29 accounting standards1-29

8/3/2019 29 Accounting Standards1-29

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Mahesh Nethi1 19-Jun-10

Maheswara Rao. NethiMaheswara Rao. Nethi

ACCOUNTING STANDARDS ACCOUNTING STANDARDS

1818thth

June 2009.June 2009.




Introduction to Accounting Standards Introduction to Accounting Standards

Applicable to commercial, industrial orApplicable to commercial, industrial or

business enterprises.business enterprises.

Also applicable to sole proprietary concerns/ Also applicable to sole proprietary concerns/ individuals, partnership firms, societies, trusts,individuals, partnership firms, societies, trusts,HUF and association of persons carrying onHUF and association of persons carrying oncommercial, industrial or business activitiescommercial, industrial or business activitiesand are subject to attest function of theand are subject to attest function of the

members of ICAI.members of ICAI.

Enterprises are classified into threeEnterprises are classified into three

categories, viz., Level I, Level II and Level IIIcategories, viz., Level I, Level II and Level III




Introduction to Accounting Standards Introduction to Accounting Standards

Section 211 (3A): every profit & loss account andSection 211 (3A): every profit & loss account and

balance sheet of the company shall comply with thebalance sheet of the company shall comply with theaccounting standards.accounting standards.

Section 211 (3C): accounting standards means theSection 211 (3C): accounting standards means the

standards of accounting recommended by ICAI.standards of accounting recommended by ICAI.

Section 227 (3)(d): auditorsSection 227 (3)(d): auditors’’ to report on complianceto report on compliance

with accounting standards.with accounting standards.

Companies (Accounting Standard) Rules, 2006Companies (Accounting Standard) Rules, 2006

issued by Government of India on 7.12.2006issued by Government of India on 7.12.2006




SMALL AND MEDIUM COMPANIES (SMCs)SMALL AND MEDIUM COMPANIES (SMCs)

According to rule 2(f), a SMC is a company which satisfies all According to rule 2(f), a SMC is a company which satisfies all five conditions: five conditions:

Equity or debt securities not listed or in the process of listin Equity or debt securities not listed or in the process of listin g on stock g on stock

exchange.exchange.

Not a bank or financial institution or insurance company; Not a bank or financial institution or insurance company;

Turnover (excluding other income) does not exceed rupees fiftyTurnover (excluding other income) does not exceed rupees fifty crore crore . .

Does not have borrowings exceeding Rs. 10 Does not have borrowings exceeding Rs. 10 crore crore . .

Not a holding company or subsidiary of a non Not a holding company or subsidiary of a non--SMC company.SMC company.

According to Rule 5, an existing non According to Rule 5, an existing non--SMC company which subsequentlySMC company which subsequently

becomes an SMC shall not qualify for exemptions/relaxations in a becomes an SMC shall not qualify for exemptions/relaxations in a pplicability pplicability

of Notified AS of Notified AS’’ s until the company remains an SMC for 2 consecutive s until the company remains an SMC for 2 consecutive

accounting periods. accounting periods.




Relaxations: Relaxations:

(AS) 3 “Cash Flow Statements” and (AS) 17 “Segment Reporting” are notmandatory for SMCs.

An SMC need not comply with paras 11 to 16 of AS-15 to the extent they dealwith recognition and measurement of short-term accumulated compensatingabsences. [Proviso below Para 16 of AS-15]

An SMC need not discount amounts of contributions payable to a definedcontribution plan that fall due after 12 months. [Proviso below Para 46 ofAS-15]

An SMC need not discount amounts of termination benefits that fall due

after 12 months. [Proviso below Para 139 of AS-15]

An SMC need not comply with disclosure requirements of paras 119 to 123 ofAS-15 in respect of accounting for defined benefit plans.


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An SMC need not apply the measurement and recognition principles ofPara 129 to 131 regarding accounting for other long-term employeebenefits. [Proviso below Para 131 of AS-15]

An SMC is not required to disclose diluted EPS (both including and

excluding extraordinary items).

An SMC need not comply with disclosure requirements of sub-paras(b) and (d) of Para 46 of AS-19 “Leases”.

An SMC can opt to measure ‘value in use’ for AS-28 purposes based onreasonable estimates instead of determining value in use by present value

technique.

An SMC is exempt from the disclosure requirements of paragraphs 66 and69 of AS-29



Accounting Standard 1 Accounting Standard 1 – – Disclosure Disclosure

of Accounting Policies of Accounting Policies

Standard refers to disclosure of significantStandard refers to disclosure of significant

accounting policies followed in preparing andaccounting policies followed in preparing andpresenting financial statements.presenting financial statements.

Fundamental accounting assumptionsFundamental accounting assumptions – – goinggoingconcern, consistency and accrual. If these areconcern, consistency and accrual. If these are

not followed, fact to be disclosed.not followed, fact to be disclosed.

Major considerations governing selection andMajor considerations governing selection and

application of accounting policies: prudence,application of accounting policies: prudence,

substance over form and materiality.substance over form and materiality.



Accounting Standard 1 Accounting Standard 1 – – Disclosure Disclosure

of Accounting Policies of Accounting Policies

Disclosures:Disclosures:

All significant policies.All significant policies.

Any change in accounting policies having aAny change in accounting policies having a

material effect in the current period or futurematerial effect in the current period or futureperiods to be disclosed. Amount to beperiods to be disclosed. Amount to bedisclosed. Where such amount is notdisclosed. Where such amount is not

ascertainable, the fact should be indicated.ascertainable, the fact should be indicated.



Accounting Standard 2 Accounting Standard 2 – – Valuation of Valuation of

Inventories Inventories

Not applicable to WIP under constructionNot applicable to WIP under constructioncontracts, WIP of service providers, shares,contracts, WIP of service providers, shares,debentures and financial instruments held asdebentures and financial instruments held asstock in trade, producersstock in trade, producers’’ inventories ofinventories of

livestock, agricultural and forest products andlivestock, agricultural and forest products andmineral oils, ores and gases.mineral oils, ores and gases.

Inventories are assets held for sale in ordinaryInventories are assets held for sale in ordinary

course of business, in the process of productioncourse of business, in the process of productionof such sale, or in the form of materials to beof such sale, or in the form of materials to beconsumed in production process or rendering ofconsumed in production process or rendering ofservices.services.





