The document compares Indian Accounting Standards and International Financial Reporting Standards regarding the accounting treatment of fixed assets. Some key differences include: - Under IAS 16, subsequent replacement costs of parts must be capitalized, whereas AS 10 only requires capitalization if it increases future benefits. - IAS 16 requires capitalization of major inspection costs, whereas AS 10 does not. - IAS 16 does not allow gains on derecognition of assets to be treated as revenue, but AS 10 is silent on this. The document also discusses the accounting for government grants, foreign currency transactions, and integral versus non-integral foreign operations.

1. INDIAN ACCOUNTING STANDARDS
VS
IFRS

3. Administration and
other general
overhead expenses
are usually excluded
3
The cost of an item of
fixed asset comprises
its purchase price,
including import
duties and other nonrefundable taxes or
levies and any
directly attributable
cost of bringing the
asset to its working
condition for its
intended use
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COST COMPONENTS
If the interval
between the date a
project is ready to
commence
commercial
production and the
date at which
commercial
production actually
begins is prolonged,
all expenses incurred
during this period are
charged to the profit
and loss statement.

4. COST CONSIDERATIONS
Improvements and Repairs
Retirements & Disposals
Non-monetary Consideration
•Expenditure that increases the future
benefits from the existing asset is
included in the gross book value, e.g
an increase in capacity.
•An item of fixed asset is eliminated from
the financial statements on disposal.
•When a fixed asset is acquired in
exchange for shares, it is usually
recorded at the fair market value of
the asset or of the securities issued,
whichever is more clearly evident.
•The cost of an extension to an existing
asset which is of a capital nature and
which becomes an integral part of the
existing asset is added to its gross book
value.
•Items of fixed assets that have been
retired from active use are stated at
the lower of their net book value and
net realisable value and are shown
separately in the financial statements.
•When a fixed asset is acquired in
exchange for another asset, its cost is
usually determined by reference to the
fair market value of the consideration
given.

5. •Goodwill, in general, is
recorded in the books
only when some
consideration in money
or money’s worth has
been paid for it.
•As a matter of financial
prudence, goodwill is
written off over a period.
Disclosures
•In the case of fixed assets
acquired on hire, such
assets are recorded at
their cash value, which, if
not readily available, is
calculated by assuming
an appropriate rate of
interest.
Special Types
Special Cases
•Where an enterprise
owns fixed assets jointly,
the extent of its share in
such assets, and the
proportion in the original
cost, accumulated
depreciation and written
down value are stated in
the balance sheet.
•gross and net book
values of fixed assets at
the beginning and end
of an accounting period
showing additions,
disposals, acquisitions
and other movements
•expenditure incurred on
account of fixed assets in
the course of
construction or
acquisition
•revalued amounts
substituted for historical
costs of fixed assets

7. IAS – 16
Property plant and equipment is initially measured at its cost using the cost model or revaluation
model
Depreciation begins when the asset is available for use and continues until the asset is
derecognised, even if it is idle
Any claim for compensation from third parties for impairment is included in profit or loss when
the claim becomes receivable
The residual value and the useful life of an asset should be reviewed at least at each financial
year-end and, if expectations differ from previous estimates, any change is accounted for
prospectively

8. IAS-16
AS-10
Under IAS 16, if subsequent costs are
incurred for replacement of a part of an
item of fixed assets, such costs are required
to be capitalized and simultaneously the
replaced part has to be de-capitalized.
AS 10 provides that only that expenditure
which increases the future benefits from the
existing asset beyond its previously assessed
standard of performance is included in the
gross book value, e.g., an increase in
capacity.
does not exclude real estate developers
from its scope
specifically excludes accounting for real
estate developers from its scope

9. IAS-16
AS-10
requires that the cost of major inspections
does not require that the cost of major
should be capitalised with consequent
inspections should be capitalized.
derecognition of any remaining carrying
amount of the cost of the previous inspection.
provides that gains arising on derecognition
of an item of property, plant and equipment
should not be treated as revenue
silent on this aspect.
specifically states that the cost of abnormal
amounts of wasted material, labour, or other
resources incurred in the construction of an
asset is not included in the cost of the asset
while dealing with self-constructed fixed
assets does not mention the same.

