The document outlines some of the key differences between International Financial Reporting Standards (IFRS) and Indian GAAP. Some of the major differences include: - IFRS allows for revaluation of certain assets while Indian GAAP generally uses historical cost. - IFRS requires two years of financial statements including balance sheets, income statements, cash flows, and changes in equity. Indian GAAP also requires two years but does not mandate cash flows. - IFRS does not prescribe financial statement formats while Indian GAAP specifies formats according to Company law. - IFRS requires certain items to be presented separately on statements while Indian GAAP has fewer separation requirements.

1. Overview of Significant Differences between International Financial Reporting Standards (IFRS) and Indian GAAP

9. Accounting Differences Subject IFRS Indian GAAP Special purposes entities (SPEs) Consolidate where the substance of the relationship indicates control. No specific guidance. Non-consolidation of subsidiaries Dissimilar activities or temporary control are not a justification for non-consolidation. Only if acquired and held for resale or there are severe long-term restrictions to transfer funds to the parent. Business combinations All business combinations are acquisitions. No comprehensive accounting standard on business combinations. All business combinations are acquisition; however, required use of pooling of interests method in certain amalgamations [when all the specified conditions are met]. To summarize: On consolidation, for an entity acquired and held as an investment: treated as acquisition. On amalgamation of an entity, either uniting of interests or acquisition. On business acquisition (i.e. assets and liabilities only) treated as acquisition.

10. Accounting Differences Subject IFRS Indian GAAP Uniting of interests method Prohibited. Required for certain amalgamations when all the specified conditions are met, else accounted under the purchase method. Acquired intangible assets Capitalise if recognition criteria are met; intangible assets must be amortised over useful life. Intangibles assigned an indefinite useful life must not be amortised but reviewed annually for impairment. Revaluations are permitted in rare circumstances. Capitalise if recognition criteria are met; intangible assets must be amortised over useful life with a rebuttable presumption of not exceeding 10 years. Revaluations not permitted. Property, plant and equipment Use historical cost or revalued amounts. Regular valuations of entire classes of assets are required when revaluation option is chosen. Use historical cost. Revaluations are permitted, however, no requirement on frequency of revaluation. On revaluation, an entire class of assets is revalued, or selection of assets is made on a systematic basis. Depreciation Allocated on a systematic basis to each accounting period over the useful life of the asset. Similar to IFRS , except where the useful life is shorter than that envisaged under the Companies Act or the relevant statute, the depreciation is computed by applying a higher rate.

11. Accounting Differences Subject IFRS Indian GAAP Deferred income taxes Use full provision method (some exceptions) driven by balance sheet temporary differences. Recognise deferred tax assets if recovery is probable. Recognise tax effect of timing difference as deferred tax asset or liability. Recognise deferred tax assets (a) for entities with tax losses carry forward, if realisation is virtually certain, whereas (b) for entities with no tax losses carry forward, if realisation is reasonably certain. A number of other specific differences. Fringe benefits tax Included as part of related expense (fringe benefit) which gives rise to incurrence of the tax. Disclosed as a separate item after profit before tax on the face of the income statement. Convertible debt Account for convertible debt on split basis, allocating proceeds between equity and debt Convertible debt is recognised as a liability based on legal form without any split. Functional currency Currency of primary economic environment in which entity operates. Does not define functional currency.

12. Accounting Differences Subject IFRS Indian GAAP Compensated absences Provision on actual cost to the company basis Provision based on actuarial valuation Preliminary expenses Charged to income statement. Deferred and written off over the period of 5 years. loans Origination Cost Origination cost is amortized Charged to Profit and loss account Financial liabilities - classification Mandatory redeemable preference shares are classified as liabilities. All preference shares are classified as shareholders’ funds. Employee benefits -Pension costs defined benefit plans Must use the projected unit credit method to determine benefit obligation Provision in the accounts is normally made on the basis of actuarial valuation – no specific method is prescribed

13. Accounting Differences Contd…… Subject IFRS Indian GAAP Depreciation Allocated on a systematic basis to each accounting period over the useful life of the asset. Depreciation is provided based on the useful lives of assets or the minimum rates prescribed by the Indian Companies Act, whichever is higher. Asset lives are not prescribed by the Companies Act, but can be derived from the depreciation rates. Capitalisation of borrowing costs Permitted, but not required for qualifying assets. Compulsory when relates to the construction of certain assets. Foreign exchange fluctuation Under IAS such gains or losses are required to be expensed Indian GAAP requires that any profit/loss arising on the restatement of foreign exchange liabilities incurred for the acquisition of imported fixed assets as a result of change in exchange rates is capitalized as part of the original cost of the assets. Impairment of long lived assets IAS require that assets be reviewed for impairment and impairment losses recognized in the accounts Indian GAAP also has adopted the provisions of IFRS with effect from 1.4 2004 for listed companies and commercial enterprise with a turnover > 50 crores Leasehold Land Disclosed as prepaid assets and accounting treatment is similar to operating leases. Disclosed as a part of fixed assets.

14. Accounting Differences Contd…. Subject IFRS Indian GAAP Changes in accounting policies Restate comparatives and prior-year opening retained earnings. Include effect in the income statement of the period in which the change is made except as specified in certain standards where the change resulting from adoption of the standard has to be adjusted against opening retained earnings. Correction of fundamental errors Restatement of comparatives is mandatory. Include effect in the current year income statement with appropriate disclosure Deferred Taxes Use full provision method (some exceptions), driven by balance sheet temporary differences . Recognise deferred tax assets if recovery is probable. Deferred tax assets and liabilities should be recognised for all timing differences subject to consideration of prudence in respect of deferred tax assets. Lease Accounting Has been in place for a much longer time. Applicable since 2001 Asset Retirement Obligation (ARO) Obligations that are legally enforceable and unavoidable, and are associated with the retirement of tangible long-lived assets, be recorded as liabilities when those obligations are incurred and recorded at fair value. No such guidance available.