According to the assessment of accounting and auditing practices conducted by the World Bank in 2004, considerable efforts have been made to align Indian Accounting Standards (ASs) with the International Financial Reporting Standards (IFRSs). The Institute of Chartered Accountants of India (ICAI) uses IFRSs in developing the national standards, departing in some cases from IFRSs, if justified. Over the last years, the ICAI has issued and revised several accounting standards, significantly reducing the gap between ASs and IFRSs. However, differences still exist. Certain IFRS concepts are yet to be adopted, less detailed disclosures are required in some ASs, and certain ASs are narrower in scope than equivalent IFRS. In the October 2006 message to the members of the ICAI, the President of the ICAI T. N. Manoharan announced the creation of an 11-member task force to explore the possibility of adopting all IFRSs in full, without modification, as Indian standards. As stated in the Press Release of the ICAI dated October 14, 2006, the Accounting Standards Board (ASB) of the ICAI, recognizing the growing need of full convergence of its ASs with IFRSs, will examine various issues involved and will formulate a concept paper in this regard. Full convergence would involve adoption of IFRSs in the same form as that issued by the International Accounting Standards Board (IASB) without any modifications. The concept paper would deal with legal, regulatory and other implications and in case the task force recommends full convergence for all enterprises or a class of enterprises such as listed enterprises, it would also consider laying down a road map for full convergence.

General Overview

According to the assessment of accounting and auditing practices conducted by the World Bank in 2004, considerable efforts have been made to align Indian Accounting Standards (ASs) with the International Financial Reporting Standards (IFRSs). The Institute of Chartered Accountants of India (ICAI) uses IFRSs in developing the national standards, departing in some cases from IFRSs, if justified. Over the last years, the ICAI has issued and revised several accounting standards, significantly reducing the gap between ASs and IFRSs. However, differences still exist. Certain IFRS concepts are yet to be adopted, less detailed disclosures are required in some AS, and certain AS are narrower in scope than equivalent IFRSs. In the October 2006 message to the members of the ICAI, the President of the ICAI T. N. Manoharan announced a creation of the 11-member task force to explore the possibility of adopting all IFRSs in full, without modification, as Indian standards. As stated in the Press Release of the ICAI dated October 14, 2006, the Accounting Standards Board (ASB) of the ICAI, recognizing the growing need of full convergence of its ASs with IFRSs, will examine various issues involved and will formulate a concept paper in this regard. Full convergence would involve adoption of IFRSs in the same form as that issued by the International Accounting Standards Board (IASB) without any modifications. The concept paper would deal with legal, regulatory and other implications and in case the task force recommends full convergence for all enterprises or a class of enterprises such as listed enterprises, it would also consider laying down a road map for full convergence. (WB 2004, p. i; ICAI 2006b, p. 2; Deloitte IAS Plus website)

The Companies Act of 1956 provides the basic requirements relating to financial reporting of all companies incorporated in India. The Companies Act of 1956 has been amended on numerous occasions. The 1999 amendment of the Companies Act requires all companies to comply with ASs, disclose any deviation, give reasons for such deviation, and state the impact of the deviation on the financial statements. The Central Government enforces the Companies Act through the Ministry of Company Affairs (MCA), formerly the Department of Company Affairs (DCA), the Company Law Board, the Regional Directors, and the Registrars of Companies (RoC). The MCA has the mandate to monitor general purpose financial reporting, which is exercised primarily through the statutory audit. (WB 2004, pp. 2, 3)

Listed companies in India are required to comply with the Securities and Exchange Board of India (SEBI) requirements as outlined in the SEBI Act and the Securities Contracts (Regulation) Act. To protect investor interests, SEBI-issued listing requirements specify disclosures applicable to listed companies in addition to other applicable auditing and accounting requirements. The SEBI, through Listing Agreement, requires compliance with the ICAI-issued accounting standards. The SEBI does not proactively monitor compliance with financial reporting requirements, which is unlike many other international securities market regulators. The SEBI only looks at financial statements contained in the prospectus at the time of a public offering or in the case of a complaint against a listed company. The SEBI refers cases of noncompliance that come to its attention to the Stock Exchange, the ICAI, and the MCA, as applicable. The Bombay and National Stock Exchanges rely on external auditors to monitor compliance with the accounting and disclosure requirements. (WB 2004, pp. 5, 13)

