Accounting Standard 1: Disclosure of Accounting Policies Significant Accounting Policies followed in preparation and presentation of fina ncial statements

should form part thereof and be disclosed at one place in the f inancial statements. Any change in the accounting policies having a material effect in the current pe riod or future periods should be disclosed. The amount by which any item in fina ncial statements is affected by such change should be disclosed to the extent as certainable. If the amount is not ascertainable the fact should be indicated. If fundamental assumptions (going concern, consistency and accrual) are not foll owed, fact to be disclosed. Major considerations governing selection and application of accounting policies are i) Prudence, ii) Substance over form and iii) Materiality. The ICAI has made an announcement that till the issuance of Accounting Standards on (i) Financial Instruments : Presentation, (ii) Financial Instruments : Discl osures and (iii) Financial Instruments : Recognition and Measurement, an enterpr ise should provide information regarding the extent of risks to which an enterpr ise is exposed and as a minimum, make following disclosures in its financial sta tements: a. category-wise quantitative data about derivative instruments that are outstan ding at the balance sheet date, b. the purpose, viz. hedging or speculation, for which such derivative instrumen ts have been acquired, and c. the foreign currency exposures that are not hedged by a derivative instrument or otherwise. This announcement is applicable in respect of financial statements for the accou nting period(s) ending on or after March 31, 2006. Accounting Standard 2: Valuation of Inventories This standard should be applied in accounting for inventories other than WIP ari sing under construction contracts, WIP of service providers, shares, debentures and financial instruments held as stock in trade, producers inventories of livest ock, agricultural and forest products and mineral oils, ores and gases to the ex tent measured at net realisable value in accordance with well established practi ces in those industries. Inventories are assets held for sale in ordinary course of business, in the proc ess of production of such sale, or in form of materials to be consumed in produc tion process or rendering of services. Inventories do not include machinery spares which can be used with an item of fi xed asset and whose use is irregular. Net realisable value is the estimated selling price less the estimated costs of completion and estimated costs necessary to make the sale. Cost of inventories should comprise all costs incurred for bringing the inventor ies to their present location and condition. Inventories should be valued at lower of cost and net realisable value. Generall y, weighted average cost or FIFO method is used in cases where goods are ordinar ily interchangeable. Specific Identification Method to be used when goods are not ordinarily intercha ngeable or have been segregated for specific projects. Disclose the accounting policies adopted including the cost formula used, total carrying amount of inventories and its classification. Also refer ASI 2 deals with accounting of machinery spares Accounting Standard 3: Cash Flow Statements Prepare and present a cash flow statement for each period for which financial st atements are prepared. A cash flow statement should report cash flows during the period classified by o

perating, investing and financial activities. Operating activities are the principal revenue producing activities of the enter prise other than investing or financing activities. Investing activities are the acquisition and disposal of long term assets and ot her investments not included in cash equivalents. Financing activities are activities that result in changes in the size and compo sition of the owner s capital and borrowings of the enterprise. A cash flow statement for operating activities should be prepared by using eithe r the direct method or the indirect method. For investing and financing activiti es cash flows should be prepared using the direct method. Cash flows arising from transactions in a foreign currency should be recorded in enterprise s reporting currency by applying the exchange rate at the date of the cash flow. Investing and financing transactions that do not require the use of cash and cas h equivalent balances should be excluded. An enterprise should disclose the components of cash and cash equivalents togeth er with reconciliation of amounts as disclosed to amounts reported in the balanc e sheet. An enterprise should disclose together with a commentary by the management the a mount of significant cash and cash equivalent balances held by it that are not a vailable for use. Accounting Standard 4: Contingencies and Events Occurring after the Balance Shee t Date A contingency is a condition or situation the ultimate outcome of which will be known or determined only on the occurrence or non-occurrence of uncertain future event/s. Events occurring after the balance sheet date are those significant events both favourable and unfavourable that occur between the balance sheet date and the da te on which the financial statements are approved. Amount of a contingent loss should be provided for by a charge in P & L A/c if i t is probable that future events will confirm that an asset has been impaired or a liability has been incurred as at the balance sheet date and a reasonable est imate of the amount of the loss can be made. Existence of contingent loss should be disclosed if above conditions are not met , unless the possibility of loss is remote. Contingent Gains if any, not to be recognised in the financial statements. Material change in the position due to subsequent events be accounted or disclos ed. Proposed or declared dividend for the period should be adjusted. Material event occurring after balance sheet date affecting the going concern as sumption and financial position be appropriately dealt with in the accounts. Contingencies or events occurring after the balance sheet date and the estimate of the financial effect of the same should be disclosed. Note: The underlined paras/words have been withdrawn on issuance of AS 29 effect ive for accounting periods commencing on or after 1-4-2004. Accounting Standard 5: Net Profit/Loss for the Period, Prior Period Items and Ch anges in Accounting Policies All items of income and expense, which are recognised in a period, should be inc luded in determination of net profit or loss for the period unless an accounting standard requires or permits otherwise. Prior period, extraordinary items be separately disclosed in a manner that their impact on current profit or loss can be perceived. Nature and amount of signifi cant items be provided. Extraordinary items should be disclosed as a part of pro fit or loss for the period. Effect of a change in the accounting estimate should be included in the determin

ation of net profit or loss in the period of change and also future periods if i t is expected to affect future periods. Change in accounting policy, which has a material effect, should be disclosed. I mpact and the adjustment arising out of material change should be disclosed in t he period in which change is made. If the change does not have a material impact in the current period but is expected to have a material effect in future perio ds then the fact should be disclosed. Accounting policy may be changed only if required by the statute or for complian ce with an accounting standard or if the change would result in appropriate pres entation of the financial statements. A change in accounting policy on the adoption of an accounting standard should b e accounted for in accordance with the specific transitional provisions, if any, contained in that accounting standard. Accounting Standard 6: Depreciation Accounting Standard does not apply to depreciation in respect of forests, plantations and s imilar regenerative natural resources, wasting assets including expenditure on e xploration and extraction of minerals, oils, natural gas and similar non-regener ative resources, expenditure on research and development, goodwill and livestock . Special considerations apply to these assets. Allocate depreciable amount of a depreciable asset on systematic basis to each a ccounting year over useful life of asset. Useful life may be reviewed periodically after taking into consideration the exp ected physical wear and tear, obsolescence and legal or other limits on the use of the asset. Basis for providing depreciation must be consistently followed and disclosed. An y change to be quantified and disclosed. A change in method of depreciation be made only if required by statute, for comp liance with an accounting standard or for appropriate presentation of the financ ial statements. Revision in method of depreciation be made from date of use. Cha nge in method of charging depreciation is a change in accounting policy and be q uantified and disclosed. In cases of addition or extension which becomes integral part of the existing as set depreciation to be provided on adjusted figure prospectively over the residu al useful life of the asset or at the rate applicable to the asset. Where the historical cost undergoes a change due to fluctuation in exchange rate , price adjustment etc. depreciation on the revised unamortised amount should be provided over the balance useful life of the asset. On revaluation of asset depreciation should be based on revalued amount over bal ance useful life. Material impact on depreciation should be disclosed. Deficiency or surplus in case of disposal, destruction, demolition etc. be discl osed separately, if material. Historical cost, amount substituted for historical cost, depreciation for the ye ar and accumulated depreciation should be disclosed. Depreciation method used should be disclosed. If rates applied are different fro m the rates specified in the governing statute then the rates and the useful lif e be also disclosed. Accounting Standard 7 : Accounting for Construction Contracts (Revised 2002) Applicable to accounting for construction contract. Construction contract may be for construction of a single/combination of interre lated or interdependent assets. A fixed price contract is a contract where contract price is fixed or per unit r ate is fixed and in some cases subject to escalation clause. A cost plus contract is a contract in which contractor is reimbursed for allowab le or defined cost plus percentage of these cost or a fixed fee. In a contract covering a number of assets, each asset is treated as a separate c onstruction contract when there are: separate proposal; subject to separate negotiations and the contractor and customer is able to acce pt/reject that part of the contract;

method used to determine recognised contract revenue. claims and incentive payments that will probably re sult in revenue and are capable of being reliably measured. Change in estimate to be accounted for as per AS 5. when outcome can be estimated re liably up to stage of completion on reporting date. and contracts are performed concurrently or in a continuous sequence. this Standard stands withdrawn. the expected loss should be recognised as an expense immediately. contract cost should be recognised as an expense in the period in which they are incurred. contracts are closely interrelated with an overall profit margin. An enterprise to disclose contract revenue recognised in the period. methods used to determine the stage of completion of contracts in progress. Accounting Standard 8: Accounting for Research and Development Note: In view of operation of AS 26. For contracts in progress an enterprise should disclose the aggregate amount of costs incurred and recognised profits (less recognised l osses) up to the reporting date. When uncertainties no longer exist revenue and expenses to be recognised as ment ioned above when outcomes can be estimated reliably. a price negotiated without regard to original contract price Contract revenue comprises of initial amount and variations in contract work. it is probable that economic benefits will flow to the enterprise. In Fixed Price Contract outcome can be estimated reliably when total contract revenue can be measured reliably. Additional asset construction to be treated as separate construction contract wh en assets differs significantly in design/technology/function from original contrac t assets. When it is probable that contract costs will exceed total contract revenue. contract cost and stage of completion can be measured reliably at reporting date . Contract Revenue and Expenses to be recognised.identifiable cost and revenues of each asset A group of contracts to be treated as a single construction contract when they are negotiated as a single package. In cost plus contract outcome is estimated reliably when it is probable that economic benefits will flow to the enterprise. Accounting Standard 9: Revenue Recognition . and An expected loss should be recognised as expense. amount of advances received and amount of retention. Contract cost comprises of costs directly relating to specific contract costs attributable and allocable to contract activity other costs specifically chargeable to customer under the terms of contracts. and contract costs are clearly identified and measured reliably for comparing actual costs with prior estimates. When outcome of a contract cannot be estimated reliably revenue to the extent of which recovery of contract cost is probable should be r ecognised. and contract cost whether reimbursable or not can be clearly identified and measured reliably. An enterprise should present gross amount due from customers for contract work as an asset and the gross amount due to customers for contract work as a liability.

