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Ind AS and Financial Consolidation and Reporting
Indian Accounting Standards (Ind AS) were notified in February 2016 by the Ministry of Corporate Affairs. They are based on International Financial Reporting Standards (IFRS).

Following is the roadmap for implementation of Ind AS in India…
How do Ind AS impact the preparation of financial statements and financial consolidation?
a. Statement of Changes in Equity
b. Treatment of exchange differences
c. Consolidation procedures and computation of non-controlling interests
New Statement of Changes in Equity (Ind AS 1)
A columnar statement showing changes in equity showing reconciliation between carrying amounts at the beginning and end of the period has to be given. Example of a statement of changes in equity-
eMerge™ has built-in functionality to prepare such columnar statement of changes in equity.
Effect of changes in foreign exchange rates (Ind AS 21)
Ind AS 21 introduces a new concept of “functional currency”. It is defined as the currency of the primary economic environment in which the entity operates. Functional currency can be different than the national currency of the country in which the company is incorporated. An entity has to prepare its financial statements in its functional currency. Foreign currency is simply a currency other than the functional currency of the entity.
Under certain circumstances, Ind AS 21 permits change in an entity’s functional currency. An entity’s functional currency reflects the underlying transactions, events and conditions that are relevant to it. Accordingly, once determined, the functional currency is not changed unless there is a change in those underlying transactions, events and conditions. Whenever there such a change in the functional currency, the entity has to apply translation procedures applicable to the new functional currency PROSPECTIVELY from the date of change (Para 35 of Ind AS 21).
Initial recognition of the foreign currency transaction:
A foreign currency transaction shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. (Para 21).
Reporting at the end of subsequent reporting periods (Para 23):
Type Rate to be used for translation
Foreign currency monetary items Closing rate
Non-monetary items that are measured in terms of historical cost in a foreign currency Exchange rate at the date of the transaction
Non-monetary items that are measured at fair value in a foreign Currency Exchange rates at the date when the fair value was measured
Recognition of exchange differences:
Monetary items (Para 28 of Ind AS 21):
Exchange difference arising on: To be recognized in
Settlement of monetary items Profit or loss in the period in which they arise
On translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements Profit or loss in the period in which they arise
Non monetary items  (Para 30 of Ind AS 21):
Exchange difference arising on: To be recognized in
Non monetary item where gain or loss is recognized in other comprehensive income Other Comprehensive Income
Non monetary item where gain or loss is recognized in profit or loss Profit or loss
Monetary item that forms part of a reporting entity’s net investment in a foreign operation (para 32 of Ind AS 21)
Financial statements: To be recognized in
Separate financial statements of reporting entity Profit or loss
Consolidated financial statements when foreign operation is a subsidiary Initial recognition in Other Comprehensive Income. On disposal of net invesement: reclassification from equity to profit or loss
eMerge™ has automated the computation of such exchange differences and appropriate presentation in financial statements as per the above requirements.
Consolidation procedures and Non-controlling interests (Ind AS 110).
This standard covers “line by line” consolidation of parent with its subsidiaries. Para B86 prescribes the following procedure…
Combine line items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries
Offset (eliminate) the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary (Ind AS 103 explains how to account for any related goodwill)
Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets, such as inventory and fixed assets, are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS12, Income Taxes, applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions
Non controlling interests (Para B94 and B95)
An entity shall attribute the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests. The entity shall also attribute total comprehensive income to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Contrast this with Para 26 of AS21 which specifies that minority interests cannot be negative (loss).

If a subsidiary has outstanding cumulative preference shares that are classified as equity and are held by non-controlling interests, the entity shall compute its share of profit or loss after adjusting for the dividends on such shares, whether or not such dividends have been declared.

eMerge™ computes non-controlling interests as per requirements of Ind AS 110.

Ind AS 111 specifies proportionate consolidation in case of joint operators. In case of joint ventures, equity method should be used for consolidation. Ind AS 28 prescribes equity method for investment in associates.

eMerge™ seamlessly handles both equity and proportionate methods of consolidation.
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