The Banking Regulation Act of 1949 empowers the Reserve Bank of India (RBI) to regulate financial reporting of the financial sector, including banks and financial institutions. Banking companies are also required to comply with requirements of the Companies Act provided they are consistent with the Banking Regulation Act. The RBI has issued circulars requiring compliance with the ICAI-issued accounting standards. The RBI relies on banks' statutory auditors to ensure compliance with the general purpose financial reporting requirements. (WB 2004, p. 5)

The Insurance Regulatory and Development Authority (IRDA) regulates the financial reporting practices of insurance companies under the IRDA Act. Insurance companies and their auditors are required to comply with the requirements of the IRDA Regulations (Preparation of Financial Statements and Auditor's Report of the Insurance Companies) in preparing and presenting their financial statements and the format and content of the audit report. The IRDA requires compliance with ICAI-issued accounting standards. The IRDA has the authority to impose sanctions for noncompliance. However, in practice, this power has rarely been exercised. (WB 2004, pp. 6-7)

The ICAI was established in 1949 under the Chartered Accountants Act (1949). The ICAI regulates the accountancy profession and, in line with India's imperial history, was initially modeled on the Institute of Chartered Accountants in England and Wales (ICAEW). Other professional bodies include the Institute of Cost and Works Accountants of India (ICWAI), and the Institute of Company Secretaries of India (ICSI). Accounting standards in India are formulated by the ASB of the ICAI. Due process is followed to promulgate ASs. Based on the draft regulations prepared by the ASB, the ICAI Council approves and issues new standards under its authority and prescribes a deadline for adoption. (WB 2004, pp. 8, 12)

The Council of the ICAI has decided upon the following scheme for applicability of ASs to Small and Medium Sized Enterprises (SMEs). This scheme comes into effect in respect of accounting periods commencing on or after April 1, 2004. For the purpose of applicability of ASs, enterprises are classified into three categories: Level I, Level II and Level III. Level II and Level III enterprises are considered as SMEs. Level I enterprises are required to comply fully with all the accounting standards. Level II and Level III enterprises will have to follow the recognition and measurement principles stated in the individual ASs. Relaxations are provided only with regard to disclosure requirements to SMEs. Accordingly, Level II and Level III enterprises are fully exempted from certain accounting standards which are primarily disclosure standards. The exemptions/relaxations are provided by modifying the applicability portion of the relevant existing ASs. (Deloitte IAS Plus website)

Level I Enterprises are those which fall in any one or more of the following categories, at any time during the accounting period: (1) enterprises whose equity or debt securities are listed whether in India or outside India; (2) enterprises that are in the process of listing their equity or debt securities as evidenced by the board of directors' resolution; (3) banks including co-operative banks; (4) financial institutions, enterprises carrying on insurance business; (5) all commercial, industrial, and business reporting enterprises whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 500 million; (6) all commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 100 million at any time during the accounting period; (7) holding and subsidiary enterprises of any one of the above at any time during the accounting period. (Deloitte IAS Plus website)

Level II Enterprises are not Level I enterprises but those who fall in any one or more of the following categories: (1) all commercial, industrial, and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 4 million but does not exceed Rs. 500 million; (2) all commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 10 million but not in excess of Rs. 100 million at any time during the accounting period; (3) holding and subsidiary enterprises of any one of the above at any time during the accounting period. Level III Enterprises are those that are neither Level I nor Level II. (Deloitte IAS Plus website)

Under the Companies Act of 1956, management and auditors of companies are required to report on the compliance with accounting standards. The companies are required to file their accounts with the Registrar of Companies, who are a constituent of the MCA. The Registrars are expected to look into the compliance with the legal provisions relating to the preparation and presentation of accounts including accounting standards. Further, by virtue of Companies (Amendment) Act, 2000, the Board of Directors' report shall also include a Directors' Responsibility Statement indicating, inter alia, that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures. The ICAI has also cast a duty on its members to examine compliance with Accounting Standards in the presentation of financial statements covered by their audit. In case members do not comply with this requirement, they are liable for disciplinary action under the provisions of Chartered Accountants Act of 1949. (ICASL n.d, p. 23)

The Institute of Chartered Accountants of India and the Institute of Cost and Works Accountants of India are members of the International Federation of Accountants (IFAC). (IFAC website)

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

NC

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, the Institute of Chartered Accountants of India (ICAI) does not consider International Financial Reporting Standard (IFRS 1) relevant to India and therefore has not adopted it. (ICASL n.d., p. 11)

