assets (Refer Note 4) have been
(Refer Note 2)
given to

SMCs

(Refer Note

2)

Notes:

1. AS 21, AS 23 and AS 27 (relating to consolidated financial statements) are required to be complied with
by a company/non-corporate entity if the company / non-corporate entity, pursuant to the requirements of
a statute/regulator or voluntarily, prepares and presents consolidated financial statements.

2. Relaxations from certain requirements have been given to SMCs and Non-Corporate Entities falling in
Level II and Level III (SMEs) as follows:

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Accounting Details of relaxations
Standard

AS 15 SMCs and Level II and Level III Non-Corporate entities are exempted from the applicability of
the following paragraphs:

Particulars - All SMCs - Level II and Level II and Level III

Level III Non-Corporate Non-Corporate entities

entities where average where average no. of

no. of persons persons employed

employed during the during the year is < 50

year is >=50

Recognition and measurement of Exempted
short-term accumulated compensating
absences which are non-vesting
contained in paras 11 to 16

Discounting of amounts that fall due more Exempted
than 12 months after balance sheet date
under para 46 (Defined Contribution
Plans) or para 139 (Termination Benefits)

Recognition and measurement principles Exempted Exempted

under paras 50 to 116 and presentation However, such entities However, such entities
and disclosure requirements under paras should –
117 to 123 for accounting of defined may –
benefit plans
a. Actuarially determine Calculate and account
and provide for accrued liability by
accrued liability using reference to some other
PUCM
rational method, e.g.

b. Determine discount a method based on

rate by reference assumption that such

to market yields benefits are payable to
on Govt. bonds at all employees at end of
balance sheet date accounting year

c. Disclose actuarial

assumptions as per

para 120(l)

Recognition and measurement of other Exempted However, such entities

long-term employee benefits contained in However such entities may –
paras 129 to 131
should – Calculate and account

a. Actuarially determine accrued liability by
and provide for reference to some other
accrued liability using rational method, e.g.

PUCM. a method based on

b. Determine discount assumption that such
rate by reference benefits are payable to
to market yields all employees at end of
on Govt. bonds at accounting year

balance sheet date

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Accounting and Auditing

Accounting Details of relaxations
Standard

AS 19 Paras 22 (c), (e) and (f); 25 (a), (b) and (e); 37 (a) and (f); and 46 (b) and (d) relating to
disclosures are not applicable to SMCs/non-corporate entities falling in Level II.

Paras 22 (c), (e) and (f); 25 (a), (b) and (e); 37 (a), (f) and (g); and 46 (b), (d) and (e) relating
to disclosures are not applicable to Level III entities.

AS 20 Diluted earnings per share (both including and excluding extraordinary items) is not required
to be disclosed by SMCs/ non-corporate entities falling in Level II and Level III and information
required by para 48(ii) of AS 20 is not required to be disclosed by Level III entities if this
standard is applicable to these entities.

AS 28 SMCs / non-corporate entities falling in Level II and Level III are allowed to measure the ‘value
in use’ on the basis of reasonable estimate thereof instead of computing the value in use by
present value technique.

Consequently, if a SMC / non-corporate entity falling in Level II or Level III chooses to measure
the ‘value in use’ by not using the present value technique, the relevant provisions of AS 28,
such as discount rate etc., would not be applicable to such an SMC / entity.

Further, such an SMC / entity need not disclose the information required by para 121(g).

AS 29 Paras 66 and 67 relating to disclosures are not applicable to SMCs / non-corporate entities
falling in Level II and Level III.

3. AS 25, Interim Financial Reporting, does not interim financial results. For example, presently,

require a company / non-corporate entity to SEBI requires listed entities to present interim

present interim financial report. It is applicable financial results, e.g., quarterly financial results,

only if a company /non-corporate entity is those entities will apply this Standard.

required by a statute or a regulator or elects 4. The Ministry of Corporate Affairs (MCA) has,
to prepare and present an interim financial
vide the Companies (Accounting Standards)
report. Thus, the recognition and measurement
Amendment Rules, 2016, amended AS 2, 4,
requirements contained in this Standard are
10, 13, 14, 21 and 29 The key amendments are
applicable only to the entities for preparation of
summarised as under:

Accounting Key changes
Standard

AS 2 Inventories shall not include spare parts, servicing equipment and standby equipment which
fall under the definition of PPE under revised AS 10 (i.e., those which are intended to be used
for a period of more than 12 months).

AS 4 Dividends declared after balance sheet date but before the financial statements are approved
for issue will not be recognised as a liability at the balance sheet date but be disclosed as part
of notes to accounts.

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Accounting Key changes
Standard

AS 10 1. It defines as to what constitutes the unit of measure for recognition, i.e., what constitutes
an item of PPE.

2. Entity has to choose either cost or revaluation model as its accounting policy for
subsequent measurement. If an item of PPE is revalued, the entire class to which that
asset belongs is revalued.

