BANGLADESH ACCOUNTING STANDARDS (BAS) Net Profit or Loss for the Period, Fundamenial Errors and ‘Changes in Accomnting Policies Deon eee Reet Cat}BAS-8 Contents BAS 8 : Net Profit or Loss for ths Poriod, Fundamental Errors and Changes in Accounting Policies OBJECTIVE SCOPE Paragraphs 1-5 DEFINITIONS 6 NET PROFIT CRLOSSFORTHE PERIOD 7-50 Extraordinary Items 11-18 Profit ot Loss from Ordinary Activities 16-18 Changes in Accotiting Estimates, 23-30 FUNDAMENTAL ERRORS 31-40 Benchmark Trestment 84-87 Allowed Alternative Treatment 38-40 CHANGES IN ACCOUNTING POLICY 41-57 Adoption of a Bangladesh Accotnting Standard 46-48, Other Caanges in Accounting Policies - Benchirark Treatment 49-53 Other Changes in Accounting Policies - Allowed Alternctive Treatment 54-67 COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARD 68 EFFECTIVE DATE. 59BASS BAS & : Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies Summary Effective Date : Poriods boginaing on or after 1 January 1096. ICAB adopted BAS 8 on 1 Jonunry 1901 and subsequently amended the first version Objective To prescribe the classification, disclosure, and accounting treatment of certain items in the income staterneni so that all enities prepare and present an income statement on a consistent basis Key Featnres : mAll itans of income and expense recognized in a period should be inchided in the determination of the net prot ot toss for the period tnless an BAS requires or permits otherwise, such as revaluation swpluses BAS 16. Properyy, Plant ane Eguipmere w Items of unusual size, nature, ot incidence from ordinary activties to be separately disclosed. 1 Changes in accounting estimates (for example, change in usafid life of an assa) are to be accounted for in the current year, o: future ‘years, or beth (no restaternent), = A change in accounting policy should only be made if required by statute of by « siantard- selling body or s0 a3 to givea more appropricte presentation, = A change made on the basis of @ new BAS is accounted for in accordance withthe iransitional provisions specified inthe new StandardBASS a For correction of fundamental errors that occurred in prior year, and other non- mandated changes in accounting policies - specifies a benchmark ireatment. (astatemant and adjustment to opening retained earnings) and allowed alternative treatment (cumulative effect in net profit or loss for the period plus proforma information 1 Disclosure requirements Related, : None Bangladesh Accounting ‘Standards: Interpretation @as)PASS BAS 8 : Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies The standards, which have bean set in bali walic type, should be read ia the cantaxt af the background material and implementation guidance in this Standard, and in the context of the Framework of Bangladesh Accounting Standards. Bangladesh Accounting Standards are rot imanded 10 apply to immaterial itams. Objective Tho objective of thie Standird is to procortbe the clesification, disclosure and accounting treatment of certain items in the income statement so tht all antarprises prepare and present an income statement on a consistent basis, This enhances comparability both with the enterprise's financial statements of previcus periods and wih the financial statements of other enterprises Accordingly, this Standard requires the classification and disclosiwe of extraordinary items and the disclosure of certain items within profit or loss stom ordinary activities It also. specifies the accounting treatment for changes in accownting estimates, changes in accounting policies and the correction of fundamental errors, Scope This Standard should he applied in presenting profit or loss from ordinary activities and extraordinary items in the income statement and in accounting for changes in accounting estimates, fandamental emors and changes in accounting policies. This Standard deals with, among other things, the disclosure of certain items of net profit or loss for the period. These disclosures are made in. addition to any other disclosures required by other Bangledesh Accounting 1BASS Standards, including BAS 1, Presentation af Financial Staramants. 