IFRS 1 First-time Adoption of International Financial Reporting Standards was issued in June 2003 and applies to an entity whose first IFRS financial statements are for a period beginning on or after January 1, 2004. IFRS 1 also applies to each interim financial report, if any, that the entity presents under International Accounting Standard (IAS) 34 Interim Financial Reporting for part of the period covered by its first IFRS financial statements. (Deloitte IAS Plus website)

IFRS 2: Share-based Payment (effective 2005)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, International Financial Reporting Standard (IFRS) 2 was under preparation. Employee-share based Payments were covered by a Guidance Note issued by the Institute of Chartered Accountants of India (ICAI). Further, some other pronouncements dealt with other share-based payments, e.g., Accounting Standard (AS) 10, Accounting for Fixed Assets. (ICASL n.d., p. 10)

IFRS 2 Share-based Payment was issued in February 2004 and applies to annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IFRS 3: Business Combinations (effective 2004)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, the corresponding Indian Accounting Standard (AS) is AS 14 Accounting for Amalgamations which is based on IAS 22 that has been withdrawn by the International Accounting Standards Board (IASB). International Financial Reporting Standard (IFRS) 3, which supersedes IAS 22 and is effective for the periods commencing on March 31, 2004, is under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 9)

IFRS 4: Insurance Contracts (effective 2006)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IFRS 4: Insurance Contracts is under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 12)

IFRS 4 Insurance Contracts was issued in March 2004 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

ID

Institute of Chartered Accountants of India (ICAI) issued Accounting Standard (AS) 24 Discontinuing Operations in 2002. The ICAI decided to make Accounting Standard (AS) 24 mandatory for accounting periods commencing on or after April 1, 2004 for listed companies and for unlisted companies whose turnover exceeds Rs. 500 million. In respect of all other enterprises, AS 24 would be mandatory in nature in respect of accounting periods commencing on or after April 1, 2005. Earlier application of the accounting standard would be encouraged. (AS 24; Deloitte IAS Plus website)

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 24 is based on IAS 35 that has been withdrawn by the International Accounting Standards Board (IASB). IFRS 5, which supersedes IAS 35 and is effective for the periods commencing on January 1, 2004, is under review by the Institute of Chartered Accountants of India (ICAI). After the issuance of the new standard, AS 24 will be withdrawn. (ICASL n.d., p. 10)

The International Accounting Standards Board (IASB) issued International Financial Reporting Standard (IFRS) 5, Non-current Assets Held for Sale and Discontinued Operations in March 2003. The new standard has been effective for the periods commencing on January 1, 2004. (Deloitte IAS Plus website)

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

NC

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, the Institute of Chartered Accountants of India (ICAI) does not consider IFRS 6 relevant to India and therefore has not adopted it. (ICASL n.d., p. 11)

IFRS 6: Exploration for and Evaluation of Mineral Assets was issued in December 2004 and is applicable for annual periods beginning on or after January 1, 2006. (Deloitte IAS Plus website)

IFRS 7: Financial Instruments: Disclosures (effective 2007)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IFRS 7: Financial Instruments: Disclosures is under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 12)

IFRS 7: Financial Instruments: Disclosures was issued on August 18, 2005 and is applicable for annual periods beginning on or after January 1, 2007. (Deloitte IAS Plus website)

IAS 1: Presentation of Financial Statements (effective 2007)

ID

There is no equivalent Indian standard. The corresponding Indian standard is Accounting Standard (AS) 1, Disclosure of Accounting Policies issued by the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) in 1979. According to the World Bank, the Companies Act prescribes the presentation of financial statements in a way that is not fully consistent with the requirements of International Accounting Standard (IAS) 1. (WB 2004, p. 17; AS 1)

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IAS 1 effective 2005 is under review by the ICAI. (ICASL n.d., p. 12)

The revised IAS 1 Presentation of Financial Statements was issued in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IAS 2: Inventories (effective 2005)

ID

The corresponding Indian Accounting Standard (AS) 2 Valuation of Inventories was issued by the Council of the Institute of Chartered Accountants of India (ICAI) in June, 1981 and was later revised in 1999. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 2 is based on the earlier version of IAS 2. As of 2006, IAS 2 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10; ICAI website)

The International Accounting Standards Board (IASB) revised IAS 2 in December 2003. The revised standard will be effective for the periods commencing on January 1, 2005. (Deloitte IAS Plus website)