Inventories do not include machinery sparesInventories do not include machinery spares

which can be used with an item of fixed assetwhich can be used with an item of fixed assetand whose use is irregular. Such spares areand whose use is irregular. Such spares areto beto be capitalisedcapitalised in accordance with AS10.in accordance with AS10.

Cost of inventories should comprise of allCost of inventories should comprise of allcosts of purchase, costs of conversion andcosts of purchase, costs of conversion andother costs incurred in bringing theother costs incurred in bringing the

inventories to their present location andinventories to their present location andcondition.condition.

Exclusions from cost of inventories: abnormalExclusions from cost of inventories: abnormal

wastage, storage costs, administrativewastage, storage costs, administrativeoverheads and selling & distribution costs.overheads and selling & distribution costs.





Inventories should be valued at lower of costInventories should be valued at lower of costand net realisable value. Cost is determinedand net realisable value. Cost is determinedon FIFO basis or weighted average basis.on FIFO basis or weighted average basis.Finished goods and WIP includes anFinished goods and WIP includes an

allocation of fixed and variable productionallocation of fixed and variable productionoverheads.overheads.

Net realisable value is the estimated sellingNet realisable value is the estimated selling

price less the estimated costs of completionprice less the estimated costs of completionand estimated costs necessary to make theand estimated costs necessary to make thesale. An assessment is made of net realisablesale. An assessment is made of net realisable

value at each balance sheet date.value at each balance sheet date.






Accounting policies adopted in measuringAccounting policies adopted in measuringinventories including the cost formula used.inventories including the cost formula used.

The total carrying amount of inventories andThe total carrying amount of inventories andits classification into raw materials andits classification into raw materials andcomponents, work in progress, finishedcomponents, work in progress, finished

goods, stores and spares and loose tools.goods, stores and spares and loose tools.



Accounting Standard 4 Accounting Standard 4 – – ContingenciesContingencies

and events occurring after the balance and events occurring after the balance sheet date sheet date

Contingency is a condition or situation theContingency is a condition or situation theultimate outcome of which will be known orultimate outcome of which will be known ordetermined only on the occurrence or nondetermined only on the occurrence or non--

occurrence of uncertain future events.occurrence of uncertain future events.

Events occurring after the balance sheet dateEvents occurring after the balance sheet dateare those significant events bothare those significant events both favourablefavourable

andand unfavourableunfavourable that occur between thethat occur between thebalance sheet date and the date on which thebalance sheet date and the date on which thefinancial statements are approved.financial statements are approved.





Contingent loss should be provided for by aContingent loss should be provided for by acharge to P & L A/c if it is probable that futurecharge to P & L A/c if it is probable that futureevents will confirm that an asset has beenevents will confirm that an asset has beenimpaired or a liability has been incurred as atimpaired or a liability has been incurred as atthe balance sheet datethe balance sheet date and a reasonableand a reasonableestimate of the amount of loss can be madeestimate of the amount of loss can be made..

Existence of a contingent loss should beExistence of a contingent loss should bedisclosed in the financial statements if abovedisclosed in the financial statements if aboveconditions are not met, unless the possibilityconditions are not met, unless the possibility

of a loss is remote.of a loss is remote.





Contingent gains if any, should not be recognised inContingent gains if any, should not be recognised in

the financial statements.the financial statements.

Material changes in assets and liabilities due toMaterial changes in assets and liabilities due to

events occurring after the balance sheet date thatevents occurring after the balance sheet date thatrelate to conditions existing as at the balance sheetrelate to conditions existing as at the balance sheet

date should be accounted or disclosed.date should be accounted or disclosed.

Dividends for the period which are proposed orDividends for the period which are proposed ordeclared after the balance sheet date should bedeclared after the balance sheet date should be

adjusted.adjusted.





Material events occurring after the balanceMaterial events occurring after the balancesheet date affecting the going concernsheet date affecting the going concernassumption and financial position beassumption and financial position beappropriately dealt with in the accounts.appropriately dealt with in the accounts.


Events occurring after the balance sheet dateEvents occurring after the balance sheet date

and an estimate of the financial effect or aand an estimate of the financial effect or astatement that such estimate cannot bestatement that such estimate cannot bemade.made.



Accounting Standard 5 Accounting Standard 5 – – Net Profit/ Net Profit/

Loss for the period, Prior period items Loss for the period, Prior period items and changes in accounting policies and changes in accounting policies

All items of income and expenses, which areAll items of income and expenses, which arerecognised in a period, should be included inrecognised in a period, should be included indetermination of net profit or loss for thedetermination of net profit or loss for theperiod unless an accounting standardperiod unless an accounting standardrequired or permits otherwise.required or permits otherwise.

The nature and amount of each prior periodThe nature and amount of each prior period

and extraordinary items should be separatelyand extraordinary items should be separatelydisclosed in a manner that their impact ondisclosed in a manner that their impact oncurrent profit or loss can be perceived.current profit or loss can be perceived.Extraordinary items should be disclosed in theExtraordinary items should be disclosed in the

profit and loss account as a part of netprofit and loss account as a part of netprofit/loss for the period.profit/loss for the period.



Accounting Standard 5 Accounting Standard 5 – – Net Profit/ Net Profit/

Loss for the period, Prior period items Loss for the period, Prior period items and changes in accounting policies and changes in accounting policies

Accounting policy may be changed only if required byAccounting policy may be changed only if required bystatute or for compliance with an accounting standardstatute or for compliance with an accounting standardor if the change would result in appropriateor if the change would result in appropriatepresentation in the financial statements.presentation in the financial statements.

Any change in an accounting policy, which has aAny change in an accounting policy, which has amaterial effect, should be disclosed. The impact andmaterial effect, should be disclosed. The impact andadjustment arising out of material change should beadjustment arising out of material change should be

disclosed in the period in which such change is made.disclosed in the period in which such change is made.If it is impracticable to quantify the amount, this factIf it is impracticable to quantify the amount, this factshould be disclosed.should be disclosed.



