Bird’s Eye View of Accounting Standards AS 1 — Disclosure of Accounting Policies (At a glance) OBJECTIVE To promote better understanding of financial statements by establishing the disclosure (including the manner) of significant accounting policies oO ew NEED Altemative accounting principles and methods of applying them exists a CONSDIERATIONS Ensure true and fair view by + = Prodence + Substance over Form 4 Motoriatine es, FUNDAMENTAL ACCOUNTING ASSUMPTIONS + Going concern + Consistency + Accrual ———___¥ DISCLOSURE + All significant accounting policies + Change in accounting policy having material effect alongwith effect of change + Fact of non-disclosure of funda-mental accounting assumptions, if any. Principles and methods of applying such principles Examples Valuation of inventory, goodwill, depreciation method ete.AS 2 — Valuation of Inventories (At a glance) OBJECTIVE | To preseribe, the manner of determination of value of inventories to be carried to the financial statements und the ascertainment of cost of inventories and uny write-down thereof to net reslisuble value (NRV) + ‘VALUE OF INVENTORY {on item by item basis but in some cases may be dene on Group busis) ‘Lower of Cost NRV ance fete CT pte > | atmated selling peice in the ondinary course ef business Purchase Price 4 Preright duties & taxes ne {Otter expendiames, realy aiibuablc wanquisition ca or Savenion J ‘Estimated cost of completion Direct Labour 4 Allocated variable production Siesta ruins > 4 Allocated Fixed production Overheads (based om normal = ‘Clas > eupacity) Estimated cnsts necessary to make the sale COST FORMULAS FIFO, Weighted Average, Stundard Cost, Retail method, Specific Identification LIFO not allowed SPECIAL POINTS + Joint costs to be allocated on arational & — NRV to be estimated by considering ‘consistent basis, e 4. relative sales value nt * Most reliable evidence available split off point + Price fluctuations * Relevant post bulunce sheet events * Purpose for which inventory is held + Incase of by products, deduct the NRW of by “Material and other supplies for use in production products from the cost of mainproducts of inventories © Don't write down below cost if ultimated product expected to be sold at or above cost DISCLOSURES + Accounting policies adopted for yaluation (including change, if any, alongwith its impact Cost Formula Used Carrying amount of inventories Anpronriate classification of inventoriesAS 3— Cash Flow Statement (At a glance) OBJECTIVE P saving desired information about historical changes in cash &. cash equisalenis of an enterprise classified into operating, investing 8. fimncing activities Shortterm, highly liquid & ober investments reallly eouver- ¢ — Principal revenue producing acth _-p etivitios not being investing & financing activities fible into cash at a mgligible _ HAT TOF aon Toss if ee age Accvisiton & dispostl of longterm assets and can chewing (Toone investments (other than those inctuded in cash on hand & y qnivalents demand deposit Financing Activities with banks —-plResulting in changes in size & composition of ‘vines capital & borrowings of enterprise - HOW TO PRESENT Net profivloss adjusted for non-cash transactions, Maer asses oes can nS & gf « Direct method (not allowed far listed enterprises) defemals, past accruals, future operating cash payments ane disclos Inditeet Method = === > receipts/payments, incomefexpenses associated with investing/finaming cash flows SPECIALCASES ‘© Reporting Cash flows on anet basis © Forigneutreny cash lows © Buraondinay items © Inlerest & dividend © Tuesonimone © investment in subsidiaries, associates and JV * Acquition & cisposal of subsidiaries & other business units DISCLSOSURE © Componenis of cash & cash equivalents + Reconciliation ef the amcunts in CFS withthe equivalent tems reported in ths balance shoot + Significant cash &ecash oquivalents held by the enterprise but not available for uss by it, alongwith & commentary by managements ‘ ‘Voluntary diel asures relating to = Undnawn borrowing facilities amount — aggregate amount of cash flows that represent inewases in operating capacity separately from those cash flows thet are quired to maintain operating capacityAS 4— Contingencies and Events Occurring after the Balance Sheet Date (At a glance) (@ CONTINGENCIES OBJECTIVE ‘To prescribe the treatment of (e) EVENTS OCCURRING AFTER THE BALANCE SHEET DATE I Concition/situation existing on Balance Sheet Date result of which (gain or loss) is not known on the balance sheet dato but is made Imown/detsrmined on ths aceumencs at ‘non-oceuence of one or more vacertain future events + Insome-tax demand notice on company on halanoe sheet date, disputed by company + Bill Discounted by bank: = Contingent Loss © Ifprotable—pmvids © Can adjust related counter claim © Generadunspecified business tisk — doa' provide > Contingent Gain * Realisation certain — recognise, else dout recamiss © Natweot contingency © Uncertaintics that may affect the future outeome, Bstimate of financial effect or the fact that estimate can't be made J aning ¥ Examples. |-—-* Accounting Disclosure t | Siznificant cvents (faveurablehmfayourshle) occurring post balance sheet date but before approval of financial statements by Board of Directors Debior becoming insolvent Proposed dividend +> Adjusting events Adjust assets & liabilities for ¢ events providing additional evidence to assist the estimation of amounts relating to conditions sxisting at halance sheet date or which indicate that enrerpsise is no Jonger a going comern ‘+ statutory requirements or special nature +> = Non-adjusting events © Noadjustment required for events that don't relate toconditions existing atthe balance sheet date * Nature of events * Estimate of financial effect or the fact that estimate cannot be madeAccounting treatment of contingent losses Accounting Treatment of Contingent losses Relating to conditions or situations existing at Relating to conditions orsituations of post- the balance sheet date balance sheet date Neither provisioning nor Loss is probable (Likely) ‘Conflicting or insufficient disclosures required ‘evidence is there for estimating: ‘the amountot loss No provision required, Disclose the existence and nature of contingency ‘When thete is no related comntet ‘When there is 4 related counter claim or claim agains third party claimorelaim against thitd purty © Make provision for entire * Make provision for net (talanes) amount af loss Joss + Disclose the nature and gms umount of contingent liability Provision is also not required in respect of general or unspecified business risk since they do not relate fo conditions or situations existing at the balance sheet date.AS 5 — Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies (Ata glance) ‘To prescribe the criteria for classification & disclosure of certain items, such as Prior Period Items, Extraordinary items, changes in accounting policies, ete. in profit é loss account to enhance its comparability OBJECTIVE + v ¥ Ordinary Activities Extraordinary Items Prior period ems Activities normally Tlems of income or undertaken us parla expenses that arise business & From events of incidental activities ansactions cleady distinct fromthe ordinary activities of Activities of special Income wc expenses arising in the eurrent Petiod asa result of preparation of FS of prior periods ieee | Shauldbe infequent Infrequent & different Soittecetic orinepular fr args denceio bosons accountng extates Serea # Witing downer Loss due to + Onission from Trenance Sangunice reconling of # Dinposatorficea Atactment of expenses die to Dispos Proper he Srestaht oes + Undemtaternem of Ieome das Tmatematieal mistakes + + + Sepanteisslosure Separate disclosure of Sepante discloate af + Natwreandamouat * Nature and amount nous that impact Ensure that impact oneument profit or on current profit or Josscan te clearly lass ean be cleanly. perceived perceived = Note and amount «| + = ¥ Classification Meaning ‘Any special condition/caution Examples ¥ ‘Changes im Accounting Fotictes mg e ‘A.change in the specific accounting ptineiples and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements Allawedonly id J © equine by Statute, or ‘* Required hy Accounting Standard, or ‘© Leads to mare appropriate passertation of financial statements (FS) +» + ‘+ Changes trom weighted average to BIEO Unventor) [> + Change fromSIM to WDV + ‘Changes in Accounting estimates “A change in ine estimated ‘Amount in any items of Financial statements + = Whenaiftcult a distinguish biw change in accounting policy & ‘accounting estimate, ‘reat as change in accounting estimate + Adopt same classification as was previously wed + (Change in the: = Amount af bad debts © Change in the meful life (Depreciation) of