Ind AS adoption results in 3.5% decrease in reported net income in FY16: PwC Ind AS Impact Analysis

  • 54% companies reported decrease in net income of FY16 
  • Predominantly, all sectors reported an average net increase resulting in increase in equity of 5.2% as of 31 March 2016 upon Ind AS adoption
  • Excise duty gross up resulted in a 7.1% increase in top line of companies for the year ended 31 March 2016. With GST implementation, companies will again see an adjustment in their top line as GST will replace the existing excise-duty tax in India. 
  • Industrial manufacturing, automotive and power and mining sectors reported a net increase in reported income.

Mumbai, 4 July, 2017: Ind AS adjustments have resulted in a decrease in the reported net income of companies for the year ended 31 March 2016 by approximately 9,444 crore INR, a 3.5% decrease in reported net income.
These results are as per PwC’s Ind AS Impact Analysis: Corporate India’s transition to Ind AS, which analysed the reported results for 76 companies included in the NIFTY 50 and NIFTY NEXT 50 benchmark indices.

There was a positive impact on the reported net income of 35 companies (46%) under Ind AS for the year ended 31 March 2016. The total increase in Ind AS net income was approximately 10,515 crore INR (3.9%). There was a negative impact on the reported net income of 41 companies (54%) under Ind AS. The total decrease in net income was approximately 19,959 crore INR (7.4%), resulting in an overall net decrease in net income of approximately 9,444 crore INR (3.5%).

Average net increase in equity of 5.2%

There was a positive impact on the reported total equity of 55 companies out of the 76 companies analysed under Ind AS as of 31 March 2016. The total increase in Ind AS total equity was approximately 132,297 crore INR (6.7%). There was a negative impact on the reported total equity of 19 companies (26%) under Ind AS. The total decrease in total equity was approximately 30,612 crore INR (1.5%), resulting in an overall net increase of approximately 101,685 crore INR (5.2%).

The report also found that a majority of the Ind AS adjustments are due to revenue recognition, taxes, financial instruments, retirement benefit obligations and business combination and consolidation. Additionally, amortisation impact on indefinite lived intangible assets such as goodwill and depreciation impact on fair valued property, plant and equipment were also identified to be common Ind AS adjustments across companies. 93% of the companies reported revenue and taxes as an accounting area with maximum adjustments, followed by 89% of companies reporting financial instruments (including derivatives) as the next most significant accounting area of adjustment.

Sectoral impact

  • Changes to net income of companies ranged from a maximum increase of 83.7% to a maximum decrease of 191.1%.
  • Metals, capital projects and infrastructure, and retail and consumer are the top 3 sectors which reported a net decrease in net income upon Ind AS adoption.
  • Telecom, retail and consumer and metals reported the highest average net increase in equity on adoption of Ind AS.
  • Oil and gas, retail and consumer and automotive sectors reported maximum increase in revenues.

About the Ind AS Impact Analysis Report: 

The report is a follow up to the PwC Ind AS Impact Analysis report released in September 2016, to understand the impact of Ind AS transition on the reported results for the year ended 31 March 2016 under Ind AS vis-à-vis previously reported Indian GAAP results. For the purposes of this report, we have evaluated financial information for the year ended 31 March 2016 released by 76 companies until 31 May 2017. We have used a benchmark that is consistent with that used for the evaluation of companies in our previous report—i.e. companies which are listed on the National Stock Exchange (NSE) of India and included in NIFTY 50 and NIFTY NEXT 50 benchmark indices. In our analysis of NIFTY 50 and NIFTY NEXT 50 companies, we have excluded 18 companies that are either banks or non-banking finance companies (NBFCs) or insurance companies to whom Ind AS is not yet applicable and 6 companies that did not file their results for the year ended 31 March 2016 under Ind AS.

Since our report is based on published annual financial results which do not have detailed disclosures otherwise presented in annual financial statements, we may have made certain assumptions and generalisations for the purpose of aggregating the results and analysis.

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