In case of rendering of services. expenditure incurred in course of construction and reva lued amount if any be disclosed. At each Balance Sheet date foreign currency monetary items such as cash. In the latter case it should be accounted at realisable rate i . Revaluation. ca sh receipt etc. when risks and rewards of ownership are transferred to the buyer and when effective contro l of the seller as the owner is lost. hire-purchase and lease agreements. royalties on accrual and dividend when own er s right to receive payment is established. government grants an d other similar subsidies and revenue of insurance companies from insurance cont racts. Also refer ASI 14 (withdrawing GC 3/2002) deals with the manner of disclosure of excise duty in presentation of revenue from sales transactions (turnover). Increase in value on revaluation be credited to Revaluation Reserve while the de crease should be charged to P & L A/c. Accounting Standard 10: Accounting for Fixed Assets Fixed asset is an asset held for producing or providing goods and/or services an d is not held for sale in the normal course of the business. revenue must be recognised either on completed service method or proportionate completion method by relating the revenue with work accomplished and certainty of consideration receivable. Self-constructed assets are to be capitalised at costs that are specifically rel ated to the asset and those which are allocable to the specific asset. Profit/Loss on disposal be recognised on disposal to P & L statement. Basis of revaluation should be disclosed. It also deals with accou nting of forward exchange contract. Fair market value is determined with reference to asset given up or asset acquired. if fluctuation during the period is not significant. In case of volumino us transactions a weekly or a monthly average rate is permitted. deleti ons and other movements. if any. Initial recognition of a foreign currency transaction shall be by applying the f oreign currency exchange rate as on the date of transaction. Interest is recognised on time basis. Assets should be eliminated from books on disposal/when of no utility value. Revenue from sales and services should be recognised at the time of sale of good s or rendering of services if collection is reasonably certain. Fixed asset acquired in exchange or part exchange should be recorded at fair mar ket value or net book value of asset given up adjusted for balancing payment.Standard does not deal with revenue recognition aspects of revenue arising from construction contracts. Gross and net book values at beginning and end of year showing additions. Also refer ASI 2 which deals with accounting for machinery spares. receiva bles. 2001 in view of AS 19 Leases becoming effective). Special considerations apply to these cases. i. (Not applicable for assets acquired af ter 1st April. payables shall be reported at the closing exchange rates unless there are restrictions on remittances or it is not possible to effect an exchange of curre ncy at that rate. Assets acquired on hire purchase be recorded at cash value to be shown with appr opriate note about ownership of the same.e. Disclose circumstances in which revenue recognition has been postponed pending s ignificant uncertainties. It includes financing cost for period up to the date of readiness for use.. Cost to include purchase price and attributable costs of bringing asset to its w orking condition for the intended use. Accounting Standard 11: The Effects of Changes in Foreign Exchange Rates (Revise d 2003) The Statement is applied in accounting for transactions in foreign currency and translating financial statements of foreign operations. Goodwill should be accounted only when paid for. should be of class of assets and not an individual asset.

Profit or loss arising on the renewal or cancellation of the forward contract sh ould be recognised as income or expense for the period. Further adjustments are to be made for significan t movements in exchange rates upto the balance sheet date of the reporting curre ncy.e. instead of stating it at historical cost. The financial statements of an integral foreign operation shall be translated as if the transactions of the foreign operation had been those of the reporting en terprise. Exchange differences arising on monetary item which in substance. Note: Schedule VI to the Companies Act. the amount of such increase or decreas e. Further. Any goodwill or capital reserve on acquisition on non-integral fina ncial operation is translated at the closing rate. deducted from the cost of the fixed asset. both monetary and non monet ary assets and liabilities should be translated at the closing rate as on the ba lance sheet date. the assets and liabilities ar e translated at the exchange rate prevailing on the balance sheet date of the no n integral foreign operations. unless the same is in substance an enterprise s net investment i n non integral foreign operation. Exchange difference on forward exchange contract is the diffe rence between exchange rate at the reporting date and exchange difference at the date of inception of the contract for the underlying currency. The resulting exchange differences should be a ccumulated in the foreign currency translation reserve until the disposal of net investment.. Forward Exchange Contract may be entered to establish the amount of the reportin g currency required or available at the settlement date of the transaction or in tended for trading or speculation. The income and expenses should be translated at the exchange r ates at the date of transactions. should added to. exchange difference arising on intra group monetary items continues to be recognised as i ncome or expense. it is initially to be accounted at the exchange rate prevailing on the date of transaction.n reporting currency. for fixed assets. Non monetary items such as fixed assets. the treatment described in Schedule VI will be in c ompliance with this standard. 1956. or. Exchange differences arising on translation shall be considered for deferred tax in accordance with AS 22. provides that any increase or redu ction in liability on account of an asset acquired from outside India in consequ ence of a change in the rate of exchange. In Consolidated Financial Statement (CFS) of the reporting enterprise. For incorporation of non integral foreign operation. is net investm ent in a non integral foreign operation (long term loans) shall be credited to f oreign currency translation reserve and shall be recognised as income or expense at the time of disposal of net investment. Non monetary items which are carried at fair value shall be reported at the exchange rate that existed when the value was det ermined. Exchange differences arising on the settlement of monetary items or on restateme nt of monetary items on each balance sheet date shall be recognised as expense o r income in the period in which they arise. When there is a change in the classification of a foreign operation from integra l to non integral or vice versa the translation procedures applicable to the rev ised classification should be applied from the date of reclassification. A gain or loss on forwar . Where the contracts are not intended for trad ing or speculation purposes the premium or discount arising at the time of incep tion of the forward contract should be amortized as expense or income over the l ife of the contract. When the financial statements of non integral foreign operations of a different date are used for CFS of the reporting enterprise. Therefore. as the case may be. i. investment in equ ity shares which are carried at historical cost shall be reported at the exchang e rate on the date of transaction. exchange differences on such contracts should be r ecognised in the P & L A/c in the reporting period in which there is change in t he exchange rates.

In the latter case the grant should be credited to th e P & L A/c over a reasonable period. Such gain or loss should be comput ed with reference to the difference between forward rate on the reporting date f or the remaining maturity period of the contract and the contracted forward rate .d exchange contract intended for trading or speculation should be recognised in the profit and loss statement for the period. Revenue grants when refundable should be first adjusted against unamortised defe rred credit balance of the grant and the balance should be charged to the P & L A/c. Grants related to non-depreciable asse t should be generally credited to Capital Reserves unless it stipulates fulfilme nt of certain obligations. o In case of reclassification of significant foreign operation. Alternat ively. Accounting policy adopted for grants including method of presentation. Grants towards specific assets should be deducted from its gross value. Grants when become refundable. given at concessional rate. debentures or bonds. extent of recognition in financial statements. Asset given free of cost be recorded at nom inal value. if material in amount. Non mandatory Disclosures can be made for foreign currency risk management polic y. Disclosure to be made for: o Amount of exchange difference included in Profit and Loss statement. Grants receivable as compensation for losses/expenses incurred should be recogni sed and disclosed in P & L A/c in the year it is receivable and shown as extraor dinary item. The deferred income balance to be shown se parately in the financial statements. Accounting Standard 13: Accounting for Investments Current investments and long term investments be disclosed distinctly with furth er sub-classification into government or trust securities. Grants should not be recognised unless reasonably assured to be realized and the enterprise complies with the conditions attached to the grant. shares. it can be treated as deferred income in P & L A/c on rational basis over the useful life of the depreciable asset. the nature of th e change. Any such increase in the value of the a sset shall be depreciated prospectively over the residual useful life of the ass et. o Net exchange difference accumulated in Foreign Currency Translation Reserve. the reasons for the same and its impact on the shareholders fund and t he impact on the Net Profit and Loss for each period presented. Grants by way of promoter s contribution is to be credited to Capital Reserves and considered as part of shareholder s funds. Accounting Standard 12: Accounting for Government Grants Grants can be in cash or in kind and may carry certain conditions to be complied . Grants of revenue nature to be recognised in the P & L A/c over the period to ma tch with the related cost. as applicable. For such contract. Such grants can be treated as other income or can be reduced from related expense. others unless it is required to be classified in other manner as per the statute governing the enterprise. Grants in the form of non-monetary assets. fees and . This means that the forward contract is marked to market. investment properties. which are intended to be compensated. Cost of investment to include acquisition charges including brokerage. Grants against specific assets on becoming refundable are recorded by increasing the value of the respective asset or by reducing Capital Reserve / Deferred inc ome balance of the grant. be shown as extraordinary item. accounting of non-monetary assets given at concession/ free of cost be disclosed. p remium or discount is not recognised separately. shall be accounted at their acquisition cost.