depreciable assets + + Disclose the Disclose in the yearot = Change change 4 inpuct & rowlting adjustments inthe ¢ Natureand amount ponodofcange ofchange © impact not ascertainable then, such fact * [not practicable to ‘+ Nomsterial impact inthe curent perio a Be fut asa material pct ater periods, Soul fict of change in the year of changeAS 6— Depreciation Accounting (At a glance) OBJECTIVES Depreciation to be charged for proper matching of revenue and related costs. As 6 (Revised) lays down the criteria in accordance with which various aspects relating Lo depreciation are to be dealt with so as to enhance the intelligibility of the financial stawements © Used for more than one accounting period © Limited useful life * Held for production/supply of goods/services or Applies to Depreciable Assets y for purposes other than sale in ordinary course Depreciation Depends on y + Historical Cost + Expected useful life + Estimated residual vane ’ v v © Acquisitions Cost & other © Shorter than physical lit * Could betaken as equivalent to incidental expenses sralisable value of similar assets * Value could be substituted © Guiding factors operated uve similar conditions in certain cases, ¢.g., + Logal or contmetual Limits ‘and have now reached the end of change in long-term - Extraction or eonsumption theiruseful Lives liahility on account of + Extent of use © Winsignificant, taken as NIL exchange fluctuations, change in duties, ete. * Can getredmred due to = technological changes + Impmvement in production methods ~ Legal or other restrictions, etc. a Methods Straight Line Method (SLM) Written Down Value (WDV)‘ ‘ t AdditionExtension Charging Depre- to an existing asset ciation at Rates different than that t prescribed by Statute © Has a separate identity and can be used after ex- isting asset isdis- "4" me posed of 1 = Charge depre-Onlyit Yes ciation inde- "EM" PY peadeallly “ based on useful Iife of addition’ Menallows ovo 1 + No separate * Required by statute ‘idenity or Accounting: + Deprecinie over Standard, o remaining: * Leads a more useful life ar at appropriate the rate applied — preparation or toexisting asset presentation of FS t Special Issues 1 1 + t y Changein —Revalnation —Changein Disposal of ‘Change of method historical cost of ” = life asset ' Revised Revised = Revised Credit depreciation depreciation depreciation. protivcharge =id =f Joss on disposal, a=Revisd — c=Rovaluod ¢=namontied PRL Moot unamortised §— amount depreciable year of disposal depreciable = @=Remain- amount amount inguseful life f= Revised beRemaiting e Toho remaining useful wefil life appliod life *Tobeapplied prospectively To he applied Frospectively Jrospectively ‘Treatment of Effective date deficivexcess Retrospective» Charge effect deficieney/eredit surplus to P&L Ak of year of change DISCLOSURE + Historical cost or other substituted amount + ‘Total depreciation for cach dass of assets + Related accumulated depreciation + Depreciation method used and any changes alongwith their impact, if material ‘© Depreciation rates or useful lives of astots, if different ftom principal rates specified in Statute + Effect of revalution, if material + Surplus or deficiency, if material, on disposalAS 7— Construction Contracts (Ata glance) OBJECTIVE Toestablish the ground rules for recognition of revenue and cost, relating to construction contracts. in different accounting periods in which construction work is performed ¥ FOCUS & COVERAGE * Focuses accounting in the financial statements of contractors © Apart from normal construction contracts, also covers— — Contacts for rendering of services directly related to construction of the asset — Contacts fordestruction or restoration of assets — Contracts forrestoration of environment following demolition of assets t FIXED PRICE Contract Price or rate per unit of output is fixed (Costescalation elause could be present) COST PLUS Revenue = Cost + Some percentage or fixed fee METHOD ALLOWED Percentage completion COMBINING & SEGMENTING Construction Contracts ‘CONSTRUCTION OF ADDITIONAL ASSETS ‘COMBINE IF, Contracts © Can be treated as a single package © Part of single project, and © Performed concurrently orina continuous sequence SEGMENT IF Separate proposals submitted for each asset «Each asset has been subject to separate negotiation and can be accepted or rejected, and * Costs. & revenue of cach asset can be identified COMBINE IF © Assets dont differ significanlly in design, technology or function fiom assets in original ooatraet, ox © Prive negotiated with regard to original contract price ELSE, SEGMENTt ‘CONTRACT REVENUE & EXPENSES + CONTRACT REVENUE + CONTRACTEXPENSE * Initial amount agreed * Direct Costs * Variations in contract work, claims and incentive payments # Allocable costs provided * Coss specifically changeable to the customer — Measurable — Probuble y+. 4 RECOGNITION CRITERIA rT + CONTRACT REVENUE ‘When outeums of contract + CONTRACT EXPESNES (a) Percentage completion method 4 6) Can be estimated reliably [+ (a) Percentage completion method + Any expected loss also to be charged off (b) To the extent of such contract costs incurred the — b) Can't be estimated reliably [> (b) ‘Treat as period expense recovery of which is probable fd * Any expected loss also to be charged off CHANGES IN ESTIMATES * Of contract revenue/costs * OF outcome of contract TREAT AS CHANGE IN ACCOUNTING ESTIMATES, APPLY AS 5 (Revised) ¥ DISCLOSURES * — Contract revenue recognised, methods used to determine the contract revenue and stage of completion * For contracts in progress at the reporting date — Aggregate amount of costs incurred and recognised profits (less recognised losses) upto the reporting date — Advances received and retentions © Gross amount due from customers as an asset and gross amount due to customers as liability © Contingencies as per AS 4 (Revised)AS 9— Revenue Recgonition (Ata glance) OBJECTIVE | ‘To lay down the bases for recognition of revenue arising in the course of ordinary activities of an enterprise from sale of goods, rendering of services & use by others of enterprise resources yielding interest, royalties & dividends v ( REVENUE, Gross inflow of cash, receivables or other consideration in the course of ordinary activities CRITERION FOR REVENUE RECOGNITION Sale of Goods Rendering of Services Use by others of enterprise's resources vielding interest, royalties & dividend © Transfer of propertyin = * Percentage completion goods method. ’ Interest — Tin ition basis © Transfer of significant © Completed contract earn Proportion ass Royalties — Averual basis risk & rewards method Dividends — When owner's right to receive payment is established EBPECT OF UNCERTAINTIES + As to collectability + As to Measurability Amount not reasonably determinable, If no reasonable certainty al Uncertainty as to collection No uncertainty as to postpone. reco gnition the time of raising claim, arises subsequent to the time collection but payment Postpone recognition to the of sile-or rendering service received in instalments extent of uncertainty Recognise when consideration can be reasonably determined ¥ DISCLOSURES Recognise when ultimate. « Don't adjust revenue. Recognise revenue at the) * Revenue recognition policy collection reasonably certain already recorded time of sale or rendering of | © Changes in accounting policies, if any, and the impact thereof * Make provision serviocs * Circumsiances in which revenue recognition has been postponed * Gross Tumover, Excise Duty & Net TurnoverAS 10 — Accounting for Fixed Assets (At a glance) OBJECTIVE To prescribe the accounting treatment and disclosure requirements relating to] fixed assets except in cases covered by AS 6 (Revised), AS 12, AS 14, AS 16, AS 19 and AS 26. L IDENTIFICATION OF FIXED ASSETS * Productive use * Not meant for sale in ordinary course of business * Stand by and servicing equipment» Machinery spares specific to a fixed asset with irregular use L COMPONENTS OF COSTS © Purchase price * Import duties and other non-refundable taxes or levies + Directly attributable costs * Specifically attributable administration and general overheads + Expenditure on start-up and commissioning * Cost of addition/extention of capital nature * Improvements and repairs resulting in future, benefits, ¢.g., increase in| capacity + Exclude internal profit for self-constructed assets * Consider AS 16 for borrowing costs + Acquired for non-cash consideration, take fair market value of] consideration given or of the asset acquired or net book value of asset, whichever is more relevant and clearly evident. L REVALUATION * By competent valuers, indexation or current prices. + Restate either both gross book value and accumulated depreciation or simply add net increase to net book