AS 1 vs. ICDS I – Accounting policies
|
Concept of Prudence modified
|
Provision is made for all known liabilities and losses on best estimate basis
|
Marked to market (MTM) loss or an expected loss shall not be recognised unless permitted by any other ICDS
Changes in the Act – New section 36(1)(xviii) to allow deduction of MTM or other expected loss computed as per ICDS is being inserted in Act.
|
Anticipated profits are not recognised
|
ICDS silent on recognition of anticipated profits
|
Materiality omitted
|
Materiality should be considered while selecting and applying accounting policy
|
Concept of Materiality not recognised in ICDS
|
Change in Accounting Policy
|
Change in accounting policy permitted if (a) required by statute; (b) required for compliance of AS; (c) change results in more appropriate presentation of financial statements
|
Accounting policies shall not be changed without a “reasonable cause”
|
Disclosure of change in accounting policy
|
Required in period of change, if impact is not material in current period but material in later periods
|
Required in period of change and also required in first year in which change has material effect, if impact is not material in current period but material in later periods
|
AS 2 vs. ICDS II – Valuation of inventories
|
Valuation of service inventory
|
No specific provision
|
Valuation at cost6 or net realisable value (NRV), whichever is lower
Changes in the Act – Section 145A amended to provide inter alia that inventory shall be valued at lower of actual cost or NRV computed in the manner provided in ICDS.
|
Inventory valuation methods
|
Inventory valuation methods are (a) first-in, first-out (FIFO); (b) weighted average cost formula; (c) specific identification; (d) retail method; (e) standard cost method
|
Same as AS.
Kindly note that Standard Costing method which was not permitted under erstwhile ICDS is now permitted under ICDS-2016.
|
Opening inventory
|
No specific provision
|
- Value of opening inventory of a business shall be the same as the value of inventory at the end of the immediately preceding financial year
- In case of commencement of business, Cost of inventory on the day of commencement of business will be opening inventory
|
Change in method of inventory valuation
|
Change permitted if (a) required by statute; (b) required for compliance of AS; (c) change results in more appropriate presentation of financial statements
|
Method of valuation once adopted shall not be changed without “reasonable cause”
|
Inventory valuation in case of certain dissolutions
|
No specific provision
|
In case of partnership firm, AOP or BOI7 inventory on the date of dissolution shall be valued at NRV, whether or not business is discontinued
|
AS 7 vs. ICDS III – Construction contracts
|
Recognition of contract revenue
|
Contract revenue to be recognised if it is possible to reliably measure the outcome of a contract
|
- The criteria of ‘reliable measurement of outcome of contract’ omitted
- ICDS requires recognition if there is reasonable certainty of its ultimate collection
|
Retention money
|
Silent on treatment of accrual of income
|
Retention money to be considered as part of contract revenue and revenue to be recognised on percentage of completion (POCM)8 basis9
Changes in the Act – New section 43CB to provide that contract revenue shall include retention money;
|
Allowability of losses including probable / expected loss
|
Losses fully allowable irrespective of commencement, stage of completion and expected profits from other independent contracts
|
- Losses not allowable unless actually incurred and only on POCM basis
- ICDS on accounting policies also does not permit recognition of foreseeable loss
|
Contract Work-in-progress recognition
|
Contract cost which relate to future activity shall be recognised as an asset only if recoverability is probable
|
Contract cost to be recognised as an asset
|
Early stage of contract – Revenue to be recognised only to the extent of cost
|
- Revenue to be recognised only to the extent of recoverable costs
- No profit to be recognised during early stages of contract
|
Same as AS, however ICDS objectively defines early stage as not to exceed beyond 25%
|
Pre-construction incidental income
|
Contract cost may be reduced by any incidental income that is not included in contract revenue
|
Contract cost shall be reduced by any incidental income (except interest, dividend and capital gains) that is not included in contract revenue
Changes in the Act –
New section 43CB to provide that Contract cost shall not be reduced by incidental interest, dividend and capital gains.
|
AS 9 vs. ICDS IV – Revenue Recognition
|
Postponement of revenue recognition
|
Revenue recognition to be postponed if significant uncertainty exists on measurability and collectability of revenue from sale of goods, rendering of services, interest, royalties and dividends
|
Revenue to be recognised only if there is reasonable certainty of its ultimate collection from sale of goods and rendering of services
|
|
No specific guidance provided in case of export incentives.
|
Changes in the Act –
New section 145B to provide inter alia that the claim for export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved.
|
Method of revenue recognition for service contracts
|
- Proportionate completion method; or
- Straight line basis over the specific period10; or
- Any other method which better represents the patters of performance; or
- Completed service contract method
|
Erstwhile ICDS mandatorily required recognition on POCM basis.