IAS 7: Cash Flow Statements (effective 1994)

NC

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 7: Cash Flow Statements. Accounting Standard (AS) 3 Cash Flow Statements (revised 1997) came into effect in respect of accounting periods commencing on or after April 1, 1997. (ICASL n.d., p. 8; AS 3)

As stated in a comparison of Indian accounting standards with International Financial Reporting Standards (IFRSs) prepared by PricewaterhouseCoopers, although the format and method of preparation of cash flows statement are similar to IFRS, indirect method is required for listed companies and direct method is required for insurance companies. Moreover, there are no exemption for preparation of cash flow statements under IFRSs, while Indian requirements exempt certain Small and Medium Sized Enterprises (SMEs). (PWC 2006, p. 5)

IAS 7 Cash Flow Statements is applicable for periods beginning on or after January 1, 1994. (Deloitte IAS Plus website)

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

ID

Accounting Standard (AS) 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies was issued by the Council of the Institute of Chartered Accountants of India (ICAI) in November 1982, with a limited revision made in 2001. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 5 is based on the earlier version of IAS 8. As of 2006, IAS 8 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10; ICAI website)

The International Accounting Standards Board (IASB) revised IAS 8 in December 2003. The revised standard will be effective for the periods commencing on January 1, 2005. (Deloitte IAS Plus website)

IAS 10: Events after the Reporting Period (effective 2005)

ID

The corresponding Indian Accounting Standard (AS) 4, Contingencies and Events Occurring after the Balance Sheet Date was issued in November 1982 and later revised in 1995. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 4 is based on the earlier version of IAS 10. As of 2006, IAS 10 effective 2005 was under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 10; AS 4)

International Accounting Standard (IAS) 10 was approved by the IASC Board in March 1999 and became effective on January 1, 2000. The revised IAS 10 Events After the Balance Sheet Date was issued by IASB in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IAS 11: Construction Contracts (effective 1995)

EN

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 11, Construction Contracts. AS 7 Construction Contracts came into effect for accounting periods commencing on or after April 1, 2003. (ICASL n.d., p. 8; AS 7)

IAS 11 Construction Contracts is applicable for periods beginning on or after January 1, 1995. (Deloitte IAS Plus website)

IAS 12: Income Taxes (effective 2001)

ID

Accounting Standard (AS) 22, Accounting Standard on Accounting for Taxes on Income comes into effect in respect of accounting periods commencing on or after April 1, 2001. The Standard is mandatory in respect of accounting periods commencing on or after April 1, 2001 for: (1) companies whose debt or securities are listed on a recognized stock exchange in India and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India; and (2) all enterprises in a group where the parent presents consolidated financial statements, if the Standard is mandatory for any enterprise of that group in terms of (1) above. In respect of accounting periods commencing on or after April 1, 2002 for companies not covered by the above; (3) in respect of accounting periods commencing on or after April 1, 2003 for all other enterprises, including firms, trusts, and associations of persons. (Deloitte IAS Plus website)

The objective of AS 22 is to prescribe the accounting treatment for taxes on income including the determination of the amount of the expense or savings related to taxes on income in respect of an accounting period and the disclosure of such an amount in the financial statements. For the purposes of this Standard, taxes on income include all domestic and foreign taxes that are based on taxable income and the tax effect of timing differences (deferred taxation). AS 22 differs from International Accounting Standard (IAS) 12. Whereas IAS 12 recognizes and measures deferred income taxes based on temporary (book-tax differences in balance sheet items), AS 22 recognizes and measures deferred taxes based on timing differences (book-tax differences in items reported in the income statement). (Deloitte IAS Plus website)

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, at the time of the assessment IAS 12 effective January 1, 1998 was under review by the ICAI. (ICASL n.d., p. 9)

IAS 14: Segment Reporting (effective 1998)

EN

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 14, Segment Reporting. AS 17 Segment Reporting came into effect in respect of accounting periods commencing on or after April 1, 2001. (ICASL n.d., p. 8; AS 17)

IAS 14 Segment Reporting is applicable for periods beginning on or after 1 July 1998. (Deloitte IAS Plus website)

IAS 16: Property, Plant and Equipment (effective 2005)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, Indian Accounting Standard (AS) 10, Accounting for Fixed Assets is based on the pre-revised IAS 16. As of 2006, the Institute of Chartered Accountants of India (ICAI) had finalized the draft of the Revised AS 10 which is based on IAS 16 effective 2005. (ICASL n.d., p. 11)