walue, + Revaluation of a class of assets not to result in net book value of the class greater than its recoverable amount. * Create revaluation reserve for increase, will not be available for| distribution. + For decrease, charge profit and loss account or revaluation reserve.DISPOSALS Gain or loss recognised in profit and loss account. Loss on sale of revalued asset could be charged against revaluation| reserve, Balance in revaluation reserve transferred to general reserve. + SPECLAL CASES Jointly owned assets: — Show share of enterprise, or _— Add pro rata cost of such assets with similar fully owned assets Several assets purchased for a consolidated price — Apportion the consideration on a fair basis. Goodwill — recorded only when purchased (cash or otherwise) — Write it off over a period of time Other intangibles — Apply AS 26 Assets on hire purchase — Apply AS 19. L DISCLOSURES Gross and net book value in beginning, additions, disposals, acquisitions| and other movements. Expenditure incurred during construction or acquisition for assets in the] process of construction or acquisition. Revalued amounts, method adopted for revaluation, nature of indices| used, year of appraisal and whether external valuer was involved. Relevant disclosures under AS | and AS 6 (Revised)Revaluation First Time Revaluation Already revaluated in the past Previously there was + Increase in value + Decrease in value © Credit Revaluation © Charge to Profit & + Increase in value + Decrease in value Reserve! Loss Ale | Now Now | | Tnerease in value Decrease in value Tnerease in value Decrease in. t { value Credit Revaluation «Charge Revaluation # Credit P&L A/c to the t Reserve Reserve to the extent of extent of previous * Charge to previous increase decrease P&L Ale Charge P & LA/c for + Credit ‘Revaluation. balance, if any Reserye' for balance, if ayAS 11 — The Effect of Changes in Foreign Exchange Rates (At a glance) | To lay down principles for deciding which exchange rates to be used and how to recognise the financial effect of changes in exchange rates OBJECTIVE Initial Recognition [effects of changes in t exchange rate subsequent to initial # Rale-on the date of recognition (ransaclons, or «Tf no. significant Quetwations, average rate if iL ‘approx, actual rate Monelary Items = Nonemonclary items, } carried in terms of ‘Closing Rate or other realistic rate Historical Cost. Fair r Rate prevailing on vailing at the date-of transactions values were determined ‘ REPORTING & J 1 RECOGNITION PRINCIPLES 1 } Exchange differences on monetary items v + Relating om enterprise's nel invest- ment in a non-ntegral foreign operation To be acfouaed ina foreign currency tran- slation reserve until the disposal of nel invest- ment + + Others ' Inomeor expenseof the patiod For trading or speculative purposes © Amortise premiumélis-count arising at the inception of the contract over the life of contract © Recognise the exchange. difference in the profit and loss. account im the reporting period in which exchange rales change © Recognise profit.or loss amiving on cunoellation or re-newel, as incomefexpense for the period Forward Exchange Contracts + Others ’ © Ignore premiam of discount * Mark the value of contract to its current market value ‘on each balance sheet date and recognise the gain or lossNon-Integral Foreign Operations + Assets & + Tacome & + Contingent + GAY or capital liabilities expense) liabilities Reserve on acquisi- (monetary & tien non-monetary) ' ‘ , Actual Rateof Closing rite Closing rate ‘the date of ‘transactions Closing Rate TRANSLATION OF FINANCIAL STATMENTS OF FOREGIN OPERATIONS Integral Foreign Operations + Individual item + Cost & deprectation of + Inventories inPSof for — ungible FA , ‘operation {@) When FA carried atoost (4) CostRate when Y ~ Rale atthe date of cost was incurred Actual Rate onthe — purchase (by NRV-When date of transaction (h) When FA cartiedatfair NRV is ‘value - Rate that cxisted on determined, usually ‘the dale of valuation the closing rate (__ ommetssues Tax effects of exchange differences + Disposal of nom-integral foreign operation Recognise the cumulative amount of the exchange differences that have been deferred and which relate to that operation, as income/expense in the period in Apply AS 22 which gain/loss on disposal is recognised DISCLOSURES xchange differences included in net profit or loss forthe period © Net exchange differences sccumulated in foreign curremy translation serve as a separte camponent af shareholder's funds and a reconciliation of the amount af such exchange differences st the beginning and end of the period, Change in classification of a foreign operation Apply the translation procedures tothe revised classification from the date of chan ge in the classification + Integral to non-integral 4 Non- integral to integral umulate the exchange» Translated amount of non- differences arising on monetary items.at the date of © Reason for using a different currency, when the reporting currency is different frem the cunency of| Uanslation of non-monetary change treated as historical cost thecounty in which the enterprise is domiciled «© When theto isa change in classification — Nature and reason for change —_Impuct of change on shareholder's funds — the impact on net profit ar lass For each prier period presented lad the change occured at the boginning af the earliest period presented. assets at the date of te- «Exchange differences lying in classification, inforeign foreign currency translation currency translation reserve reserve not Lo he recognised as. incomefexpense till the disposal of operationAS 12— Accounting for Government Grants (At a glance) ‘OBJECTIVE To lay down the accounting treatmentand disclosure norms of government grants such as subsidies, cash incentives, duty drawbacks, etc. WHEN TO RECOGNISE ‘There is reasonable assurance that— # the enterprise will comply with artached condition, if any © the grant will be received ACCOUNTING TREATMENT Inthe nature of In the nature of revenue promoter’s contribution ‘Two alternatives If it relates to specific fixed assets Credit to Cyl ‘Reserve t + Cannot be distributed as Depreciable Fixed Assets Nowlepreciable dividend or treated as Two Alternatives fixed assets deferred ineome moo Deduet gran! fom Credit P&L Ake on a |* Deduct gram from + Treat it asdeferred No conditions to Conditions to be relaied expenses systematic basis over | 8108s value of asset income & be fulfilled fulfill (which it intends to periods. necessary to |* Depreciation on net Teeognise as compensate) match it with relaled | Yalue (gross value income inthe Credit to Capital = Credit to income: outs minus grant) proportion in reserve ‘over the same period When grant equals the Which depreciation ‘over which oosl of whole or virtually the is charged every meeting such whole of thecost of the Yea! ublgaton is charged asset, show asset ala * Depreciate on to inoome nominal value gross value¥ SPECIAL CASES 1 Contingency ’ If contingency arises after grant has. been recognised, apply AS 4 (Revised) Relating to revenue ‘ * Apply first against unamortised deferred credil, in respectol grant * Charge balance to P&L Afe ‘Non-monetary grant * Asscls given al concessional rales — record at acquisition cost # Assets given free of cost record at nominal value REFUND OF GRANTS Treatit as an Extraordinary item Relating to promoter's contribution * Deduct from Capital Reserve DISCLOSURE Extraordinary item Apply AS 5 (Revised) when grant is awarded * for giving immediate financial support & nol as an incentive lo undertake specific expenditure, or * as compensation for expenses or losses incurred in previous periods Relating to specific fixed asset * Inorease book value of asset andl depreciate the revised book value prospectively over remaining useful life of asset, or © Deduct from capital reserve or deferred income balance * Accounting policy including the methods of presentation © Nature and extent of goverment grants recognised in the financial statemenis, including grants of non-monetary assets given al aconcessiondl raleor fiee of costAS 13 — Accounting for Investments (Ata glance) To prescribe accounting treatment for investments in the financial statements of an enterprise & related disclosure reauirements } ( OBJECTIVE Current * Ready realiseble © To be held for one year or less. —__ COMPUTATION OF COST Purchase Price + Incidental expenses - Pre-acquisition income Long-Term ; * Intended to held for long period + Purchase price when actual cash Acquired for consideration has been paid other than cash (fully or partly) Take actual cash price Issue of securities Tn exchange for another asset Fair Value of Fair value of asset given , securities issued up or fair value of investment, whichever