The excess or shortfall of consideration over value of net assets be recognised as goodwill or capital reserve. profit / loss on disposal and changes in carrying amount of such invest ment. Changes in the carrying amount and the difference between the carrying amount an d the net proceeds on disposal be charged or credited to the P & L A/c. assets. Under the Pooling of the Interest Method.f 1-4-2004) Disclosures to include effective date of amalgamation for accounting. Investment properties should be accounted as long term investments. Significant restrictions on right of ownership. Any non-cash item included in the consideration on amalgamation should be accoun ted at fair value. the method of accounting followed.duties. Current investments be carried at lower of cost and fair value either on individ ual investment basis or by category of investment but not on global basis. Effect on financial statement of such change in policy be reported as p er AS5. In case the scheme of amalgamation sanctioned under the statute prescribes a tre atment to be given to the transferor company reserves on amalgamation. (Limited Revision to AS 14 w. Accounting Standard 14: Accounting for Amalgamations Amalgamation in nature of merger be accounted for under Pooling of Interest Meth od and in nature of purchase be accounted for under Purchase Method. if any. particulars of the scheme sanctioned. the cost of the investment is the fair value of the securities issued or the assets given up. Under Purchase Method. Provision for decline (other than temp orary) to be made for each investment individually. In case of amalgamation under the Purchase Method the consideration and the treatment given to the difference compared to t he value of the net identifiable assets acquired including period of amortizatio n of goodwill arising on amalgamation is to be disclosed. same shou ld be followed. Also deviations between the two accounting treatments given t o the reserves and the financial effect. The reserves of the transferor company shall lose its identity.e. a uniform policy be adopted on amalg amation. classification of inve stments. Disclosure should be made of aggregate amount of quoted and unquoted investments together with aggregate value of quoted investments. In case of conflicting accounting policies. all assets and liabilities of the transferor company be r ecorded at existing carrying amount or consideration be allocated to individual identifiable assets and liabilities on basis of fair values at date of amalgamat ion. Acquisition cost may be determined considering the fair val ue of the investments acquired. If an investment is acquired by issue of shares/securities or in exchange of an asset. However a description of accounting treatment given to reserves and the reasons for following a treatment different from that prescribed in the AS is to be given. arising due to such deviation i s to be disclosed. Disclosure is required for the accounting policy adopted. liabilities and reserves of th e transferor company be recorded at existing carrying amount and in the same for m as it was appearing in the books of the transferor. realisability of investments and remittance of income and proceeds of disposal thereof be disclosed. Difference between the amount recorded as share capital issued and the amount of capital of the transferor company should be adjusted in reserves. Accounting Standard 15: Accounting for Retirement Benefits in the Financial Stat ement of Employers For retirement benefits of provident fund and other defined contribution schemes . Long term investments be carried at cost. In case of amalgamation under the Pooling of Interest Method the treatment given to the difference between the consideration and the value of the net identified assets acquired is to be disclosed.

obligation of th e enterprise may get increased at subsequent dates. Applicable to Level II & III enterprises (subject to certain relaxation provided ). any method of accrual for accoun ting long-term employee benefits liability is allowed. Accounting Standard 15 . In case of a multi-employer plans. nominees are also covered. which the employer has entered into. Excess payment be treated as pre-pa yment. the amount to be recognised as a defined benefit liab . expense should be recognised for discounted liabilities. cost incur red be determined actuarially. contribution payable by employer and any shortfall on collection from employee s if any for a year be charged to P & L A/c. These include performance bonus (payable within 12 m onths) and non-monetary benefits such as housing. While estimating. car or subsidized goods or ser vices to current employees. 2006. accounting treatment will depend on the type of arrangements. Excess/ shortfall of contribution paid against am ount required to meet accrued liability as certified by actuary be treated as pr e-payment or charged to P & L account If liability for retirement benefit is funded through a scheme administered by a n insurer. For Enterprises employing less than 50 persons. For gratuity and other defined benefit schemes. Short-term employee benefits should be recognised as an expense without discount ing. The obligation that arises from the enterprise s informal practices should also be accounted with its obligation under the formal defined benefit plan. children. unless permitted by other AS to be included as a cost of an asset. Under the later plans if actuarial or investment experience are worse then expected. appropriate charge to P & L to be made through a provision for accruing liability. Employee benefits are all forms of consideration given in exchange of services r endered by employees. Cost of accumulating compensated absences is accounted on accrual basis and cost of non-accumulating compensated absences is accounted when the absences occur. If defined benefit cost can not be reliably estimat ed it should recognise cost as if it were a defined contribution plan. an enterprise should recognise its proportion ate share of the obligation. under which e nterprise s obligation is limited to contribution agreed to be made and investment returns arising from such contribution. deferred compensation and termination benefits. dependent s. For balance sheet purpose. post-employment benefits. If payment for retirement benefits out of employers funds. or defined benefit plans under which th e enterprise s obligation is to provide the agreed benefits. Benefits provided to employees spouses. The excess/ shortfall of the contribution paid against the amount required to m eet accrued liability as certified by actuary or confirmed by insurer should be treated as pre-payment or charged to P & L account. Post employment benefits can either be defined contribution plans. with cert ain disclosures (in para 30) State Plans and Insured Benefits are generally Defined Contribution Plan. If liability for retirement benefit funded through creation of trust. an actuarial certificate or confirmation from insurer to be obtained.Employee Benefits Effective from accounting period comm encing on or after 1 April. calculated accordi ng to actuarial valuation. Employee benefits include those provided under formal plan or as per informal practices which give rise to an obligation or required as pe r legislative requirements. Financial statements to disclose method by which retirement benefit cost have be en determined. probab ility of payment at a future date is also considered. Any alteration in the retirement benefit cost should be charged or credited to P & L A/c and change in actuarial method should be disclosed as per AS 5. Cost of Defined contribution plan should be accounted as an expense on accrual b asis. Cost of profit sharing and bonus plans are accounted as an expense when the ente rprise has a present obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made.. if number of persons employed is 50 or more. In case contribution does not fall due within 12 months from the balance s heet date.

An enterp rise should determine the present value of defined benefit obligations (through actuarial valuation at intervals not exceeding three years) and the fair value o f plan assets (on each balance sheet date) so that amount recognised in the fina ncial statements do not differ materially from the liability required. not beyo nd 1 April. Where termination benefits fall due beyond 12 months period. Accounting Standard 16: Borrowing Costs . the present value of excess should be treated as an asset. it should be disclosed separately as per AS 5 re quirements. The difference between expected return and the actual return on plan assets is trea ted as an actuarial gain / loss. compared to pre-revised AS 15. In case o f fair value of plan asset is higher than liability required. o An enterprise should disclose information by which users can evaluate the natu re of its defined benefit plans and the financial effects of changes in those pl ans during the period. if material) Rate of return expectation on plan assets. 2009 can be deferred over the pay-back period. It should be recognised in the profit and loss account over the period of vesting. If terminat ion benefit amount is material. should be adjusted against revenue reserves and surplus. Similarly. Actuarial Assumptions comprise of following : Mortality during and after employment Employee Turnover Plan members eligible for benefits Claim rate under medical plans The discount rate. for other long term employee benefits. which is also recognised in the profit and loss account. However. For determining Cost to be recognised in the profit and loss account for the Def ined benefit plan. As per the transitional provisions expenses on termination benefits incurred up to 31 March. o Termination benefits are accounted as a liability and expense only when the en terprise has a present obligation as a result of a past event. Future salary and benefits levels In case of medical benefits. outflow of resour ces will be required to settle the obligation and a reliable estimate of it can be made. following should be considered : Current service cost Interest cost Expected return of any plan assets Actuarial gains and losses Past service cost Effect of any curtailment or settlement Surplus arising out of present value of plan asset being higher than obligation under the plan. past service cost is recognis ed immediately.ility is the present value of the defined benefit obligation reduced by (a) past service cost not recognised and (b) the fair value of the plan asset. the presen t value of liability needs to be worked out using the discount rate. For disclosures requirement refer to para 120 to 125 of t he standard. Actuarial gains / losses should be recognised in profit and loss account as inco me / expenses. o Transitional Provisions When enterprise adopts the revised standard for the first time. based on market yields on Government bonds of relevant maturi ty. future medical costs (including administration cost . o The expected return on plan assets is a component of current service cost. o Past Service Cost arises due to introduction or changes in the defined benefit plan. 2010. additional charg e on account of change in a liability. surplus on curtailment is recognised over the vesting perio d.