IAS 17: Leases (effective 2005)

ID

Accounting Standard (AS) 19, Leases, issued by Institute of Chartered Accountants of India (ICAI), came into effect in respect of all assets leased during accounting periods commencing on or after April 1, 2001. AS 19 prescribes, for lessees and lessors, the appropriate accounting policies and disclosures in relation to finance leases and operating leases. Whether a lease is a finance lease or an operating lease will depend on the substance of the transaction rather than its form. At the inception of a finance lease, the lessee has to recognize the lease as an asset (and accordingly provide for depreciation) and a liability. (AS 19; Deloitte IAS Plus website)

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 19 is based on the earlier version of IAS 17. The International Accounting Standards Board (IASB) revised IAS 17 in December 2003. The revised standard will be effective for the periods commencing on January 1, 2005. As of 2006, IAS 17 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10; Deloitte IAS Plus website)

IAS 18: Revenue (effective 1995)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 18, Revenue. The revised version of IAS 18 is under review. (ICASL n.d., p. 8)

IAS 18 Revenue is applicable for periods beginning on or after January 1, 1995. (Deloitte IAS Plus website)

IAS 19: Employee Benefits (effective 2006)

EN

Accounting Standard (AS) 15, Accounting for Retirement Benefits in the Financial Statements of Employers issued by Institute of Chartered Accountants of India (ICAI), came into effect in respect of accounting periods commencing on or after April 1, 1995. In 2005, the ICAI issued Revised Accounting Standard (AS) 15 Employee Benefits. AS 15 prescribes accounting and disclosure for all employee benefits except employee share-based payments. The Revised AS 15 identifies four categories of employee benefits and prescribes the accounting for each similarly to International Accounting Standard (IAS) 19. (Deloitte IAS Plus website; AS 15; ICASL n.d., p. 11)

IAS 19 Employee Benefits is applicable for periods beginning on or after January 1, 1999. (Deloitte IAS Plus website)

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

NC

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance. AS 12 Accounting for Government Grants came into effect in respect of accounting periods commencing on or after April 1, 1992 and was recommendatory in nature for an initial period of two years. (ICASL n.d., p. 8; AS 12)

As stated in a 2006 comparison of Indian accounting standards with International Financial Reporting Standards (IFRSs) prepared by PricewaterhouseCoopers, although treatment of government grants is conceptually similar to the IFRS, there are several differences in detail. For example, in certain cases, grants received are directly credited to capital reserve (in equity). (PwC 2006, p. 15)

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance is applicable for periods beginning on or after January 1, 1984. (Deloitte IAS Plus website)

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

ID

In April 2003, the Institute of Chartered Accountants of India (ICAI) issued Accounting Standard 11 (AS 11) The Effects of Changes in Foreign Exchange Rates. The revised Accounting Standard (AS) 11 is effective for accounting periods commencing on or after April 1, 2004. The previous AS 11 required exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets, which were carried in terms of historical cost to be adjusted in the carrying amount of the respective fixed assets. The revised Standard adopts the benchmark treatment in International Accounting Standard (IAS) 21 that requires all exchange differences be recognized as expense/revenue in the current period. (Deloitte IAS Plus website)

The revised Standard, in line with IAS 21, requires classification of foreign operations as those that are part of the enterprise (termed integral foreign operations) and those that are largely independent (termed non-integral foreign operations). The financial statements of the foreign operations, which are integral, should be translated by using the temporal method that involves application of a combination of historical and closing rates. In translating the financial statements of a non-integral foreign operation, the assets and liabilities, both monetary and non-monetary, should be translated at the closing rate, items of income and expenditure should be translated at the exchange rates at the dates of the transactions and all resulting exchange differences should be accumulated in a foreign currency translation reserve until the disposal of the net investment. The revised Standard specifically deals with foreign exchange contracts entered into for the purpose of trading or speculation, which were not specifically dealt with in the old AS 11. (Deloitte IAS Plus website )

IAS 21 The Effects of Changes in Foreign Exchange Rates was issued by International Accounting Standards Board (IASB) in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IAS 21 effective 2005 is under review by the ICAI. (ICASL n.d., p. 11)

IAS 23: Borrowing Costs (effective 1995)

EN

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 23, Borrowing Costs. Accounting Standard (AS) 16 Borrowing Costs came into effect in respect of accounting periods commencing on or after April 1, 2000. (ICASL n.d., p. 8; AS 16)

