Presented By : Group-10 ‡ Ashish Kumar ‡ K.Anvesh ‡ Nitin Chauhan ‡ Rohit Khandelwal ‡ Sonal Mishra ‡ Tanuj Gupta

while rest of its part should be amortized during the life of that asset ( like Stamp Duty. . Registration Fees).BORROWING COSTS Objective--The objective of this Standard is to prescribe the accounting treatment for Borrowing Costs.  Other elements of Borrowing Cost are Interest and Commitment charges. Finance charges and Currency Exchange difference.  One time cost incurred on borrowing a fund should be amortized over the period of that borrowed fund.  AS16 --Made effective from Accounting Period on or after 01/04/2000.AS-16 --.  Borrowing Costs are defined as interest and other cost incurred by an enterprise relating to borrowing of funds.

Capitalisation of Borrowing Cost :  Borrowing cost that are directly attributable to the construction or acquisition of Qualifying asset are allowed for Capitalisation.  Such Expense shall be during the year (whether accrued or paid).  Conditions for the expense to be capitalized:  Expenditure for acquisition or construction should be incurred by money borrowed.  Qualifying Asset means that assets that take substantial period( more than 1 year) of time to get ready for its intended use. .Why Borrowing Cost Should be Capitalised?  To ascertain the Proper Valuation of the Qualifying Asset.  Activity necessary to prepare the asset for its intended use should be in progress.

For e. Construction of residential Cessation only on remaining flats. capitalised.g.  After the cessation of the Qualifying  Unavoidable or compulsory delay Asset. . may not be suspended.g. (carried forward to P&L account) Construction of bridge in high flooded geographical area. some are ready to be sold.Cessation of Borrowing Cost Suspension of Borrowing Cost  Capitalization of Expense into the  If the project is interrupted during borrowing cost shall be done up to the period than borrowing cost for the date when the asset is ready that period should not be for use. it should be expensed out . can be restarted.  Capitalisation in Parts :  When work resumes Capitalisation For e.

.DISCLOSURES  The financial statements should disclose :  the accounting policy adopted for borrowing costs.  the amount of borrowing costs capitalised during the period.

 Transactions between a reporting enterprise and its related parties. .AS 18² RELATED PARTY DISCLOSURES  Objective ² The objective of this Standard is to establish requirements for disclosure of:  Related Party Relationships.

. plan and direct activities of an Enterprise.  Joint Venture it is a Contractual agreement between two or more parties to govern Financial & Operating policies of an economic activity subject to Joint control.  What is Related Party Transaction ? Transfer of resources and obligations between related parties.  Associate Company neither Subsidiary nor Joint Venture with that party but has significant influence.18 --.AS.  Key Management Personnel persons authorised to control.Related Party Disclosures  Who are Related Party of an Enterprise ??  Subsidiary Company a holding company holds one half of its nominal value of Equity capital or composition of Board of Directors. regardless of whether or not a price is charged.

Seller Co. James Mr. buys equipment from Seller Co. who is on the board of both firms. Mr. James owns 60% of Buyer Co. Buyer Co.  Key Problem:  The proposed transaction may have a business purpose.g. shares Mr. For e.Typical Related Party Transaction  Simple transaction (purchase of equipment) between two entities (³Buyer´ and ³Seller´) controlled by the same shareholder (³Mr James´). shares Buyer Co.  James is on both sides of the transaction and may benefit if Buyer acquires overpriced equipment from Seller (not for personal benefit). James owns 90% of Seller Co. . purchasing the equipment may lead to expanded sales.

g.Items of similar nature by type of Related party . For e. Company A enjoys 60 % voting rights in Company B and 30 % Voting Rights in Company C.Name of Related party and Nature of relationship PARA 23 of AS -.Amount written off Debt PARA 26 of AS -.Directly or indirectly owning 20% or more Voting power.  By way of Substantial interest in Voting Power -. Meaning of Control ? Control can be achieved in following ways in an enterprise :  By Ownership ± having more than 50% Voting Rights.  Composition of Board of Directors ± to appoint or remove majority of Directors of the Company. Are Company B and Company C related party of Company A?  Disclosure as per AS 18 ²    PARA 21 of AS -.

Stocks. bonds.AS-30 ---FINANCIAL INSTRUMENTS-RECOGNITION & MEASUREMENT  Objective ± To establish principles for recognising and measuring financial assets.  It will be applicable from periods commencing from 01/04/2009. and the like are all examples of financial assets.It is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity shares of another enterprise.  FINANCIAL LIABILITY² Any liability that arises because of a Financial instrument (as discussed above). .  FINANCIAL INSTRUMENT -.  FINANCIAL ASSETS ² An asset that derives value because of a contractual claim. bank deposits. financial liabilities and some contracts to buy or sell non-financial items.

 Short term receivables and payables at original price after discount. .  MEASUREMENT : A financial instrument can be measured in the following ways :  Fair Value of Assets and Liabilities of acquire and issue.  Fair value + Direct Transaction cost (Brokerage. RECOGNITION : Disclosure of Asset or contract in the Balance Sheet during the particular time. Security Exchange).

 Derivatives -.Financial instruments whose value is based on the market value of an underlying asset such as stocks. bonds or a commodity.  Why Hedging is required ?  Hedge Accounting Process -Hedge accounting means recognition of changes in profit or loss at the same time in relation to the following : HEDGE ACCOUNTING Fair Value Hedge Cash Flow Hedge . options and forward contracts  Hedging ² It¶s a two way process to minimize the risk. Examples of derivatives are futures contracts.


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