4. The tax effects of extraordinary tems, fundamental enors and changes in accounting policiss are acceunted for and 5 disclosed in accordance with BAS 12, Income Taxes 5. Where BAS 12 refers to unusual items, this should be raad as extraordinary items as defined in this Standard Definitions 6 The following terms are used in this Standard with the meanings specified: Extraordinary items are income or expenses that arise ‘fom events or transactions that are clearly distinct from ihe ordinary activities of the enterprise and therefore are ‘Rot expected to recur frequently or regularly. Oratnany actiides are any acdivides which are undertaten ‘yan enterprise as part of its business and such related acthdties in which ihe enterprise engages in furtherance 0G, incidental ta, or atising from these aettuies. Fundamental errors are errors discovered tn the current petiod that axe of such significance that the financial ‘slatemenis of ane ot more prior periods can no longer be considered to have heen reliahle at the date of their issue, Accounting policies are the specific principles, bases, ‘conventions, rules and practices adopted by an enterprise in preparing and presenting Financial statements.49, a. BASS Net Profit or Loss for the Period ALT items of income and expense recognised in a period should be included tn the determination of the nei prof or loss fer the period unless 2 Bangladesh Accounting ‘Standard requires ar permits otnerwise. Normally, all sams of ticome and expense recognised in a period are included in the determination of the net profit or loss for the period. This includes extreordinary items and the effects of changes in accounting esimates. However, circumstances may exist when certain items may be excluded from net profit ot less for the aumrent period. This Standard deals with two such citcumstances: the correction of fiandamental errors and the effect of changes in accounting policies ther Bangladesh Accounting Standards deal with items which may meet the Framework definitions of income or expense but which are usually excluded from the determination of the net profit or loss. Examples include revaluation surpluses (see BAS 16, Property, Plant and Eyuiomend) znd gains and losses arising on the translation of the finencial statements of a foreign entity (see BAS 21. The Effects of Changes in Foreign Exchange Rates) The net profit or loss for the period comprises the faliowing components, each of which should he disclosed on the face of the income statement: (9) profit or loss from ordinary actiities; and (@) extraordinary itams. Extraordinary Items The nature and the amount of cach extraordinary fem should be separately disclosed.12, 13, 14 15, 18. BAS3 Virtually all items of income and expense included in the detemmination of nat profit ot loss for the pariod arise in the course of the ordinary activities of the enterprise. Therefore, only on rare occasions does an event or transaction giverise to an extraordinary item. ‘Whether an event o trensiction is clearly distinct from the odinary ectivities of the enterprise is determined by the nature of the event of transaction in relation to the business ordinarily carried on by the enterprise rather than by the frequency with which such events are eepected to occur. Therefore, an event or transaction may be extraordinary for one enterprise but not extraordinary for another enterptise because of the differences between their respective ordinary adivities, For example, losses sustained as a result of an earthquake may qualify as an extractdinary tem for many enterprises. However, claims from policyholders arising from an earthquake do not qualify as an extreordinary item for an insurance enterprise thet insures against such risks Examples of events of transections that generally give tise to extraordinary items for most enterprises are (@\ the expropriation of assets: ot (ban earthquake of other natutel disaster. The disclosure of the neture and amount of each extraordinary item may be made on the face of the inceme statement, or when this disclosure 18 made in the notes to the fmancial statements, the total amount of all extraordinary items 1s disclosed on the face of the ineeme statement. Profit or Loss from Ordinary Activities Vien tems of income and expense within proftt or loss from ordinary activites are of such size, mature or incidence that their disclosure is relevant to explaia the 4BAS-8 performance of the enterprise far the period, the nature and amount of such itams should ba disclosed separately. 17. Although the items of income and expense described in puagreph 16 ore not actracrdinary itens, the nature and amount of such items may be ralevant to users of Financial statements in understanding the financial position and parformance of an anterprise and in making projections about financial position and parformance Disclosure of such information is usually made in the notes to the Financial statements 18. Circumstances: which may-give rise to the separate disclosure of items of income and expense in accordance with paragraph 16 include: ( the write-down of inventotias to net tealisable valtie or proverty. plant and equipment to recoverable amount. as well as the reversal of such write-downs: (b) 2 restructuring of the activities of an enterprise and the reversal of any provisions for the costs of restructuring: (0 disposals of items of property, plant end equipment, (@ disposals of long-term investments; (Q dscontinsed operations; (f Migation settlements; and (@ cther reversals of provisions 19-22, (Deleted) ‘Changes in Accounting Estimates 28. As aresult of the uncertainties inherent in basiness activities, ‘many financial statement items cannot be measured with precision but can cnly be estimated. The estimation process 5BAS-8 involves judgements based on the Latest information available. Estimates may be required, for example, of bad debts, inventory obsolescence ot the useful lives ot expected pattern of consumption of economic benefits of deprestable assets, The use of reasonable estimates 15 an essential part of the preperation of financial statements and does not ‘undermine their reltabity, 24, An estimate may have to be revised if changes occur regarding the circumstances oa which the estimate was besed or as aresul of new informeticn, more experience ot subsequent developments, By its nature, the revision of the estimate does not bring the adjustment within the definitions ofan extreordinary item or a fundamental exter. 25. Sometimes it is difficult to distinguish between a change in accounting policy and change in an accounting estimate In such cases, the chenge is treated ao a change in on accounting estimate, with eppropriete discloswe. 28. The effect of a change in an accounting estimate should be included in the determination of not profitor loss in: (@) the pariod of the chango, if the chango affects the period only: or (®) ihe pariod of the change and fitare periods, if the change affects both 27. A change in aa accounting ettimate may affect the currant paied only or both the current period and future periods. For exemple, a change i the estimate of the amount of bad debts affects only the current period and therefore is recognised inmedictely. However, a change in the estimated useful life or the expected pattern of consumption of economic benefits of a deprecicble asset affects the depreciation expense in the current period and in each period during the remaining useful life of the asset. In both cases, the effect of the change relating to the currant period 6BASS is tecognised es income or expense in the current period, The 29, 3 2, effect, if any, on future periods is recognised in future patiods The effect of a change in an accounting estimate should be inclded in the same income statement classification as ‘was used previously for the estimate, To ensure the compaability of financial statements of different periods, the effect of a chenge in an accounting estimate for estimates which were previcusly included in the profit or loss from ordinary activities is included in that componert of net profit or less. The effect of a change in an accounting estimete for an estimate which was previously included as an extraordinary item is reported as an extraordinary item. ‘The nature and amount of a change in an accounting estinaie that has a material effect in the current period oF Which is expected to Have a material effect in subsequent periods should he disclosed, If it is impracticable 10 quantity the amount, this fact should Be disciosed. Fundamental Errors Errors in the preparation of the financie! statements of one ot more priot periods may be discovered in the current period, Errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts, fraud or oversights. The correction of these e1ots is normally included in the determination of net profit or loss for the current period, On rare occasions, an error has such a significant effect on the Financial aataments of one or more prior periods that those Financial statements can no longer be considered to have been reliable at the date of their issue, These errors are refarred to as findamental errors. An example of a fundamental error is the inclioion in the financial statements of a previous period of material amounts of work in progress andreceivables in 1BASS respect of fraudulent contracts which canaot be enforced. The catrection of fundamental etrors that relate to prior periods requires the restatement of the comparative mformation of the presentation of eddmonal pro formna information. 38. The comedion of fundemental errors can be distinguished 26. 