Net income of Nifty companies fell after new accounting standards: PWC
Adoption of Indian Accounting Standards (Ind AS) caused a 3.5% decline in the net income of companies adding up to Rs9,444 crore in FY2016, said PWC
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New Delhi: Adoption of Indian Accounting (Ind AS) Standards caused a 3.5% decline in the net income of companies adding up to Rs9,444 crore in the year ended 31 March, 2016, PricewaterhouseCoopers Pvt. Ltd said.
The audit firm analyzed 76 companies from various sectors in the Nifty 50 and Nifty Next 50 benchmark indices to arrive at the figures.
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In the report titled Ind AS impact analysis: Corporate India’s transition to Ind AS, PricewaterhouseCoopers said the majority of Ind AS adjustments were 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.
Companies or their subsidiaries having net worth greater than Rs500 crore, adopted IndAS from 1 April 2016, while listed companies, those in the process of getting listed with net worth above Rs.250 crore to Rs.500 crore and their subsidiaries adopted it from 1 April 2017.
Since comparisons have to be in the same accounting standard, changes have to be brought for financial year 2015-16 accounts as well.
There was a 5.2% net increase in reported equity as on 31 March on Ind AS adoption. Telecom, retail and consumer and metals reported the highest average net increase in equity.
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According to Sumit Seth, increase in equity is primarily due to two factors. One is fair value gains on investments, which enables accounting for unrealised gains.
Other is fair value on account of fixed assets, which accounted for 80% increase in the total equity.
Fair value is defined as price of an asset at a particular point of time.