Accounting Standard 6 Accounting Standard 6 – – Depreciation Depreciation

Accounting Accounting

Not applicable to depreciation in respect of forests,Not applicable to depreciation in respect of forests,

plantations and similar regenerative naturalplantations and similar regenerative natural

resources, wasting assets including expenditure onresources, wasting assets including expenditure on

exploration and extraction of minerals, oils, naturalexploration and extraction of minerals, oils, natural

gas and similar nongas and similar non--regenerative resources,regenerative resources,expenditure on research and development, goodwillexpenditure on research and development, goodwill

and livestock.and livestock.

Depreciation is allocated so as to charge a fairDepreciation is allocated so as to charge a fair

proportion of the depreciable amount in eachproportion of the depreciable amount in each

accounting period over the expected useful life ofaccounting period over the expected useful life of

asset.asset.





Useful life may be reviewed periodically afterUseful life may be reviewed periodically aftertaking into consideration the expectedtaking into consideration the expectedphysical wear and tear, obsolescence andphysical wear and tear, obsolescence andlegal or other limits on the use of the asset.legal or other limits on the use of the asset.

Basis for providing depreciation must beBasis for providing depreciation must beconsistently followed and disclosed. Anyconsistently followed and disclosed. Anychange to be quantified and disclosed.change to be quantified and disclosed.

In case of addition or extension to an existingIn case of addition or extension to an existingasset, depreciation is to be provided on theasset, depreciation is to be provided on theadjusted figure prospectively over the residualadjusted figure prospectively over the residuallife of the asset.life of the asset.





Revision in the method of depreciation shouldRevision in the method of depreciation shouldbe made from the date of use. Change in thebe made from the date of use. Change in themethod of charging depreciation is a changemethod of charging depreciation is a changein accounting policy and its effect should bein accounting policy and its effect should be

quantified and disclosed.quantified and disclosed.

Where historical cost undergoes a changeWhere historical cost undergoes a changedue to price adjustments etc, the depreciationdue to price adjustments etc, the depreciation

on the revisedon the revised unamortisedunamortised amount should beamount should beprovided over the balance useful life of theprovided over the balance useful life of theasset.asset.







Historical cost or amount substituted forHistorical cost or amount substituted forhistorical cost, depreciation for the year andhistorical cost, depreciation for the year and

accumulated depreciation.accumulated depreciation.

Depreciation method used and if rates appliedDepreciation method used and if rates appliedare different from the rates specified in theare different from the rates specified in the

governing statute then the rates and usefulgoverning statute then the rates and usefullife are to be disclosed.life are to be disclosed.




Accounting Standard 7 Accounting Standard 7 – – Accounting Accounting

for Construction Contracts for Construction Contracts

Applicable for construction contracts which may beApplicable for construction contracts which may be

for construction of single/combination of interrelatedfor construction of single/combination of interrelatedor interdependent assets.or interdependent assets.

In a contract covering a number of assets, eachIn a contract covering a number of assets, each

asset is treated as a separate construction contractasset is treated as a separate construction contractwhen there are:when there are:

a)a) separate proposal;separate proposal;

b)b) each asset is subject to separate negotiations andeach asset is subject to separate negotiations andthe contractor and customer is able to accept/rejectthe contractor and customer is able to accept/rejectthat part of the contract;that part of the contract;

c)c) costs and revenues of each asset can be identified.costs and revenues of each asset can be identified.






Contract revenue and contract costs shouldContract revenue and contract costs should

be recognised, when outcome of thebe recognised, when outcome of the

contract can be estimated reliably upto thecontract can be estimated reliably upto thestage of completion at the reporting date.stage of completion at the reporting date.






In fixed price contract, the outcome can beIn fixed price contract, the outcome can be

estimated reliably when all the following conditionsestimated reliably when all the following conditions

are satisfied;are satisfied;

a)a) total contract revenue can be measured reliably;total contract revenue can be measured reliably;

b)b) it is probable that economic benefits associated withit is probable that economic benefits associated with

the contract will flow to the enterprise;the contract will flow to the enterprise;

c)c) both the contract cost to complete and the stage ofboth the contract cost to complete and the stage of

completion can be measured reliably at thecompletion can be measured reliably at the

reporting date; andreporting date; and






d)d) contract costs can be clearly identified andcontract costs can be clearly identified and

measured reliably so that actual contract costsmeasured reliably so that actual contract costsincurred can be compared with prior estimates.incurred can be compared with prior estimates.

In cost plus contracts the outcome can be estimatedIn cost plus contracts the outcome can be estimatedreliably when all the following conditions arereliably when all the following conditions aresatisfied:satisfied:

a)a) it is probable that the economic benefits associatedit is probable that the economic benefits associatedwith the contract will flow to the enterprise; andwith the contract will flow to the enterprise; and

b)b) contract costs whether reimbursable or not can becontract costs whether reimbursable or not can beclearly identified and measuredclearly identified and measured realiablyrealiably..






Contract revenue comprises of:Contract revenue comprises of:a)a) the initial amount of revenue agreed in thethe initial amount of revenue agreed in the

contract; andcontract; and

b)b) variations in contract work, claims andvariations in contract work, claims and

incentive payments that will probably resultincentive payments that will probably result

in revenue and are capable of being reliablyin revenue and are capable of being reliablymeasured.measured.






When outcome of a contract cannot beWhen outcome of a contract cannot beestimated reliably;estimated reliably;

a)a) revenue should be recognised only to therevenue should be recognised only to the

extent of contract costs recovery of which isextent of contract costs recovery of which isprobable;probable;

b)b) contract cost should be recognised as ancontract cost should be recognised as an

expense in the period in which they areexpense in the period in which they areincurred; andincurred; and

c)c) an expected loss should be recognised asan expected loss should be recognised as

expense.expense.






When it is probable that contract costs willWhen it is probable that contract costs willexceed total contract revenue, the expectedexceed total contract revenue, the expectedloss should be recognised as an expenseloss should be recognised as an expenseimmediately.immediately.


contract revenue recognised in the period;contract revenue recognised in the period;

method used to determine contract revenuemethod used to determine contract revenuerecognised in the period; andrecognised in the period; and

methods used to determine the stage ofmethods used to determine the stage ofcompletion of contracts in progress.completion of contracts in progress.