) General ly. amount of segme nt assets and liabilities. Capitalization of borrowing costs should be suspended during extended periods in which development is interrupted. Statement does not deal with the actual or imputed cost of owner s equity/preferen ce capital. In case exchange difference on foreign currency borrowings represent saving in i nterest. it should be treated as part of interest cost for AS 16 (ASI-10). all the activities for its intended use or sale are complete. The dominant source and nature of risk and returns of an enterprise should gover n whether its primary reporting format will be business segments or geographical segments. In case of funds obtained generally and used for obtaining a qualifying asset. a period of 12 months is considered as a substantial period of time (ASI-1). Under primary reporting format for each reportable segment the enterprise should disclose external and internal segment revenue. same shall be considered as reportable segment in the current year. or (b) segme nt result. Internal organizational management structure. for repo rting. Income on the temporary investment of the borrowed funds be deducted from borrow ing costs.Statement to be applied in accounting for borrowing costs. A business segment or geographical segment is a reportable segment if (a) revenu e from sales to external customers and from transactions with other segments exc eeds 10% of total revenues (external and internal) of all segments. segment result. whether profit or loss. Accounting Standard 17: Segment Reporting Requires reporting of financial information about different types of products an d services an enterprise provides and different geographical areas in which it o perates. A business segment is a distinguishable component of an enterprise providing a p roduct or service or group of products or services that is subject to risks and returns that are different from other business segments. depreciation. Financial statements to disclose accounting policy adopted for borrowing cost an d also the amount of borrowing costs capitalized during the period. cost of fixed assets acquired. in respect of that part. other than borrowings for obtaining qualifying asset. compared to interest rate for the local currency borrowings. or (c) segment assets are 10% or more of all the ass ets of all the segments. internal financial reporting syste m is normally the basis for identifying the segments. If there is reportable segment in the preceding period (as per criteria). should be capitalized. If total external revenue attributable to reportable segment constitutes less th an 75% of total revenues then additional segments should be identified. A geographical segment is distinguishable component of an enterprise providing p roducts or services in a particular economic environment that is subject to risk s and returns that are different from components operating in other economic env ironments. Capitalization should cease when activity is completed substantially or if compl eted in parts. the carrying amount is written down. . amortiza tion of assets and other non cash expenses. is 10% or more of (i) combined result of all segments in profit or (ii) combined result of all segments in loss whichever is greater in absolute amount. Borrowing costs that are directly attributable to the acquisition. t he borrowing cost to be capitalized is determined by applying weighted average o f borrowing cost on outstanding borrowings. construction or production of any qualifying asset (assets that takes a substantial period of time to get ready for its intended use or sale. When the expected cost of the qualifying asse t exceeds its recoverable amount or Net Realizable Value.

Relative (of an individual) means spouse. certain further disclosur es are required. AS disclosure is not required. and (iii) Financiers. Join t Ventures of the reporting entity. distributor or general a gent merely by virtue of economic dependence. public utilities. Secondary segment information is also required to be disclosed. assets and cost of fixed assets acquired. and key management personnel. sister. Items of similar nature may be aggregated by type of the related party. other elements of trans action if necessary for understanding. Howe ver. government departments and bodies merely by virtue of their normal dealings with the enterprise. Where there are transactions between the related parties following information i s to be disclosed: name of the related party. Standard also defines inter alia control. Reconciliation between information about reportable segments and information in financial statements of the enterprise is also to be provided. significant influence. daughter. Remuneration paid to key management personnel falls under the definition of a related party transa ction (ASI-23). Parties are considered related if one party has ability to control or exercise s ignificant influence over the other party in making financial and/or operating d ecisions. join t venture. if more than one business or geographical segment is not identified (ASI-20). that individu al in dealings with the reporting entity. The statement deals with following related party relationships: (i) Enterprises that directly or indirectly control (through subsidiaries) or are controlled by or are under common control with the reporting enterprise. (iii) Individuals o wning voting power giving control or significant influence. Names of the related party and nature of related party relationship to be disclo sed even where there are no transactions but the control exists. The type . Disclosure under the standard is not required in the following cases (i) If such disclosure conflicts with duty of confidentially under statute.Interest expense (on operating liabilities) identified to a particular segment ( not of a financial nature) will not be included as part of segment expense. When primary format is based on geographical segments. trade unions . (ii) In consolidated financial statements in respect of intra-group transactions. Disclosures are also required relating to intra-segment transfers and compositio n of the segment. (iv) Key management personnel and their relatives. nature of relationship. amounts written off or written back in respect of debts due from or to rel ated parties. amount or appropriate proportion outstand ing pertaining to related parties. Following are not considered related parties: (i) Two companies merely because o f common director. provision for doubtful debts from related par ties. son. supplier. and (v) Enterprises over which any of the persons in (iii) or (iv) are able to exercise significant influence. Investing party or venturer in respect of wh ich reporting enterprise is an associate or a joint venture. This includes in formation about revenues. (ii) Associates. Accounting Standard 18: Related Party Disclosures Applicability of AS 18 has been restricted to enterprises whose debt or equity s ecurities are listed in any stock exchange in India or are in the process of lis ting and all commercial enterprises whose turnover for the accounting period exc eeds Rs 50 crores. or be influenced by. (ii) Customer. duty cast by a regulator or a component authority. brother. nature of transaction and its volume (as an amount or proportion). father and mother who may be expected to influence. and (iii) In case of state-controlled ente rprises regarding related party relationships and transactions with other statecontrolled enterprises. associate. franchiser. interest included in the cost of inventories (as per AS 16) is to be consid ered as a segment expense (ASI-22).

A non-executive director is not a key management person for the purpose of this standard. conti ngent rent recognised as income. Finance income should be based on pattern reflecting a constant periodic return on net investment in lease. Lease payments should be appropriated between finance charge and the reduction o f outstanding liability so as to produce a constant periodic rate of interest on the balance of the liability. o he is in a position to exercise significant influence by virtue of owning an interest in the voting power or. Treatment in case of operating lease in the books of the lessee : Lease payments should be recognised as an expense on straightline basis or other systematic basis. unguaranteed residual value accruing to the lessor. Unless. Treatment in case of finance lease in the books of lessee: At the inception. profit should be calculated as if commercial rat es of interest were charged. licensing agreements for items such as motion pictures films. accu mulated provision for uncollectible minimum lease payments receivable. A lease is classified as a finance lease or an operating lease. A finance lease is one where risks and rewards incident to the ownership are tra nsferred substantially. total of future minimum sub lease payments expe cted to be received and general description of significant leasing arrangements. If artifici ally low interest rates quoted. general description of significant leasing arrangements. T he related party transactions which are not entered in the normal course of the business would ordinarily be considered material (ASI-13). (ASI-21). Depreciation policy for leased asset should be consistent with that for other ow ned depreciable assets and to be calculated as per AS 6. u nearned finance income. Disclosure should be made of total gross investment in lease and the present val ue of the minimum lease payments at specified periods. o he is responsible and has the authority for directing and controlling the acti vities of the reporting enterprise. accounting policy adopted in respect of initial direct costs. if appropriate. Disclosure should be made of assets acquired under finance lease. Accounting Standard 19: Leases Applies in accounting for all leases other than leases to explore for or use nat ural resources. Mere participation in the policy decision ma king process will not attract AS 18. Manufacturer/dealer lessor should recognize sales as outright sales. total future minimum sub lease payments expected to be received. and lease for use of lands. contingen t rent recognised. Initial direct costs should be expensed. Disclosure should be made of total future minimum lease payments for the specifi ed periods. vi deo recordings plays etc. more than 10% of related party transactions are not to be clubbed in an aggregated disclosure. lea se payments recognised in the P & L statement with separate amount of minimum le .e. Treatment in case of finance lease in the books of lessor: The lessor should recognize the asset as a receivable equal to net investment in lease. otherwise it is an operating lease. lease should be recognised as an asset and a liability at lowe r of fair value of leased asset and the present value of minimum lease payments (calculated on the basis of interest rate implicit in the lease or if not determ inable. reconciliation between to tal gross investment in lease and the present value of minimum lease payments.of related party for the purpose of aggregation of items of a similar nature im plies related party relationships. Material transactions. reconciliation between t otal minimum lease payments at balance sheet date and their present value.. net carrying a mount at the balance sheet date. i. at lessee s incremental borrowing rate). total minimum lease payments at the balance she et date and their present values for specified periods.

The weighted average number of shares for all the periods presented is adjusted for bonus issue. . however. the difference (loss) should be recognised im mediately. share split and consolidation of shares. Costs including depreciation should be recognised as an expense. If th e sales price is above the fair value the excess over the fair value should be a mortised.f 1-4-2004) Earnings attributable to equity shareholders are after the preference dividend for the period and the attributable tax. In calculating diluted EPS each issue of potential equity share is considered se parately and in sequence from the most dilutive to the least dilutive. sub lease payments recognised in the P & L st atement. Sale and leaseback transactions If the transaction of sale and lease back results in a finance lease. Note : Leases applies to all assets leased out after 1st April. Basic EPS is calculated by dividing net profit or loss for the period attributab le to equity shareholders by weighted average of equity shares outstanding durin g the period. the loss whi ch is compensated by future lease payments should be amortized in proportion to the lease payments over the period for which asset is expected to be used. In case of enterprises presenting consolidated financial statements EPS to be ca lculated on the basis of consolidated information. any excess or deficiency of sale proceeds over the carrying amount should be amortized ove r the lease term in proportion to depreciation of the leased assets.. In case of rights issu e at price lower than fair value. accumulated d epreciation and impairment loss. if the fair value is less than the carrying amount of the asset. if a ppropriate. Disclosure should be made of carrying amount of the leased assets. Treatment in case of operating lease in the books of the lessor: Lessors should present an asset given on lease under fixed assets and lease inco me should be recognised on a straight-line basis or other systematic basis. assuming conversion into equity of all dil utive potential equity). Initial direct costs are either deferred over lease term or recognised as expens es. Basic & Diluted EPS to be computed on the basis of earnings exclud ing extraordinary items (net of tax expense). future minimum lease payments in aggregate and for the specified periods. there is an embedded bonus element for which a djustment is made. general description of significant leasing arrangements. (Limited Revision w. 2001 and is mand atory. Accounting Standard 20: Earnings Per Share Focus is on denominator to be adopted for earnings per share (EPS) calculation. general description of the leasing arrangement and policy for initial costs. Effect of anti-dilutive potential equity share is ignored in calculating diluted EPS. as well as individual financi al statements. depreciation and impairment loss recognised or reversed for the period. But if the sale price is below the fair value any profit or loss should be recognised immediately.ase payments and contingent rents.e. Potential equity shares are treated as dilutive when their conversion into equit y would result in a reduction in profit per share from continuing operations. Requirement is to present basic and diluted EPS on the face of Profit and Loss s tatement with equal prominence to all periods presented.e. For calculating diluted EPS. If the transaction results in an operating lease and is at fair value. net profit or loss attributable to equity sharehold ers and the weighted average number of shares are adjusted for the effects of di lutive potential equity shares (i. profit or loss should be recognised immediately. In a transaction resulting in an operating lease. EPS required being presented even when negative.