36 from changes in accounting estimates. Accounting estimates by thet nature are approximations that may need revision as additional information becomes known, For example, the gain or loss recognised ou the outcome of 4 contingency Which previously could not de estimated reliably does not constitute the correction ofa fundamental enor Benchmark Treatment The amount of the correction of a fandamental error that ‘relates to prior periods should be reported by adjasting the opening Balance of retained earnings, Comparative Jnformation should be restated, unless it is impracticable to oso. The financial statements, including the comparative information For prior periods, cro prosenied as if the fundamental ertos had bean corrected in the poriod in which it was mado. Therofora, the amount of the correction that relatas to cach period presented is included within tho net prof or loss for that poriod, The amount of the corraction relating to periods pricr to those included in the comparative information in the financial statements is adjusted against the opaning balance of reteined earnings in the earliest period prasented Any other information reported with respect to peice periods, such as historical summaries of Financial data, is also restated ‘The testatement of comparative information does not necessarily give rise to the amendment of financial statements which have been approved by sharsholders ot registered or filed with regulatory authorities. However national laws may require the amendment of such financial statements.7. 39 BAS-8 An enterprise should disclose the following: (@) ihe nature of the fundamental error; (®) the amount of the correction for the current period and for each prior period presented; (@ the amount of the correction relating to periods prior 10 those included in the comparative information; and (@) the fact that comparative information has been estated or that it is impracticable to do sa. Allowed Alte: native Treatment ‘The amount ot» meetin (f 2 1'mdamenial error should be incladed in tne determination of net profit or Joss for the c.vnt with. 1 pa-atve information ‘should be prevenind as renoried in the fina aciai statements of the prior 2a information, prepared in 34, should be ‘presented unt } ‘The correctiot included in the detem:mation » amen period. However, ad anted, often as separate colt ot loss of the current. perioc ented 2s if the fundamental € + period when it was made I this accounting treatment in « staternents are required to include comparative information which agrees with the frian aC} ASM HEAT HIea|or periods 49. An enterprise should disclose the following: (3) the nature of the Fundamental error; (® the amount of the correction recognised in net profit ar loss for the current period; and 9a 42. 43, a4. BAS-8 (@) tho amount of the correction incladsd in each period ‘far which pro forma information is presanied and the amount of tho correction rélating to pariods priar to those incladad in tho pro forma information. If itis impracticable io presant pro forma information, this ‘fact should be disclosed. Changes in Accounting Policies Users nead to be able to compare the financial statements of an enterprise aver 2 pariod of time to identify trends in iis financial position, performance and cash flows Therefore, the same accounting policies ate netmally adopted in each, period A change in accounting policy should be made only if seguired by statute, or by an accounting standard seiting ody, or if the change will result in a more appropriate presentation of events or transactions in the financial Statements of the enterprise. A mote appropriate presentation of events ot transactions in the financial statements ocours when the new accounting policy results in more selevent or reliatle information about, the financial position, parformance of cash flows of the entarprise ‘The following are not changes in accounting policies: (a) the adoption of an accounting policy for events or transactions that differ in sabstance from previously occurring events or mansactions; and () the adoption of a new accounting policy for evenis or transactions which did not occur previously or that wore immaterial. ‘The initial adoption of a policy io carry assets at revalued amounts under the allowed alternative treatment in BAS 16 Property, Plant and Equipment, is a change in 105 46. BASS accounting policy but it i dealt with as a rovalaation in accordance with BAS 16, rathar than in accordance with this Standard. Therefore, paragraphs £8 to $7 of this Standard are not applicable io such changes in accounting policy: A changa in accounting policy is appliad retrospectively of prospectively in accordance with the requirements of this Standard Retrospective application results in the new accounting policy being applied to events and transactions 2s 4 the new accounting policy had always been in use Therefore, the accounting policy is applied to events and transactions from the date of origin of sch items Prospective application mears that the new accounting policy 4s applied to the events and transactions occurring after the date of the change, No adjustments relating to prior petiogs remade either tothe opening balance of retained exrnings ct in teporting the né. grofit ot loss for the current period because existing balances are not recalculated However, the new accounting policy is applied to existing balances es from the date of the change For ezimple, n enterprise may decide to change its acceunting policy for Lorrowing