IAS 23 Borrowing Costs is applicable for periods beginning on or after January 1, 1995. (Deloitte IAS Plus website)

IAS 24: Related Party Disclosures (effective 2005)

ID

Accounting Standard (AS) 18, Related Party Disclosures, issued by Institute of Chartered Accountants of India (ICAI), came into effect in respect of accounting periods commencing on or after April 1, 2001 and is mandatory in nature. (AS 18)

The International Accounting Standards Board (IASB) revised IAS 24 in December 2003. The revised standard will be effective for the periods commencing on January 1, 2005. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IAS 24 effective 2005 is under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 11; Deloitte IAS Plus website)

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

ID

As of February 2005, the standard corresponding to International Accounting Standard (IAS) 26 was under preparation. (ICASL n.d., p. 8)

IAS 26 Accounting and Reporting by Retirement Benefit Plans is applicable for periods beginning on or after January 1, 1988. (IASB website)

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

ID

Accounting Standard on Accounting for Investments in Associates in Consolidated Financial Statements (AS 21) came into effect in respect of accounting periods commencing on or after April 1, 2002. An enterprise that presents consolidated financial statements should account for investments in associates in the consolidated financial statements in accordance with this Standard. According to Deloitte, AS 21 differs from International Accounting Standard (IAS) 27 in that it does not make it mandatory for an enterprise (group) to prepare consolidated financial statements. (Deloitte IAS Plus website)

It is mandatory only for listed companies and banks to prepare consolidated financial statements. The requirements with respect to presentation of consolidated financial statements are prescribed under the Stock Exchange Listing Agreement and Reserve Bank of India (RBI) regulations. This requirement is not mandated either by the Companies Act or Indian Accounting Standards. Even after Securities and Exchange Board of India (SEBI) introduced the requirement to present consolidated financial statements for a listed company in the Listing Agreement, the Companies Act in effect as of 2004 still required annexing the single company audited financial statements of all subsidiary undertakings (including overseas subsidiaries) prepared under Indian laws and regulations. The companies, which prepare consolidated financial statements, usually seek an exemption in this respect. (WB 2004, p. 14)

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 21 is based on the earlier version of IAS 27. As of 2006, IAS 27 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10)

The International Accounting Standards Board (IASB) revised IAS 27: Consolidated and Separate Financial Statements in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)

IAS 28: Investments in Associates (effective 2005)

ID

Accounting Standard (AS) 23, Accounting for Investments in Associates in Consolidated Financial Statements, issued by the Council of the Institute of Chartered Accountants of India, came into effect in respect of accounting periods commencing on or after April 1, 2002. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 23 is based on the earlier version of IAS 28. As of 2006, IAS 28 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10; AS)

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

NC

International Accounting Standard (IAS) 29, Financial Reporting in Hyper-inflationary Economies is not considered relevant for issuance of either Accounting Standards or the Guidance Notes by the Institute of Chartered Accountants of India (ICAI) since the hyper-inflationary conditions do not prevail in India. (ICAI 2005)

IAS 31: Interests in Joint Ventures (effective 2005)

ID

Accounting Standard (AS) 27 Accounting Standard on Financial Reporting of Interests in Joint Ventures has been effective for accounting periods commencing on or after April 1, 2002. AS 27 sets out principles and procedures for accounting for interests in joint ventures and reporting of joint venture assets, liabilities, income, and expenses in the financial statements of the venturers and investors. AS 27 is mandatory for both the separate financial statements and the consolidated financial statements prepared by an enterprise. (Deloitte IAS Plus website)

Institute of Chartered Accountants of India (ICAI) revised the standard in 2004. The limited revisions come into effect in respect of accounting periods commencing on or after April 1, 2004. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 27 is based on the earlier version of IAS 31. As of 2006, IAS 31 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10; AS 27)

The International Accounting Standards Board (IASB) revised IAS 31 in December 2003. The revised standard will be effective for the periods commencing on January 1, 2005. (Deloitte IAS Plus website)

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, the draft AS Financial Instruments - Presentation had already been formulated by the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) and was expected to be issued together with along with the proposed accounting standard on Financial Instruments: Recognition and Measurement. (ICASL n.d., p. 10)

IAS 32: Financial Instruments: Disclosure and Presentation was issued in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IAS 33: Earnings per Share (effective 2005)