If the number of equity shares or potential equity shares outstanding increases or decreases on account of bonus. For listed companies mandatory as per listing agreement. All subsidiaries. Consolidated financial statements to be presented in addition to separate financ ial statements. if consolidated financial s tatements are presented. Disclosure under Part IV of Schedule VI to the Companies Act. splitting or consolidation during the year or after the balance sheet date but before the approval of financial statement. liabilities. Near future generally means not more than twelve months from the date of acquisition of rele vant investments (ASI. Control is to be regarded as temporary when an enterpri se holds shares as stock-in-trade and has acquired and held with an intention to d ispose them in the near future (ASI-25). the ownership directly or indirectly through subsidiaries. Amounts of earnings used as numerator for computing basic and diluted EPS and th eir reconciliation with Profit and Loss statement are disclosed. Intra-group balances and intra-group transactions and resulting unrealised profi ts should be eliminated in full. notes and other statements necessary for preparing a true and fair view. then it should calculate EPS in acco rdance with the standard. as the case may be. Cash flow only in case parent presents cash flow statement. to obtain economic be nefit. Nominal value of shares is disclosed along with EPS. Control means. Control of composition implies power to appoint or remove all or a majority of d irectors. CFS normally includes consolidated balance sheet.e. Unrealised losses should also be eliminated unl ess cost cannot be recovered. Accounting Standard 21: Consolidated Financial Statements To be applied in the preparation and presentation of consolidated financial stat ements (CFS) for a group of enterprises under the control of a parent. income and expenses which involves: Elimination of cost to the parent of the investment in the subsidiary and the pa rent s portion of equity of the subsidiary at the date of investment. It has been clarified that if an enterprise discloses EPS for complying with req uirements of any source or otherwise. If the enterprise is not so covered but chooses to present EPS. Also. both the enterprises are required to consolidate the financial statements of the fir st mentioned enterprise (ASI-24).. bas ic and diluted EPS are recalculated for all periods presented. Consolida ted Financial Statements is recommendatory. The differen ce to be treated as goodwill/capital reserve. Minority interest in the net income to be adjusted against income of the group. intention at the time of investing is to dispo se the relevant investment in the near future or the subsidiary operates under sev ere long-term restrictions impairing transfer of funds to the parent.. Consolidation to be done on a line by line basis by adding like items of assets. i. The fact is also disclosed. When an enterprise is controlled by two enterprises definitions of control. Note: Earnings Per Share apply to the enterprise whose equity shares and potenti al equity shares are listed on a recognised stock exchange.This is determined on the basis of earnings per incremental potential equity. these should be prepared in accordance with the standar d. Minority interest in net assets to be shown separately as a liability. Subsidiary is an enterprise that is controlled by parent. should calculate and disclose EPS as per A S 20. domestic and foreign to be consolidated except where control i s intended to be temporary. However. of mor e than one-half of the voting power of an enterprise or control of the compositi on of the board of directors or such other governing body. the weigh ted average number of equity shares used in calculating the basic EPS and dilute d EPS and the reconciliation between the two EPS is to be disclosed. 1956 should be in accordance with AS 20 (ASI-12). consolidated P & L. The tax expense (current tax and deferred tax) of the parent and its subsidiarie .

the fact should be disclosed together with p roportion of such items. loss after considering the cost indexation as per the Income Tax Act. Where two or more investments are made in a subsidiary. convincing evidence is re quired to support the judgment of virtual certainty (ASI-9). Unrecognised DTA to be reassessed at each balance sheet date.4).e. proportion of ownership and voting power held if different. DTA to be recognised on the amount. names of the subsidiaries whose reporting dates are different than that of the parent. The consequent difference in depreciation char ge of the subsequent years shall also be treated as a permanent difference. which originate in one period and do not get reverse subsequently. effect of the acquisition and disposal of s ubsidiaries on the financial position. Permanent differences are those differences between taxable income and accountin g income. When enterprise has carry forward tax losses. consolidati on of P & L account to be made up to date of cessation.1-4-2002 (c) All other enterprises . In respect of loss under the head Capital Gains. Also. i. (ASI-2 . which is allowed as pe r the provisions of the Act. Accounting Standard 22: Accounting for Taxes on Income Effective date when mandatory (a) For listed companies and their subsidiaries 14-2001 (b) For other companies . Deferred tax should be recognised for all the timing differences. country of incorporation or residence. Financial statements used in consolidation should be drawn up to the same report ing date. If the accounti ng policies followed are different. The transferee company can recognise a DTA in respect of carry forward losses of .s to be aggregated and it is not required to recompute the tax expense in contex t of consolidated information (ASI-26). equity of the subsidiary to be generally determined on a step by step basis. In the year in which parent subsidiary relationship ceases to exist. the difference b etween the values shall be treated as a permanent difference and hence it will n ot give rise to any deferred tax. subject to the consideration of prudence in respect of deferred tax assets (DTA). Consolidation should be prepared using same accounting policies. DTA to be recognised only if there is virtual certainty supported by convincing evidence of future taxable income. where identifiable assets / liabi lities are accounted at the fair value and the carrying amount for tax purposes continue to be the same as that for the transferor enter price. Also nature of relationship between parent and subsidiary if parent does not own more than one half of voting power. Disclosure is to be of all subsidiaries giving name. Timing differences are those differences between taxable income and accounting i ncome for a period that originate in one period and are capable of reversal in o ne or more subsequent periods. When the consolidated statements are presented for the first time. Virtual certainty refers to the fact that there is practically no doubt regarding the determinati on of availability of the future taxable income.. The differences between taxable income and accounting income to be classified in to permanent differences and timing differences. adjustments for the effects of signi ficant transactions/events between the two dates to be made.1-4-2003. figures for t he previous year need not be given. If reporting dates are different. Notes forming part of the separate financial statements of the parent enterprise and its subsidiaries which are material to represent a true and fair view are r equired to be included in the notes to the consolidated financial statements (ASI-15). Treatment of deferred tax in case of Amalgamation (ASI-11) in case of amalgamation in nature of purchase. The parent s share in the post-acquisition reserves of a subsidiary is not require d to be disclosed separately in the consolidated balance sheet. DTA shall be recognised only to the extent that there is a reasonable certainty of sufficient future taxable ca pital gain (ASI .

Tax expenses for the period. o In case of amalgamation is in the nature of purchase and assets and liabilitie s are accounted at their existing carrying value. should be considered for reversal first (ASI-3) and (ASI-5). comprises of current tax and deferred tax. if an enterprise has unabsorbed depreciation or carry forward of losses under tax laws. Assets and liabilities to be net ted off only when the enterprise has a legally enforceable right to set off. However. should not be recognised to the extent deduction from the total income of an e nterprise is allowed during the tax holiday period. though transferor enterprise would not have recognised such deferred tax assets on account of prudence. Current tax [includes payment u/s 115JB of the Act (ASI-6)] should be measured at the amount expected to be paid to (recovered from ) the taxation authorities. The nature of the evidence supporting the recognition of deferred tax assets sho uld be disclosed. As-23: Accounting for Investments in Associates in Consolidated Financial Statem ents Issuing Authority: Effective date : The Institute of Chartered Accountants of India. On the first occasion of applicability of this AS the enterprise should recognis e. The deferred tax assets and liabilities in respect of timing differences which o riginate during the tax holiday period and reverse during the tax holiday period . DTA should be disclosed separately after the head Investments and deferred tax lia bility (DTL) should be disclosed separately after the head Unsecured Loans (ASI-7) in the balance sheet of the enterprise. if DTA gets recognised in the first year of amalgamation. the corresponding effect of this recognition to be given in the statement of profit and loss. the deferred tax balance that has accumulated prior to the adoption of this S tatement as deferred tax asset / liability with a corresponding credit / charge to the revenue reserves. Nature: Scope Mandatory . the effect shall be through adjustment to goodwill/ capital reserv e. using the applicable tax rates. the effect shall be given through revenue reserves.the transferor enterprise. o In case of amalgamation is in the nature of merger. DTA should be recognised at the time of amalg amation (subject to prudence). Deferred Tax to be measur ed using the regular tax rates for companies that pay tax u/s 115JB of the Act ( ASI-6). Accounting treatment will depend upon nature of amalgamation. which shall be as follows : o In case of amalgamation is in the nature of purchase and assets and liabilitie s are accounted at the fair value.4. Deferred tax assets and liabilities should be measured using the tax rates and t ax laws that have been enacted or substantively enacted by the balance sheet dat e and should not be discounted to their present value. However. which origi nate first. DTA and DTL should be recognised in the year in which the timing differences originate.2001 Applicable to: An enterprise that presents consolidated financial statements. the deferred tax assets sh all not be recognised at the time of amalgamation. Timing differences. if conditions relating to prudence as per AS 22 are satisfied. However. DTA shall not be recognised at the time of amalgamation. The break-up of deferred tax assets and deferred tax liabilities into major comp onents of the respective balances should be disclosed in the notes to accounts. if DTA gets recognis ed in the first year of amalgamation. o In all the above if the DTA cannot be recognised by the first annual balance s heet following amalgamation. Accounting period commencing on or after 1. if timing differenc es reverse after the tax holiday period.