3. Cost of an item of PPE is its cash price at date of recognition. If payment is deferred
beyond normal credit terms, then difference between cash price and total payment is
charged as interest.

4. Component accounting is made mandatory in line with Schedule II of the Companies Act,
2013

5. Depreciation method applied to assets to be reviewed every financial year, any change
in method to be accounted as change in accounting estimate in accordance with AS 5.

6. The initial cost of decommissioning, restoration and similar liabilities would also be
included in the cost of PPE

AS 13 An investment property will now be accounted for in accordance with the cost model as
prescribed in the revised AS 10 instead of AS 13.

AS 14 Disclosure required in situations where scheme of amalgamation prescribes a different
treatment to be given to reserves of the transferor company as compared to the requirement
of this standard. This requirement does not apply to any scheme of amalgamation approved
under the Companies Act, 2013.

AS 21 Where an enterprise does not have a subsidiary but has an associate and/or JV, such an
enterprise should also prepare consolidated financial statements in accordance with the
applicable accounting standards.

AS 29 Amount of provision recognised under revised AS 10 with respect to decommissioning,
restoration and similar liabilities should be discounted.

The aforesaid amendments are effective from April 1, i. ASI 2 – Accounting for Machinery Spares
2017. (Re. AS 2 and AS 10)

5. The MCA has, vide the Companies (Accounting ii. ASI 11 – Accounting for Taxes on Income
Standards) Amendment Rules, 2018, in case of an Amalgamation (Re. AS 22)
substituted para 32 of AS 11. It now also states
that remittance from a non-integral foreign iii. ASI 12 – Applicability of AS 20 (Re. AS 20)
operation by way of repatriation of accumulated
profits does not form part of a disposal unless iv. ASI 23 – Remuneration paid to key
it constitutes return of the investment. The management personnel – whether a related
amendment is effective from 1st April, 2018, i.e. party transaction (Re. AS 18)
for FY 2018-19 onwards.
v. ASI 27 – Applicability of AS 25 to Interim
6. Accounting Standards Interpretations issued Financial Results (Re. AS 25)
by ICAI, except the following, have been
incorporated by way of explanation to the vi. ASI 29 – Turnover in case of Contractors
Accounting Standards on the lines of the (Re. AS 7 (revised 2002))
Companies (Accounting Standards) Rules, 2006,
as amended: In last few years, ICAI has, barring some exceptions,
followed Accounting Standards prescribed under
the Companies (Accounting Standards) Rules, 2006
also for non-corporate entities under the project

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Accounting and Auditing

“Harmonisation of various differences between the Accounting Standards issued by the ICAI and the Accounting
Standards notified by the Central Government”.

Components of Financial Statements

Following are the components of Financial Statements under Ind-AS and IGAAP:

Components of Financial Statements Under Ind AS? Under IGAAP
Balance Sheet as at end of the period Yes Yes
Statement of Profit and Loss for the period Yes Yes
Statement of Changes in Equity for the period Yes No
Statement of Cash Flow for the period Yes If applicable
Statement of Significant Accounting Policies Yes Yes
Notes to accounts and other explanatory notes Yes Yes

Synopsis of Material Differences to Key Ind-ASs satisfied at a point of time or over time. If any
vis-à-vis corresponding IGAAP of the conditions specified below are satisfied,
(Note: It is to be noted that the material presented performance obligation is satisfied over time (and
below is a mere summary of the Standards and revenue is recognized over time):
gives a broad overview of the same and does not
cover all the Standards. The actual Standards are – Customer Simultaneously receives and
much more detailed in the nature and readers are consumes benefits provided by the entity’s
advised to refer the same for a comprehensive performance as the entity performs;
understanding)
– Entity’s performance creates or enhance an asset
I. INCOME AND EXPENSES that the customer controls as the asset is created
or enhanced;
REVENUE RECOGNITION
– Entity’s performance does not create an asset
Ind-AS-115 Revenue from Contracts with with alternative use to the entity and the entity
Customers has enforceable right for performance completed
to date.
(Significantly different from the corresponding
AS-9 on Revenue Recognition and AS-7 on An entity shall recognise the amount of allocated
Construction Contracts) transaction price as revenue once a performance
obligation is satisfied. Transaction price which can be
Ind-AS-115 recommends a five step model to a fixed or variable amount is determined based on the
recognise revenue: terms of contract and the entity’s customary practices.

– Identify the contract with a customer Variable Consideration
If the consideration includes a variable amount, an
– Identify the performance obligations in the entity should estimate the amount of consideration to
contract which it will be entitled in exchange for transferring the
promised goods or services to a customer.
– Determine the transaction price
The existence of a significant financing component
– Allocate the transaction price to the performance In determining the transaction price, an entity should
obligations in the contract adjust the promised amount of consideration for
the time value of money if significant financing
– Recognise revenue when (or as) the entity components exist.
satisfies the performance obligation by
transferring a promised goods or services to a
customer.

