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Atul Ltd | Annual Report 2016-17
Transition to Ind AS
(continued)
c)
Fair valuation of investments
Under IGAAP, investments in equity instruments were classified as long-term investments or current investments
based on the intended holding period and realisability. Long-term investments were carried at cost less provision
for other than temporary decline in the value of such investments. Current investments were carried at lower of
cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair
value changes of these investments have been recognised in other equity as part of 'Other reserves - FVOCI Equity
instruments' at the date of transition. This increased other reserves by
`
287.50 cr as at March 31, 2016 (April 01,
2015:
`
325.88 cr).
d)
Proposed dividend
Under IGAAP, dividends proposed by the Board of Directors after the Balance Sheet date, but before the approval
of the Financial Statements were considered as adjusting events. Accordingly, provision for proposed dividend was
recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the Shareholders
in the General Meeting. Accordingly, the liability for proposed dividend (including dividend distribution tax) of
`
35.70 cr as at March 31, 2016 (April 01, 2015:
`
30.35 cr) included under current provisions has been reversed
with corresponding adjustment to Retained earnings. Consequently, the total equity has increased by an equivalent
amount.
e)
Deferred tax
Under IGAAP, deferred tax accounting was done using the income statement approach which focuses on differences
between taxable profit and accounting profit for the period. Ind AS requires entities to account for deferred taxes
using the Balance Sheet approach which focuses on temporary differences between the carrying amount of an
asset or liability in the Balance Sheet and its tax base. The application of Ind AS 12 approach has resulted in
recognition of deferred taxes on temporary differences which were not required to be recorded under IGAAP.
In addition, the various transitional adjustments have led to deferred tax implications which the Company has
accounted for. Deferred tax adjustments are recognised in correlation to the underlying transaction either in
Retained earnings or Other Comprehensive Income on the date of transition.
f)
Excise duty
Under IGAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from
sale of goods is presented inclusive excise duty. Excise duty paid is presented on the face of the Statement of Profit
and Loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the
year ended March 31, 2016 by
`
154.47. There is no impact on the total equity and profit.
g)
Investments in debt instruments - Redeemable Preference share and loans to Related Parties
Under IGAAP, current investments were measured at cost or fair value, whichever is lower. Long-term investments
were carried at cost less provision for other than temporary decline in the value of such investments. The Redeemable
Preference shares and loans given to Related Parties were long-term in nature and measured at cost less provision
for other than temporary decline in the value of such investments.
Ind AS requires all financial instruments to be measured on initial recognition at fair value. Where a loan is advanced
on normal commercial terms (both in terms of principal and interest), the fair value at inception will usually equal
the loan amount. In case of loans advanced to Related Parties, the terms are either not on normal commercial terms
or they are forced. On initial recognition the fair value of loans and Redeemable Preference shares to Related Parties
has been estimated by discounting the future loan repayments using the rate the borrower may pay to an unrelated
lender for a loan | Preference share with otherwise similar conditions (for example, amount, duration, currency,
ranking and any security). Having separated the ‘off-market’ element of the transaction, the remaining part of the
loan receivable is accounted for as a financial instrument at amortised cost or FVPL.
Accordingly, the difference between the transaction amount and its fair value at the date of transaction has been
recorded as an investment in equity of the related entity in the Financial Statements (as a component of the overall
investment) with a corresponding impact to the investment in Preference share and loans. Going forward, the
interest income and fair value changes in the instruments are recognised in the Statement of Profit and Loss.
Notes
to the Financial Statements