By HIMANSHU V. KISHNADWALA Chartered Accountant
Disclosure
related to new and amendments to Ind AS which are not applied as they are effective for periods
beginning on or after 1st April
2018
Compilers’ Note
Paragraph 30 of Ind AS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’, states as
follows: “When an entity has not applied a new Ind AS that has been issued but
is not yet effective, the entity shall disclose:
(a) this fact; and
(b) known or reasonably estimable
information relevant to assessing the possible impact that application of the
new Ind AS will have on the entity’s financial statements in the period of
initial application.”
Given below are disclosures by 2
companies as per the above requirement.
Tata
Consultancy Services Ltd (31st March 2018)
From Notes to Standalone
Financial Statements
Recent
Indian Accounting Standards (Ind AS)
Ministry of Corporate Affairs
(“MCA”) through Companies (Indian Accounting Standards) Amendment
Rules, 2018 has notified the following new and amendments to Ind ASs which the
Company has not applied as they are effective for annual periods beginning on
or after April 1, 2018:
u Ind AS 115 Revenue from
Contracts with Customers.
u Ind AS 21 The effect of changes in Foreign Exchange
rates.
Ind AS 115 – Revenue from
Contracts with Customers
Ind AS 115 establishes a single
comprehensive model for entities to use in accounting for revenue arising from
contracts with customers. Ind AS 115 will supersede the current revenue
recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when
it becomes effective.
The core principle of Ind AS 115 is
that an entity should recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or
services. Specifically, the standard introduces a 5-step approach to revenue
recognition:
u Step 1: Identify the
contract(s) with a customer
u Step 2: Identify the
performance obligation in contract
u Step 3: Determine the
transaction price
u Step 4: Allocate the
transaction price to the performance obligations in the contract
u Step 5: Recognise revenue
when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity
recognises revenue when (or as) a performance obligation is satisfied, i.e.
when ‘control’ of the goods or services underlying the particular performance
obligation is transferred to the customer.
The Company has completed its
evaluation of the possible impact of Ind AS 115 and will adopt the standard
with all related amendments to all contracts with customers retrospectively
with the cumulative effect of initially applying the standard recognised at the
date of initial application. Under this transition method, cumulative effect of
initially applying IND AS 115 is recognised as an adjustment to the opening
balance of retained earnings of the annual reporting period. The standard is
applied retrospectively only to contracts that are not completed contracts at
the date of initial application. The Company does not expect the impact of the
adoption of the new standard to be material on its retained earnings and to its
net income on an ongoing basis.
Ind AS 21 – The effect of
changes in Foreign Exchange rates
The amendment clarifies on the
accounting of transactions that include the receipt or payment of advance
consideration in a foreign currency. The appendix explains that the date of the
transaction, for the purpose of determining the exchange rate, is the date of initial
recognition of the non-monetary prepayment asset or deferred income liability.
If there are multiple payments or receipts in advance, a date of transaction is
established for each payment or receipt. TCS Limited is evaluating the impact
of this amendment on its financial statements.
Infosys
Ltd. (31st March 2018)
From Notes to Standalone
Financial Statements
Recent
accounting pronouncements
Appendix B to Ind AS 21, Foreign
currency transactions and advance consideration:
On March 28, 2018, Ministry of
Corporate Affairs (“MCA”) has notified the Companies (Indian
Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21,
Foreign currency transactions and advance consideration which clarifies the
date of the transaction for the purpose of determining the exchange rate to use
on initial recognition of the related asset, expense or income, when an entity
has received or paid advance consideration in a foreign currency. The amendment
will come into force from April 1, 2018. The Company has evaluated the effect
of this on the financial statements and the impact is not material.
Ind AS 115- Revenue from
Contract with Customers:
On March 28, 2018, Ministry of
Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from
Contract with Customers. The core principle of the new standard is that an
entity should recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. Further,
the new standard requires enhanced disclosures about the nature, amount, timing
and uncertainty of revenue and cash flows arising from the entity’s contracts
with customers.
The standard permits two possible
methods of transition:
Retrospective approach – Under this
approach the standard will be applied retrospectively to each prior reporting
period presented in accordance with Ind AS 8- Accounting Policies, Changes in
Accounting Estimates and Errors
Retrospectively
with cumulative effect of initially applying the standard recognised at the
date of initial application (Cumulative catch – up approach) –
The effective date for adoption of
Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Company will adopt the standard
on April 1, 2018 by using the cumulative catch-up transition method and
accordingly comparatives for the year ending or ended March 31, 2018 will not
be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected
to be insignificant.