For each performance obligation, the entity should
determine whether performance obligation is

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Accounting Standards

Non-Cash Consideration – Pays or promises to pay the consideration
When customer promises to pay consideration other
than in cash form, an entity should measure it at fair Allocation of Transaction Price to Performance
value. If fair value cannot be reasonably measured, Obligation
then entity should measure the consideration indirectly
by reference to the stand-alone selling price of the Entity should allocate the transaction price to each
goods or service in exchange for consideration. performance obligation identified in a contract on
a relative stand-alone selling price basis (It is the
Consideration payable to Customer price at which an entity would sell a promised good
Consideration payable to the customer includes cash or service separately to a customer). If this price is
amounts, credits or other items (voucher or coupon) directly not available, it should be estimated using
and the entity accounts for it as a reduction of the methods such as:
transaction price (revenue). An entity should recognise
the reduction of revenue when (or as) either of the • The adjusted market assessment approach
following events occurs:
• Expected cost plus margin approach
– Recognises revenue for the transfer of related
goods or service to the customer • Residual approach

Disclosures
Entity should disclose qualitative and quantitative

information as indicated below:

Customer Contracts Significant Judgments Any assets recognized

and changes made in from the cost to obtain

applying this standard to or fulfill a contract with

those contracts customers

Revenue recognized to be disclosed separately from Explain the judgments used Closing balance of asset

its other sources of revenue for determining timing for recognized from cost

Any impairment loss recognized on any receivable or satisfaction of performance Amount of amortization

contract assets obligation and transaction and any impairment loss

price and amount allocated recognized

A reconciliation of the contract price with the revenue recognised at the time of sale of goods or rendering of
recognised services if collection is reasonably certain; i.e., when
risks and rewards of ownership are transferred to the
AS-9- Revenue Recognition buyer and when effective control of the seller as the
owner is lost.
Scope
AS-9 does not deal with the following: In case of rendering of services, revenue must be
– Revenue arising from construction contracts, hire- recognised either on completed service method
or proportionate completion method by relating
purchase and lease agreements; the revenue with work accomplished and certainty of
– Revenue relating to government grants and other consideration receivable.

similar subsidies; and Interest is recognised on time basis, royalties on
– Revenue of insurance companies from insurance accrual basis and dividend when owner’s right to
receive payment is established.
contracts.
Disclosures
Recognition Principles
Revenue from sale of goods and services should be

BCAS 09
Referencer
2020-2021

Accounting and Auditing

Disclose circumstances in which revenue recognition – initial amount and
has been postponed pending significant uncertainties.
– variations in contract work, claims and
AS 7 - Construction Contracts • incentive payments that will probably
• result in revenue and are capable of being
Scope • reliably measured.
The AS is applicable in accounting of contracts in
the books of contractor. It is to be noted that this • Contract cost comprises of:
standard is not applicable for construction projects •
undertaken by the entity on behalf of its own. It is – costs directly relating to specific contract
also not applicable to service contracts which are not
related to construction of assets. – costs attributable and allocable to contract
activity
• Construction contract may be for construction
of a single/combination of interrelated or – other costs specifically chargeable to
interdependent assets. customer under the terms of contracts.

• A fixed price contract is a contract where contract Contract Revenue and Expenses to be
price is fixed or per unit rate is fixed and in some recognised, when outcome can be estimated
cases subject to escalation clause. reliably up to stage of completion on reporting
date.
• A cost plus contract is a contract in which
contractor is reimbursed for allowable or defined In Fixed Price Contract outcome can be
cost plus percentage of these cost or a fixed fee. estimated reliably when:

• In a contract covering a number of assets, each – total contract revenue can be measured
asset is treated as a separate construction reliably
contract when there are:
– it is probable that economic benefits will
– separate proposals; flow to the enterprise;

– subject to separate negotiations and the – contract cost and stage of completion can
contractor and customer is able to accept/ be measured reliably at the reporting date;
reject that part of the contract; and

– identifiable cost and revenues of each – contract costs are clearly identified and
asset measured reliably for comparing actual
costs with prior estimates.
• A group of contracts to be treated as a single
construction contract when: In cost plus contract outcome is estimated
reliably when:
– they are negotiated as a single package;
– it is probable that economic benefits will
– contracts are closely interrelated with an flow to the enterprise; and
overall profit margin; and
– contract cost, whether reimbursable or not,
– contracts are performed concurrently or in can be clearly identified and measured
a continuous sequence. reliably.

• Additional asset construction to be treated as When outcome of a contract cannot be estimated
separate construction contract when: reliably:

– assets differs significantly in design/ – revenue to the extent of which recovery
technology/function from original contract of contract cost is probable should be
assets. recognised;

– a price negotiated without regard to original – contract cost should be recognised as an
contract price expense in the period in which they are
incurred; and
Contract Revenue and Contract Costs •
• Contract revenue comprises of: – all foreseeable losses must be fully
provided for.