ICDS-2016 provides following methods:
- POCM; or
- Straight line basis over the specific period10; or
- Completed service contract method permitted only if duration of service contract does not exceed ninety days.
Changes in the Act –
New section 43CB to provide that profits arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method except for certain service contracts.
|
Method to recognise interest income
|
Interest accrues, in most circumstances, on time basis
|
Interest shall accrue on time basis except for interest on refund, tax, duty or cess which shall be deemed to be the income in the year of receipt.
|
Disclosure requirement
|
Disclose circumstances in which revenue recognition has been postponed pending significant uncertainties.
|
Disclosures for amounts not recognised as revenue due to lack of reasonable certainty of its ultimate collection along with nature of uncertainty
|
AS 10 vs. ICDS V - Tangible fixed assets
|
Applicability
|
Fixed assets such as land, building, plant and machinery, vehicles, furniture and fittings, goodwill, patents, trademarks and designs.
|
Tangible fixed assets being land, building, machinery, plant or furniture
|
Component of cost
|
‘Cost’ of fixed asset comprises its purchase price, non-refundable taxes and any directly attributable cost of bringing the asset to its working condition for its intended use. Trade discount and rebates will be deducted while computing cost.
|
It has similar definition to AS 10 but words used are ‘actual cost’ as compared to ‘cost’ in AS 10.
|
Standby equipment and servicing equipment
|
AS acknowledges capitalisation of stand-by equipment and servicing equipment as a normal practice but does not mandate it.
|
ICDS ‘mandates’ capitalisation of stand-by equipment and servicing equipment.
|
Machinery spares
|
- It is ‘usually’ charged to P&L a/c on consumption.
- However, if spares are used only in connection with the item of fixed asset with irregular use then it ‘may’ be appropriate to capitalise
|
- It ‘shall’ be charged to P&L a/c on consumption.
- However, if spares are used only in connection with the item of fixed asset with irregular use then it ‘shall’ be capitalised
|
Asset acquired against non-monetary consideration
|
In case of acquisition of fixed asset in exchange for another asset, shares or other securities issued, cost of asset acquired should be recorded either at (a) fair market value of asset given up11 /shares or securities issued or (b) fair market value of asset acquired, whichever is more clearly evident
|
In case of acquisition of a tangible fixed asset in exchange for another asset, shares or other securities issued, actual cost of the tangible fixed asset shall be recorded at fair value of tangible fixed asset acquired
|
Assets acquired for consolidated price
|
Consolidated price to be apportioned to various assets on a fair basis as determined by competent valuers
|
Consolidated price shall be apportioned to various assets on a fair basis
|
Disclosure requirement
|
Gross and net book values at beginning and end of year showing additions, deletions and other movements, expenditure incurred in course of construction and revalued amount, if any
|
Description of assets/block of assets, depreciation rate and allowable depreciation, actual cost / opening WDV and closing WDV showing additions or deductions including adjustment for CENVAT, exchange difference and subsidy, grant or reimbursement12
|
AS 11 vs. ICDS VI - Effects of changes in foreign exchange rates
|
Revenue monetary items (like trade receivables, payables)
|
- Converted into reporting currency by applying the closing rate
- Exchange difference recognised in P&L a/c
|
- Converted into reporting currency by applying the closing rate
- Exchange difference recognised as income or expense in P&L a/c subject to provisions of Rule 115
|
Revenue non-monetary items
|
If item is carried at historical cost – Reported at the exchange rate on the date of transaction
|
Non-monetary item except inventory – To convert into reporting currency using the exchange rate at the date of the transaction
|
If item is carried at fair value -Reported at the exchange rate that existed when the value was determined
|
Non-monetary item being inventory – Reported using the exchange rate that existed when such value was determined [Inserted in ICDS-2016]
|
Capital monetary items – Relating to imported assets and domestic assets
|
- Requires recognition in P&L A/c
- Option of capitalisation u/s 211(3C) of Cos Act, 1956 as per which exchange differences arising in case of long-term foreign currency monetary items shall be either adjusted to capital asset or accumulated in FCMITDA13 (Paras 46 & 46A)
|
- Requires recognition as income or expense subject to provisions of s.43A 14
- No paras 46 and 46A exists
- No distinction recognised between capital and revenue items
|
Foreign operations
|
Foreign operation is a subsidiary, associate, joint venture or branch of the reporting enterprise, the activities of which are based or conducted in a country other than the country of the reporting enterprise.
|
Foreign operations of a person is a branch, by whatever name called, of that person, the activities of which are based or conducted in a country other than India.