costs and capitalise those costs in conformiy with the allowed altenative treatment in BAS 23, Borrowing Costs. Under prospective application, the new policy caly applies to borrowing costs that are incumed afte the date of the change in accounting policy Adoption of an Bangladesh Accounting Standard A change in accounting policy which is made on the adoption of an Bangladesh Accounting Standard should he accounted for in accordance with the specific transitional provisions, i any, in that Bangladesh Accounting Standard. In the absence of any transitional provisions, ihe change in accounting polity should be applied in accordance with the henchmark treatment in paragraphs 4 5? and 53 or the allowed alternative teatment in paragraphs 52, 56 and 57. ia7 43, 49. 50, 51 BAS-8 Tho transitional provisions in « Bangladesh Accounting Standard may roquite either a retrospective or 2 prospective application of a change in accounting policy. When an enterprise has not adopted a new Bangladesh Accounting Standard which has been published by the ICAB but which has not yet come into offect, the enterprise fs encouraged to disclose the mature of the future change in accounting policy and an estimate of the effect of the change on is net profit or Loss and financial position. Other Changes in Accounting Policies - Benchmark ‘Treatment A. change in accounting policy should be applied setrospoctivaly unless tho amount of any resulting adjasiment that relator io prior poriods is not reasonably determinable. Any resulting adjestment should be reparted as an adjustment to the opening balance of retained earnings, Comparative information should be cesiated ‘unless i ls impracticable io do so. The financial statements, including the comparative information for prior periods, are presented as if the new accounting policy had always been in use. Therefor2, competative infermation is restated in order to reflect the new eccounting policy. The amount of the adjustment relating to periods prior to those included mn the nancial statements is adjusted against the opening balance of retsined eamings of the earliest period presented. Any other information with respect to prior periods, such as historical srarnatios of financial data, is also rastated. The restatement of comparative information doas not necassarily give riseto the amendment of financial staternenis wwhich have heen approved by shareholders or registered or filed with regulatory authorities However, national laws may require the amendment of such financial stalements 1252. 53. 54. 56. RAS-8 The change in accounting policy should be applied prospectively when the amount of the adjustment to the ‘opening baianco of retained oarnings required By paragraph 49 camnot bo reasonably datermined. When a change in accounting policy has a material eftoct on the current period or any prior period presented or may have 2 material effect in subsequent periods, an enterprise should disclose the following: @) the reasons for the change: (6) the amannt of the adjustment for the current period and for each period presented: 6) the amount of the adjastment relating to periods prior to ‘thase included in the comparative information; and @) the fact that comparative information has been restated or ‘that itis impracticable to dosa. Other Changes in Accounting Policies - Allowed Alternative Treatment A change in accounting policy should be applied yetrospectively unless the amount of any resulting adjasiment that relates io prior periods is not reasonably determinable, Any resulting adjustment showld he jaduded in the detetmination Of the net profit or joss for the current period. Comparative information should he presanied a5 reported in the financial statements of the rior period Additional pro forma comparative information, prepared in accordance with paragraph 43 should be présented unless itis impracticable to do so. 1 Adjustments resulting from a change in accounting policy ate included in the cetermination of the net profit ot 1oss for the period. However, additional comparative information 1s presented, often as separate columns, in order to show the net profit or loss and the financial position of the current poriod and any prior periods presonted a6 if the new scoounting policy had always been applied. It may be 13BASS necessary to apply this accounting treatment in countrios whore 56. 