When uncertainties no longer exist, revenue and
expenses to be recognised as mentioned above

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Accounting Standards

when outcomes can be estimated reliably. revenue;

• When it is probable that contract costs will – Methods used to determine the stage of

exceed total contract revenue, the expected completion of contracts in progress;

loss should be recognised as an expense – Gross amount due from customers for contract
immediately.
work as an asset; and

• Any changes in estimate to be accounted for as – Gross amount due to customers for contract work
per AS 5.
as a liability.

Disclosures – For contracts in progress:

– Contract revenue recognised in the period; • the aggregate amount of costs incurred and

– Method used to determine recognised contract recognised profits (less recognised losses)
up to the reporting date;

• amount of advances received; and
• amount of retention.

Taxes on Income: Significant Differences between AS 22 and Ind AS 12

Topic AS 22, Accounting for Taxes on Income Ind AS 12, Income Taxes

Deferred Entities are required to calculate the deferred Entities are required to calculate the deferred
tax assets/
liabilities tax assets/ liabilities using the profit and tax assets/ liabilities using the balance sheet

loss account method, focusing on temporary differences

approach, requiring recognition of tax effects in the accounting for the expected future tax
of differences between taxable income and consequences of events.

accounting income. For this purpose, temporary differences are

For this purpose, differences between taxable differences between the carrying amount of
income and accounting income are classified an asset or

into: liability in the balance sheet and its tax base.

• Timing differences being the Temporary differences may be either:

differences between taxable income • Taxable temporary differences, which
and accounting income for a period that are temporary differences that will result
in taxable amounts in future periods
originate in one period and are capable when the carrying amount of the asset
or liability is recovered or settled.
of reversal in one or more subsequent

periods.

• Permanent differences which are the • Deductible temporary differences,
differences between taxable income which are temporary differences that will
result in amounts that are deductible in
and accounting income for a period determining taxable profit (tax loss) of
future periods when the carrying amount
that originate in one period and do not

reverse subsequently.

of the asset or liability is recovered or

settled

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Accounting and Auditing

Topic AS 22, Accounting for Taxes on Income Ind AS 12, Income Taxes

Recognition of Deferred taxes are generally recognized for Deferred tax is recognized for all taxable
deferred taxes
all timing differences arising on differences in temporary differences between accounting and

accounting and taxable income. tax base of an asset or liability except to the

extent of those which arise from:

a. initial recognition of goodwill or

b. asset or liability in a transaction which:

i. is not a business combination; and

Probable as ii. at the time of the transaction,
against virtual affects neither the accounting nor
certainty the tax profit (tax loss).

With respect to unabsorbed depreciation With respect to carry forward of unused tax
or carry forward of losses under tax laws, losses and unused tax credits, a deferred
deferred tax assets should be recognized only tax asset shall be recognized to the extent
to the extent that there is virtual certainty that it is probable that future taxable profit
supported by convincing evidence that will be available against which the unused tax
sufficient future taxable income will be losses and unused tax credits can be utilized.
available against which such deferred tax
assets can be realized.

However, deferred tax asset for all other
unused credits is recognized to the extent
that there is a reasonable certainty that
sufficient future taxable income will be

available against which such deferred tax

assets can be realized.

Revaluation of No deferred tax is to be recognized if assets In some jurisdictions, the revaluation or the
assets (property, plant and equipment) are revalued restatement of an asset to fair value affects

since it is considered as a permanent taxable profit (tax loss) for the current period.

difference. As a result, the tax base of the asset is

adjusted, and no temporary difference arises.

In other jurisdictions, the revaluation or
restatement of an asset does not affect
taxable profit in the period of the revaluation
or restatement and consequently, the
tax base of the asset is not adjusted.
Nevertheless, the future recovery of the
carrying amount will result in a taxable flow
of economic benefits to the entity and the
amount that will be deductible for the tax
purposes will differ from the amount of those
economic benefits. The difference between
the carrying amount of a revalued asset and
its tax base is a temporary difference and
give rise to a deferred tax liability or asset.

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Accounting Standards

Topic AS 22, Accounting for Taxes on Income Ind AS 12, Income Taxes

Investment in No deferred tax required to be recognized in With respect to all taxable temporary
subsidiaries,
branches and respect thereof. differences, deferred tax liability is recognized
associates
and interest in Deferred tax expense is an aggregate total on unrealised / accumulated profits, except to
joint ventures from separate financials statements of each the extent that both of the following conditions
entity of the group with no adjustment on are satisfied:

consolidation. • The parent, the investor, the venture or

joint operator is able to control timing of

the reversal of the temporary difference,

and

• It is probable that the temporary
difference will not reverse in the
foreseeable future.

Tax benefits No equivalent guidance. With respect to share based payments,
related to deferred tax benefit is calculated based
share-based on the tax deduction for the share-based
payments. payment under the applicable tax law.

