Shareholder Value & Global

reporting. Reconciliation of
Indian GAAP financial
statements with
US/International GAAPS

MADE BY:
PIYUSH KUMAR 82069
VAIBHAV DWIVEDI 82081
 Shareholder value and GRI

Financial reporting and sustainability reporting are

often assumed to be distant cousins.
The latter has only recently been formalized with
the advent of the Global Reporting Initiative’s.
Hundreds of companies worldwide produce
sustainability reports, but very few combine these
disclosures with their financial data. As a result,
investors are making decisions based on incomplete
information because they lack disclosures on how
sustainability enhances value creation.
PROBLEMS … AND A SOLUTION

Companies receive diverse Stakeholders receive

information requests incomplete information

A generally-accepted reporting framework

developed through a multi-stakeholder
process

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 GRI Objective
Integrating financial, environmental, and social
performance reports.
Over the longer term, process innovations can
also lead to the creation of new products to meet
emerging customer needs.
Sustainability reporting has become increasingly
relevant for investors as a source of information
on environmental and social performance.
MD&A currently is the vehicle through which
much sustainability information is incorporated
and reported in the United States.
Sustainability reporting is typically seen as
separate from financial reporting, since it is not
solely done for investors.
Many facts and trends translate into intangibles or
risks and opportunities that define business
prospects.
 Benefits

 Efficiency
– single, generally-accepted reporting
framework
 Internal
Management – alignment and
communication of policies and performance
 Benchmarking – internal and external
 Recognition
and Fairness – reward high
performance, expose laggards

Stakeholder consultation – vehicle for
strengthening dialogue

Credibility – an international framework with
broad-based support for both process and product

Communication – with customers, media, and
regulators

Competitive Advantage – capital, product/service,
labor markets
 Summary Of Significant Differences between US GAAP, Indian GAAP

Particulars Indian GAAP US GAAP

1. Revenue Revenues are recognized when all Industry specific revenue
Recognition 8 of
significant risks and rewards recognition guidelines. Could be
ownership are transferred or on a different from what I-GAAP has
percentage of completion basis. No recognized.
detailed industry specific guidelines.

2. Balance sheet Conforms to statute and captions Balance sheet captions are
Are in the specific order : presented in order of liquidity
--Equity and reserves starting with the most liquid assets,
--Debt cash.
--Fixed assets etc Also requires disclosure of
Required only for the current year movements in stockholders’ equity,
with the prior year comparatives. including the number of shares
outstanding for all years presented.

3. Correction of Include effect in current year income Restate comparatives.Adjustments

fundamental errors Statement. required to be made topreviously
issued financial statements.
4.Derivative and other No definitive standard yet. New Gains/losses on hedges of foreign
financial standard on financial instruments: entity investments recognized in
instrument- Recognition and Measurement is equity. All hedge ineffectiveness
Measurement of presently under formulation. recognize in the income statement.
hedges of foreign Gains/losses held in equity must be
entity transferred to the income statement
investments. on disposal of investment.
 Particulars Indian GAAP US GAAP

5. Comprehensive No standards, not required. Unrealized gains/losses on

income investment and Foreign currency
translation disclosed as a separate
component of equity.

6. Derivatives and other No definitive standard yet. New Measure derivatives and hedge
financial Standard on financial instruments: instrument at fair value: recognize
instruments – Recognition and Measurement is changes in fair value in income
measurement of presently under formulation. statement except for effective cash
derivative instruments flow hedges, defer in equity
and hedging activities. until effect of the underlying
transaction is recognized in the
income statement.
Gains/losses on hedge instrument
used to hedge forecast transaction,
included in cost of asset/liability.

7. Business Combinations Restricts the use of pooling of Only accounted for by the purchase
interest method to circumstances method. Several differences can
which meet the criteria listed for an arise in terms of date of
amalgamation in the nature of a combination, calculation
merger. In all other cases, the Of share value to use for purchase
purchase method is used. price, especially if the I-GAAP
method is ‘amalgamation’.

8. Cash Flow Mandatory only for listed Mandatory for all entities.

Statement companies and companies meeting
certain turnover conditions.9
 Particulars Indian GAAP US GAAP
9. Property, Plant and Use historical costs or revalued Revaluations not permitted. Tested
Equipment amounts. On revaluation, an for impairment whenever
entire class of assets is events or changes in
revalued, or selection of assets circumstances indicate that its
for revaluation is made on a carrying amount may not be
systematic basis. recoverable.
No current restriction on frequency
of valuation.
10. Dividends Dividends are reflected in the Dividends are accounted for when
financial statements of the year approved by the board
to which they Relate even if /shareholders. If the approval
proposed or approved after is after the year end, the
the year end. dividend is not considered as a
subsequent event to adjust the
financials.
11. Prior period Prior period items are separately Correction of an error in previously
adjustments disclosed in the current issued financial statement is
statement of Profit and Loss recognized by restating
together with their nature and previously issued financial
amount in a manner that their statements.
impact on current profit and
loss can be perceived.