CARRYING AMOUNT 38 more clearly evident # Not to be valued on global basis. ‘Current Investment Long-term Investment * Lower of Cost & Fair Value * Cost Reductions to fair value & any Reversals * Permanent reduction to be charged to P&L Alc thereof taken to P&L Ake * Permanent reduction can be reversed when value of investment, rises.1 DISPOSAL OF INVESTMENTS Investments fully sold Investment partly sok * Ascertain proportionate carying amount (through FIFO, Average Cost, ele) (a) eeer tain carrying amount (a) « Ascertain Net disposal proceeds (B) scertain Net disposal proceeds (b) . . If wb, Charge difference to P&L Ale Mb, Charge difference to P&L Ale ab, No further action required =, No further action required ach, Credit difference o P&L Ale ach, Credit differenoy to P&L Ale - RECLASSIFICATION: Current to Long-term Long Term to current Transfer at Lower of Cost & Fair Value Transfer at Lower of Costand Carrying atthe date of transfer Amouat al the date of transfer ¥ DISCLOSURE. Accounting policies adopted for determination of carrying amounts Gross Income from interest, dividends, rentals sepecately from long-term & current investments TDS on gross income under ‘Advance Taxes Paid Profits md losses on disposal of current investments & Long-term investments, alongwith their ewrrying amounts Significant restrictions on right of ownership, realisebilily of investments or the remittance of income & prooeeds of disposal Aggregate amount of quoted & unquoted investments Aggregate market value of quoted investments Other disclosures, if any, under relevant statuteAS 14 — Accounting for Amalgamations (Ata glance) OBJECTIVE ‘To nrescribe accounting treatment for amaleamations (excludine cases of acauirine controlling interest) and anv resultant eoodtwill or reserves + TYPES OF AMALGAMATIONS ‘Depends on satisfaction of 5 conditions HEall3 conditions | ¢ 4) assots& liabilities of ansferor company bocome assets an Liahlites af transferee.company Hany oneor more © Aileast 90% of face value of equity shureholders af transferor company bscomesharcholders in tranafemee company condition violated ¥ * Consideration is equity shares in transferee company, cash amy be given for fraction shares Mee ‘© Business of transferor company camied on by transferee company Purchase Gemuineoating of |* No adinstment made to tho book valne of transferor company in the financial statements (FS) of tmnsferee company except to an poe °' | ensure uniformity of accounting policies nvalves acquisition inferests ¥ J (ACCOUNTING TREATMENT 1 (a) Poolling of interest 0) Method ta) Purchase (6) Preserved — (b) Identity of reserves & PRL Alc (b) Not preserved except for identity of stanmory (c) Adjusted in the reserves in the FS of | (-) pjsforonce between consideration paid @) & value of net] eserves transferee company assets acquired (i) ic). Hf >) —Goodwill, write off in maximum 5 (@) Recorded at their existing carrying amounts | (/) Recording value of assets, liabilities & reserves of transferor te (Any non-cash element should be recorded at company I (et) — Capital Reserve fairvalue) id) At their existing camying amounts or by locating consideration to individual AMALGAMATION AFTER BALANCE SHEET DATE identifiable assets & liabilities of transferor Do not incerporat itn FS company on the basis of their fair value at the Disclose as per AS-4 (Revised) dateof amalgamation Additional disclosures for Merger (REQUIRED vlc For all amalgamations ONLY IN FIRST FS AFTER MERGER) + kine fowl tea es ofomlgmsg comps | Sn estos PURCHASE Reute « Deseription & no. of shares issued ® Effective date only in First Financial Statements afer purchase) * Ferentags ofsach cormany’s equity shares |S Mfihod ef acoutine « Consideration, including description exchanged * Particulus of thescheme sanctioned under a statute * Goodwill or capital reserve * Difference bw consideraion the valueof | y Fer of post lance sect amalgamation, if any * Period of amortisation of goodwill the net identifiable assels acquired & its treatmentAS 15 — Employee Benefits (At a glance) OBJECTIVE ‘To prescribe the accounting & disclosure for Employee Benefits TYPES OF BENEFITS Y ¥ v Short-term benefits Post-employment benefits Other long-term benedits (Gulu, paid leave, borus, non (Gratuity, pension, post-employment lie dong-service leave, sabbatical leave, monetary benefits, et. falling insures, medical care etc) juileeawards, etc, ) ve within 12 months) — OO HFF Defined Contribution Plans Defined Benefit Plans ‘(Employer's contribution is fixed) (Employer's Contribution is not fixed) ACCOUNTING TREATMENT: + Accumulating Compensated absences * Defined Contribution Plans + Linbility ‘Recognise when employee render service that inoveases heicentilement tofulue compensated atsenoes * Non-Accumolating Compensated absences ‘Recognise when anemployes is actually absent “Profitstmring & Hom Plans (due within 12 oaths) "Recognise when there is present obligation ad a lable estimnle af theoblisation can be made 4 No ac until assumptions required + No discounting requzed unless contibution fall due afler 12 months from, the posed in which services are rendered * Contribution recognised as expense + Defined Benefit Plans (A) Defined benefits * PY of defined benefit obligation 4-) Uniecognised past service onst (6 Pair value of plan ascets cut of which obligations ave to be sated dicetly 4 If sul svete dasa 8) Expeise *Cumentsericecost 4 Inert cost + Expected retum on plinasies dc reimbarsement rights + Actual gains doses + Pas service cst + Hffectof cunaimens/serements + Extunt which asctin (A) above exconls PY of economic benefits in the form of refunds fromthe pln or redaction in future contetutions tothe plan ‘4 PV of defined benefit obtigntion at halmee sheet date () Fair value of plan sets atbalance shoct date, ‘ut of which obligations are to be setled directly *# Bapense (+veor -¥e) # Cumentservicecost ‘ Inverest cost + Expected tum om omy plas assets md reimbursement ight roopnsiod as asset + Actumial gnins/losses Past service ovst ‘+ Hffect of curtailment/settementsSPECIAL POINTS ‘Discount rate to be determined wart market yieldsat balance sheet date on go vemment bonds ‘Recoghise past service cost as expense on SLM basis over the average period until benefits become vested; if benefits already vested, reco gnise expense immediately otinate fir value of plan assets by discounting expected futuw cash flows (discount rate wo reflect the risk assocated wit plan asses & nuturty expected disposal date of those assets) Reimburseneal to besecogalsed a a separate asset al fe value Recognise gain or loss on settlement ofa defined benefit plan when curtilmentorsettement oxcurs Offset asses relating oa plan against icity relating to-another plan When the surplus in one plan can beused to sete the obligation under the other pans the obligation is intended to be sated on net basis ‘Treat a naltemployer plan as a defined benefit plan unless itis not possible to do so for want of informtion, In that case its to be accounted foras defined contibutin plan, _Actwiril gains orosses tobe recognised immediatly, Recognise termination benefits as expense when there is present obligation as a. result of past event anda relisble estimate can be maid thereof provided i is probable that sm oul/iow of reowtces embodying economic benefits will be required to sete the oblisation, TRANSITIONAL PROVISIONS + Terinination benefits ‘© Exponso incurred upto 313-2000 can he defer over pay hack period. But no expense tole caried forward beyond 31-3-2010 * Defined benefit plans Recognise the folowing transitional lability (ater adjusting elated tax expense) against opening halance of revenue reserves and surplus: PV ofthe Geopentic LOA) BusheeSeenent + Compasiton ofeach geographical segment petiod Bases ) sation and amtisat eiaphic (LOC) (g) Depreciation and amortisation expenses . ° (i) Olher significant non-cash expenses 3. Geographic LOC) Business Segment (Reconciliation of revenue, seement resull, assels & (Goo graphic (LOA) liailitesAS 18 — Related Party losures (At a glance) OBIECIIVE Toestablish the disclosure sequirements of related party selationships de transactions between a reporting enterprise & is related parties Contra} means vor the other party in financiaoperating decisions Significant Influence means # > 50f6 voting power * Control over board composition ‘© Substantial interest in voting Power + powerto direct 4 APPLIES ONLY TO «Holding, subsidiarles, fellow subsidiut es *# Associates & Joint Ventuies « Individuals & other relatives + Key management personnel ¢: their relatives ¢ Bnicrprises owned by directors or major shareholders «Enterprises having a common key management personnel Participation in financial erating policy