Changes in No equivalent guidance. Current tax and deferred tax consequences
tax status of are required to be included in the statement
an entity or its of profit or loss of the period of change unless
shareholders. those consequences relate to transactions
and events recognized outside the statement
pf profit or loss either in other comprehensive
income or directly in equity in the same or a
different period.

Recognition of No equivalent guidance. Current tax and deferred tax shall be

taxes on items However, ICAI has issued an announcement recognized outside profit or loss if the tax
recognized in this regard. This announcement requires relates to items that are recognized, in the

in other any expense charged directly to reserve and/ same or a different period, outside profit or

comprehensive or securities premium account to be net of loss. Therefore, the tax on items recognized
income or benefits that arise from the admissibility of in the comprehensive income or in equity, is

directly in such expense for tax purpose. also recorded in other comprehensive income

equity Similarly, any income credited directly to or in equity as appropriate.

a reserve account should be net of its tax

effect.

Deferred tax No equivalent guidance. • Acquired deferred tax benefits
in respect
of business recognized within the measurement
combination
period that result from new information

about facts and circumstances that

existed at the acquisition date shall

be applied to reduce the carrying

amount of any goodwill related to that

acquisition. If the carrying amount of

that goodwill is zero, any remaining

deferred tax benefits shall be recognized

in other comprehensive income and

accumulated in equity as capital reserve

or recognized directly in capital reserve.

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2020-2021

Accounting and Auditing

Topic AS 22, Accounting for Taxes on Income Ind AS 12, Income Taxes
Tax holiday •
period All other acquired deferred tax benefits
realized shall be recognized in profit or
Disclosures loss (or, if Ind AS 12 so requires, outside
profit or loss).

• An entity does not recognize deferred
tax liabilities arising from the initial
recognition of goodwill.

The deferred tax in respect of timing No equivalent guidance.
differences which reverse during the tax
holiday period is not recognized to the extent
the enterprise’s gross total income is subject
to certain deduction during the tax holiday
period as per the Income Tax, Act, 1961. In
certain cases, the deferred tax in respect of
timing differences which reverse during the
tax holiday period is not recognized to the
extent deduction from the total income of an
enterprise is allowed during the tax holiday
period.

Deferred tax in respect of timing differences A reconciliation between the income
which reverse after the tax holiday period is tax expense reported and the product
recognized in the year in which the timing of accounting profit multiplied by the
differences originate. applicable tax rate.

However, recognition of deferred tax assets is
subject to the consideration of prudence. For
the above purposes, the timing differences
which originate first are considered to reverse
first.

These additional disclosures are not required. a)

b) Unrecognized deferred tax liability on
undistributed earnings of subsidiaries,
branches, associates & joint venture.

c) Details of tax holidays and the expiry
date thereof.

14 BCAS
Referencer
2020-2021

Accounting Standards

Borrowing Cost: Significant Differences between AS 16 and Ind AS 23

Topic AS 16, Borrowing Cost Ind AS 23, Borrowing Cost

Components of Borrowing costs include: Borrowing costs include:
borrowing costs
a. interest and commitment charges on a. interest expense calculated using the

bank borrowings; and other short- effective interest method as described

term and long-term borrowings; in Ind AS 109, Financial Instruments;

b. amortization of discounts or premiums b. finance charges in respect of finance

relating to borrowings; leases recognized in accordance with

c. amortization of ancillary Ind AS 116, Leases; and

costs incurred in connection with the c. exchange differences arising from
foreign currency borrowings to the
arrangement of borrowings;
extent that they are regarded as an
d. finance charges in respect of assets
adjustment to interest costs.
acquired under finance leases or

under other similar arrangements;

and

e. exchange differences arising from
foreign currency borrowings to the
extent that they are regarded as an
adjustment to interest costs.

Substantial period A qualifying asset is an asset that A qualifying asset is an asset that necessarily

of time necessarily takes a substantial period takes a substantial period of time to get ready

of time to get ready for its intended use for its intended use or sale. However, Ind AS

or sale. AS 16 provides that ordinarily, 23 does not provide any guidance on this

a period of 12 months is considered as term unlike AS 16.

substantial period of time unless a shorter

or longer period can be justified on the

basis of facts and circumstances of the

case. In estimating the said period, time

which an asset takes, technologically and

commercially, to be ready for its intended

use or sale is considered.

W e i g h t e d No equivalent guidance In some circumstances, it is appropriate to
average include all borrowings of the parent and its
borrowing cost subsidiaries when computing a weighted
average of the borrowing costs; in other
circumstances, it is appropriate for each
subsidiary to use a weighted average of
the borrowing costs applicable to its own
borrowings.

Disclosure The financial statements should disclose: An entity shall disclose:

a. the accounting policy adopted for a. the amount of borrowing costs

borrowing costs; and capitalized during the period; and

b. the amount of borrowing costs b. the capitalization rate used to

capitalized during the period. determine the amount of borrowing

costs eligible for capitalization.