For contracts in progress an enterpriseFor contracts in progress an enterpriseshould disclose:should disclose:

a)a) the aggregate amount of costs incurred andthe aggregate amount of costs incurred andrecognised profits (less recognised losses)recognised profits (less recognised losses)

up to the reporting date;.up to the reporting date;.b)b) amount of advances received; andamount of advances received; and

c)c) amount of retention.amount of retention.







An enterprise should present:An enterprise should present:

a)a) gross amount due from customers forgross amount due from customers forcontract work as an asset; andcontract work as an asset; and

b)b) the gross amount due to customers forthe gross amount due to customers for

contract work as a liability.contract work as a liability.




Accounting Standard 9 Accounting Standard 9 – – Revenue Revenue

Recognition Recognition

Standard does not deal with revenue arisingStandard does not deal with revenue arisingfrom construction contracts, hirefrom construction contracts, hire--purchasepurchaseand lease agreements, government grantsand lease agreements, government grantsand other similar subsidies and revenue ofand other similar subsidies and revenue ofinsurance companies from insuranceinsurance companies from insurance

contracts.contracts.

Revenue from sale and services should beRevenue from sale and services should berecognised on sale of goods or rendering ofrecognised on sale of goods or rendering of

services if collection is reasonably certain;services if collection is reasonably certain;and when risks and rewards of ownership areand when risks and rewards of ownership aretransferred to the buyer and when effectivetransferred to the buyer and when effective

control of the seller as the owner is lost.control of the seller as the owner is lost.




Accounting Standard 9 Accounting Standard 9 – – Revenue Revenue

Recognition Recognition

In case of rendering of services, revenueIn case of rendering of services, revenuemust be recognised either on completedmust be recognised either on completed

contract method or on proportionatecontract method or on proportionatecompletion method by relating the revenuecompletion method by relating the revenuewith the work accomplished andwith the work accomplished and certainitycertainity ofof

consideration receivable.consideration receivable.

Interest is recognised on time basis, royaltiesInterest is recognised on time basis, royaltieson accrual basis and dividend when owneron accrual basis and dividend when owner’’ss

right to receive payment is established.right to receive payment is established.

Disclose circumstances in which revenueDisclose circumstances in which revenuerecognition has been postponed pendingrecognition has been postponed pending

significant uncertainties.significant uncertainties.





for Fixed Assets for Fixed Assets

Fixed asset is an asset held for producing orFixed asset is an asset held for producing orproviding goods and/or services and is notproviding goods and/or services and is not

held for sale in the normal course of theheld for sale in the normal course of thebusiness.business.

Cost to include purchase price andCost to include purchase price andattributable costs of bringing assets to itsattributable costs of bringing assets to itsworking condition for the intended use. Itworking condition for the intended use. Itincludes financing cost for the period upto theincludes financing cost for the period upto the

date of readiness for use.date of readiness for use.

Self constructed assets are to beSelf constructed assets are to be capitalisedcapitalisedat costs that are specifically related to theat costs that are specifically related to the

asset and those which are allocable to theasset and those which are allocable to thespecific asset.specific asset.






Fixed asset acquired in exchange or partFixed asset acquired in exchange or part

exchange should be recorded at fair marketexchange should be recorded at fair marketvalue or net book value of asset given upvalue or net book value of asset given upadjusted for balancing payment, cash receiptadjusted for balancing payment, cash receiptetc. Fair market value is determined withetc. Fair market value is determined with

reference to asset given up or asset acquired.reference to asset given up or asset acquired.

Revaluation, if any, should be for class ofRevaluation, if any, should be for class ofassets and not an individual asset. Basis ofassets and not an individual asset. Basis ofrevaluation should be disclosed. Increase inrevaluation should be disclosed. Increase invalue on revaluation be credited tovalue on revaluation be credited torevaluation reserve while the decrease shouldrevaluation reserve while the decrease should

be charged to P&L A/c.be charged to P&L A/c.






Goodwill should be accounted only when paidGoodwill should be accounted only when paidfor.for.

Assets should be eliminated from books onAssets should be eliminated from books on

disposal/when of no utility value.disposal/when of no utility value.

Profit/Loss on disposal of assets should beProfit/Loss on disposal of assets should berecognised in the P&L statement.recognised in the P&L statement.

Fixed assets acquired on hire purchaseFixed assets acquired on hire purchaseshould be recorded at their cash value, whichshould be recorded at their cash value, whichif not readily available, should be calculatedif not readily available, should be calculated

by assuming an appropriate rate of interest.by assuming an appropriate rate of interest.






Where several fixed assets are purchasedWhere several fixed assets are purchasedfor a consolidated price, the considerationfor a consolidated price, the considerationshould be apportioned to the various assetsshould be apportioned to the various assetson a fair basis as determined by competenton a fair basis as determined by competent

valuersvaluers..Disclosures:Disclosures:

a)a) Gross and net book value of assets at theGross and net book value of assets at thebeginning and end of an accounting periodbeginning and end of an accounting periodshowing additions, disposals, acquisitionsshowing additions, disposals, acquisitionsand other movements;and other movements;







a)a) Expenditure incurred on account of fixedExpenditure incurred on account of fixedassets in the course of construction orassets in the course of construction or

acquisition.acquisition.




Accounting Standard 11 Accounting Standard 11 – – The effect of The effect of

changes in Foreign Exchange Rates changes in Foreign Exchange Rates

Standard should be applied in accounting forStandard should be applied in accounting for

transactions in foreign currency, translatingtransactions in foreign currency, translatingthe financial statements of foreign operationsthe financial statements of foreign operationsand accounting of forward exchange contract.and accounting of forward exchange contract.

Initial recognition of a foreign currencyInitial recognition of a foreign currencytransaction shall be by applying the foreigntransaction shall be by applying the foreigncurrency exchange rate as on the date of thecurrency exchange rate as on the date of thetransaction. In case of voluminoustransaction. In case of voluminoustransactions a weekly or a monthly averagetransactions a weekly or a monthly averagerate is permitted, if fluctuation during therate is permitted, if fluctuation during theperiod is not significant.period is not significant.






At each balance sheet date, foreign currencyAt each balance sheet date, foreign currencymonetary items shall be reported at themonetary items shall be reported at theclosing exchange rates unless there areclosing exchange rates unless there arerestrictions on remittances. Such items shouldrestrictions on remittances. Such items shouldbe accounted at the amount at which it isbe accounted at the amount at which it is

likely to belikely to be realisedrealised in reporting currency.in reporting currency.