ID

Accounting Standard (AS) 20, Earnings Per Share, issued by Institute of Chartered Accountants of India (ICAI), came into effect in respect of accounting periods commencing on or after April 1, 2001. The objective of the AS 20 Accounting Standard on Earnings Per Share (EPS) is to lay down principles for the determination and presentation of EPS, to enable comparison of performance amongst different enterprises. The Standard would apply to all enterprises whose equity shares or potential equity shares are listed on a recognized stock exchange in India and would be mandatory in nature in respect of accounting periods commencing on or after April 1, 2001. Enterprises which have neither listed equity shares or potential equity shares but which disclose EPS, should calculate and disclose EPS in accordance with AS 20. In consolidated financial statements, the information required by AS 20 should be prepared on the basis of consolidated information. At present, all companies are required to report their EPS as part of their financial statements prepared in accordance with Schedule VI to the Companies Act of 1956. (Deloitte IAS Plus website; IAS 20)

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, AS 20 is based on the earlier version of IAS 33. As of 2006, IAS 33 effective 2005 was under review by the ICAI. (ICASL n.d., p. 10)

International Accounting Standard (IAS) 33 Earnings per Share was issued in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IAS 34: Interim Financial Reporting (effective 1999)

EN

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 34: Interim Financial Reporting. AS 25 Interim Financial Reporting came into effect in respect of accounting periods commencing on or after April 1, 2002. The standard was subsequently revised by Institute of Chartered Accountants of India (ICAI) to align the drafting of AS 25 with the corresponding IAS 34. The limited revision came into effect in respect of accounting periods commencing on or after April 1, 2004. (ICASL n.d., p. 8; AS 17)

IAS 34 Interim Financial Reporting is applicable for periods beginning on or after January 1, 1999. (Deloitte IAS Plus website)

IAS 36: Impairment of Assets (effective 2004)

ID

The Institute of Chartered Accountants of India (ICAI) issued Accounting Standard on Impairment of Assets (AS 28) effective for accounting periods commencing on or after April 1, 2004 for listed companies and for unlisted companies whose turnover exceeds Rs. 500 million. It is effective one year later for other companies. The Standard prescribes the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount. AS 28does not apply to inventories, assets arising from construction contracts, financial assets including investments, and deferred tax assets; separate standards address impairment for those assets. The Standard applies to assets whether carried at cost or at revalued amounts. (Deloitte IAS Plus website)

IAS 36 Impairment of Assets was issued in March 2004. It is applied to goodwill and intangible assets acquired in business combinations after March 31, 2004, and to all other assets for annual periods beginning on or after March 31, 2004. According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, amendments to IAS 36 pursuant to the Business Combination project were under review by the ICAI. (ICASL n.d., p. 9; Deloitte IAS Plus website)

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

NC

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, India has adapted International Accounting Standard (IAS) 37: Provisions, Contingent Liabilities and Contingent Assets. AS 29 on Provisions, Contingent Liabilities and Contingent Assets is effective for accounting periods commencing on or after April 1, 2004. (ICASL n.d., p. 8; AS 29)

As stated in Appendix E of AS 29, AS 29 differs from IAS 37, Provisions, Contingent Liabilities and Contingent Assets (1998) in several respects. IAS 37 requires that where the effect of the time value of money is material, the amount of a provision should be the present value of the expenditures expected to be required to settle the obligation. AS 29 requires that the amount of a provision should not be discounted to its present value. The reason for not requiring discounting is that, at present, in India, financial statements are prepared generally on historical cost basis and not on present value basis. Moreover, the provisions of IAS 37 relating to onerous contracts including the definition of 'onerous contract' have been omitted from the AS 29. (AS 29)

Further, AS 29 does not deal with 'constructive obligation'. In situations such as restructuring, general recognition criteria are required to be applied. Both AS 29 and IAS 37 require that an enterprise should not recognize a contingent asset. However, IAS 37 requires certain disclosures in respect of contingent assets in the financial statements where an inflow of economic benefits is probable. In contrast to this, as a measure of prudence, AS 29 does not even require contingent assets to be disclosed in the financial statements. AS 29 recognizes that contingent asset is usually disclosed in the report of the approving authority where an inflow of economic benefits is probable. (AS 29)

Under AS 29, a provision should be recognized when: (1) an enterprise has a present obligation as a result of a past event; (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (3) a reliable estimate can be made of the amount of the obligation. If those conditions are not met, a provision should not be recognized. Further, an enterprise should not recognize a contingent liability or a contingent assets. (Deloitte IAS Plus website)