éeeisions © IF > 20% voting power, i is presumed unless + proved otherwise score} + SPECIFIC EXCLUSIONS © Zoompanies just because of a common director (provided the dimetor is not ableto effect their policies in mutual dealings) © Single customer, supplier. franchisee, distributor or general agent, just because of significant business volume * Following parties (in the course of their nomual dealings, just because of those dealings) — Finaneer — Trade Unions + — Public wilties — Govt departmanviagencies/sponsored bodies No disclosure required— © If discloses would be in conflict with the reporting enterprise's duty of confidentiality With respect to intra-group transactions in DISCLOSURES (tems of similarnarire may be clubbed provided any item individually s not significant) t (a) Name of related party © Nature of related party relationship (@)_Iftherehaveheen transactions hiv related parties * Name of transacting purly consolidated financial state ments ‘© Related party relationships and transactions bw state-awned enterprises * Description of relationship & nature of transactions including volume © Onnstanding items on balance sheet date & provision for doubtful debts cue fom, ‘such parties «© Write offs during the reporting period of dus fromto related parties © Other necesury elements (@_Tlems of similar natureAS 19 — Leases (Ata glance) OBJECTIVE To prescribe appmptiate accounting ueatment & disclosures in relation wo finance & operating, leases in the books of lessor de Lessee ’ CLASSIFICA TION FINANCE LEASE * To be dane at the inception of lease OPERATING LEASE © Transfer of substantially all the (inception is earlier af dateof— ‘® Other thin finance lease — lease agreement, or risks & wards of ownesship reement, ; oo © Prefersubstance over form — a commitment by the parties to the principal pravisions of lease) © Reclassification possible but not dus ta changes inestimate/cireumstances + Lplicit [nterest Rate + Lessee's Incremental borrowing rate of interest ¢ 4 Discount sate that makes present value Rate of interest that the lessee would of Gross Investment just equal to fait have to pay on a similar base value (amu's length price) of leased asset + Minimom Lease Payments (MLP) , Lease payments over * Gross Investient MLP *NetLavestment Cross Investment eae teen under a finance ewe () uncamed Finance Income + Residual value # Unguaranieed residual quamaoteed by oc on vale + Investment bela of lessee ACCOUNTING TREATMENT + FINANCELEASE OPERATINGLEASE, | __. EESSOR ; LESSEE LESSOR LESSEE 4 Recopnisasuecevablesatan amoust equal Comet iavestuenl + Teen gnise leases an asset & Liability at + Donot recognise selling profit + Recognised lease * Recognist finance income in PAL Me, ensurecemstant inception “+ Show asset on lease a8 fixed asset payments as an periodic retum on net investment a's + Recoid al fair value al inception notexceeding | s Recognisecost & depreciation as expense expense on stiaoht * Reduce lease payiienis from prinvipal & unearted present value of MLP ([rom les see's + Allocate initial ditect costs over the lease Line basis unless Finance income, ; penspective) term in proportion to the cognition of other basis is * Tocreave in unguaranieed residual value nol recorded. for # AApportion ease payment bw finance charge rent income or teat them as period justified ceerease revise income allocation Ae reduction of os Hility (Face charge to | expense 4 Allocate initil dict costs agains! nance income over be caleulaed in amanner ensuring constant | 4 Recognise leave income on a sraght line lease erm or recognise immediately as an expense petiodic.rate of interest) basis, unlessotber buss is justified Recon! profit as per sles policy Depreciate the asset on a systematic basis. SALE.& LEASE BACK TRANSACTIONS + + FINANCELEASE: * Defer any excess or deficiency of sale pmceeds over carrying amount & amortise it over lease tem in proportion of + oeae ‘LEASE Sale Price (a) Fair Value (6) a=b apd ach . © Defer excess over fair * [flossis compensated by furmre profit or loss value & amortise it over lease payments st below market immediately a period for which asset price then defer it & amortise in is expected to be used Propertion to lease payments over expected period of use * Else, recognise it immediately DISCLOSURES depreciation on Leased asset + FINANCE LEASE, LESSOR, LESSEE, ‘Reooneiliation bi gross # Sogregate leased asset fram owned ‘investment & present value of agaset MIP receivableat halance sheets Net carying amount al hulance sheet ate date foreach class of assets ‘Unearmed finance income * Reconciliation byw MLP at balance Ungvarinteed residual value sheet date and present value Accumulated provision for © Contingent ents recognised incollectible MLP receivable Eyqure ruinimum sub-lease payments ‘Contingent rent reangnised tobe received under non-cancellable Genel description ofsignificant subleases leasing agreements * General description of si gnificunt Acoounting policy for initial leasing agreements direct onsts *# AS6 (Revised) & AS 10 disclosures . + OPERATING LEASE Y t + +SALE & LESSOR, LESSEE LEASE BACK — + For each class of asssets Futur MLP under non- (BOTH + Gross carrying amount cancellable lease LESSOR & —- Accumulated & period dep © Future minimum sub- LESSEE) =~ Accumulated & poriod impairment loss lease payments Description of —- Impairment loss reversed for the period receivable fr non- significant + Future MLP under non-cancellable lease caneellable suib-leases leasing + Contingent rent reeogmised © MLP & contingent rat amungements 4 General description of significant leasing recognised Disclosure ‘agreements © Sub-lease payments under AS 5 ‘Accounting palicy for intial direc costs reprised (Revised) if ASG (Revised) &AS 10 Disclosures y- Ganeral description of applicable significant leasing ‘agreomoentsAS 20— Earnings Per Share (Ata glance) “OBJECTIVE | To lay down guidelines for calculation of Number of Sharés' for finding EPS so as to maintain uniformity in calculating EPS WHAT IS TO BE CALCULATED Basic EPS Diluted EPS for each class of equity shares that camties different rights to share in net profits HOW TO CALCULATE DILUTED BPS = (g)/th) fa) = (0) -@) (b) = (¢) adjusted by (f) (@)= (a) Adjusted for (i) Q)= b+ @ 3) = Not profit or loss for the {t= Weighted avg, no of equity (i)=* Interest & dividend woognised (0) = Weighted avg.no. of additional Petiod attitutable to equity shares o/s during the periad in the period relating to dilutive equity shares that would. ave shareholders @) = No, of equity shares o/s in potential equity shares including been o/s if all dilutive potential (¢) =Net pmofit orloss tho beginning of the petiod adjustment for change in tax equity shares had been @ Preference dividend + tax) = No, of equity shares boneht expense converted ondistribution, ifany back or issued during the * After tax amount of other period mmltiplied by time changes in expensesfincome weighting factor resulting from cmversion of lute potential equity shares RESTATMENTOF BASIC & DILUTED EPS » When no, of equity or potential equity shares ofs changes (de to bouus, sight, shar split or couselidation of shares) after balance sheet datebut before approval of financial statements, EPS calculations for that period and any prior period to be based on:new no. of shames » EDS not to bo adjusted for tansictions occurring after the balance sheet date and not affecting amount of capital wed for earning profitst SPECIAL CONSIDERATIONS FOR, ® Bonus ® Right ©) Share split ® Consolidation of shares * Options © Contingently Issuable shares © Anti-dilutive items DISCLOSURES MANDATORY VOLUNTARY & RECOMMENDED Basic & Diluted PS (Whether positive ornegative) Fact ofa change in cal ulations of BPS dueto bonus, right et Regoncilation of me profit or loss with the numerator Weighted ave, uo of equity shares for basic & diluted BPS & their reconciliation with each ether Nominal value of shares along with EPS figures Fer share amount for various components of net profit eg., profit from ordinary activities ‘Terms & conditions of contracts generating potential equity shares Tf P&L. Ave includes extraccdimuy items (as per AS 5 (Revised) then = Basic & diluted EPS on the basis of earnings excluling extmordi nary items (net of tax expense) Post balance sheet eventsAS 21 — Consolidated Financial Statements (At a glance) OBJECITVE ‘To lay down the principles & procedures for preparation && presentation of Consolidated Financial Statements (CFS) ¥ REQUIREMENT OF PRESENTING (CFS) AS 21 on its own does not require an enterprise to prepure & prevent CFS but if un enterprise present CFS then, AS 24 is a must to follow CONSOLIDATION PROCEDURE © Combine FS of parent é& subsidiaries on a fine by line basis «© Steps Gy