Accounting Differences

Subject Special purposes entities (SPEs) IFRS Consolidate substance relationship control. Indian GAAP where the No specific guidance. of the indicates

Non-consolidation of Dissimilar activities or Only if acquired and held for resale or subsidiaries temporary control are not a there are severe long-term restrictions to justification for non- transfer funds to the parent. consolidation. Business combinations All business combinations No comprehensive accounting standard on are acquisitions. business combinations. All business combinations are acquisition; however, required use of pooling of interests method in certain amalgamations [when all the specified conditions are met]. To summarize: On consolidation, for an entity acquired and held as an investment: treated as acquisition. On amalgamation of an entity, either uniting of interests or acquisition. On business acquisition (i.e. assets and liabilities only) treated as

Subject

IFRS

Indian GAAP Required for certain amalgamations when all the specified conditions are met, else accounted under the purchase method. Capitalise if recognition criteria are met; intangible assets must be amortised over useful life with a rebuttable presumption of not exceeding 10 years. Revaluations not permitted.

Uniting of interests method Prohibited.

Acquired intangible assets

Capitalise if recognition criteria are met; intangible assets must be amortised over useful life. Intangibles assigned an indefinite useful life must not be amortised but reviewed annually for impairment. Revaluations are permitted in rare circumstances. Use historical cost or revalued amounts. Regular valuations of entire classes of assets are required when revaluation option is chosen.

Property, plant and equipment

Use historical cost. Revaluations are permitted, however, no requirement on frequency of revaluation. On revaluation, an entire class of assets is revalued, or selection of assets is made on a systematic basis.

Depreciation

Allocated on a systematic basis Similar to IFRS, except where the to each accounting period over useful life is shorter than that the useful life of the asset. envisaged under the Companies Act or the relevant statute, the

Subject

IFRS

Indian GAAP Recognise tax effect of timing difference as deferred tax asset or liability. Recognise deferred tax assets (a) for entities with tax losses carry forward, if realisation is virtually certain, whereas (b) for entities with no tax losses carry forward, if realisation is reasonably certain. A number of other specific differences.

Deferred income taxes Use full provision method (some exceptions) driven by balance sheet temporary differences. Recognise deferred tax assets if recovery is probable.

Fringe benefits tax

Included as part of related Disclosed as a separate item after expense (fringe benefit) which profit before tax on the face of the gives rise to incurrence of the income statement. tax.

Subject Compensated absences Preliminary expenses

IFRS

Indian GAAP

Provision on actual cost to Provision based on actuarial the company basis valuation Charged statement. Origination amortized to income Deferred and written off over the period of 5 years. cost is Charged to Profit and loss account All preference shares are classified as shareholders funds. Provision in the accounts is normally made on the basis of actuarial valuation no specific method is prescribed

loans Origination Cost Financial liabilities classification

- Mandatory redeemable preference shares are classified as liabilities.

Employee benefits - Must use the projected Pension costs defined unit credit method to benefit plans determine benefit obligation

Subject Depreciation

IFRS

Indian GAAP

Allocated on a systematic basis Depreciation is provided based on the to each accounting period over useful lives of assets or the minimum rates the useful life of the asset. prescribed by the Indian Companies Act, whichever is higher. Asset lives are not prescribed by the Companies Act, but can be derived from the depreciation rates. of Permitted, but not required for Compulsory when relates qualifying assets. construction of certain assets. to the

Capitalisation borrowing costs

Foreign exchange Under IAS such gains or losses Indian GAAP requires that any profit/loss fluctuation are required to be expensed arising on the restatement of foreign exchange liabilities incurred for the acquisition of imported fixed assets as a result of change in exchange rates is capitalized as part of the original cost of the assets. Impairment of long IAS require that assets be lived assets reviewed for impairment and impairment losses recognized in the accounts Indian GAAP also has adopted the provisions of IFRS with effect from 1.4 2004 for listed companies and commercial enterprise with a turnover > 50 crores

Leasehold Land Disclosed as prepaid Disclosed as a part of fixed assets. assets and accounting treatment is similar to operating leases.

Subject

IFRS

Indian GAAP

Changes in Restate comparatives and prior-year Include effect in the income statement accounting policies opening retained earnings. of the period in which the change is made except as specified in certain standards where the change resulting from adoption of the standard has to be adjusted against opening retained earnings. Correction of Restatement fundamental errors mandatory. Deferred Taxes of comparatives is Include effect in the current year income statement with appropriate disclosure Deferred tax assets and liabilities should be recognised for all timing differences subject to consideration of prudence in respect of deferred tax assets.

Use full provision method (some exceptions), driven by balance sheet temporary differences. Recognise deferred tax assets if recovery is probable.

Lease Accounting

Has been in place for a much longer Applicable since 2001 time.

Asset Retirement Obligations that are legally No such guidance available. Obligation (ARO) enforceable and unavoidable, and are associated with the retirement of tangible long-lived assets, be recorded as liabilities when those obligations are incurred and recorded at fair value.