(i) The financial instruments to which Ind AS 39 does not apply include financial instruments issued by the entity that meet the definition of an equity instrument in Ind AS 32 (including options and warrants) or that are required to be classified as an equity instrument in accordance with paragraphs 16A and 16B or paragraphs 16C and 16D of Ind AS 32. The existing standard does not exclude the latter. (Paragraph 2(d) of Ind AS 39).
(ii) As per Paragraph 2(f) of AS 30, the contracts for contingent consideration in a business combination in case of acquirers are exempted from the scope of the Standard. However, Ind AS 39 does not include this exemption.
(iii) Paragraph 8.2(a)(ii) of AS 30 states that a financial asset or financial liability at fair value through profit or loss is classified as held for trading if ‘it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking’. Ind AS 39 states that a financial asset or financial liability at fair value through profit or loss is classified as held for trading if ‘on initial recognition it is part of a portfolio of identified financial instruments………’. The existing standard does not use the words ‘on initial recognition’.
(iv) Ind AS 39 does not include the paragraph ‘this would normally be relevant in case of a venture capital organisation, mutual fund, unit trust or similar entity whose business is investing in financial assets with a view to profiting from their total return in the form of interest or dividends and changes in fair value corresponding to paragraph 8.2(b)(ii) of AS 30 when a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
(v) Ind AS 39 states that ‘an entity shall not reclassify any financial instrument out of the fair value through profit or loss category if upon initial recognition it was designated by the entity as at fair value through profit or loss; and may, if a financial asset is no longer held for the purpose of selling or repurchasing it in the near term (notwithstanding that the financial asset may have been acquired or incurred principally for the purpose of selling or repurchasing it in the near term), reclassify that financial asset out of the fair value through profit or loss category if the requirements in paragraph 50B or 50D are met.’ AS 30 prohibits any financial instruments into or out of the category of financial instruments designated at fair value through profit or loss. (Paragraph 50(b) of Ind AS 39)
(vi) AS 30 states that ‘an entity should not reclassify a financial instruments into or out of the fair value through profit or loss category while it is held or issued’ while Ind AS 39 states that ‘an entity shall not reclassify a derivative out of the fair value through profit or loss category while it is held or Issued.’ (Paragraph 50 of Ind AS 39).
(vii) Ind AS 39 (Application Guidance on effective interest rate) specifically states that ‘if a financial asset is reclassified in accordance with paragraphs 50B, 50D or 50E, and the entity subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase shall be recognised as an adjustment to the effective interest rate from the date of the change in estimate rather than as an adjustment to the carrying amount of the asset at the date of the change in estimate.’ AS 30 does not specify so. (AG 8 of Ind AS 39).
(viii) The following paragraph has been added in Ind AS 39: ‘if an entity is unable to measure separately the embedded derivative that would have to be separated on reclassification of a hybrid (combined) contract out of the fair value through profit or loss category, that reclassification is prohibited. In such circumstances the hybrid (combined) contract remains classified as at fair value through profit or loss in its entirety.’ (Paragraph 12, of Ind AS 39)
(ix) Ind AS 39 modifies paragraph 2(g) of the existing standard as any forward contracts between an acquirer and a selling shareholder to buy or sell an acquiree that will result in a business combination at a future acquisition date. The term of the forward contract should not exceed a reasonable period normally necessary to obtain any required approvals and to complete the transaction.’ (Paragraph 2(g), of Ind AS 39)(Changes shown in bold)
(x) Paragraph 80 of AS 39 states that ‘for hedge accounting purposes, only assets, liabilities, firm commitments or highly probable forecast transactions that involve a party external to the entity can be designated as hedged items. It follows that hedge accounting can be applied to transactions between entities or segments in the same group only in the individual or separate financial statements of those entities or segments and not in the consolidated financial statements of the group.’ The words ‘or segments’ have been deleted in Ind AS 39. (Paragraph 80 of Ind AS 39, paragraph 89 of AS 30)
(xi) Paragraph 97 of Ind AS 39 modifies paragraph 108 of AS 30 to state ‘if a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised in other comprehensive income in accordance with paragraph 95 shall be reclassified from equity to profit or loss as a reclassification adjustment (see Ind AS 1) in the same period or periods during which the hedged forecast cash flows affects profit or loss (such as in the periods that interest income or interest expense is recognised). However, if an entity expects that all or a portion of a loss recognised in other comprehensive income will not be recovered in one or more future periods, it shall reclassify into profit or loss as a reclassification adjustment the amount that is not expected to be recovered.’ (Paragraph 97 of Ind AS 39, AS 30, paragraph 108 of AS 30) (Changes shown in bold)
(xii) The financial instruments to which Ind AS 39 does not apply include financial instruments issued by the entity that meet the definition of an equity instrument in Ind AS 32 (including options and warrants) or that are required to be classified as an equity instrument in accordance with paragraphs 16A and 16B or paragraphs 16C and 16D of Ind AS 32. The existing standard does not refer to the latter. (Paragraph 2(d) of Ind AS 39)
(xiii) Ind AS 39 does not exempt contracts for contingent consideration in a business combination from its scope while the existing standard provides an exemption. In the existing standard, the exemption applies only to the acquirer. (Paragraph 2(f) of Ind AS 39).