Non monetary items which are carried atNon monetary items which are carried athistorical cost shall be reported at thehistorical cost shall be reported at the

exchange rate on the date of transaction. Nonexchange rate on the date of transaction. Nonmonetary items which are carried at fair valuemonetary items which are carried at fair valueshall be reported at the exchange rate thatshall be reported at the exchange rate that

existed when the value was determined.existed when the value was determined.






Exchange difference arising on settlement ofExchange difference arising on settlement of

monetary items or on restatement ofmonetary items or on restatement ofmonetary items on each balance sheet datemonetary items on each balance sheet dateshall beshall be recognisedrecognised as expense or income inas expense or income inthe period in which they arise.the period in which they arise.

Exchange difference arising on monetaryExchange difference arising on monetaryitems which in substance is net investment initems which in substance is net investment ina non integral foreign operation (long terma non integral foreign operation (long termloans) shall be credited to foreign currencyloans) shall be credited to foreign currencytranslation reserve andtranslation reserve and recognisedrecognised as incomeas incomeor expense at the time of disposal of netor expense at the time of disposal of net

investment.investment.






The financial statements of an integralThe financial statements of an integral

foreign operation shall be translated as if theforeign operation shall be translated as if thetransactions of the foreign operation hadtransactions of the foreign operation hadbeen those of the reporting enterprise;been those of the reporting enterprise; i.ei.e, it, itis initially to be accounted at the exchangeis initially to be accounted at the exchange

rate prevailing on the date of transaction.rate prevailing on the date of transaction.

For incorporation of non integral foreignFor incorporation of non integral foreignoperations:operations:

a)a) both monetary and non monetary assets andboth monetary and non monetary assets andliabilities should be translated at the closingliabilities should be translated at the closing

rate as on the date of the balance sheet date;rate as on the date of the balance sheet date;





changes in Foreign Exchange Rates changes in Foreign Exchange Ratesb)b) the income and expense should be translated at thethe income and expense should be translated at the

exchange rates at the date of transactions; andexchange rates at the date of transactions; and

The resulting exchange differences should beThe resulting exchange differences should beaccumulated in foreign currency translation reserveaccumulated in foreign currency translation reserveuntil the disposal on net investment. Any goodwill oruntil the disposal on net investment. Any goodwill or

capital reserve on acquisition of noncapital reserve on acquisition of non--integralintegralfinancial operation is translated at the closing rate.financial operation is translated at the closing rate.

In consolidated financial statement of the reportingIn consolidated financial statement of the reporting

enterprise, exchange difference arising on intraenterprise, exchange difference arising on intragroup monetary items continues to begroup monetary items continues to be recognisedrecognised asasincome or expense, unless the same is in substanceincome or expense, unless the same is in substancean enterprisean enterprise’’s net investment in non integral foreigns net investment in non integral foreign

operation.operation.






Exchange difference arising on translation shall beExchange difference arising on translation shall beconsidered for deferred tax in accordance with AS22.considered for deferred tax in accordance with AS22.

Forward exchange contracts not intended for tradingForward exchange contracts not intended for tradingor speculation purposesor speculation purposes – – the premium or discountthe premium or discount

arising at the time of inception of the forward contractarising at the time of inception of the forward contractshould beshould be amortisedamortised as expense or income over theas expense or income over thelife of the contract. Exchange differences on forwardlife of the contract. Exchange differences on forwardexchange contracts should beexchange contracts should be recognisedrecognised in the P&Lin the P&L

A/c in the reporting period in which there is a changeA/c in the reporting period in which there is a changein the exchange rates.in the exchange rates.

A i S d d 11A ti St d d 11 Th ff fTh ff t f






Exchange difference on such contracts is theExchange difference on such contracts is the

difference between exchange rate at thedifference between exchange rate at the

reporting date and exchange difference at thereporting date and exchange difference at the

date of inception of the contract for thedate of inception of the contract for the

underlying currency .underlying currency .

Profit or loss arising on renewal orProfit or loss arising on renewal or

cancellation of the forward contract should becancellation of the forward contract should be

recognisedrecognised as income or expense for theas income or expense for the

period.period.

A i S d d 11A ti St d d 11 Th ff fTh ff t f






Gain or loss on forward exchange contractGain or loss on forward exchange contract

intended for trading or speculation should beintended for trading or speculation should be

recognisedrecognised in the profit and loss account forin the profit and loss account for

the period which is computed with referencethe period which is computed with reference

to the difference between forward rate on theto the difference between forward rate on thereporting date for the remaining maturityreporting date for the remaining maturity

period of the contract and the contractedperiod of the contract and the contracted

forward rate. This means that the forwardforward rate. This means that the forwardcontract is marked to market.contract is marked to market.





for Government Grants for Government Grants

Grants can be in cash or in kind and mayGrants can be in cash or in kind and may

carry certain conditions to be complied.carry certain conditions to be complied.

Grants should not beGrants should not be recognisedrecognised unlessunlessreasonably assured to bereasonably assured to be realisedrealised and theand the

enterprise complies with the conditionsenterprise complies with the conditionsattached to the grant.attached to the grant.

Grants by way of promoters contribution is toGrants by way of promoters contribution is to

be credited to capital reserve and consideredbe credited to capital reserve and consideredas part of shareholders fundsas part of shareholders funds






Grants towards specific assets should beGrants towards specific assets should be

deducted from its gross value. Alternatively, itdeducted from its gross value. Alternatively, itcan be treated as deferred income in the P&Lcan be treated as deferred income in the P&LA/c on rational basis over the useful life of theA/c on rational basis over the useful life of thedepreciable asset.depreciable asset.

Grants related to nonGrants related to non--depreciable assetsdepreciable assetsshould be credited to capital reserve unless itshould be credited to capital reserve unless itstipulatesstipulates fulfilmentfulfilment of certain conditions. Inof certain conditions. Inthe later case the grant should be credited tothe later case the grant should be credited tothe P&L A/c over a reasonable period and thethe P&L A/c over a reasonable period and thedeferred income balance shown separately indeferred income balance shown separately in

the financial statements.the financial statements.






