IFRS v/s Ind AS – Which 1 is Better ?

Introduction

IFRS v/s Ind AS : The Ministry of Corporate Affairs (MCA) in India has issued a roadmap for the implementation of Indian Accounting Standards (Ind AS) converged with International Financial Reporting Standards (IFRS). This implementation is based on a phased approach, primarily focused on a company’s net worth. The MCA has issued several notifications and amendments to ensure the smooth transition to Ind AS.

In this article, we will analyze and compare the differences between IFRS v/s Ind AS, discussing the general differences, specific differences in accounting treatments and disclosure requirements, and the implications of these differences on financial reporting in India.

Complexities in GAAP Differences: IFRS and Ind AS

While there are 39 notified Ind AS, several of them have no significant differences compared to their corresponding IFRS. However, some differences are noteworthy and have been provided in the form of notes.

General Differences

1. Different terminology is used in Ind AS, such as “balance sheet” instead of “Statement of financial position” and “Statement of Profit and Loss” instead of “Statement of comprehensive income.”
2. Transitional provisions in IFRS have not been included in Ind AS, as all transitional provisions related to Ind AS have been incorporated in Ind AS 101 – First-time Adoption of Indian Accounting Standards.
3. Ind AS does not issue IFRIC and SIC separately but includes them as an appendix to Ind AS.

These general differences, while not affecting the substance of the accounting standards, may lead to confusion for those who are familiar with IFRS terminology. It is essential for professionals to familiarize themselves with the terminology used in Ind AS to ensure accurate understanding and application of the standards.

Notable Differences between Ind AS and IFRS

1. Ind AS 101 vs. IFRS 1: Ind AS 101 defines “previous GAAP” as the basis of accounting used for reporting requirements in India immediately before adopting Ind AS, whereas IFRS 1 defines “previous GAAP” as the basis of accounting used immediately before adopting IFRS. This difference in definition reflects the focus on Indian GAAP for entities transitioning to Ind AS.
2. Ind AS 102 vs. IFRS 2: Ind AS 101 provides additional optional exemptions related to long-term foreign currency monetary items and service concession arrangements relating to toll roads, not present in IFRS 1. These exemptions are specific to the Indian context and may provide relief for entities dealing with these items during the transition to Ind AS.
3. Ind AS 103 vs. IFRS 3: Ind AS 101 allows adjustment of goodwill with the Capital reserve, whereas IFRS 1 allows adjustment in goodwill. This difference in treatment may lead to different presentation and measurement of goodwill in the financial statements.
4. Ind AS 105 vs. IFRS 5: Ind AS 105 requires the reclassification of assets and liabilities of a disposal group as held for sale, while IFRS 5 does not have such a requirement. This difference may result in different classification and presentation of disposal groups in the financial statements.

The remaining notes highlight differences in specific accounting treatments and disclosure requirements between corresponding Ind AS and IFRS. These differences may have implications for the recognition, measurement, presentation, and disclosure of various financial statement items, affecting the comparability of financial statements prepared under Ind AS and IFRS.

Comparison Table: Ind AS and IFRS

Ind AS	IFRS	Comparison
Ind AS 101	IFRS 1	Ind AS 101 defines “previous GAAP” as the basis of accounting used for reporting requirements in India immediately before adopting Ind AS, whereas IFRS 1 defines “previous GAAP” as the basis of accounting used immediately before adopting IFRS.
Ind AS 102	IFRS 2	Ind AS 101 provides additional optional exemptions related to long-term foreign currency monetary items and service concession arrangements relating to toll roads, not present in IFRS 1.
Ind AS 103	IFRS 3	Ind AS 101 allows adjustment of goodwill with the Capital reserve, whereas IFRS 1 allows adjustment in goodwill.
Ind AS 105	IFRS 5	Ind AS 105 requires the reclassification of assets and liabilities of a disposal group as held for sale, while IFRS 5 does not have such a requirement.
Terminology	Terminology	Ind AS uses terms like “balance sheet” and “Statement of Profit and Loss,” while IFRS uses “Statement of financial position” and “Statement of comprehensive income.”
Transitional Provisions	Transitional Provisions	Ind AS includes transitional provisions in Ind AS 101, while IFRS includes transitional provisions within each standard.
IFRIC and SIC	IFRIC and SIC	Ind AS includes IFRIC and SIC as appendices, while IFRS issues them separately.

Implications of Differences on Financial Reporting in India

The differences between Ind AS and IFRS may have several implications for financial reporting in India:

1. Comparability: While the convergence of Ind AS with IFRS aims to enhance the comparability of financial reporting in India with global standards, the differences between the two sets of standards may still lead to some discrepancies in financial statement presentation and measurement. Entities and users of financial statements should be aware of these differences when comparing financial information prepared under Ind AS and IFRS.
2. Transition challenges: The differences between Ind AS and IFRS may pose challenges for entities transitioning from Indian GAAP to Ind AS. Entities need to carefully consider the impact of these differences on their financial statements and ensure they have the necessary systems, processes, and expertise in place to comply with the new accounting standards.
3. Regulatory and compliance implications: The differences between Ind AS and IFRS may also have regulatory and compliance implications for entities operating in India. Entities need to ensure they are aware of the specific requirements of Ind AS and any additional regulatory requirements that may arise as a result of the convergence with IFRS.
4. Education and training: The differences between Ind AS and IFRS highlight the need for education and training for accounting professionals in India. Professionals need to familiarize themselves with the new accounting standards and their implications to ensure accurate and consistent application of the standards in financial reporting.

Frequently Asked Questions(FAQs)

Conclusion

While there are similarities between Ind AS and IFRS, some differences exist in terminology, transitional provisions, and specific accounting treatments. These differences are essential for entities transitioning from Indian GAAP to Ind AS to ensure compliance with the new accounting standards. The phased implementation of Ind AS in India aims to bring Indian accounting practices closer to global standards, enhancing the transparency and comparability of financial reporting in the country. However, it is crucial for professionals and entities to understand the differences between Ind AS and IFRS and their implications on financial reporting to ensure a smooth transition and accurate financial reporting under the new standards.