Comparison Chart of ICDS-VIII, AS-13 & IndAS-109 - Income Tax - Ready Reckoner - Income Tax

Topic ICDS Indian GAAP Ind AS Securities ICDS VIII relating to securities AS 13 Accounting for Investments Ind AS 109 Financial Instruments Recognition, measurement and classification of financial assets Scope This ICDS deals only with securities held as stock-in-trade. a) This ICDS does not deal with securities held by an entity engaged in the business of insurance and securities held by mutual funds, venture capital funds, banks and public financial institutions formed under a Central or a State Act or so declared under the Companies Act, 1956 or the Companies Act, 2013 . b) The basis for recognition of interest and dividends on securities which are covered by ICDS on Revenue. Securities held as stock-in-trade are outside the scope of AS 13 . However, provisions of AS 13 relating to current investments are applicable to securities held as stock- in-trade with suitable modifications. AS 13 does not deals with : a) Investments of retirement benefit plans and life insurance enterprises; and b) Mutual funds and venture capital funds and/ or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 2013 . c) basis for recognition of interest and dividends on securities which are covered by ICDS on Revenue. d) Operating or Finance leases. Ind AS 109 includes the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items by all entities; and is broader in scope as compared to AS 13 and ICDS VIII. Initial measurement A security on acquisition shall be recognised at actual cost which shall comprise of its purchase price and include acquisition charges such as brokerage, fees, tax, duty or cess. Where a security is acquired in exchange for other securities or for another asset, the fair value of the security so acquired shall be its actual cost. Where unpaid interest has accrued before the acquisition of an interest-bearing security and is included in the price paid for the security, the treatment is similar to Indian GAAP i.e. the pre- acquisition portion is deducted from cost. The cost of an investment includes acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued (which, in appropriate cases, may be indicated by the issue price as determined by statutory authorities). The fair value may not necessarily be equal to the nominal or par value of the securities issued. If an investment is acquired in exchange, or part exchange, for another asset, the acquisition cost of the investment is determined by reference to the fair value of the asset given up. It may be appropriate to consider the fair value of the investment acquired if it is more clearly evident. When unpaid interest has accrued before the acquisition of an interest- bearing investment and is therefore included in the price paid for the investment, the subsequent receipt of interest is allocated between pre-acquisition and post-acquisition periods; the pre-acquisition portion is deducted from cost. All financial instruments are initially measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Trade receivables that do not have a significant financing component should initially be measured at transaction price as defined in Ind AS 115. Subsequent measurement This ICDS deals with securities held as stock-in-trade. At the end of the year, securities not listed on a recognised stock exchange, or listed but not quoted on a recognised stock exchange with regularity from time to time, shall be valued at initial cost. At the end of the year, securities other than those considered above shall be valued at lower of initial cost or net realisable value. The comparison of cost and net realisable value shall be done category wise and not for each individual security. For this purpose, securities shall be classified into following categories:Shares, debt securities, convertible securities, and any other securities. In case where initial cost cannot be specifically identified (for securities other than unlisted securities or listed but not regularly quoted securities), cost shall be determined on first-in- first-out basis. As per AS 13, investments are classified as long-term or current. A current investment is an investment that is by its nature readily realisable and is intended to be held for not more than one year from the date on which such investment is made. A long-term investment is an investment other than a current investment. Accordingly, the assessment of whether an investment is long-term has to be made on the date the investment is made. Long-term investments are carried at cost less provision for diminution in value, which is other than temporary. Current investments are carried at lower of cost and fair value. Valuation of current investments on overall (or global) basis is not considered appropriate. Sometimes, the concern of an enterprise may be with the value of a category of related current investments and not with each individual investment, and accordingly the investments may be carried at the lower of cost and fair value computed category- wise (i.e. equity shares, preference shares, convertible debentures, etc.). However, the more prudent and appropriate method is to carry investments individually at the lower of cost and fair value. All financial assets are classified as measured at amortised cost or measured at fair value. Where assets are measured at fair value, gains and losses are either recognised entirely in profit or loss (FVTPL), or recognised in other comprehensive income (FVTOCI). A debt instrument that is held within a business model to collect contractual cash flows and the contractual terms of which give rise on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding must be measured at amortised cost. However if the debt instrument is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, it must be measured at FVTOCI. Ind AS 109 provides an option to irrevocably designate, at initial recognition, financial assets as measured at FVTPL if doing so eliminates an accounting mismatch. Equity instruments should be classified as FVTPL. Ind AS 109 provides an option to irrevocably designate, at initial recognition, equity instruments which are neither held for trading nor are contingent consideration arising from business combination, to measure subsequent changes in fair value in other comprehensive income. The dividend from such investments is recognised in profit or loss.