Comparison of ICDS-X, AS-29 & IndAS-37 - Income Tax - Ready Reckoner - Income Tax

Topic ICDS Indian GAAP Ind AS Provisions, Contingent Liabilities and Contingent Assets ICDS X relating to provisions, contingent liabilities and contingent assets AS 29 Provisions, Contingent Liabilities and Contingent Assets Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets Scope This ICDS deals with provisions, contingent liabilities and contingent assets, except those: (a) Resulting from financial instruments; (b) Resulting from executory contracts; (c) Arising in insurance business from contracts with policyholders; and (d) Covered by another ICDS. This Standard should be applied in accounting for provisions and contingent liabilities and in dealing with contingent assets, except: (a) those resulting from financial instruments that are carried at fair value; (b) those resulting from executory contracts, except where the contract is onerous; (c) those arising in insurance enterprises from contracts with policy-holders; and (d) those covered by another Accounting Standard. This Standard shall be applied by all entities in accounting for provisions, contingent liabilities and contingent assets, except: (a) those resulting from executory contracts, except where the contract is onerous; and (b) those covered by another Standard. Recognition of provisions A provision shall be recognised when all of the following conditions are met: (a) there is a present obligation as a result of a past event; (b) it is reasonably certain that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. The term reasonably certain has not been defined in the ICDSs, the Act or the Rules. A provision shall be recognised when all of the following conditions are met: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. Provisions are not recognised based on constructive obligations though some provisions may be needed in respect of obligations arising from normal practice, custom and a desire to maintain good business relations or to act in an equitable manner. A provision is recognised only when a past event has created a legal or constructive obligation, an outflow of resources is probable, and the amount of the obligation can be estimated reliably. A constructive obligation is an obligation that derives from an entity's actions where, by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities. Provisions- Discounting Similar to Indian GAAP Discounting of liabilities is not permitted and provisions are carried at their full values. When the effect of time value of money is material, the amount of provision is the present value of the expenditure expected to be required to settle the obligation. The discount rate is a pre-tax rate that reflects the current market assessment of the time value of money and risks specific to the liability. Contingent assets - assessment Contingent assets are assessed continually and when it becomes reasonably certain that inflow of economic benefit will arise, the asset and related income are recognised in the year in which the change occurs. Therefore, the term virtually certain under Indian GAAP and Ind AS is replaced with reasonably certain . Contingent assets are assessed continually and if it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the financial statements of the period in which the change occurs. Similar to Indian GAAP Measurement The amount recognised as asset and related income shall be the best estimate of the value of economic benefit arising at the end of the year. The amount and related income shall not be discounted to its present value. An asset and related income recognised shall be reviewed at the end of each year and adjusted to reflect the current best estimate. No guidance included No guidance included Reimbursement Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when it is reasonably certain that reimbursement will be received if the entity settles the obligation. Therefore, the term virtually certain under Indian GAAP and Ind AS is replaced with reasonably certain . Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement should be recognised when, and only when, it is virtually certain that reimbursement will be received if the enterprise settles the obligation. Similar to Indian GAAP