Background

With the impending Ind AS convergence that will be applicable to large corporates, the Institute of Chartered Accountants of India (ICAI) on 11 January 2016 formed the Ind AS Transition Facilitation Group (ITFG) in order to provide certain clarifications on issues arising due to applicability and/or implementation of Ind AS. 

The ITFG is expected to address:

• Issues which need clarifications on the application/implementation of Ind AS
• Issues pertaining to interpretation of Ind AS

New Development

The ITFG held its first meeting on 16 January 2016 and has issued its first bulletin (Bulletin I) on 11 February 2016 which provides guidance on five issues relating to the application of Ind AS.  These issues relate to following topics:

• The year from which a company would be required to comply with Ind AS based on the thresholds of net worth as defined in the Ind AS road map i.e. if a company meets the threshold of net worth in a particular financial year, then Ind AS would be applicable to such a company immediately in the next financial year.  We have summarised the applicable dates for adoption of Ind AS:

Companies meeting the net worth criterion of INR500 crore on the balance sheet date as at	Ind AS would be applicable from the financial year
31 March 2014	2016-17
31 March 2015	2016-17
31 March 2016	2016-17
31 March 2017	2017-18
Companies meeting the net worth criterion of INR250 crore or more as at 31 March 2017	2017-18

• In case of a group with subsidiaries, if a subsidiary ceases to be the subsidiary (of a parent that is covered under the Ind AS road map) before the date of adoption of Ind AS, then depending on the subsidiary’s net worth threshold, the subsidiary would fall in the road map of Ind AS.  Additionally, if a subsidiary is sold off after the adoption of Ind AS, then the subsidiary would continue to prepare financial statements under the Ind AS road map.
• Application of the option (under Ind AS 101, First-time Adoption India Accounting Standards) to continue with the accounting policy under para 46A of AS 11, The Effects of Changes in Foreign Exchange Rates would be available for those long-term foreign currency loans that were taken before the beginning of the first Ind AS reporting period i.e. 1 April 2016 for a company falling in phase I of the Ind AS adoption road map.
• When the functional currency of a company changes from INR to any other currency (e.g. USD), then any loans taken in the functional currency (USD) would not be considered as long-term foreign currency monetary items under para 46A of AS 11 even though the company could be recognising such loans under para 46A of AS 11 under the current Indian GAAP.
• A company would have to determine its functional currency retrospectively on application of Ind AS in light of no specific exception or exemption provided in Ind AS 101.

Next Step  

Companies should consider the interpretations issued by ITFG while transitioning to Ind AS.

Our comments

This is a welcome step by ICAI, wherein forming ITFG would help ensure that companies falling under the road map of Ind AS achieve consistent interpretations on Ind AS related topics.  While forming its interpretations, we urge ITFG to consider international interpretations on IFRS to avoid areas of divergence.

To access the text of the ITFG Bulletin I, please click here.