Goodwill or Capital Reserve arising on acquisition of associate should be includ ed in the carrying amount of investments but should be disclosed separately. Scope of Equity Method A subsidiary should be excluded when control is temporary or when it operates un der severe long term restrictions. Name of subsidiary of which reporting dates are different from that of the paren t's and difference in reporting dates.pursuant to a single plan.or terminating through abandonment. proportion of voting power held.such as by selling off the component's assets and settlin g its liabilities individually. The carrying amount of investments is adjusted for post acquisiti on change in the investor's share of net assets in the investee.and .or disposing of piecemeal. Accounting Standard 24 .Should be applied in the presentation and preparation of consolidated financial statements by an investor Does not deal with separate financial statements prepared by an investor Definitions An Associate is an enterprise in which the investor has significant influence & which is neither a subsidiary nor a joint venture of the investor.such as by selling the component in a si ngle transaction or by demerger or spin-off of ownership of the component to the ente rprise's shareholders. Significant Influence is the power to participate in the financial and/or operat ing policy decisions of the investee but not control over those policies. Disclosure In accordance with AS-4 (Contingencies and Events Occuring after the Balance She et Date). Listing and description of associates including proportion of ownership interest and. Accounting Procedure The Broad Procedure and Concepts underlying the consolidation procedure are simi lar to those applicable in AS-21 (Consolidated Financial Statements). its share of the contingencies and capital commitments of an associate for which it is also contingently liable. The carrying amount of investment is to be reduced when there is a decline other than temporary in the value of investment. Such investment should be classified as long term investment.\ Investor's share of profit or loss of such investment should be disclosed separa tely in P&L account. The consolidate d P&L reflects investor's share of results of operation in the disposing substantially in its entirety.Discontinuing Operations Important Definitions: Discontinuing Operation Discontinuing operation is a component of an enterprise that the enterprise. if different. Such s ignificant influence is usually evidenced in the following ways: Representation on the Board of Directors or corresponding governing body of the investee Participation in policy making processes Material transactions between the investor & the investee Interchange of managerial personnel Provision of essential technical information Equity Method is the method of accounting whereby the investment is initially re corded at cost. identifying any Goodwill / Capital Reserve arising at the time o f acquisition. Such reduction being determined and made for each investment individually.and those contingencies that arise because the investor is severally liable for the liabilities of the associate. the Investor discloses in the consolidated financial statements. Investor's share of extraordinary or prior period items should also be reported.

the date or period in which the discontinuance is expected to be completed if kn own or determinable.and the amounts of net cash flows attributable to the operationg. Initial Disclosure event the enterprise has entered into a binding sale agreement for substantially all o f the assets attributable to the discontinuing operation. the amount of pre-tax profit or loss form ordinary activities attributable to th e discontinuing operation during the current financial reporting period.and that represents a separate major line of business or geographical area of operat ions. terminating through abandonment.and cash flow relating to a discontinuing operation. If an initial disclosure event occurs between the balance sheet date and the dat e of approval of accounts. the date and nature of the initial disclosure event. liabilities. the carrying amounts. Presentation and Disclosure Initial Disclosure The following information should be included in the financial statements beginni ng with the financial statements for the period in which the initial disclosure event occurs: a description of the discontinuing operation(s).revenue.losses.investing and finan cing activities of the discontinuing operation during the current financial repo rting of the balance sheet d binding sale agreements pertaining to a discontinuing operation should be incl uded in the financial statements when the events occur: for any gain or loss recognised on asset disposal or liability settlement attrib utable to the discontinuing operation.and the net selling price or range of prices(which is after deducting expected dispo sal costs) of those net assets for which the enterprise has entered into one or more binding s ale agreements. the amounts of revenue and expenses in respect of the ordinary activities attrib utable to the discontinuing operation during the current financial reporting per iod.liability settlements.that represents a separate major line of business or geographical area of operat ions.formal plan for the discontinuance and made an announcement of the plan. Recognition and Measurement Recogniton and measurement principles established in other accounting standards should be followed in the accounting of changes in assets. are made.e xpenses.and that can be distinguished operationally and for financial reporting purposes. the amount of the pre-tax gain or loss and income tax expense relationg to the gain or loss. disclosures as required by AS 4 .of the total assets to be disp osed of and the total liabilities to be settled.the expected timing of receipt of those cash flows and the carryi ng amount of those net assets on the balance sheet date. Other Disclosures The following information pertaining to asset disposals.and the income tax expense related thereto. Updating the Disclosures The financial statements for periods subsequent to the one in which the initial disclosure event occurs should include a description of any significant changes .Contingencies and E vents Occurring After the Balance Sheet Date.and that can be distinguished operationally and for financial reporting purposes. the business or geographical setment(s) in which it is reported as per AS 17-Seg ment Reporting.or the enterprise's board of directors or similar governing body has both approved a detailed.

includi ng: any significant activities or events since the end of the most recent annual rep orting period relating to a discontinuing operation.Interim Financial Reporting. condensed cash flow statement. and the income tax expense related thereto.and b) any significant changes in the amount or timing of cash flows relating to the assets to be disposed or liabilities to be settled.Interim Financial Reporting Definitions: Interim period: A financial reporting period shorter than a full financial year. Minimum Components of an Interim Financial Report An interim financial report should a minimum. The fact.and selected explanatory notes. Restatement of Prior Periods Comparative information for prior periods that is presented in financial stateme nts prepared after the initial disclosure event should be restated to segregate assets. Interim financial report : Financial report containing either a complete set of financial statements or a set of condensed financial statements(as described in this standard) for an interim period. liabilities. Form and Content of Interim Financial Statements a) Where complete set of financial statements are prepared and presented in the interim financial report: The form and content of those statements should conform to the requirements as a pplicable to annual complete set of financial statements. The above disclosures should continue for periods upto and including the period in which the discontinuance is completed(though full payments from the buyer(s) may not yet have been received). the amount of pre-tax profit or loss from ordinary activities attributable to th e discontinuing operation during the current financial reporting period. expenses and cash flows of continuing and disconti nuing operations. Disclosure in Interim Financial Reports Disclosures in an interim financial report in respect of a discontinuing operati on should be made in accordance with AS 25 .reasons and effect of an abandoned or withdrawn plan previously reporte d as a discontinuing operation should be disclosed. b) Where a set of condensed financial statements are prepared and presented in t he interim financial report: The condensed statements should include.each of the headings and su . revenue. Separate Disclosure for Each Discontinuing Operation Any disclosures required by this standard should be presented separately for eac h discontinuing operation. However presentation of a complete set of financial statements or more than the minimum line items or selected explanatory notes is not prohibited or discourage d. condensed statement of profit and loss.and the amount of pre-tax gain or loss recognised on the disposal of assets or settl ement of liabilities attributable to the discontinuing a minimum the following components : condensed balance the amount or timing of cash flows relationg to the assets to be disposed or liabilities to be settled and the events causing those changes. Presentation of the Required Disclosures The above disclosures should be presented in the notes to the financial statemen ts except the following which should be shown on the face of the statement of pr ofit and loss: operation. Accounting Standard 25 .

net income. Selected Explanatory Notes The following minimum information should be included in the notes.equity and potential eq uity shares. in addition to the above Materiality Materiality should be assessed in relation to the interim period financial data. issuances.or incidence.acquisition or disposal of subsidiaries and long-term investments. Periods for which Interim Financial Statements are required to be presented Interim reports should include interim financial statements (condensed or comple te) for periods as follows: Balance Sheet At end of current interim period and at end of immediately prece ding financial year Statement of Profit and Loss For current interim . dividends.restructurings and discontinuing operations.segment capital employed and segment result for primary segment( whether business segment or geographical segment)-only if the enterprise is requ ired in terms of AS-17-Segment Reporting to disclose segment information in its annual financial statements.the interim financial report includes both the consolidated financial statements and separat e financial statements.for an interim period.aggregate or per share(in absolute or percentage terms). the nature and amount of changes in estimates of amounts reported in prior inter im periods of the current financial year or in prior financial years. explanatory comments about the seasonality of interim operations. If an enterprise's annual financial report included the consolidated financial s tatements in addition to the parent's separate financial statements.liablities.complete or condensed. The above information should normally be reported on a financial year-to-date ba sis.if they have been changed. Cumulatively for cur rent financial year to date Comparative figures both current and year-to-date of immediately preceding financial year Cash Flow Statement Cumulatively for the current financial year-to-date Comp arable figures for year-to-date-period of immediately preceding financial year Enterprises engaged in highly seasonal businesses are encouraged to report finan cial information for twelve months ending on the interim reporting date (alongwi th comparable previous year figures).repayments and restructuring of debt.any material events or transactions necessary to an understanding of the current interim period should also be disclosed.Additional line it ems or notes should be included if their omission would make the condensed inter im financial statements misleading. segment revenue.equity. and material changes in contingent liabilities since the last annual balance sheet d ate.b-headings that were included in its most recent annual financial statements and the selected explanatory notes as required by this statement.However. If an enterprise presents basic and diluted earnings per share in its annual fin ancial statements in accordance with Accounting Standard (AS) 20-Earnings Per Sh are. the effect of changes in the composition of the enterprise during the interim pe riod such as amalgamations.or cash flows that are unusual because of their nature. the nature and amount of items affecting assets. a description of the nature and effect of the cha nge.if not disclos ed elsewhere in the interim financial report: a statement that the same accounting policies are followed in the interim financ ial statements as those followed in the most recent annual financial statements or .size.if those ch anges have a material effect in the current interim period.complete or condensed.separately for equity shares and other shares. basic and diluted earnings per share should be presented in accordance with AS-20 on the face of the statement of profit and loss.