Grants in the form of nonGrants in the form of non--monetary assets,monetary assets,

given at concessional rates, shall begiven at concessional rates, shall beaccounted at their acquisition cost. Assetsaccounted at their acquisition cost. Assetsgiven free of cost be recorded at nominalgiven free of cost be recorded at nominalvalue.value.

Grants of revenue nature to beGrants of revenue nature to be recognisedrecognised ininthe P&L A/c over the period to match with thethe P&L A/c over the period to match with therelated cost, which are intended to berelated cost, which are intended to becompensated. Such grants can be treated ascompensated. Such grants can be treated asother income or can be reduced from relatedother income or can be reduced from relatedexpense.expense.






Grants receivable as compensation forGrants receivable as compensation for

losses/expenses incurred should belosses/expenses incurred should berecognisedrecognised and disclosed in P&L A/c in theand disclosed in P&L A/c in theyear it is receivable and shown asyear it is receivable and shown asextraordinary item, if material in amount.extraordinary item, if material in amount.

Grants when become refundable be shown asGrants when become refundable be shown asextraordinary item. Revenue grants whenextraordinary item. Revenue grants whenrefundable should be first adjusted againstrefundable should be first adjusted againstunamortisedunamortised deferred credit balance of thedeferred credit balance of thegrant and the balance should be charged togrant and the balance should be charged tothe P&L A/c.the P&L A/c.






Grants against specific assets on becomingGrants against specific assets on becoming

refundable are recorded by increasing therefundable are recorded by increasing thevalue of the respective asset or by reducingvalue of the respective asset or by reducingcapital reserve/deferred income balance ofcapital reserve/deferred income balance ofthe grant as applicable. Any increase in thethe grant as applicable. Any increase in the

value of the asset should be depreciatedvalue of the asset should be depreciatedprospectively over the remaining useful lifeprospectively over the remaining useful lifeof the asset.of the asset.


a)a) accounting policy adopted for grantsaccounting policy adopted for grants

including method of presentation in theincluding method of presentation in thefinancial statements;financial statements;





for Government Grants for Government GrantsDisclosures:Disclosures:

b)b) nature and extent of government grantsnature and extent of government grantsrecognisedrecognised in the financial statements,in the financial statements,including grants of nonincluding grants of non--monetary assetsmonetary assets

given at a concession rate or free of cost.given at a concession rate or free of cost.





for Investments for Investments

Current investments and long term investmentsCurrent investments and long term investments

should be disclosed distinctly in the financialshould be disclosed distinctly in the financialstatements with further substatements with further sub--classification intoclassification into

government or trust securities, shares, debentures orgovernment or trust securities, shares, debentures or

bonds, investment properties, others unless it isbonds, investment properties, others unless it is

required to be classified in other manner as perrequired to be classified in other manner as per

statute.statute.

Investment properties should be accounted for asInvestment properties should be accounted for aslong term investments.long term investments.

Cost of investments should include acquisitionCost of investments should include acquisition

charges including brokerage, fees and duties.charges including brokerage, fees and duties.






If an investment is acquired by issue ofIf an investment is acquired by issue ofshares/securities or in exchange of an asset, the costshares/securities or in exchange of an asset, the cost

of the investment is the fair value of the securitiesof the investment is the fair value of the securitiesissued or the assets given up. Acquisition cost mayissued or the assets given up. Acquisition cost maybe determined considering the fair value of thebe determined considering the fair value of theinvestments acquired.investments acquired.

Current investments should be carried at the lower ofCurrent investments should be carried at the lower ofcost and fair value determined either on an individualcost and fair value determined either on an individualinvestment basis or by category of investment but notinvestment basis or by category of investment but not

on global basis.on global basis.

Long term investments should be carried at cost.Long term investments should be carried at cost.Provision for decline (other than temporary) should beProvision for decline (other than temporary) should bemade for each investment individually.made for each investment individually.






Changes in the carrying amount and the differenceChanges in the carrying amount and the differencebetween the carrying amount and the net proceedsbetween the carrying amount and the net proceeds

on disposal should be charged or credited to theon disposal should be charged or credited to theP&L A/c.P&L A/c.


a)a) accounting policy adopted;accounting policy adopted;

b)b) classification of investments;classification of investments;

c)c) Interest, dividends (showing separately dividendsInterest, dividends (showing separately dividendsfrom subsidiary companies), and rentals onfrom subsidiary companies), and rentals oninvestment showing separately such income frominvestment showing separately such income fromlonglong--term and current investments.term and current investments.





for Investments for InvestmentsDisclosures:Disclosures:

d)d) profit/loss on disposal and changes inprofit/loss on disposal and changes incarrying amount of such investments;carrying amount of such investments;

e)e) aggregate amount of quoted and unquotedaggregate amount of quoted and unquotedinvestments together with aggregate marketinvestments together with aggregate marketvalue of quoted investments.value of quoted investments.

f)f) Significant restrictions on right of ownership,Significant restrictions on right of ownership,realisabilityrealisability of investments or the remittanceof investments or the remittance

of income and proceeds of disposal.of income and proceeds of disposal.





for Amalgamations for Amalgamations

Amalgamations in the nature of merger should beAmalgamations in the nature of merger should beaccounted for under the pooling of interest methodaccounted for under the pooling of interest method

and in the nature of purchase it should beand in the nature of purchase it should beaccounted for under the purchase method.accounted for under the purchase method.

Under the pooling of interest method:Under the pooling of interest method:

a)a) assets, liabilities and reserves of the transferorassets, liabilities and reserves of the transferorcompany should be recorded at existing carryingcompany should be recorded at existing carryingamount and in the same form as it was appearing inamount and in the same form as it was appearing in

the books of the transferor.the books of the transferor.b)b) Shareholders holding not less than 90% of the faceShareholders holding not less than 90% of the face

value of the equity shares become equityvalue of the equity shares become equityshareholders of the transferee company by virtue ofshareholders of the transferee company by virtue of

amalgamation.amalgamation.