Ascertain d Eliminate (a) Cost to the parent of its investment in cach subsidiary (8) Parent's portion of equity of cach subsidiary at the date of investment G8. fash difference is goodwill, If ecb the, capital reserve: Gif} Ascertain minority interest in net income & net assets for the period Gv) Adjust minority interest in net income against consolidated profits ow mute intra-group balances & transactions, resulting unrealised profits & unrealised losses (unless cost can’t be recovered) ¥ KEY POINTS FS also fo be prepared by parent even if CPS prepared All subsidiaries whether domestic or foreign to be consolidated Don't exclude a subsidiary from consolidation even if ts business activities are dissimilar CFS preferably to be prepared on the basis of FS drawn upto the same reporting date, in no case difference bw reporting dates to excced 6 months CPS to be prepared on the baxis of same uniform accounting policies © In separate FS of parent, investment in subsidiary to be accounted for ax per AS 15 © When an enterprise ceasex to be a subsidiary, treat the investment in it ax per AS 13 (unless if hax become an associate) * When an enterprise controlled by 2 enterprises, both the controlling enterprises require to consolidate the subsidiary + If majority voting power held but all shares held as ‘stock-in-trade; control treated as temporary © Negative minority interest not to be shown in consolidate balance sheet + Arrears of cumulative preference dividend belonging to minority to he adjusted for calculating holding company's share of profit or losses ‘+ Recognise the profit or lass on disposal of subsidiary in consolidated P&L Ave © Tax expense not to be recomputed. / ¥ DISCLOSURES I any subsidiary excluded from consolidation, reasons thereof Tf uniform accounting policies not followed — fact & proportion of such items in CFS ‘List of all subsidiaries, name, country, ownership interest ‘Where applicable — nature of relationship, if parent docs not own majority voting power — effects of acquisition & disposal of subsidiaries on financial position & results for reporting period, including effect on previous period, — name(s) of subsidiaryfics) of which reporting dates are different & the differenceAS 22 — Accounting for Taxes on Income (At a glance) OBJECTIVE At times, taxable income differs significantly from accounting income due to timing & permanent differences. Objective of AS 22 is to lay down treatment of such differences & to prescribe accounting treatment for other issues relating to taxes on income TAX EXPENSE. means Deferred tax + Current tax Deferred Tax Current Tax ‘Based on tuuable income as per Arives oul of Permanent & Timing differences, Income Tax Laws (relating to tax lability) om accounting income Permanent Differences ‘Timing Differences Y y ‘Originate in one period but Originate in one period and get don't reverse subsequently reversed in one mow Ister periods | Results in IGNORE Deferred Tax Asset DTA) Deferred Tax Liabilities (DTL) ‘Tax in subsequent years lawer "Tax in subsequent years higher ’ ’ PRL Ale — Credit P&L Me — Debit Balance Sheet — Asset Balance Sheet — Liability © State itatthe amount expected to be paid or recovered, + Use lax rate & ta lawsenacted ot substantially enacted by the balance sheet date using lax rales Atax laws enacted * Don't discount DTA or DTL to their present value MEASUREMENT i ’ OFFSETTING | * Offset current tax assets & liabilities if + Offsel DTA & DIL if (oerserming ) i ‘i © enlerprise bas a legally enforceable right to sel aff the © enterprise has a legally enforceable right to set off assets against current tax Habilities & rent ead anne “! ° # DIA & DIL relate to taxes on noome levied by same governing tax Lawes enterprise intends o sete the asst liability on a net basis' RECOGNITION ISSUES For deferred tax © Consider prudence * Recognise & o/f DTA when there is reasonable certainty © For unabsorbed depreciation & cf of Lax loses, recognise & of DTA when there is virtual ceriainly * Review DTA at each balance sheet date & write down if required © Reasscss unrecognised DTA at cach balance shect date © [gnore timing differences originating & reversing during tax holiday © Recognise DTA for timing differences originaling during tax holiday but reversing afler Lax holiday period is over ® Recognise DTA for loss w/h capital gain subject to consideration of prudence © [ftax paid under MAT, recognise DTA or DTL using regular tax rates and not MAT rates } DISCLOSURES © Distinguish DTA & DTL from current tax assets & liabilities © DTA & DIL under a separate beading in balance sheet ¢ Break up of DTA & DIL into major components in notes to accounts ¢ TEDTA relating to unabsorbed depreciation & cif of losses recognised , nature of supporting evidence j TRANSITIONAL PROVISIONS « Determine accumulated deferred tax in the first period by comparing opening balance of assets & liabilities for accounting & tax purposes * Creditopening balance of revenue reserves (and debit in case of DL) in caseof DTAAS 23 — Accounting for Investments in Associates in Consolidated Financial (Ata glance) OBJECTIVE To lay dawn principles & procedures for recognising effects of investments in associates on the financial position and operating results of the group ASSOCIATE MEANS © Other than a subsidiary or joint venture © Alas significant ifluence (power to investee but not control over these poli ipute in the financial und/or operating policy decisions of the ics) Gained by Stutute, agreement or share ownership (alleust 20%: of voting power, excluding potential equity shares) APPLY EQUITY METHOD FOR ACCOUNTING * Tnitial recognition — Atcost — Identify goodwill (When consideration given is more) or capital reserve (when it is less) # Include goodwilVeapital reserve in carrying amount of investment but disclose it separately * Distributions received from investee reduce the carrying amount of investment © Carrying amount increased or decreased to recognise the investor's share of past-acquisition profit or loss, also adjusted for alterations in investor's proportionate interest in investee arising from changes in investec's equity, otc. © Elintinate unrealised profits 4 losses, resulting from transactions b/w investor (or its consolidated subsidiaries) & the associate, fo the extent of investor's interest (unless can’t be recavered) * Tnvester’s share in profits to be computed afler charging arrears of preference dividend, if any, belonging to ‘persons outside the group Tf investors’ share: of losses of an associate equals or exoceds the carrying amount of investment, discontinue recognising share af further losses and report investment at nil value. «Reduce the carrying amount if there is permunent decline in the value of investment + REPORTING DATE & ACCOUNTING POLICIES = Should he ame © If not, make appropriate ajusitments Preferably same reporting date © If different, make adjustments for significant changes that occurred EXCEPTIONS TO AND DISCONTINUANCE OF EQUITY METHOD }* Investment intended to be temporary, or J+ Assuciate operates under severe long-term restrictions significantly imparing its Hability to transfer funds to| the investor, oF * Investor ceases to have significant influence, though retains whole or part of its investment + DISCLOSURES # [equity method not followed, reasons thereof © Goodyall/Cupital reserve # Listing & description of associates including proportion of ownership + Separate disclosure of investor's share of profits or losses of investments in associates # Investor's share of extruondinaryfprior period items, # Investor's share of contingencies and cupital commitments of an aksociate for which it is also contingently able; & those contingencies that arise because the investor ix severally Hable for the Habilities of the associate, * Name of associate whose reporting date is different from that of the investor 4 the difference: * If different accounting policies have been used d& appropriate adjustments have not been made then, the fact, alongwith the differences in accounting policies yy,Separate major line of business or geographical area of operations means ' * A reportable segment under AS 17, or * Pat of a weportale segment in appropriate cases AS 24 —Discontinuing Operations (Ata glince) ‘OBJECTIVE To prescribe principles for reporting information about discontinuing operations of an enteaprise A component said to be disting uishable operationally and for financial reporting — purpases when (ALL CONDITIONS TO BB SATISFIED) the following can be dimetly attributed to it: * [ts operating ast & liabilities * Tis revenue; nd * A mnajocity of its operating expenses disposing of substantially in its entirety, og. by selling the component in a single transaction or by demerger