(xiv) Ind AS 39 provides that in determining the fair value of the financial liabilities which upon initial recognition are designated at fair value through profit or loss, any change in fair value consequent to changes in the entity’s own credit risk shall be ignored. AS 30, however, requires all changes in fair values in case of such liabilities to be recognised in profit or loss.
(xv) Ind AS 39 gives guidance on- (i) Reassessment of Embedded Derivatives (ii) Hedges of a Net Investment in a Foreign Operation and Extinguishing Financial Liabilities with Equity Instruments. AS 30 does not give such guidance.
Ind AS 103, Business Combinations, and existing AS 14, Accounting for Amalgamations
(i) Ind AS 103 defines business combination which has a wider scope whereas the existing AS 14 deals only with amalgamation. (Appendix A of Ind AS 103 and Paragraph 1 of existing AS 14)
(ii) Under the existing AS 14 there are two methods of accounting for amalgamation. The pooling of interest method and the purchase method. Ind AS 103 prescribes only the acquisition method for each business combination. (Paragraph 7 of existing AS 14 and paragraph 4 of revised AS 14)
(iii) Under the existing AS 14, the acquired assets and liabilities are recognised at their existing book values or at fair values under the purchase method. Ind AS 103 requires the acquired identifiable assets liabilities and non-controlling interest to be recognised at fair value under acquisition method. (Paragraph 12 of existing AS 14 and paragraphs 18-19 of Ind AS 103)
(iv) Ind AS 103 requires that for each business combination, the acquirer shall measure any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. On other hand, the existing AS 14 states that the minority interest is the amount of equity attributable to minorities at the date on which investment in a subsidiary is made and it is shown outside shareholders’ equity. (Paragraph 13 (e) of existing AS 21 and paragraph 19 of Ind AS 103)
(v) Under Ind AS 103, the goodwill is not amortised but tested for impairment on annual basis in accordance with Ind AS 36.The existing AS 14 requires that the goodwill arising on amalgamation in the nature of purchase is amortised over a period not exceeding five years. (Paragraph 19 of existing AS 14 and paragraphs B63 (a) of Appendix B of Ind AS 103)
(vi) Ind AS 103 deals with reverse acquisitions whereas the existing AS 14 does not deal with the same. (Paragraph B 19-B27 of Ind AS 103)
(vii) Under Ind AS 103, the consideration the acquirer transfers in exchange for the acquiree includes any asset or liability resulting from a contingent consideration arrangement. The existing AS 14 does not provide specific guidance on this aspect. (Paragraph 39 of Ind AS 103)
(viii) Ind AS 103 requires bargain purchase gain arising on business combination to be recognised in other comprehensive income and accumulated in equity as capital reserve, unless there is no clear evidence for the underlying reason for classification of the business combination as a bargain purchase, in which case, it shall be recognised directly in equity as capital reserve. Under existing AS 14 the excess amount is treated as capital reserve (paragraph 34 of Ind AS 103 and paragraph 17 of the existing AS 14).
(ix) Appendix C of Ind AS 103, deals with accounting for common control transactions, which prescribes a method of accounting different from Ind AS 103. Existing AS 14 does not prescribe accounting for such transactions different from other amalgamations.
Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, and the existing AS 24 (issued 2002), Discontinuing Operations
(i) Ind AS 105 specifies the accounting for non- current assets held for sale, and the presentation and disclosure of discontinued operations. The existing AS 24 establishes principles for reporting information about discontinuing operations. It does not deal with the non-current assets held for sale; fixed assets retired from active used and held for sale, are dealt in existing AS 10, Accounting for Fixed Assets. (Paragraph 1 of Ind AS 105 and ‘Objective’ of existing AS 24 )
(ii) In the existing AS 24, requirements related to cash flow statement are applicable when the enterprise presents a cash flow statement. Ind AS 105 does not mention so. (Paragraph 2 of existing AS 24 )
(iii) Under Ind AS 105, a discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale. In the existing AS 24, there is no concept of discontinued operations but it deals with discontinuing operations.