BCAS 15
Referencer
2020-2021

Accounting and Auditing

Employee Benefit Expenses: Significant Differences between AS 15 and Ind AS 19

Topic AS 15, Employee Benefits Ind AS 19, Employee Benefits

Definition of Employees includes only whole-time Employees include directors.
Employee directors.

A c t u a r i a l The detailed actuarial valuation of the Detailed actuarial valuation needs to be

valuation present value of defined benefit obligations undertaken determine the present value

may be made at intervals not exceeding of the net defined benefit liability (asset) is
three years. However, with a view that performed with sufficient regularity so
the amounts recognized in the financial that the amounts recognized in the financial

statements do not differ materially from statements do not differ materially from the
the amounts that would be determined at amounts that would have been determined at

the balance sheet date, the most recent the end of the reporting period. It however
valuation is reviewed at the balance sheet does not specify what constitutes
date and updated to reflect any material sufficient regularity.
transactions and other material changes

in circumstances (including changes

in interest rates) between the date of
valuation and the balance sheet date.

The fair value of any plan assets is
determined at each balance sheet date.

Actuarial gains All actuarial gains and losses should be Actuarial gains and losses representing
and losses
recognized immediately in the statement of changes in the present value of the defined
Discount rate
profit and loss. benefit obligation resulting from experience
Defined benefit
plans adjustment and effects of changes in
actuarial assumptions are recognized in other

comprehensive income and not reclassified to
profit or loss in a subsequent period.

Discount rate to be used for determining The rate used to discount post- employment

defined benefit obligation is by reference to benefit obligations shall be determined by
market yields at the balance sheet date on reference to market yields at the end of
government bonds of a currency and terms the reporting period on government bonds.

consistent with the currency and term of However, requirements given in IAS 19 in this
the post-employment benefit obligations. regard have been retained with appropriate

modifications for currencies other than Indian
rupee.

The changes in defined benefit liability The change in the defined benefit liability

(surplus) has the following components: (asset) has the following components:

a. Service cost- recognized in profit or a. Service cost - recognized in profit or
loss loss;

b. Interest cost- recognized in profit or b. Net interest cost (i.e. time value) on

loss the net defined benefit deficit/(asset)-

c. The expected return on any plan recognized in profit or loss;

assets -recognized in profit or loss; c. Re-measurement including:

d. Net actuarial gains and losses i. changes in fair value of plan
recognized in profit or loss. assets that arise from factors
other than time value; and

16 BCAS
Referencer
2020-2021

Accounting Standards

Topic AS 15, Employee Benefits Ind AS 19, Employee Benefits
Past service cost
and curtailments ii. actuarial gains and losses on
obligations - recognized in other
Termination comprehensive income.
benefits
Past service cost is recognized as under: Past service cost (including curtailments) is

a. As an expense on a straight-line basis recognized as an expense at the earlier of
over the average period until the the following dates:

benefits become vested. a. when the plan amendment or

b. If benefits already vested recognized curtailment occurs; and

as an expense immediately entities b. when the entity recognizes related
recognize a curtailment when it restructuring costs or termination
occurs. However, when a curtailment benefits.
is linked with restructuring it is

accounted for at the same time as

the related restructuring.

An enterprise should recognize termination An entity shall recognize a liability and

benefits as a liability and an expense expense for termination benefits at the earlier

when, and only when: of the following dates:

a. the enterprise has a present a. when the entity can no longer withdraw

obligation as a result of a past event; the offer of those benefits; and

b. it is probable that an outflow of b. when the entity recognises costs for a

resources embodying economic restructuring that is within the scope of

benefits will be required to settle the Ind AS 37 and involves the payment of

obligation; and termination benefits.

c. a reliable estimate can be made of
the amount of the obligation.

Effects of Changes in Foreign Exchange Rates: Significant Difference between AS 11 and Ind AS 21

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in
Foreign Exchange Rates Foreign Exchange Rates

Functional and There is no concept of functional currency. Functional currency is the currency of the

p r e s e n t a t i o n AS-11 does not specify the currency in primary economic environment in which the

currency which an enterprise presents its financial entity operates.

statements. Foreign currency is a currency other than the

However, an enterprise normally uses functional currency.

the currency of the country in which it is Presentation currency is the currency in
domiciled.
which the financial statements are presented.

AS-11 defines the term ‘Foreign Currency’ ·

as a currency other than the reporting

currency which is the currency in which
financial statements are presented

BCAS 17
Referencer
2020-2021

Accounting and Auditing

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in
Foreign Exchange Rates Foreign Exchange Rates

E x c h a n g e In general, exchange differences arising In general, exchange differences arising both

differences both on: on:

a) Transactions settled during the period; a) Transactions settled during the period;
and and

b) Upon re-translation of the monetary b) Upon retranslation of the monetary items

items at the balance sheet date at the balance sheet date

are recorded in the profit and loss for the are recorded in the profit and loss for the

period. period.