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 Particulars Indian GAAP US GAAP
12.Pension / Gratuity / Required to be mandatorily To be provided for and funded
Post provided Based on either actuarial based on acturial valuation.
Retirement Benefits valuation or Contribution to a Significant disclosure
defined plan. Follows AS- requirements exist. Acturial
15, Acturial gain/losses are gains/losses are amortized.
recognized immediately.
13. Balance sheet Does not need segregation of current Segregation necessary.
and non-current portions of
assets and liabilities.
.
14. Investment and Only unrealized depreciation on AFS Both appreciation and depreciation (
Marketable Securities. ( Available-For-Sale ) securities if unrealized ) is recognized as Other
is recognized in the income Comprehensive Income. Separate
statement. standard for treatment of cost of
development of computer software.

15. Research and Deferred where technical or Research costs can be capitalized

development commercial feasibility is established and amortized as intangible assets in
costs and the enterprise has adequate the specific cases i.e cost unique to
resources to enable the product or extractive industries and cost of
process to be marketed. intangibles which have alternative
future uses. All other costs are
Charged to expense as and when
incurred.

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 Particulars Indian GAAP US GAAP
16. Accounting for Exchange differences on foreign All exchange differences are
Foreign currency transactions are included in determining net
Currency Transactions recognized in the profit and income for the period in which
loss account with the exception differences arise.
that exchange differences related to
the acquisition of fixed assets
adjusted to the carrying cost of
the relevant fixed asset.
17. Goodwill Goodwill is capitalized and tested Goodwill is not amortized but
for impairment annually. goodwill is to be tested for
Except for goodwill from impairment annually.
amalgamation, which is
amortized over 3-5 years.

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 Significant difference B/w Indian GAAP and US
GAAP as per Financial statement(Patni )

1     Income taxes  

This represents deferred tax impact of significant differences between Indian GAAP and US GAAP.
 
2       Foreign currency differences  
In Indian Gaap, as per the guidance under AS 30, “Financial Instruments : Recognition and
Measurement” with regard to foreign currency purchased options, the changes in the time value (i.e. forward
premia differential) is excluded from the assessment of effectiveness testing and taken into the profit and loss
account whereas under US Gaap with respect to those contracts the overall changes in the fair value including
the changes in the time value is considered in effectiveness testing and reported in the Statement of
Shareholder’s equity and other comprehensive income.
 
3       Employee retirement benefits  
This represents difference in recording pension, gratuity, and leave encashment costs.
 
4       ESOP related Compensation Cost  
Under US GAAP, compensation cost is recognised for share based payments using a fair value
measurement method where the estimated fair value of awards is charged to income on a accelerated basis
over the requisite service period, which is generally the vesting period. Accordingly, compensation cost has
been recorded based on fair value under US GAAP while such accounting is done based on intrinsic value
under Indian GAAP.
 
5       Business acquisition  
Under US GAAP, the assets and liabilities acquired on acquisition of The Reference Inc, Patni
Telecom Solutions Inc. (formerly Cymbal Corporation) etc have been recorded at fair values assigned
to them, whereas under Indian GAAP these have been recorded at respective book values. Further,
under US GAAP, a portion of the purchase consideration has been allocated to intangible assets
meeting the criteria for being recognized as an asset apart from goodwill. These intangible assets are
being amortised over its useful life in proportion to the economic benefits consumed during each
reporting period. Under Indian GAAP, the entire difference between the purchase consideration and
the book value of assets acquired has been recorded as goodwill, which is subject to impairment
testing.
 
6       Impairment of Intangibles  
Due to adverse market conditions, during the year ended 31 December 2009 the Company
reviewed the recoverability of the carrying amount of the software proprietary intellectual property
rights or the IPR. In Indian Gaap as per the guidance in AS – 28 “Impairment of assets”, based on
management estimate as the expected discounted cashflows from the use of this IPR was lower than
the carrying amount an impairment charge net of tax was accounted under Indian Gaap.
 
Under US Gaap as the sum of undiscounted cash flows expected to result from it’s use exceeded
the carrying value hence no impairment charge was recognized.
THANK YOU