IAS 38: Intangible Assets (effective 2004)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IAS 38 was under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 11)

Accounting Standard (AS) 26, Accounting Standard on Intangible Assets came into effect in respect of expenditure incurred on intangible items during accounting periods commencing on or after April 1, 2002 and was mandatory in nature from that date for the following: (1) enterprises whose equity or debt securities are listed on a recognized stock exchange in India, and enterprises which are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India; (2) all other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds Rs. 500 million. In respect of all other enterprises, AS 26 takes effect in accounting periods commencing on or after April 1, 2004 and is mandatory in nature from that date. AS 26 addresses the accounting for intangible assets that are not dealt with specifically in other Accounting Standards. It requires an enterprise to recognize an intangible asset if, and only if, certain criteria are met. AS 26 also specifies how to measure the carrying amount of intangible assets and requires disclosures about intangible assets. In 2004, the ICAI amended AS 26 to exclude terminal benefits from its scope. Terminal benefits are defined as employee benefits payable as a result of either: (1) an enterprise's decision to terminate the employee's employment before the normal retirement date; or (2) an employee's decision to accept voluntary redundancy in exchange for such benefits. (Deloitte IAS Plus website)

The limited revision was made because Indian Industries claimed to be in a disadvantageous position while passing through a restructuring phase because AS 26 had required that all such payments be charged off when incurred. The Indian Industries noted that termination benefits are excluded from the scope of International Accounting Standard (IAS) 38 Intangible Assets, which is the corresponding International Accounting Standard to AS 26, and instead are incorporated in IAS 19 Employee Benefits, which corresponds to AS 15 Accounting for Retirement Benefits in the Financial Statements of Employers. Because AS 15 at that time was under revision, the ICAI decided to amend the scope of AS 26. Accordingly, the treatment of terminal benefits will be dealt with by AS 15 when revised. The limited revision to AS 26 is effective for accounting periods commencing on or after April 1, 2003, the date from which AS 26 had come into effect. (Deloitte IAS Plus website)

The International Accounting Standards Board (IASB) issued the revised IAS 38 Intangible Assets in March 2004. The revised standard is applied to the accounting for intangible assets acquired in business combinations after 31 March 2004, and to all other intangible assets for annual periods beginning on or after 31 March 2004. (Deloitte IAS Plus website)

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IAS 39 is under review by the ICAI. (ICASL n.d., p. 11)

In December 2003, the IASB issued IAS 39: Financial Instruments: Recognition and Measurement comprehensively revised as a part of the IASB's Improvement Project. IAS 39 became effective in January 2005. Subsequently, during the period of 2004-2005 the IASB issued several amendments to IAS 39 on macro hedging, day 1 gain/loss transition, hedges of forecast intragroup transactions, fair value option, and financial guarantee contracts. The amendment for macro hedging and the amendment for day 1 gain/loss transition are applicable for annual periods beginning on or after January 1, 2005. The amendment for hedges of forecast intragroup transactions, the amendment for fair value option, and the amendment for financial guarantee contracts is applicable for periods beginning on or after January 1, 2006. (Deloitte IAS Plus website)

IAS 40: Investment Property (effective 2005)

NC

In April 2003, the Institute of Chartered Accountants of India (ICAI) issued Accounting for Investments (AS 13) that corresponded to International Accounting Standard (IAS) 26 withdrawn by the International Accounting Standards Board (IASB). The ICAI has revised AS 13 by extending its non-applicability to Venture Capital Funds. This is effective for accounting periods commencing on or after April 1, 2002. (ICAI 2005; Deloitte IAS Plus website)

As stated in a comparison of Indian accounting standards with International Financial Reporting Standards (IFRSs) prepared by PricewaterhouseCoopers, under Indian GAAP, investment property is treated the same as a long-term investment and is carried at cost less impairment. Under IFRS, investment property is measured at depreciated cost or fair value, with changes in fair value recognized in the income statement. (PWC 2006, p. 13)

The revised IAS 40 Investment Property was issued in December 2003 and is applicable to annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)

IAS 41: Agriculture (effective 2003)

ID

According to a comparison prepared by the Centre of Excellence for Standards & Quality of the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2006, IAS 41 effective 2003 is under review by the Institute of Chartered Accountants of India (ICAI). (ICASL n.d., p. 9)