Long-term foreign currency monetary Long-term foreign currency monetary

items: items:

Exchange differences arising on reporting of With respect to exchange differences arising
long-term foreign currency monetary items on reporting of long-term foreign currency
at rates different from those at which they monetary items, similar to Indian GAAP. an
were initially recorded during the period or entity may continue the policy adopted for
reported in previous financial statements, exchange differences arising from long term
in so far as they relate to the acquisition of foreign currency monetary items recognised
a depreciable capital asset, can be added in the financial statements for the period
to or deducted from the cost of the asset ending immediately before the beginning
and shall be depreciated over the balance of the first Ind AS financial reporting period
life of the asset and in other cases, can as per the previous GAAP, However, this
be accumulated in a “Foreign Currency option is only available in respect of those
Monetary Item. Translation Difference long term foreign currency monetary items
Account” in the financial statements and which are acquired on or before the date
amortized over the balance period of such of convergence with Ind AS.
long-term asset/liability, by recognition as
income or expense in each of such periods.
There is no time limit for availing this option.

Net investment in a non-integral foreign
operation:

Exchange differences on monetary
financial items that in substance, form

part of net investment non-integral
foreign operation is recognised in the

‘Foreign Currency Translation Reserve

‘in the separate financial statements and
recognised as income or expense at the

time of disposal of operation.

Translation in Translation of financial statement of foreign Assets and liabilities should be translated

the consolidated operation to the reporting currency of from functional currency to presentation

f i n a n c i a l the parent/investor is dependent upon currency at the closing rate at the date of the

statements the classification of the said operation as statement of financial position.

integral or non-integral.

18 BCAS
Referencer
2020-2021

Accounting Standards

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in
Derivatives Foreign Exchange Rates Foreign Exchange Rates

Integral foreign operation: Income and expenses should be translated at

a) Monetary assets are translated at actual/average rates for the period.

closing rate. Exchange differences are recognised in other

b) Non-monetary items are translated comprehensive income and accumulated in a

at historical rate if they are valued at separate component of equity.

cost. These are reclassified from equity to profit or

c) Non-monetary items which are carried loss (as a reclassification adjustment) when

at fair value or other valuation basis the gain or loss on disposal is recognised.
are reported using closing rate.
Loss of control:
d) Income and expense items are
translated at historical/average rate. Treatment of disposal depends on whether
control is lost or not. Thus, if control is lost,
e) Exchange differences are taken to the the exchange difference attributable to the
statement of profit and loss.
parent is reclassified to profit or loss from

Non-integral foreign operations foreign currency translation reserve in other

a) All assets and liabilities are to be comprehensive income.
translated at closing rate.

b) Profit and loss account items are
translated at actual/average rates).

The resulting exchange difference is taken
to Foreign Currency Translation Reserve
and is transferred to profit and loss on
the disposal of the non-integral foreign
operation.

Loss of control:

Treatment for disposal does not depend
on whether control over a foreign
subsidiary is lost or not. Even if control
is lost, only proportionate amount of
exchange difference in the foreign currency
translation reserve is recycled to statement
of profit and loss.

AS 11 applies to exchange differences on Ind AS 21 includes within its scope
all forward exchange contracts including the foreign currency derivatives that are
those entered into to hedge the foreign not within the scope of Ind AS 109 (e.g.
‘currency risk of assets and liabilities. some foreign currency derivatives that are
However, AS 11 is not applicable to the embedded in other contracts)
exchange difference arising on forward Further, Ind AS 21 is applicable when
exchange contracts entered into to amounts relating to derivatives are translated
hedge the foreign currency risks of future from its functional currency to its presentation
transactions covered by firm commitments currency
or which are highly probable forecast
transactions.

BCAS 19
Referencer
2020-2021

Accounting and Auditing

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in
Foreign Exchange Rates Foreign Exchange Rates

F o r w a r d Contracts not intended for trading or

e x c h a n g e speculation purposes:

contracts a) Any premium or discount arising at
the inception of a forward exchange
contract is amortized as expense or
income over the life of the contract.

b) Exchange differences on such a
contract are recognized in the
statement of profit and loss in
the reporting period in which the
exchange rates change.

Exchange difference on such forward
exchange contracts is the difference
between:

(a) the foreign currency amount of
contract translated at the exchange
rate at the reporting date or the
settlement date where the transaction
is settled during the reporting period,
and

(b) the same foreign currency amount Forward exchange contracts and other similar
translated at the later of the date of financial instruments which are covered under
inception of the forward exchange Ind AS 109, are excluded
contract and the last reporting date.