|
Integral foreign operation
|
- Same principles as for own assets and liabilities
- Exchange differences are recognised in P&L A/c
|
- Subject to S.43A and Rule 115, similar to AS 11
- No distinction recognised between capital and revenue items
|
Non-integral foreign operations
|
- All assets & liabilities and income & expense items are translated at closing rates
- Exchange differences are accumulated in FCTR15 A/c and to be taken to P&L a/c on disposal of non-integral foreign operations
|
ICDS 2016 removes distinction between integral and non-integral foreign operation as provided under erstwhile ICDS and therefore treatment applicable to integral foreign operation (as discussed above) also applicable to non-integral foreign operations
|
Forex derivatives for hedging purpose (Capital and revenue a/c)
|
- Premium/discount is amortised over life of contract
- Restated on MTM basis at year end and difference is recognized in P&L
- Profit/loss on cancellation or renewal is also recognised in P&L
|
Same as AS without distinguishing between contracts on capital account and revenue account (subject to s.43A applicable to imported assets)
|
Forex derivative for trading / speculation purposes / firm commitments /highly probable forecast transactions
|
- Forward contract is restated at year end on mark to market basis and difference is recognised in P&L
- No amortisation of premium/discount
|
- Premium, discount or exchange difference shall be recognized at the time of settlement
- No distinction recognised between contracts on capital account and revenue account
Changes in the Act –
New section 43AA to provide that subject to the provisions of section 43A, any foreign exchange gain or loss in respect of specified foreign currency transactions shall be treated as income or loss, and such gain or loss shall be computed as per ICDS
|
Forex derivatives not covered by ICDS VI (futures, interest rate swaps, etc.)
|
- Not covered by AS 11 being a derivative contract covered by AS 30, 31 & 32 which are yet to be notified under Companies Act, 2013
- Currently ICAI Guidance Note requires recognition of loss on MTM basis but gain to be ignored
|
- Forex derivatives not covered by ICDS VI.
- ICDS I on accounting policies provides that MTM loss or an expected loss shall not be recognised unless permitted under other ICDS.
|
AS 12 vs. ICDS VII – Government Grants
|
Recognition of grant
|
- On reasonable assurance of compliance of attached conditions and reasonable certainty of ultimate collection
- Mere receipt of grant is not sufficient
|
- On reasonable assurance of compliance of attached conditions and reasonable certainty of ultimate collection
- Recognition cannot be postponed beyond date of actual receipt
Changes in the Act –
New section 145B to provide that income referred to in section 2(24)(xviii) i.e. grant, subsidy, etc. from the Government, shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year.
|
Grant in the nature of promoters contribution
|
To be credited to capital reserve and to be treated as shareholders’ funds
|
- ICDS silent on this category 16
- Refer discussion at para II(a)
|
Grants relatable to depreciable fixed assets
|
To be reduced from cost or recognised as deferred revenue by systematic credit to P&L A/c
|
To be reduced from cost of fixed asset [in line with Explanation 10 to S. 43(1)]
|
Relatable to non-depreciable fixed assets
|
- To be credited as capital reserve, if no conditions attached to the grant
- To be credited to P&L A/c over period of incurring cost of meeting conditions of grant
|
- To be considered as income on an upfront basis, if there are no conditions attached to grant [Refer discussion at para II(a)]
- To be treated as income over period over which cost of meeting conditions is incurred
|
Grants other than those covered above
|
Revenue grant to be credited as income or reduced from related expense
|
Grant17 to be treated as income over period over which cost of meeting conditions is incurred. [Refer discussion at para II(a)]
|
Compensation for expenses / loss incurred or for giving immediate financial support
|
To be recognised as income in the year in which it is receivable
|
To be recognised as income in the year in which it is receivable
|
Disclosure requirement
|
Accounting policy adopted for grants including the method of presentation, extent of recognition in the financial statements, accounting of non-monetary assets given at concession/free of cost
|
Requires disclosure of nature and extent of recognised as well as unrecognised grants. It also requires disclosure of reasons for non-recognition of grant
|
AS 13 vs. ICDS VIII – Securities
|
Applicability
|
- AS applicable to accounting for investments
- AS clarifies that principles applicable to ‘current investments’ can apply to securities held as stock-in-trade
|
- ICDS applicable to securities held as stock-in-trade 18
- ‘Securities’ defined to have meaning assigned in S.2(h) of SCRA19 and shall include shares of a company in which public are not substantially interested except derivatives referred in S.2(h)(1a) of SCRA
|
Security acquired against non-monetary consideration
|
In case of acquisition of securities in exchange for shares or other securities issued or another asset, cost of security acquired should be recorded either at (a) fair market value of securities issued or (b) fair market value of asset given up, whichever is more clearly evident
|
In case of acquisition of securities in exchange for other securities issued or another asset, actual cost of security acquired shall be recorded at fair value of security acquired
|
Year-end valuation of securities
|
Current investments to be valued at lower of cost or fair value either on individual investment basis or by category of investment but not on global basis
|
- Securities should be valued at lower of cost or NRV. Comparison of cost and NRV shall be done category-wise.