(iv) As per Ind AS 105, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification with certain exceptions. The existing AS 24 does not specify any time period in this regard as it relates to discontinuing operations
(v) The existing AS 24 specifies about the initial disclosure event in respect to a discontinuing operation. Ind AS 105 does not mention so as it relates to discontinued operation. (Paragraph 15 of existing AS 24)
(vi) Under Ind AS 105, non-current assets (disposal groups) held for sale are measured at the lower of carrying amount and fair value less costs to sell, and are presented separately in the balance sheet. The existing AS 24 requires to apply the principles set out in other relevant Accounting Standards, e.g., the existing AS 10 requires that the fixed assets retired from active use and held for disposal should be stated at the lower of their net book value and net realisable value and shown separately in the financial statements. (Paragraphs 15 and 38 of Ind AS 105 and Paragraph 18 of existing AS 24 and Paragraph 14.2 of existing AS 10 )
(vii) Ind AS 105 specifically mentions that abandonment of assets should not be classified as held for sale. In the existing AS 24, abandonment of assets is classified as a discontinuing operation; however changing the scope of an operations or the manner in which it is conducted is not abandonment and hence not a discontinuing operation. (Paragraph 7 of existing AS 24 and paragraph 13 of Ind AS 105).
(viii) Ind AS 105 provides guidance regarding measurement of changes to a plan of sale. The existing AS 24 does not give any specific guidance regarding this aspect. (Paragraphs 26-29 of Ind AS 105).
(ix) As per Ind AS 105, a discontinued operation is a component of an entity that represents a separate major line of business or geographical area, or is a subsidiary acquired exclusively with a view to resale. Under the existing AS 24, a discontinuing operation is a component of an entity that represents the major line of business or geographical area of operations and that can be distinguished operationally and for financial reporting purposes. (Paragraph 3 of existing AS 24 and paragraph 32 of Ind AS 15).
Ind AS 107, Financial Instruments: Disclosures, and the existing AS 32 (Issued 2008) Financial Instruments: Disclosures
(i) The existing AS 32 does not apply to contracts for contingent consideration in a business combination in case of acquirers. Ind AS 107 does not exempt such contracts. (Paragraph 3 (c) of existing AS 32)
(ii) Ind AS 107 excludes from its scope puttable instruments dealt with by Ind AS 32. AS 32 does not exclude the same from its scope. (Paragraph 3 (f) of Ind AS 107 )
(iii) Ind AS 107 specifies disclosures in case of reclassification of a financial asset out of fair value through profit or loss category or out of available-for-sale category in accordance with Ind AS 39. Ind AS 32 does not provide for same. (Paragraph 12A of Ind AS 107 )
(iv) Ind AS 107 requires enhanced disclosures about fair value measurements and liquidity risk, as compared to existing AS 32. (Paragraphs 27, 27A-27B, 39, definition of liquidity risk, paragraphs B10A, B11, B11A-B11F of Appendix B and paragraphs IG13A-IG13B of Implementation Guidance of Ind AS 107. Paragraphs B12-B16 of Appendix B and IG 30-31 of Implementation Guidance of existing AS 32 has been deleted.)
Ind AS 108 Operating Segments, and the existing AS 17 (Issued 2000), Segment Reporting
(i) Identification of segments under Ind AS 108 is based on ‘management approach’ i.e. operating segments are identified based on the internal reports regularly reviewed by the entity’s chief operating decision maker. Existing AS 17 requires identification of two sets of segments—one based on related products and services, and the other on geographical areas based on the risks and returns approach. One set is regarded as primary segments and the other as secondary segments.
(ii) Ind AS 108 requires that the amounts reported for each operating segment shall be measured on the same basis as used by the chief operating decision maker for the purposes of allocating resources to the segment and assessing its performance. Existing AS 17 requires segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements. Accordingly, existing AS 17 also defines segment revenue, segment expense, segment result, segment assets and segment liabilities.
(iii) Ind AS 108 specifies aggregation criteria for aggregation of two or more segments. Existing AS 17 does not deal specifically with this aspect.
(iv) An explanation has been given in the existing AS 17 that in case there is neither more than one business segment nor more than one geographical segment, segment information as per this standard is not required to be disclosed. However, this fact shall be disclosed by way of footnote. Ind AS 108 requires certain disclosures even in case of entities having single reportable segment.
(v) An explanation has been given in the existing AS 17 that interest expense relating to overdrafts and other operating liabilities identified to a particular segment should not be included as a part of the segment expense. It also provides that in case interest is included as a part of the cost of inventories and those inventories are part of segment assets of a particular segment, such interest should be considered as a segment expense. These aspects are specifically dealt with keeping in view that the definition of ‘segment expense’ given in AS 17 excludes interest. Ind AS 108 requires the separate disclosures about interest revenue and interest expense of each reportable segment, therefore, these aspects have not been specifically dealt with.
(vi) Ind AS 108 requires disclosures of revenues from external customers for each product and service. With regard to geographical information, it requires the disclosure of revenues from customers in the country of domicile and in all foreign countries, non-current assets in the country of domicile and all foreign countries. It also requires disclosure of information about major customers. Disclosures in existing AS 17 are based on the classification of the segments as primary or secondary segments. Disclosure requirements for primary segments are more detailed as compared to secondary segments.
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