Accounting Standard 14Accounting Standard 14 –– AccountingAccounting






c)c) The balance of the Profit and Loss Account of theThe balance of the Profit and Loss Account of thetransferee company should be aggregated with thetransferee company should be aggregated with the

corresponding balance of the transferee company orcorresponding balance of the transferee company ortransferred to the general reserve if any.transferred to the general reserve if any.

d)d) Difference between the amount recorded as shareDifference between the amount recorded as share

capital issued and the amount of capital of thecapital issued and the amount of capital of thetransferor company should be adjusted in reserves.transferor company should be adjusted in reserves.

e)e) In case of conflicting accounting policies, a uniformIn case of conflicting accounting policies, a uniform

policy should be adopted on amalgamation. Effect onpolicy should be adopted on amalgamation. Effect onfinancial statement of such change in policy shouldfinancial statement of such change in policy shouldbe reported as per AS5.be reported as per AS5.





Accounting Standard 14 Accounting Standard 14 – Accounting Accounting


Under purchase method:Under purchase method:

a)a) all assets and liabilities of the transferor company beall assets and liabilities of the transferor company berecorded at their existing carrying amount orrecorded at their existing carrying amount oralternatively the consideration should be allocated toalternatively the consideration should be allocated toindividual identifiable assets and liabilities on theindividual identifiable assets and liabilities on the

basis of fair values at the date of amalgamation.basis of fair values at the date of amalgamation.b)b) The reserves of the transferor company shall lose itsThe reserves of the transferor company shall lose its

identity.identity.

c)c) The excess or shortfall of consideration over theThe excess or shortfall of consideration over thevalue of net assets should bevalue of net assets should be recognisedrecognised as goodwillas goodwillor capital reserve.or capital reserve.





for Amalgamations for Amalgamationsd)d) The goodwill arising on amalgamation should beThe goodwill arising on amalgamation should be

amortisedamortised to income on a systematic basis over itsto income on a systematic basis over its

useful life not to exceed five years unless auseful life not to exceed five years unless asomewhat larger period can be justified.somewhat larger period can be justified.

Any nonAny non--cash item included in the consideration oncash item included in the consideration on

amalgamation should be accounted at fair value.amalgamation should be accounted at fair value.

In case the scheme of amalgamation sanctionedIn case the scheme of amalgamation sanctionedunder the statute prescribes a treatment to be givenunder the statute prescribes a treatment to be given

to the transferor company reserves onto the transferor company reserves onamalgamation, same should be followed. Aamalgamation, same should be followed. Adescription of accounting treatment given to reservesdescription of accounting treatment given to reservesand the reasons for following a treatment differentand the reasons for following a treatment differentfrom that prescribed in the standard is to be givenfrom that prescribed in the standard is to be given ..





Accounting Standard 14 Accounting Standard 14 Accounting Accounting



a)a) effective date of amalgamation foreffective date of amalgamation foraccounting;accounting;

b)b) method of accounting followed;method of accounting followed;

c)c) the particulars of the scheme sanctioned.the particulars of the scheme sanctioned.








In case of amalgamation under pooling ofIn case of amalgamation under pooling ofinterest method:interest method:

a)a) the treatment given to the differencethe treatment given to the difference

between the consideration and the value ofbetween the consideration and the value ofthe net identified assets acquired is to bethe net identified assets acquired is to bedisclosed.disclosed.








In case of amalgamation under the purchaseIn case of amalgamation under the purchasemethod:method:

a)a) the consideration and the treatment given tothe consideration and the treatment given to

the difference compared to the value of thethe difference compared to the value of thenet identifiable assets acquired, and thenet identifiable assets acquired, and thetreatment thereof including the period oftreatment thereof including the period ofamortisationamortisation of any goodwill arising onof any goodwill arising onamalgamation.amalgamation.





for Employees benefits for Employees benefits

Employee benefits are all forms of considerationEmployee benefits are all forms of consideration

given in exchange of services rendered bygiven in exchange of services rendered byemployees. Employee benefits include thoseemployees. Employee benefits include thoseprovided under formal plan or as per informalprovided under formal plan or as per informalpractices which give rise to an obligation or requiredpractices which give rise to an obligation or required

as per legislative requirements. These includeas per legislative requirements. These includeperformance bonus (payable within 12 months) andperformance bonus (payable within 12 months) andnonnon--monetary benefits such as housing, car ormonetary benefits such as housing, car orsubsidisedsubsidised goods or services to current employees,goods or services to current employees,

postpost--employment benefits, deferred compensationemployment benefits, deferred compensationand termination benefits. Benefits provided toand termination benefits. Benefits provided toemployees spouses, children, dependents, nomineesemployees spouses, children, dependents, nomineesare also covered. Does not include employee shareare also covered. Does not include employee share--

based payments.based payments.

d d






Short term employee benefits should beShort term employee benefits should berecognisedrecognised as an expense withoutas an expense withoutdiscounting, unless permitted by other AS todiscounting, unless permitted by other AS tobe included as a cost of an asset.be included as a cost of an asset.

Cost of accumulating compensated absencesCost of accumulating compensated absencesis accounted on accrual basis and cost ofis accounted on accrual basis and cost ofnonnon--accumulating compensated absences isaccumulating compensated absences is

accounted when the absences occur.accounted when the absences occur.

A i S d d 1 A i






Cost of profit sharing and bonus plans areCost of profit sharing and bonus plans areaccounted as an expense when theaccounted as an expense when the

enterprise has a present obligation to makeenterprise has a present obligation to make

such payments as a result of past events andsuch payments as a result of past events anda reliable estimate of the obligation can bea reliable estimate of the obligation can be

made. While estimating, probability ofmade. While estimating, probability of

payment at a future date is also considered.payment at a future date is also considered.

d dA i S d d 15 A i






Post employment benefits can either be definedPost employment benefits can either be definedcontribution plans, under which enterprisecontribution plans, under which enterprise’’ss

obligation is limited to contribution agreed to beobligation is limited to contribution agreed to be

made and investment returns arising from suchmade and investment returns arising from suchcontribution, or defined benefit plans undercontribution, or defined benefit plans under

which the enterprisewhich the enterprise’’s obligation is to provides obligation is to provide

the agreed benefits. Under the later plans ifthe agreed benefits. Under the later plans ifactuarial or investment experience are worseactuarial or investment experience are worse

then expected, obligation of the enterprise maythen expected, obligation of the enterprise may

get increased at subsequent dates.get increased at subsequent dates.