57, 58, 59. the financial statements are requirad to include comparative information which agrees wih the financial statements presented in prior periods. The change in accounting policy should be applied (Prospectively sehen the amount to be included in net profit ‘er loss for the current period required By raph 54 ee ele eee When a change in accounting policy has a material effect an the crake parlod on a2 tio pedad presented, at may have 2 material effect in subsequent periods, an enterprise should disclose the following: &) the reasons for the change 0) the amount of the adjustment recognised in net profit ar loss in the current pertod; and &) the amount of the adjustment incladed in each period for which pro ferma information 1s prosanted and the amount of the adjasiment relating fo periods prior io those included in the financial statements. “If it is impracticable to present pro forma information, this ‘fact should be disclosed. Compliance with International Accounting Standard Compliance with this BAS ensures compliance in all material respects with Intemational Accounting Standard 1AS -8 Effective Date ‘This Bangladesh Accounting Standard becomes operative ‘Yor financial statements covering periods beginning on or after 1 January 1995. Earlier application is encouraged, Wf an enterprise applies this Standard for financial Statements covering periods beginning before 1 January 1995, the enterprise Should disclose that fact. 14BAS.8 Appendix A The appendix is iMustsatine only and does rot farm past af the standards. The purpose of the appendix is to illustrate the application of the standards io assist in clarifying their meaning. Buracts from income statamente and statements af ratzined earnings are provided to show the effects on these financial statements af the transactions dascribed below These extracts do rat necassasily conform with all the disclosure and prasentation requirements of other Bangladesh Accounting Standards. Extraordinary Items Alpha Co Extract from the Income Statement 19x1 190 Gross profit 12,000 10,000 Income tures 800) @,000 Profit from ordinary activities 400 7,000 Extraordinary item-loss on expropriation of car engine 8,150 - Net profit 5,260 Extracts from notes to the Financial Statements On 1 Ociober 191, Alpha's car engine valve manufactiring qpeations in country R were expropriated, without compensation, by the Government The results of this cperation had previously been reported in the valve manufacturing industry segment and the Pacific geographical segment. The loss arising from the expropriation has been accounted for 2s an extraordinary item. The loss arising from the expropriation is thenet carrying amount of the assets and liabilities of the operation at the date of expropriation. The revenues recognised relating to this eperation from 1 Janaary 1X1 until 1 October 19%1 were 10,000 and the profits before tax were 2,000 15BAS Fundamental Errors During 19%2, Beta Co discovered that certain products that hhad been sold during 19K1 were inccrrecily included in inventory at 31 December 19X1 at 6500 Beta's accounting records for 19%2 show sales of 104,000, cost of goads sold of 86,500 (including 6,600 for error in opening inventory), and income taxes of 6.260. In 191, Beta reported Sales 73,500 Cost of goods sold (68.500) Profit fram ordinary activities beforeincome taxes 20,000 Income taxes, (6,000) Net Profit 14,000 19X1 opening retained eamings was 20,000 and closing retsined eamings wes $4,000 Bela's income tax rate was 90% for 1902 and 19% Beta co Extract fiom the Inenme Statement ner the Benchmark Treatment (restated) 19x2 1x1 Sales 704,000 “73.500 Cost of goods sold 0.000) (60,000) Profit from ordinary activities. ~~ beforeincome taxes 24,000 18,500 Income tures (7,209 _4,050) Net Profit T1630 — oT 16RAS-8 Beta Co Steterment of Retained Bamings indee the Beachmerk Treatment (costated) texe Lox) Opening retained earnings as, previouslyreporied 34,000 20,000 Comection of fundamental emer (Net of income taxesof 1,980) (Note 1) (4,550) # Opming retained earnings as restated 29,480 Netprafit 14.800 Closing Retained Eamings 46,250 Extracts from notes to the Financial Statements, Certain products that hed been sold in 191 were incorrectiy included in inventory at $1 December 19X1 at 6,500. The finencial statements of 19X1 have been restated to correct this error. Bata Co Bxtracttram the Income Statement under fe Allowed Alfemative Trataent pss een. fesated esate) tetas 1a 1s. Sales 1040050 104000 350 Comat gods sold (Nae) (25096309 8090900) Prcitfiomosimsy seis before incomeares 17500 D0 24.000 13500 tneore wes (eludes Hoeft: of ie oaestin ofafundarerta er) (6,250) 6.001) ___—7.290) (408) NetPinit 12.200 i 3A 7BAS-& Beta Co ‘Statement of Retained Earnings under the Allowed Alternative Treatment Pro Forma (castated) (ostated) TORE TORT ToXZ 0X1 Opening retained earnings as previcusly reported 34,900 20,000 34,000 20,000 Correction of fandamentalerror Net of fncome tasces of (1.959) E550) Opening retained earaingsas restated 34.000 20,000 _29.450 20.000 Net profit 72.20 ~ 14,000 — 16800 ~ 9.450 Closing Retained Eamings FER “ILO TE T0 WAG. Extracts fiom notes to the Financial Statements Cost of goods sold for 102 inckides 6,500 for certain products that had teen sold: in 191 but were incorrectiy included in inventory at $1 December 191. Restated pro forma information for 19X2 and 1X1 is presented as if the error kad been corrected in 191 18BASS ‘Changes in Accounting Policy During 19%2, Gamama Co changed its accounting policy with respect to the treatment of borrowing costs that are directly attributable to the acquisition of a hydro-electric power station which is in course of constuction for use by Gamma. In previous periods, Gamma had capitalised such costs, net of income taxes, in aceartance with the allowed alternative treatment in BAS 23, Bomawing Costs Gamma has now decided to expanse, tather than captalise, these costs in otder to conform with the benchmark treatment mn BAS 23. Gamma capitalised borrowing costs incurred of 2600 during 19X1 and 5.200 in periods prior to 19X1. All borrowing costs maurred in previous years in respect to the acquisition of the power station were capitalised Gamma’: accounting records for 1922 show profit from ordinary activities before interest and income tares of 30,000; interest expense of 3,000 (which relates only to 10932); and income taxes of 8,100 Gamma has not yet recognised any deprecistion on the power station because itis not yet in use In 19X1, Gamma reported: Profit from ordinary activities before interest and incometaxes 18,000 Interest expense 2 Profit from ordinary activities before income taxes 18,000 Income taces 6,400) Net Profit 12,600 19X1 opening retained eamings was 20,000 and closing retained eamings wes $2,500 19BAS-8 Gammna's ta rate was 30% for 192 and 1031 Camm Co Extract from the Income Statement under the Banchmack Treatment (restated) ToRE TXT Profit from ordinary activities before interestand fncome taxes 30.000 18,000 Interest expense 000) 2.600 Profit from ordinary activities before incometaxes 27,000 0 Income taces (8.100) (4.620 Net Profit TEBoO Torr Gamma Co Statement of Retained Barnings under the Benchmark Treatment (restated Tox TSX1 Opening retained earnings as previcuslyreported 32,600 20,000 Change in eccounting policy with respect tothe capitalisation of interest (Net of income taxzas of 2,340 for 192 and 1,560 for 101) (Note 1) E460) Cea) Opening retained eamings as restated 27,140 16,360 Net profit 18,900 1070 Closing Retained Earnings AHEOEO rrr ‘Extracts from notes to the Financial Statements During 192, Gamma changed its accounting policy with tespedt to the treatment of borrowing costs related to a hyycro-electric power station which 1s in course of 20BAS construction for use by Gamma. In ordor to conform with the tonchmark treatment in BAS 23, Borrowing Costs, the enterprise now azpensas rather than capitalises such costs This change in accounting policy bas been accounted fer retrospectively The comparative statements for 19X1 have thom restated to conform to the charged policy. The effect, of the change is an increase in interest expense of 3,000 (19X2) and 2,800 (1X1), Opening ratained eamings for 10X1 have been reduced by 6,200 which is the amount of the adjustment relating to periods prior to 9X1 Gamma Co Extract trom fhe ineame Statement ander the AHlowed Altemative Treatment Po fern Gaestaed) restated 1g texte HL Frofit fomoniinary setiatie before inestand sreeme taxes $0000 1800080001800 Ineestexgene (000) = (om) 500) Ccuntuatve efoto charge naceuntng policy (7,800) refitfiem onary setiatie before icone suse: 1920 1400 ao) BdOD Tneome taxes (inciudes the: eifextola chaagein sccountngpoliny) (6,750) (6400) 100) 4,420) DetPreit 13440. aGamma Co Statsmant of Ratzinad Earnings under tha Allowed Altanaative Treatmont 192 Opening retained eamingsas previously eparted 32,600 Change in accauntingpolicy with respect to thecapitalisation of interest Net of income taxes of 2,540 for 19%2 and 1,560 for 191) iNete 1) Opming retained camingsas restated 32,600 Netprofit 13,440 Closing Retained Eareings 46,040 Pro forma estated) 19X1 20.000 20,000 12,600 22,800 19K2 32,600 (5,460) 27,140 18,800 48,040 Geststed) 1X1 20,000 (540) 16,360 10,780 27,140 Extracts from notes to the Financial Statements An adjustment of 7,800 has been made in the sncome statement for 19X2 representing the effect of a change mn accounting policy with respect to the treatment of borrowing costs related to a hydrc-electric power station, 22BASS which is in course of construction for use by Gamma. In order to conform with the benchmark traatment in BAS 23, Borrowing Cests, the enterprise now sepenses rather than capitalises uch costs. This change in accounting policy has been accounted for retrospectively. Restated pro ferma information, which assumes that the new policy had always been in use, is presented. Opening retainad eamings in the pro-forma information for 19%1 have bean reduced by 5,200 which is the amcunt of the adjustment relating to periods price to 191 23