Page 36 - Banking Finance November 2019

ARTICLE

Indian companies (Cos) and make financial statements of Paid-up share Capital and all reserves out of profit &
of Indian Cos comparable with global counterparts. securities premium account, after deducting accumulated
Y To enhance the investor's ability to compare losses, deferred expenditure, and miscellaneous expenditure
investments on a global basis & reduce the different not written off. Only capital Reserve arising out of
disclosure bias across countries. Promoters Contribution and Government Grants received
can be included. Reserves created out of revaluation of
Y To reduce the cost of reinstatement of financial assets and written back depreciation cannot be included.
statements incurred by corporate and groups having
business/investment in different countries.
If IND AS becomes applicable to any company, then IND AS
Y Lastly, to catch up with various others developing and shall automatically be made applicable to all the
third world economies who had either shifted to IFRS subsidiaries, holding companies, associated companies, and
or other globally accepted standards. joint ventures of that company, irrespective of individual
qualification of such companies.
Phases of adoption of IND AS.
Let us take a few
examples to under-
stand applicability
of IND AS.
Y Company A is the
holding company of
Company B & Company
C. Company A & Company
C net worth is less than Rs
500 crores (standalone)
whereas Company B's net
worth is greater than Rs
500 crores. Whether
Company C shall prepare
financial statements as
per IND AS?

First we need to keep in
mind that as applicability of IND AS is concerned, the
(*)The date of implementation of IND AS for banks, NBFC &
essence of definition of associate and subsidiary is "Significant
Insurance has been extended further by one year by RBI
Influence" or "Common Control". Hence in above case
from 01.02018 to 01.0420.19 and recently in March 2019
RBI further extended the implementation of IND AS for Company B shall prepare financial statements as per IND
banks till further notification). AS. Now Company A being its holding company shall have
to prepare the consolidated financials as per IND AS

Companies can voluntarily choose to incorporate IND AS in (because of Company B financials getting merged),
their reports for accounting periods beginning on or after subsequent to this even Company C shall have to prepare
consolidated financials as per IND AS however it may
April 01, 2015. However, once a company has started
reporting as per the IND AS, it cannot change to reporting continue to report standalone financials on IND GAAP basis.
as per previous laws. (Assumption company B does-not have significant influence
on Company C )
Net worth will be determined based on the stand-alone
accounts of the company as on 31st March 2014, or the first Y Let's take another example if Company X is a German
audited period ending after that date. Net Worth is the total Based Company with net-worth greater than Rs 500

36 | 2019 | NOVEMBER | BANKING FINANCE