Contracts intended for trading or
speculation purposes:

The premium or the discount on the
contract is ignored at each balance sheet
date. The value of the contract is marked
to its current market value and the gain or
loss on the contract is recognized

II. ASSETS AND LIABILITIES

Property Plant and Equipment: Significant Difference between AS 10 and Ind AS 16

TOPIC AS 10 Property, Plant and Equipment IND AS 16 Property, Plant and Equipment

Review of Estimates with respect to residual value The residual value should be reviewed at

residual value are not required to be reviewed and least at each financial year-end and, the

updated. change(s) shall be accounted for as a change

in an accounting estimate in accordance with
Ind AS 8.

Reassessment of Needs to be reviewed periodically. Reviewed at least at each financial year- end

useful life However, the timelines are not specified or more frequently if circumstances warrant.

20 BCAS
Referencer
2020-2021

Accounting Standards

TOPIC AS 10 Property, Plant and Equipment IND AS 16 Property, Plant and Equipment

Frequency of No equivalent guidance Revaluations are required to be made with
revaluation sufficient regularity to ensure that the carrying

value does not differ materially from the fair
value at the end of the previous reporting

period.

Government AS 12 provides an option of reducing the Ind AS 20 does not allow the same.

grant received for grant received from the gross value of the

PPE asset concerned.

Cost of major Costs of major inspections are generally Cost of major inspections is recognized in the
Inspections
expensed when incurred. carrying amount of PPE, if recognition criteria

are satisfied and any remaining carrying
amount of the cost of previous inspection is

derecognized.

Intangible Assets: Significant Differences between
AS 26 and Ind AS 38

TOPIC AS 26 IND AS 38

Separately No such provision In the case of separately acquired intangibles,
the criterion of probable inflow of expected
acquired future economic benefits is always considered
satisfied, even if there is uncertainty about
Intangible assets the timing or the amount of the inflow.

Revenue based Does not specifically deal with revenue There is a rebuttable presumption that
amortization
method based amortization method an amortization method that is based on

the revenue generated by an activity that

includes the use of an intangible asset

is inappropriate. Ind AS 38 allows use of

revenue based method of amortization of

intangible asset, in a limited way

Payment No such provision If payment for an intangible asset is deferred
deferred beyond beyond normal credit terms, the difference
normal credit between this amount and the total payments
terms is recognized as interest expense over the
period of credit unless it is capitalized as per
Ind AS 23

Acquired in Refers only to intangible assets acquired Ind AS 38 deals in detail in respect of
Business in an amalgamation in the nature of intangible assets acquired in a business
combination purchase and does not refer to business combination.
combinations as a whole

BCAS 21
Referencer
2020-2021

Accounting and Auditing

TOPIC AS 26 IND AS 38
Intangible assets
acquired in When an asset is acquired in exchange Requires that if an intangible asset is
exchange for another asset, its cost is usually acquired in exchange of a non- monetary

Intangible Assets determined by reference to the fair market asset, it should be recognized at the fair
acquired Free value of the consideration given. It may be value of the asset given up unless (a) the
of Charge or
for a Nominal appropriate to consider also the fair market exchange transaction lacks commercial
Consideration value of the asset acquired if this is more substance or (b) the fair value of neither
by way of
Government clearly evident. An alternative accounting the asset received nor the asset given up is
Grant treatment to record the asset acquired at reliably measurable.
Useful life of an
intangible asset the net book value of the asset given up;
in each case an adjustment is made for
Valuation model
any balancing receipt or payment of cash
Change in or other consideration also.
method of
amortization Intangible assets acquired free of charge When intangible assets are acquired free of

or for nominal consideration by way of charge or for nominal consideration by way
government grant is recognized at nominal of government grant, an entity should, in

value or at acquisition cost, as appropriate accordance with Ind AS 20, record both the
plus any expenditure that is attributable to grant and the intangible asset at fair value.

making the asset ready for intended use.

Assumption that the useful life of an Recognizes that the useful life of an

intangible asset is always finite, and intangible asset could even be indefinite

includes a rebuttable presumption that the subject to fulfillment of certain conditions, in

useful life cannot exceed ten years from which case it should not be amortized but

the date the asset is available for use. should be tested for impairment.

Revaluation model is not permitted model Permits an entity to choose either the cost

as its accounting policy model or the revaluation

Change in the method of amortization is a This would be a change in accounting

change in accounting policy estimate.

IND AS 40 : Investment Property (No Recognition
corresponding standard under IGAAP, except – Probable that future economic benefits that are
that AS-13 provides for the cost model to be
adopted on similar lines as for Property, Plant and associated with the investment property will flow
Equipment) to entity.

Definition of Investment Property – The cost of investment property can be
Investment property is property (land or building or measured reliably.
part of a building or both) held by the owner or by the
lessee as a right to use the asset) to earn rentals or Measurement at Recognition
for capital appreciation or both rather than for: An owned investment property shall be measured
initially at cost. Transaction costs are included in the
– Use in the production or supply of goods or initial investment.
service or for administrative purpose or
Deferred payments:- If payment for an investment
– Sale in the ordinary course of business property is deferred, its cost is the cash price
equivalent.

22 BCAS
Referencer
2020-2021