 "From GAAP to Ind-AS: Impact on sectors")
MANUFACTURING
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The 211 companies in this sector that adopted Ind-AS took a hit of Rs 1,220 crore on their June 2015 quarter (base quarter) earnings leading to an uptick in earnings growth for June 2016 quarter when compared with the restated June 2015 quarter
- Change in measurement of financial instruments and expected credit loss hit their earnings the most by Rs 717 crore and Rs 546 crore, respectively, and was offset partly by deferred tax credit of Rs 372 crore
- Tata Steel had a large impact as it reversed gains of Rs 803 crore on sale of equity instruments and charged extra depreciation worth Rs 246 crore
- Jindal Steel and Power (JSPL) took a hit of Rs 135 crore on its base quarter earnings due to additional depreciation on plant, property and equipment
- Capitalisation of major repairs/capital spares led to an increase of Rs 98 crore in SAIL's base quarter net
- Due to the negative impact from adopting Ind-AS, Tata Steel, Jindal Stainless and JSPL recorded deferred tax credits on such adjustments leading to a positive impact on base quarter earnings of Rs 169 crore, Rs 73 crore and Rs 51 crore, respectively
- SAIL had an increase in deferred tax worth Rs 39 crore
- ITC's base quarter earnings were hit by Rs 114 crore as it changed ESOP valuation to a fair value basis. This was partly offset by gains of Rs 18 crore from fair valuation of financial instruments
CONSTRUCTION, ENGG & INFRA
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The 49 companies that adopted Ind-AS saw their base quarter net profit reducing by Rs 135 crore when compared with restated June 2015 quarter
- Adjustment for expected credit loss had an adverse impact on base quarter earnings to the extent of Rs 151 crore, while employee benefits reduced profit by Rs 102 crore
- Larsen & Toubro reported a downward adjustment of Rs 109 crore for expected credit loss and of Rs 104 crore due to employee benefits
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The 24 companies that implemented Ind-AS reported an increase of Rs 123 crore in the base period profit, and posted a lower net profit growth in June 2016 quarter when compared with restated June 2015 quarter
- The positive impact due to financial instruments in base quarter was Rs 103 crore. Tata Power gained by Rs 126 crore, and Adani Power by Rs 46 crore
- In the area of fixed assets, net profit was impacted by Rs 64 crore, with Tata Power losing over Rs 112 crore on account of decapitalisation of forex losses, while NTPC registered an increase of Rs 182 crore in base period on account of capitalisation of major overhaul and spares, and depreciation/amortisation
INFOTECH
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For the 35 companies that adopted Ind-AS reporting, base quarter earnings were hit by Rs 141 crore - thereby raising net profit growth rate in the June 2016 quarter compared with restated Q1 FY16 quarter
- The biggest impact came in from a change in accounting policy of financial instruments, which pulled down the base quarter earnings by Rs 242 crore with FCS Software and L&T Infotech witnessing the highest impact on this provision
- Changes in accounting of some employee benefits led to an increase of Rs 87 crore in the base quarter earnings with Wipro, Infosys and Tata Consultancy Services witnessing a higher impact from this provision than peers
TELECOM
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The 10 companies that adopted Ind-AS norms witnessed an increase of Rs 282 crore in their base quarter earnings which in turn pruned their growth numbers in the June 2016 quarter when compared with restated June 2015 quarter
- Deferred taxes to the tune of Rs 377 crore fuelled large part of the gains in the base quarter earnings
- Reliance Communications' net loss for the base quarter was reduced by 58 per cent
- Tata Communications reported a decline of 13 per cent in its base quarter earnings
- Change in accounting of financial instruments pulled down Bharti Infratel's earnings by Rs 134 crore while it boosted the earnings of MTNL by Rs 59 crore
* FI: Financial instruments; charts depict the impact of certain key Ind-AS adjustments on the profit or loss of listed companies in the respective sector, which have adopted Ind-AS from April 2016.
Source: Grant Thornton India