- Securities are classified under following categories (a) shares; (b) debt; (c) convertible securities; and (d) other securities
Changes in the Act –
Section 145A amended to provide interalia. Inventory of listed securities shall be valued at lower of actual cost or NRV in the manner provided in ICDS and for this purpose, comparison of actual cost and NRV shall be done category-wise.
|
Opening value of securities
|
No specific provision
|
- Value of opening inventory of securities shall be the same as the value of securities at the end of the immediately preceding financial year.
- In case of commencement of business, Cost of security on the day of commencement of business will be opening value.
|
Valuation of unlisted or thinly traded securities
|
No specific provision
|
Valuation of unlisted or thinly traded securities shall be valued at actual cost initially recognised
Changes in the Act –
Section 145A amended to provide inter alia that Inventory of unlisted, or listed but not quoted securities, shall be valued at actual cost initially recognised as per ICDS;
|
Ascertainment of cost
|
Cost formulae are the same as those specified in AS 2 (e.g. FIFO; average cost, etc.)
|
Cost which cannot be ascertained by specific identification shall be determined on the basis of FIFO method or weighted average cost formulae.
|
Securities held by scheduled bank or public financial institutions
|
Nothing specific
|
Provided under Part B of the ICDS-2016
- Securities20 shall be classified, recognised and measured in accordance with RBI guidelines and any excess deduction claim shall be ignored
- To such extent provisions of ICDS-VI to not apply
|
AS 16 vs. ICDS IX – Borrowing costs
|
Borrowing cost
|
Borrowing cost includes exchange difference to the extent that they are regarded as an adjustment to interest costs
|
Borrowing cost does not include exchange differences arising from foreign currency borrowings
|
Qualifying assets
|
Qualifying asset defined to be an asset which necessarily takes a substantial21 period of time to get ready for its intended use or sale
|
Qualifying assets means 22
- Inventory that require a period of 12 months or more to bring them to a saleable condition
- Specified tangible and intangible assets are qualifying assets (regardless of substantial period condition for specific borrowing and for a period of 12 months or more in case of general borrowing)
|
Commencement and cessation of capitalisation
|
In case of specific borrowing
|
|
|
Capitalisation will commence when all the three conditions are satisfied (a) incurrence of capital expenditure; (b) incurrence of borrowing cost; (c) construction activity is in progress and cessation from the date when asset is ready to use
|
Capitalisation will commence from date of borrowing of funds and cessation from the date when asset is put to use23
|
|
In case of general borrowing
|
|
|
Same as in the case of specific borrowing
|
Capitalisation will commence from date of utilisation of funds and cessation from the date when asset is put to use24
|
Methodology of capitalisation
|
In case of specific borrowing
|
|
Directly attributable to borrowing cost
|
Directly attributable to borrowing cost
|
In case of general borrowing
|
|
Weighted average cost of borrowing applied to capital expenditure
|
Pro-rata borrowing cost allocation as per normative formulae (Refer note 2)
|
Income from temporary deployment of funds
|
Income from temporary deployment of unutilised funds from specific loans to be reduced from borrowing cost
|
No similar provision in ICDS
|
Suspension of capitalisation
|
Capitalisation of borrowing costs should be suspended during extended periods in which active development is interrupted
|
No similar provision in ICDS
|
AS 29 vs. ICDS X - Provisions, Contingent Liabilities and Contingent Assets
|
Onerous executory contracts
|
- Includes onerous executory contracts within its scope
- Upfront recognition of liabilities required under onerous contracts
|
Onerous executory contracts excluded from the scope of ICDS
|
Recognition of provision
|
- Provision shall be recognised when it is ”probable” that an outflow of economic resources will be required to settle an obligation
- Provision is not discounted to NPV
|
- Provision shall be recognised when it is ”reasonably certain” that an outflow of economic resources will be required to settle an obligation
- Provision is not discounted to NPV
|
Recognition of contingent asset and reimbursement claims
|
Contingent asset / reimbursement claims are recognised when the realisation of related income is ”virtually certain”
|
Contingent asset / reimbursement claims are recognised when the realisation of related income is ”reasonably certain”
|
Meaning of obligation
|
Clarifies that obligations may be legally enforceable and may also arise from normal business practice, custom and a desire to maintain good business relations or act in an equitable manner.
|
No specific guidance on meaning of ‘obligation’
|