or spin-off of ownewhip of the component to the enterprise's shracholders CHARACTERISTIC & CONDITIONS OF DISCONTINUING OPERATIONS (DOP) A discontinuing operation is: (i) a component of an enterprise, (ié) which represents a separate major line of business or geographical area of operations, (ii) which =ocm be operationally and for reporting purposes, which the enterprise, pursuant to a single plan, is distinguished financial disposing of piecemeal, eg. by selling off companent's assets & OF soiting its Liabilities individually or Tneludes © Component disposed ofina piecemeal manner pursuant to a single plan Excludes © Component disposed af (whether in entirety or lecercal) pursuant tow piecemeal plan to discontinue entire component Closure af facilities ar abandonment of products! priduct ine or change in ‘work force in respect to marke force unless they ‘oceur ineonnection with a ‘DOP terminating through abandonmentthe enterprise having entered into a binding sale agreement for substantially all of the assets INITIAL DISCLOSURE EVENT (IDB) Ealliest of ‘ attributable to DOP + Relatingto [DB Description, seement in which DOP is reported Date and nature of IDE, Expected date or petiod of completion of discontimance Carrying amounts of assets to be disposed of & liabilities tobe settled Revenue & expenses, PBT (ar loss) and tax from ordinary activities during current period (relating to DOP) Not cash flow fom all activities during current period (relating ta DOP) ‘RECOGNITION é& MEASURMENT CRITERION Use principles of recognition & measurement specified in other accounting standards DISCLSOURES t + Relating to disposal of assets or +n subsequent periods settling of Lishilities attributable ta DOP «© Significant changes in (including entering into a binding the amount of cash agreement to do so} flows (relating ta * Gain or loss — PBT jor loss) & Tax. assets to be disposed thereat, or disposal of assets or of or liabilities to be settlement of liabilities settled) & the events Net selling price, expected timing of causing those changes receipt & carrying amount of net assets for which binding agreement(s) of sale has been entered into + the enterpriss’s boant of dinccters or similar governing body having both (i) approved a detailed, formal plan for the ciscontinnance an {(d) mide an annvoncementof the plan, 4 -Atthetime of + In interim financial reports ahandonmentor * Significant activities a1 withdrawal of events since the end of the DOP plans most recent annual reporting © Fact pediod relating toa DOP © Reasons © Effect * Significatt changes in amount or timing of cash flows (relating to assets to be dispased. af or liabilities toe settled)AS 25 — Interim Financial Reporting (At a glance) OBJECTIVE To lay down what information should be provided in interim financial reports && to prescribe the recognition and measurement principles + SCOPE To be followed only when an enterprise is otherwise required to prepare & present interim L financial statements (IFS) r FORM & CONTENTS © Minimum components ‘Condensed balance sheet, P&L A/c, cash flow statements [{CFS) containing at a minimum each of the heading & sub-hending of latest annual FS] — Selected explanatory notes (to he disclosed on a year to date basix) © Basic & Diluted EPS to be presented if it ix also presented in annual FS © Should include CFS if annual financial report alsa contain CFS ¥ PERIOD FOR WHICH COMPONENTS TO BE PRESENTED # Bulunce Sheet As.on end of current interim period Comparative as at the end of immediately preceding financial year (FY) * Profit & Loxs Account For the current interim period & year to date Comparative for current interim perind & year to date of immediately preceding F¥ * Cash flow statement ‘Yeur to date for current FY Comparative yeur to date for immediately preceding FY * For seasonal business ‘Additional reporting for 12 months ending on interim reporting date and compurutive for prior 12 months period ¥ RECOGNITION AND MEASUREMENT PRINCIPLES + Sume-as in annual FS » Revenues received seasonally or occasionally & cost incurred unevenly to: be anticipated or deferred at an interim date only if it would have been appropriate at year end. ¥ OTHER KEY ISSUES * Nature & amount of changes in accounting estimates relating to final interim period to be disclosed ax al note in the annual FS if, separate IFS are nel prepared for final interim period. * Acchange in avcounting policy for which transition not specified by any AS, to be applied retrospectively to prior interim periods of current FY * Accounting policy changes made in the current period (and, hence, could not be presented in the latest annual FS} to be incorporated in the IPS of current period ¥ TRANSITIONAL PROVISIONS * No need to present following statements for all the interim periods of a FY for which IFS ure presented for tise First time: ‘Comparative current year to date staternent of profit and loss for the immediately preceding FY ‘Comparative CFS for the comparable year to date period of the immediately preceding F¥AS 26 — Intangible Assets (At a glance) OBJECTIVE To lay down the ciitetia for recognition, accounting treatment & ascettaining amount of intangible assets & to prescribe requited disclosures J APPLIES TO Intangible asset that is identifiable, non- Identifiability Newmonfiry ase monetary asset, without physical substance ‘Without physical substance « Seyamhie . held for wse in the production or sapply of + Also includes intangible asset separable © Value cannot be fixed goods o¢ services, for rental to others, or with physical substance if cat af * Can be distinguished fom by contact or other for administrative purposes physical substance is not goodwill wise significant Futur economic benefits Y RECOGNITION & INITIAL MEASUREMENT Recognise when prohablethat furure ccomomic henefits wil flow cost can he measured reliably «Initial recognition ut cast ‘Asset acquited in exchange for securities, cost taken as fairvalue of assets or securities issued «Asset acquired in amalgamation, apply AS [4 but if consideration allocated to individual identifiable assets and liabilities on the basis of fais value then: — If active market exist, take quoted market price — If active market does not exist, takearm’s length price }* IfGovemment grant received for acquisition, Record asset at (naminal valuc ar acqusition cast) + direct expenditure for putting asset into usable condition }* Donot mevgnise inlemully generated goodwill & asset generated through research phase }* Recognise intemally penerated assets (through development phase) at expenditure incurred on it from time to time since the asst first met the recognition criteria AMORTISATION Cany the asset at cost less accumulated amortisation & accurmlated impairment loss “Amortise over useful life (not mare than ten years unless higher period justified) ‘Method of amoitisation to reflect pattem ia which asset's economic benefits consuined by enterprise, if this is not determinable then SLM ‘Residual value to be taken as 2eto uuless higher value justified Review amortisation method and period atleast once every year, make change, if required +OTHER ISSUES + Impairment loss + De-recongition of intangible asset + Gain or loss on retirement/disposal * Follow AS 28 © On disposal, ar ‘ © Impuirrent test armust if * When no fire economic benefits * Recognise in P&L A/c — Assel notavuilable for use expected — Amottisation pericd exceeds temyears DISCLOSURES (a) Separately for internally generated & other intangible assets ® Useful lives/amortisation mate, amortisation method ®* Gross carrying amount, accumulated amortisation & impairment losses * Additions, disposals, impairment losses recognised or reversed, amortisation, other changes in carrying amount during the period (b) If amortised period more than 10 years — reasons (c) Existence & carrying amount of assets whose title is restricted & of assets pledged as security for liabilities (d) Amount of commitments for acquisition of assets (e) R&D recognised as expense during the period 4 TRANSITIONAL PROVISIONS © Eliminate an asset & adjust the opening balance of revenues reserves for those assets whose normal amortistion period already over ® If normal amortistion period not over and enterprise is not amortising the asset at all, restate the carrying amount as if asset was amortisaed since acquisition ® Restate the carrying amount if amortisation period adopted longer than allowed by AS 26, compute as if AS 26 followed since acquisition ®* No restatement required if amortisation period adopted is shorter than that allowed by AS 26AS 27— Financial Reporting of Interests in Joint Ventures (At a glance) OBJECTIVE To prescribe the principles & procedures for accounting for interest in joint ventures (JV) and the reporting requirements thereof nn TYPES Jointly Controlled Operations (JC) © No separate legal entity No separate accounting records & FS required | Joindy Controlled Asset¥ (JCA) # Nosepurate legal entity * No separate FS required, accounting eons limited to expenses incurred in common and ultimately bome by venturers as per their share Jointly Controlled Entities (JCE) + Separate legal entity + Separate FS.