11. FEATURES
In order to include foreign currency
transactions and foreign operations in
the financial statements, transactions
must be expressed in the enterprise’s
reporting currency.
Exchange differences arising on the
settlement of monetary items or on
reporting an enterprise’s monetary items
at rates different from those at which
they were initially recorded during the
period, or reported in previous financial
statements, should be recognised as
income or as expenses in the period in
which they arise.
The method used to translate the
financial statements of a foreign
operation depends on the way in which
it is financed and operates in relation to
the reporting enterprise. For this purpose,
foreign operations are classified as either
“integral foreign operations” or “nonintegral foreign operations”.
An exchange difference results when
there is a change in the exchange rate
between the transaction date and the
date of settlement of any monetary
items arising from a foreign currency
transaction.
A foreign operation that is integral to the
operations of the reporting enterprise In
such cases, a change in the exchange
rate between the reporting currency
and the currency in the country of
foreign operation has an almost
immediate effect on the reporting
enterprise’s cash flow from operations.

12. The individual items in
the financial statements
of the foreign operation
are translated as if all its
transactions had been
entered into by the
reporting enterprise itself.
The cost and
depreciation of tangible
fixed assets is translated
using the exchange rate
at the date of purchase
of the asset. The cost of
inventories is translated
at the exchange rates
that existed when those
costs were incurred.
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INTEGRAL FOREIGN OPERATIONS
For practical reasons, a
rate that approximates
the actual rate at the
date of the transaction is
often used, for example,
an average rate for a
week or a month might
be used for all
transactions in each
foreign currency
occurring during that
period. However, if
exchange rates fluctuate
significantly, the use of
the average rate for a
period is unreliable.

13. NIFO
1
NIFO generates assets, other
sources of income and incurs
expenses in local currency .
2
Change in exchange rate
leave no direct effect on cash
flows of reporting enterprise or
on cash flows of NIFO
Ex.For Hyundai,its Indian
operations are NIFO for
accounting purposes in its
domicile country(South Korea)

14. PROCEDURE FOLLOWED IN INCORPORATING FINANCIAL
STATEMENTS OF NIFO IN REPORTING ENTERPRISE
Assets and liabilities should be translated at closing rate
Ex. Goodwill, building, creditors etc.
Income and expenses should be translated at
exchange rates prevalent at transaction date
Exchange differences should be transferred in foreign
currency translation reserve
Opening net investment in NIFO should be translated
at current exchange rate

15. DISCLOSURES
Enterprise’s foreign currency risk
management policy
Effect of change in exchange rates on
foreign currency monetary items and
financial statements
the amount of exchange
differences included in net
profit or loss of period
reasons for using different currency from
currency of domicile country of reporting
enterprise,
net exchange differences accumulated in
foreign currency translation reserve as a
separate component of shareholders’
funds, and a reconciliation of the amount
of such exchange

16. AS-11 VS IAS-21
IAS-21
AS-11
excludes from its scope forward exchange
contracts and other similar financial
instruments., which are treated in accordance
with Ind AS 39 Financial Instruments:
Recognition and Measurement.
does not make such exclusion.
based on the functional currency approach
based on integral foreign operations and nonintegral foreign operations approach
presentation currency can be different from
local currency and it gives detailed guidance
on this
does not explicitly states so

18. Government grants
available to the
enterprise are
considered for
inclusion in accounts:
• where there is reasonable
assurance that the
enterprise will comply with
the conditions attached
to them; and
• where such benefits have
been earned by the
enterprise and it is
reasonably certain that
the ultimate collection will
be made.
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RECOGNITION
An appropriate
amount in respect of
such earned benefits,
estimated on a
prudent basis, is
credited to income
for the year even
though the actual
amount of such
benefits may be
finally settled and
received after the
end of the relevant
accounting period.

19. METHODS OF PRESENTATION
Under one method, the grant
is shown as a deduction from
the gross value of the asset
concerned in arriving at its
book value. The grant is thus
recognised in the profit and
loss statement over the useful
life of a depreciable asset by
way of a reduced
depreciation charge.
Under the other method,
grants related to depreciable
assets are treated as deferred
income which is recognised in
the profit and loss statement
on a systematic and rational
basis over the useful life of the
asset.