Accounting for Research and Development. the frequency of reporting should not affect the measurement of annual resultshence. From the date of applicability of this standard for the concerned enterprises.Accounting for Fixed Assets . Restatement of Previously Reported Interim Periods A change in accounting policy.and AS 10 .mesurements for interim reporting purposes should be made on a year-to-dat e basis.paragraphs 16.3 to 16. should be reflected by restating the financial sta tements of prior interim periods of the current financial year.and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognised stock exchange in India as e videnced by the board of direcors' resloution in this regard. All other commercial.and if only if. AS 6 .37.industrial and business reporting enterprises.Disclosure in Annual Financial Statements If an estimate of an amount reported in an interim period is changed significant ly during the financial interim period of the financial year but a separate fina ncial report is not presented for that final interim period.whose turnover for the accounting period exceeds e following stand withdrawn: AS 8 .Intangible Assets Issuing Authority: The Institute of Chartered Accountants of India.7 .and 38. Transitional Provision Comparable figures for previous interim periods need not be presented on the fir st occasion that an interim financial report is presented in accordance with thi s standard. Recognition and Measurement Same Accounting Policies as Annual An enterprise should apply the same accounting policies in its interim financial statements as are applied in its annual financial statements except for account ing policy changes made after the date of the most recent annual financial state ments that are to be reflected in the next annual financial statements. the nature and amou nt of that change in estimate should be disclosed in a note to the annual financ ial statements for that finanical year.50crores.However. Expenditure incurred on intangible items during accounting periods commencing on or after 1-4-2004 for all other enterprises. Earlier application of the standard is encouraged.A greater use of estimates may be necessa ry for interim financial reporting. in respect of profit and loss account and cash flow statement Accounting Standard 26 . Use of Estimates The measurement procedures followed should ensure reliablity and disclosure of r elevant material financial information. regarding amortisation(depreciation) of intangib le assets. Status: Mandatory Effective Date: Expenditure incurred on intangible items during accounting periods commencing on or after 1-4-2003 for the following: Enterprises whose equity or debt securities are listed on a recognised stock exc hange in India.Depreciation Accounting.certain criteria are met . Anticipation or deferral of seasonal or occasional revenues or unevenly incurred costs for interim reporting purposes should be made on the same basis as would be made at the end of the financial year.This standard requires an enterp rise to recognise an intangible asset if.other than one for which the transition is specifi ed by an Accounting Standard. Objective To prescribe the accounting treatment for intangible assets that are not dealt w ith specifically in another accounting standard.

Use of judgement is req uired.or for administrative purposes.copyrights. mineral rights and expenditure on exploration etc. An enterprise should assess the probability of future economic benefits using re asonable supportable assumptions that represent best estimate of the set of economic cond itions that will exist over the useful life of the asset.leas es(AS19). Recognition and Initial Measurement of an Intangible Asset An intangible asset should be recognised if. An intangible asset should be measured initially at cost. Internally Generated Goodwill Internally generated goodwill should not be recognised as an rights.held for use in the production or supply of goods or services. The acquisition of an intangible asset may be through the following modes: Purchase As part of an Amalgamation By way of a Government Grant In exchange or part exchange for another asset. Development Phase . start-up..and the cost of the asset can be measured reliably. deferred tax asset s (AS 22). financial assets. goodwill arising on amalgamation or consolidation(AS 14 or AS. Where it is impossible to distinguish between the two phases. Research Phase No intangible asset arising from research (or from the research phase of an inte rnal project) should be recognised. greater weight to external evidence. customer lists. intangible assets covered by AS 2 . the expenditure in curred is treated as the research phase only.among other things. Important Definitions Intangible Asset An intangible asset is an identifiable non-monetary asset. motion picture films. without physical subs tance.natural gas e tc. franchises. This standard applies to.Expenditure on research (or on the research p hase of an internal project) should be recognised as an expense when it is incur red.Valuation of Inventories and AS-7 Accounting for construction contracts.and a development phase. of minerals.and only if: it is probable that the future economic benefits that are attributable to the as set will flow to the enterprise.expenditure on advertising.research and development activities.oil. Common examples are: computer software.21).g. Scope This standard is not applicable to: intangible assets covered by another accounting standard intangible assets arising in insurance enterprises form contracts with policyhol ders.for rental t o others. Internally Generated Intangible Assets An enterprise classifies the generation of an internally generated intangible as set into: a research phase.

g.or the item is acquired in an amalgamation in the nature of purchase and cannot be recognised as an intangible asset. its intention to complete the intangible asset and use or sell it. the availability of intangible asset should be carried at its cost less any accumulated amortisation and any accumulated impairment losses. and its ability to measure the expenditure attributable to the intangible asset duri ng its development reliably.customer lists and items similar in substance should not be recognised as intangible assets Cost of an Internally Generated Intangible Asset The cost of an internally generated intangible asset comprises all expenditure t hat can be reliably attributed.this expenditure (included in the cost of acquisition) should form part of the amount attributed to goodwi ll(capital reserve) at the date of acquisition (refer AS 14.and the expenditure can be measured and attributed to the asset reliably.t he following are not included: selling.producing and making the asset ready for its intended use. which is unlikely to exceed ten yearsAmortisation should commence when the asset is available for use .financial and other resources to complete the development and to use or sell the intangible asset.exi stence of a market for the asset or its output or its usefulness(if it is intern ally generated). Amortisation Amortisation Period The amortisation period would be the best estimate of its useful life. how the intangible asset will generate probable future economic benefits e. Expenditure on an intangible item initially recognised as an expense in previous annual or interim financial statements/reports should not be recognised as part of the cost of an intangible asset at a later date.publishing titles. Recognition of an Expense Expenditure on an intangible item should be recognised as an expense when it is incurred unless: it forms part of the cost of an intangible asset that meets the recognition crit eria.and expenditure on training the staff to operate the asset.If this is the case. clearly identified inefficiencies and initial operating losses incurred before a n asset achieves planned performance. However. Subsequent expenditure on an intangible asset after its purchase or completion s hould be added to the cost of asset only if the following conditions are satisfied: it is probable that the expenditure will enable the asset to generate future eco nomic benefits in excess of its originally assessed standard of enterprise can demons trate all of the following: the technical feasibility of completing the intangible asset so that it will be available for use or sale.An intangible asset arising from development (or from the development phase of a n internal project) should be recognised if.However.administrative and other general overhead expenditure unless this expend iture can be directly attributed to making the asset ready for use.Accounting for Amalg amations).or allocated on a reasonable and consistent basis .and only if.mastheads. its ability to use or sell the intangible creating. Internally generated brands.advance payments for delivery of goods or services are recognised as ass ets. After initial recognition.

Gains or losses arising from the retirement or disposal of an intangible asset s hould be determined as the difference between the net disposal proceeds and the carrying amount of the asset and should be recognised as income or expense in th e statement of profit and loss. General The financial statements should disclose the following for each class of intangi ble assets. Review of Amortisation Period and Amortisation Method The amortisation period and the amortisation method should be reviewed at least at each financial year-end. a reconciliation of the carrying amount at the beginning and end of the period s .Impairment Losses In addition to the requirements of Accounting Standard on Impairment of Assets.the amortisation method should be changed to ref lect the changed pattern.and an intangible asset that is amortised over a period exceeding ten years from the date when the asset is available for use. Disclosure A. Amortisation Method The method selected should reflect the pattern in which the asset's economic ben efits are consumed by the enterprise.and renewal is virtually certain.the amortisation period should be changed accordingly.. the gross carrying amount and the accumulated amortisation (aggregated with accu mulated impairment losses) at the beginning and end of the period.g.The amortisation charge should be rec ognised as an expense unless another accounting standard permits or requires it to be included in the carrying amount of another asset e.If there has been a significant change in the expected pattern of e conomic benefits from the asset. Residual Value This should be assumed to be zero unless: there is a commitment by a third party to purchase the asset at the end of its u seful life. Retirements and Disposals An intangible asset should be derecognised (eliminated from the balance sheet) o n disposal or when no future economic benefits are expected from its use and sub sequent disposal.unless: the legal rights are renewable.Such changes should be accounted for in accordance with AS 5 .and it is probable that such a market will exist at the end of the asset's useful li fe.Valuation of Inventories.the straight-line method should be used. Where legal rights have been granted for a finite period.Net Profit or Loss for the Period.the useful life should not exceed such period. the amortisation methods used.If the expected useful life of the asset is significa ntly different from previous estimates.If that pattern cannot be determined reliab ly.AS 2 .distinguishing between internally generated intangible assets and oth er intangible assets: the useful lives or the amortisation rates used. an enterprise should estimate the revoverable amount of the following intangible assets at least at each financial year end even if there is no indication that the asset is impaired: an intangible asset that is not yet available for use.or there is an active market for the asset and: residual value can be determined by reference to that market. Recoverability of the Carrying Amount .Prior Period Items and Changes in Acco unting Policies. The recoverable amount should be determined under Accounting Standard on Impairm ent of Assets and impairment losses recognised accordingly.