& accounting records required | ( RECOGNITION REQUIRMENTS | ¥ Both for CES & separate FS Both for CFS & separate FS *® Separate FS © Assets under the control af venturer & © Share in JCA classified according to nature of Apply AS 13 Tail ties incurred. hy it asset * Consolidated Financial Statements (CFS) Expenses incurned by it and share of inoome Liabilities incumed by the venturer Sharein liabilities incurred jointly Share of ineomeand expenses Expenses incured in respect of owa interest in TV — Proportionate consolidation method except those held for temporary pumoses or when JCB operates under severe long-term restricitons significantly impairing its ability to transfer funds to venturer (in these cases, apply ASID FS of ICE dawn preferably tasame date Make adjustments if uniform accounting policy not followed Discontinue proportionate consclidation method from the date the ventumer ceases to have: joim contral though retains whole of part of its investment, use AS 13, AS 21 or AS 23——————— SPECIAL CASES ‘Transactions between yenturer & joint venture Interest in JV in FS of an Operators/Managers investor Fee 4#in CFS Apply AS 13, — + For operators/managers AS 21 or AS 23 * Recognise income as JCORICA ICE in sepwale FS. Apply ae + When venturer contribuics or xls 4 [nCRS «Recognise as an asses OV * Recognise portion of gain expose * Recognise portion of profit or loss ot loss attributable to attributable to interests of other interests = of other venLurers venturers * Recognise full loss if there is © Recognise Joss in full if reduction in net realisable value there is reduction in NRV (NRV) of current assets or there is of current assels or there impairment Toss is an impairment loss = «When venturer purchases assets from +h separate FS WV * Recognise full amount of * Recognise share of profit when it again ot loss resells the asset to an independent party * Recongise share of loss in same way bul recognise logs in full if DISCLOSURES there is reduction in NRV of current asset or there is impairment loss © Aggregate contingent liabilities © Aggregate capital commitments « List ofall venturers & description of interest in significant ones. © Proportion of ownership interest, name and country of incorporation or residence in ease of ICE © Aggregate assets, liabilities, income & expenses related to ils inlerests in JCEAS 28 — Impairment of Assets (At a glance) OBJECTIVE To lay down procedures for identification, recognition & reversal of impairment losses & to prescribe (disclosures WHEN TO ASSESS IMPAIRMENT. balance sheet azsess indication of impairment IDENTIFICATION, MEASUREMENT & RECOGNITION — Consider assets individually * Ascertain recoverable amount (RA) [higher of net selling price & value in usc] * Tf carrying amount > RA, charge difference to P&L A/c, ax impairment, if revaluation reserve exist adjust First to that — Tf can't be done on individual asset basis, identify CGU (smallest group of assets that generate independent cush Flows) * Ascertain RA of CGU # Allocate goodwill andl corporate asset to CGU by applying bottom up test first und then top down test (if required) # If carrying amount of CGU> RA, difference is impairment loss Allocate impairment loss first 1o allocate goodwill then to other assets (pro-rata) Ensure even afler recognising impairment, carrying umount of an asset is not belaw the RA & is not negative REVERSAL | Assess af cach balance sheet daic if impairment loss recognised in past has decreased or censed to exist @ After reversal, carrying amount of individual asse¥CGU not to exceed. carrying amount if no impairment ‘would have been recognised in past * Reversal of individual assets treated as income in P&T. Ale, if it is a revalued asset, increase revaluation ted first to assets other than goodwill (pro rasa) & then to allocated © Goodwill to be reinstated only on fulfilment of certain conditions ¥ DISCONTINUING OPERATIONS {DOP} * If sold in entirety — determine RA for DOP as a whole, else far individual asset (unless assets are sold in groups) # If DOP abandoned, determine RA for individual asset ¥ DISCLOSURES # Impairment loss recognised and reversed in Pal A/c und against revaluation surplus (If AS: 17 is applicable, this is to be disclosed in primary format) * Events & circumstances leading to recognition or reversal * Nature of individual asset/description of CGU © Current and former way of aggregating assets for identifying CGU Gif different from the past) é: reasons for change # Whether RA is net selling price or value in use; basis for determining net selling price, discount rate used ¥ TRANSITIONAL PROVISIONS © In the first year of application, * Assess and determine impairment Adjust impairment against opening balance of revenue reserve first but if asset revalued in past then, against revaluation reserve firstAS 29 — Provisions, Contingent Liabilities & (Ata glance) ‘To lay down recognitions criteria, measurement bases and disclosure requirements relating to provisions and contingent liabilities ( OBIECTIVE 4 PROVISIONS + Meaning + Recognition Measurement 4+ Review ‘A liability which can be Present obligation as a result of past event * Using best estimate of the expenditure # At each balance shee! measured only by using « Probable that outflow of resources required to sete the present obligation date and adjust the a substantial degree of embodying economic benefits will be at balance sheet dale provisions to reflect the Should not be discounted current best estimate. If estimation required to settle the obligation * Reliable estimate can be made of the * Shoukl consider relaled risks and appropriate, reverse the amount uncertainties provision # Related future events to be oonsidered when there is sufficient objective evidenoe thal they will occur. © Gains from disposal of assets not. to be considered {+ Consider reimbursements CONTINGENT ASSETS & LIABILITIES + Contingent Liabilities + Contingent Assets * Not to be recognised * Requires disclosure, unless the possibility of am oulflow of resources is removed # To be reviewed continually, if it becomes probable that an outflow of future economic benefits will be required, recognise the contingent liability as a provision © Not to be recongised * Not to be disclosed in FS, usually disclosed in Director's Report * To be reviewed continually, if it becomes virtually certain that an inflow of economic benefits will arise, recongise the assetand related incomers OTHER SPECIAL POINTS + Future operating + Adjustment of provisions + Restructuring costs losses © Only against expenditures for whieh the * Recognise provision if recognition criteria are met * Dont recongise rovisian was originally recognised * Include direct eapenditures arising from restructuring provision * Exclude — Retraining Aelocating continuing staff costs — Marketing costs — Investment in new system & distribution networks — Identifiable future operating losses upto the date of restructuring —_ Gains on expected disposal of assets. DISCLOSURES (i) Foreach elass of provision; (a) the carrying amount at the beginning and end of the period; (b) additional provisions made in the period, including increases to existing provisions; (c) amounts used (ie. incurred and charged against the provision) during the period; and (d) unused amounts reversed during the period. (e) a brief description of the nature of the obligation and the expected Liming of any resulting outflows of economic benefits; (() an indication of the uncertainties about those cutflows, an enterprise should also disclose the major assumptions made concerning, future events, if it is necessary to provide adequate information; and (g) the amount of any expected reimbursement, stating the amount of any asset that has been recongised for the expected reimbursement. (Gi) Foreach class of contingent liabilities * Nature * Estimate of fnuncial effect * Indication of uncertainties relating to any outflow + Possibility of ay reimbursement + If it is not practicable to disclose the required information, state the fact + If disclosure expected to prejudice scriously the position of an enterprise im a dispute with other parties, dou't disclose, But even then, the general nature of dispuie, together with the fact thal, and reasons why, the information has not been disclosed should be stated.