20. REFUND
Sometimes become refundable because certain conditions are not fulfilled. A government grant that
becomes refundable is treated as an extraordinary item
The amount refundable is applied first against any unamortised deferred credit remaining in
respect of the grant. Otherwise the amount is charged immediately to profit and loss statement.
Grant related to a specific fixed asset is recorded by increasing the book value of the asset or by
reducing the capital reserve or the deferred income balance, as appropriate, by the amount
refundable
Where a grant becomes refundable, in part or in full, to the government on non-fulfilment of some
specified conditions, the relevant amount recoverable by the government is reduced from the capital
reserve

21. AS-12 VS IAS-20
IFRS (IAS)
Indian Standard
IAS gives an option to measure non-monetary
government grants either at their fair value or at
nominal value
Ind AS requires measurement of such grants only at
their fair value
IAS gives an option to present the grants related to
assets, including non-monetary grants at fair value in
the balance sheet either by setting up the grant as
deferred income or by deducting the grant in
arriving at the carrying amount of the asset
Ind AS requires presentation of such grants in
balance sheet only by setting up the grant as
deferred income
Requirements regarding presentation of grants
related to income in the separate income
statement, where separate income statement is
presented under paragraph 29A of IAS 20 have
been deleted. This change is consequential to the
removal of option regarding two statement
approaches in Ind AS 1
Ind AS 1 requires that the components of profit or loss
and components of other comprehensive income
shall be presented as a part of the statement of
profit and loss.

23. LIABILITIES
• Change in nomenclature - “Sources of Funds” has been replaced with “Equity &
Liabilities”
• Money received against Share Warrants has been specifically categorised as subhead under “Shareholders Funds”
• Share Capital – Company would need to show in sub-head à Shares held more than
5% in company along with number of shares
• Under head Reserves and Surplus, new sub-heads have been added i.e. Debenture
Redemption Reserve, Revaluation Reserve & Share Option Outstanding Account
• Debit Balance of P&L A/c shall now be shown as negative figure under head Surplus
• Share Application Money pending Allotment shall now be shown separately under
Shareholders Funds
• Liabilities will now broadly be classified as
• Current Liabilities &
• Non Current Liabilities
• Deferred payment liabilities and loans & advances from related parties to be shown
separately under head “Long term Borrowings”.
• Provisions to be classified as Short Term Provisions & Long Term Provisions

24. ASSETS
• Change in nomenclature - “Application Of Funds” has been replaced with “Assets”
• Fixed Assets to be further classified as
• Tangible
• Non-Tangible
• Current Assets are to be shown under separate head.
• While calculating “Gross Block” at year end, “Acquisitions through Business Combination” to be
included in computation
• Investments carried at other than cost should be separately stated specifying the basis for valuing
them
• “Sundry Debtors” have now been named “Trade Receivables”
• “Cash and Bank Balances” have now been termed as “Cash and Cash Equivalents”. Classification
under this head has been completely revamped.
• Inventories – Goods in transit shall be disclosed under the relevant sub-head of inventories
• Misc expenditure (to the extent not written off or adjusted) shall now not be shown separately
under head “Other Current Assets”
• The amount of Proposed Dividend to be distributed to shareholders (equity and preference) for the
period and amount per share to be disclosed separately

25. CHANGES IN PROFIT & LOSS A/C
• Under head “Other Income” - Net gain/loss on foreign currency translation
and transaction (other than finance cost) shall be disclosed separately.
• Employee benefit expense shall disclose additionally expense on account of
Employee stock option scheme (ESOP)
• Following shall now be disclosed separately –
•
•
•
•
•
Provision for loss of Subsidiary companies
Net loss on sale of Investments
Details of exceptional and extraordinary items
Prior Period items
Adjustment to carrying amount of investments
• A new format has been issued for face reporting of Profit & Loss A/c.

26. IMPACT OF REVISION IN SCHEDULE VI

29. THANK YOU!