.the carrying amount should be amortised over the remaining period is longer than the balance of the recommended period. the carrying amount appearing in the balance shee t in respect of that item should be eliminated with a corresponding debit to the opening balance of revenue reserves. If such period has not expired and in a case of not amortising the if the accumulated amortisation had always been determined under this standard.the carrying amount should be restated. C.the carrying amount and remaining amortisation period of any indiv idual intangible asset that is material to the finanical statements of the enterprise as a whole. Other Information An enterprise is encouraged.the restated carrying amount should be amortised over the balance of the recommended period. Transitional Provisions Where at the time of application of this standard for the first time. then. the existence and carrying amounts of intangible assets whose title is restricte d and the carrying amounts of intangible assets pledged as security for liabilities. Research and Development Expenditure The financial statements should disclose the aggregate amount of research and de velopment expenditure recognised as an expense during the period.indicating separately those from internal development and through amal gamation. a description. an enterpr ise has not been amortising an intangible item or amortising it over a longer than the recommended period ( normally ten years ) .and the amounts of commitments for the acquisition of intangible assets. impairment losses reversed in the statement of profit and loss during the period (if any).Further. and such period has expired.The restated carrying amount should be amortised over the balance of the recommended period.and other changes in the carrying amount during the period. Accounting Standard 27.Financial Reporting of Interests in Joint Venture Issuing Authority: Status: Mandatory The Institute of Chartered Accountants of India.with the corresponding adjustment to the opening balance of revenu e reserves. amortisation recognised during the period. B.howing: additions.the carrying amount should be i f the accumulated amortisation had always been determined under this give a description of any fully amortised intangible asset that is still in use. with a corresponding adjustment to the opening balance of revenue reserves. impairment losses recognised in the statement of profit and loss during the peri od (if any).the reasons for the presumption that the useful life will exceed ten years from the date of availability for use alongwith the factor(s) that played a significant role in determining the usefule life.but not required. The financial statements should also disclose: if an intangible asset is amortised over more than ten years. retirements and disposals. if the remaining period is shorter than the balance of the recommended period.

Interest in such a jointly controlled entity should be accounted for as an investment in accordance with AS 13 .Effective Date: In respect of accounting periods commencing on or after 1. From such discontinuance date. A Venturer: A party to a joint venture and has joint control over that joint ven ture.income and expenses of a jointly controlled entity is reported as separate line items in the venturer's financial statements. Forms of Joint Venture A. its share of any liabilities incurred jointly with the other venturers in relati on to the joint venture.liabilities. any income from the sale or use of its share of the output of the joint venture.and any expenses which it has incurred in respect of its interest in the joint ventu re Jointly Controlled Entities Separate Financial Statements of A Venturer: Interest in a jointly controlled entity should be accounted for as an investment in accordance with AS 13 . Proportionate Consolidation: A method of accounting and reporting whereby a vent urer's share of each of the assets.or the use of the proportionate consolidation is no longer appropriate because the jointly controlled entity operates under severe long-term restrictions that sign ificantly impair its ability to transfer funds to the venturer.and an interest in a jointly controlled entity which operates under severe long-term restrictions that significantly impair its ability to transfer funds to the vent urer.classified according to the nature of the assets. which is subject to joint control.and consequently in its consolidated f inancial statements: its share of the jointly controlled assets. Jointly Controlled Assets In respect of its interest in jointly controlled assets. Jointly Controlled Operations In respect of its interests in jointly controlled operations.its interest in the entity.and the expenses that it incurs and its share of the income that it earns from the j oint its separate finfancial statements.Accounting for Investments Consolidated Financial Statements of a Venturer: A venturer should report its interest in a jointly controlled entity using propr tionate consolidation except an interest in a jointly controlled entity which is acquired and held exclusivel y with a view to its subsequent disposal in the near future. A venturer should discontinue the use of proportionate consolidation from the da te that: it ceases to have joint control over a jointly controlled entity but retains.Accounting for Investments. any liabilities which it has incurred.interest in a jointly controlled entity should be accounted .a venturer should r ecognise in its separate financial statements and consequently in its consolidat ed financial statements: the assets that it controls and the liabilities that it incurs.2002 Important Definitions Joint Venture: A contractual arrangement whereby two or more parties undertake a n economic activity.eit her in whole or in part.4.a venturer should recogn ise. together with its share of any expenses incurred by the joint venture.

if the venturer acq uires unilateral control over the entity and becomes parent within the meaning o f that standard.Accounting for Investments in Associates in Consolidated Financial Statements.Consolidated Financia l Statements or AS 23 . Reporting Interests in Joint Ventures in the Financial Statements of an Investor Investor's Consolidated Financial Statements Such interest in a joint venture not having joint control.AS 21 .cost of the investment should be determined as under: the venturer's share in the net assets of the jointly controlled entity as at th e date of discontinuance of proportionate consolidation should be ascertained.unless the probability of l oss is remote.separately from the amount of other contingent liabilities: .and the amount of net assets so ascertained should be adjusted with the carrying amount of the relevant goodwill/capital reserve as at the date of discontinuance of proprtionate consolidation.for: in accordance with AS 21 .Revenue Recognition.the venturer should r ecognise only that portion of the gain or loss which is attributable to the inte rests of the other venturers.should be reported in accordance with AS 13 .Accounting for Investments. In case of transactions between a venturer and a joint venture in the form of a jointly controlled entity.Consolidated Financial Statements.For this purpose.and in all other cases. Purchase of Assets from a Joint Venture The venturer should not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent appropriate. or in accordance with AS 23 .Accounting for Investmen ts. the above requirements should be applied only in the preparation and presentation of consolidated financial statements and not in the preparation and presentation of separate financial statements of the venturer.and provided the venturer has transferred the significant risks and rewards of ownership. A venturer should recognise its share of the losses in the same way as profits e xcept that losses should be recognised immediately when they represent a reduction in the net realisable value of current assets or an impairment loss.Accounting for In vestmants. While the assets are retained by the joint venture. Operators of Joint Ventures Operators or managers of a joint venture should account for any fees in accordan ce with AS 9 . Transactions between a Venturer and Joint Venture Sale of assets to a joint venture Recognition of gain or loss from the transaction should reflect the substance of the transaction. The venturer should recognise the full amount of any loss when the contribution or sale provides evidence of a reduction in the net realisable value of current ass ets or an impairment loss. Disclosure A venturer should disclose the following in its separate as well as in consolida ted financial statements: aggregate amount of following contingent liabilities.Accounting for Investments in Associate s in Consolidated Financial Statements . as appropriate. Investor's Separate Financial Statements This should be accounted for in accordance with AS 13 .as an investment in accordance with AS 13 .

in the separate financial statements.and enterprises that are in the process of issuing equity or debt secut ities that will be listed on a recognised stock exchange in India as evidenced by the board of directors'resolution in this regard. Transitional provisions have also been provided for.income and expenses rela ted to its interests in the jointly controlled entities .Both external and internal sources of inf ormation should be considered for this purpose.liabilities. aggregate amount of following commitments in respect of its interests in joint ventures separately from other commitments: capital commitments incurred in relation to his interests in the joint venture a nd its share in capital commitments incurred jointly with other and country of incorporation o r residence in respect of jointly controlled entities. Procedures for recognising and measuring impairment of an individual asset and/o r a cash-generating unit have been spelt out in the standard. his share of contingent liabilities of the joint ventures themselves for which h e is contingently liable.Recoverable amount has b een defined as the higher of an asset's net selling price and its value in use. In respect of all other enterprises. mandatory from accounting periods commencin g on or after 1-4-2005. Accounting Standard 28 Impairment of Assets Issuing Authority: The Institute of Chartered Accountants of India Status: Mandatory for the following: In respect of accounting periods commencing on or after 1-4-2004 for: Enterprises whose equity or debt securities are listed on a recognised stock exc hange in India.and contingent liabilities that arise because the venturer is contingently liable fo r the liabilities of the other venturers of a joint venture.reversals of impairment losses etc. Scope This standard does not apply to inventories. .50 crores.V alue in use is the present value of estimated future cash flows expected to aris e from the continuing use of the asset and from its proceeds of disposal. the aggregate amounts of each of the assets.industrial and business reporting enterprises.An asset is impaired when the car rying amount of the asset exceeds its recoverble amount. and All other commercial.requirement s for reversal of an impairment loss have also been laid out.and its share of capital commitments of the joint ventures themselves. deferred tax assets or investments as these are covered by separate accounting s tandards.assets arising from construction con tracts. Details of impairment losses.whose turnove r for the accounting period exceeds Rs. have to be disc losed in The financial statements for each classes of assets. a list of all joint ventures and description of interests in significant joint v entures and proportion of ownership interest. Brief Summary An enterprise should assess at each balance sheet date whether there is any indi cation that an asset has been impaired.contingent liabilities incurred in relation to his interests in the joint ventur e and his share in each of the contingent liabilities incurred jointly with othe r venturers.Further.

Important note: The above is only a very brief outline of the accounting standard. .

Sign up to vote on this title
UsefulNot useful