A i S d d 1A i S d d 15 A iA i






If defined benefit cost cannot be reliablyIf defined benefit cost cannot be reliablyestimated it shouldestimated it should recogniserecognise cost as if it werecost as if it were

a defined contribution plan, with certaina defined contribution plan, with certain

disclosures.disclosures.

Cost of defined contribution plan should beCost of defined contribution plan should be

accounted as an expense on accrual basis. Inaccounted as an expense on accrual basis. Incase contribution does not fall due within 12case contribution does not fall due within 12

months from the balance sheet date, expensemonths from the balance sheet date, expense

should beshould be recognisedrecognised for discounted liabilities.for discounted liabilities.







For balance sheet purpose, the amount to beFor balance sheet purpose, the amount to berecognisedrecognised as a defined benefit liability is theas a defined benefit liability is the

present value of the defined benefitpresent value of the defined benefit

obligation reduced byobligation reduced by

a)a) past service cost not yetpast service cost not yet recognisedrecognised; and; and

b)b) the fair value of the plan asset at the balancethe fair value of the plan asset at the balancesheet date.sheet date.







An enterprise should determine the presentAn enterprise should determine the presentvalue of defined benefit obligations (throughvalue of defined benefit obligations (through

actuarial valuation at intervals not exceedingactuarial valuation at intervals not exceeding

three years) and the fair value of plan assetsthree years) and the fair value of plan assets(on each balance sheet date) so that amount(on each balance sheet date) so that amount

recognisedrecognised in the financial statements do notin the financial statements do not

differ materially from the liability required.differ materially from the liability required.

In case the fair value of plan asset is higherIn case the fair value of plan asset is higher

than the liability required, the present value ofthan the liability required, the present value ofexcess should be treated as an asset.excess should be treated as an asset.

A i S d d 15A ti St d d 15 A iA ti






An enterprise should use the projected unitAn enterprise should use the projected unitcredit method to determine the present value ofcredit method to determine the present value of

its defined benefit obligations and the relatedits defined benefit obligations and the related

current service cost and where applicable, pastcurrent service cost and where applicable, pastservice cost.service cost.

Actuarial gains/losses should beActuarial gains/losses should be recognisedrecognised ininprofit and loss account as income/expense.profit and loss account as income/expense.

A i S d d 15A ti St d d 15 A iA ti






When enterprise adopts the revised standardWhen enterprise adopts the revised standardfor the first time, additional charge on accountfor the first time, additional charge on account

of change in a liability, compared to preof change in a liability, compared to pre--revisedrevised

AS15 should be adjusted against revenueAS15 should be adjusted against revenuereserves and surplus.reserves and surplus.

Accounting Standard 16Accounting Standard 16 –– BorrowingBorrowing




Accounting Standard 16 Accounting Standard 16 Borrowing Borrowing

CostsCosts

Statement does not deal with the actual orStatement does not deal with the actual orimputed cost of owners equity/preferenceimputed cost of owners equity/preference

capital.capital.

Borrowing costs that are directly attributableBorrowing costs that are directly attributableto the acquisition, construction or productionto the acquisition, construction or production

of any qualifying asset should beof any qualifying asset should be capitalisedcapitalisedprovided the assets takes a substantial periodprovided the assets takes a substantial periodof time to get ready for its intended use orof time to get ready for its intended use or

sale. Generally a period of 12 months issale. Generally a period of 12 months isconsidered as a substantial period of time.considered as a substantial period of time.

Income on the temporary investment of theIncome on the temporary investment of the

borrowed funds should be deducted fromborrowed funds should be deducted fromborrowing costs.borrowing costs.

A ti St d d 16A ti St d d 16 B iB i




Accounting Standard 16 Accounting Standard 16 – – Borrowing Borrowing

CostsCosts

In case of funds obtained generally and usedIn case of funds obtained generally and usedfor obtaining a qualifying asset, the borrowingfor obtaining a qualifying asset, the borrowingcost to becost to be capitalisedcapitalised is determined byis determined byapplying weighted average cost of borrowingapplying weighted average cost of borrowingcost on outstanding borrowings, other thancost on outstanding borrowings, other than

borrowings for obtaining a qualifying asset.borrowings for obtaining a qualifying asset.

CapitalisationCapitalisation of borrowing costs should beof borrowing costs should besuspended during extended periods in whichsuspended during extended periods in which

development is interrupted. When thedevelopment is interrupted. When theexpected cost of the qualifying asset exceedsexpected cost of the qualifying asset exceedsits recoverable amount or netits recoverable amount or net realisablerealisable

value, the carrying amount is written down.value, the carrying amount is written down.

A ti St d d 16A ti St d d 16 B iB i




Accounting Standard 16 Accounting Standard 16 – – Borrowing Borrowing

CostsCosts

CapitalisationCapitalisation should cease when activity isshould cease when activity iscompleted substantially or if completed incompleted substantially or if completed inparts, in respect of that part, all the activitiesparts, in respect of that part, all the activitiesfor its intended use or sale are complete.for its intended use or sale are complete.

Disclosures:Disclosures:a)a) accounting policy adopted for borrowingaccounting policy adopted for borrowing

cost; andcost; and

b)b) the amount of borrowing coststhe amount of borrowing costs capitalisedcapitalisedduring the period.during the period.

Accounting Standard 18 Accounting Standard 18 – – Related Related




gg

Party Disclosures Party Disclosures

This statement should be applied in reportingThis statement should be applied in reportingrelated party relationships and transactionsrelated party relationships and transactions

between a reporting enterprise and its relatedbetween a reporting enterprise and its relatedparties. The requirements of this statement apply toparties. The requirements of this statement apply tothe financial statements of each reporting enterprisethe financial statements of each reporting enterpriseas also to consolidated financial statementsas also to consolidated financial statements

presented by a holding company.presented by a holding company.

The statement deals with following related partyThe statement deals with following related partyrelationships:relationships:

a)a) enterprises that directly or indirectly control (throughenterprises that directly or indirectly control (throughsubsidiaries) or are controlled by or are undersubsidiaries) or are controlled by or are undercommon control with the reporting enterprise;common control with the reporting enterprise;





gg


b)b) Associates and joint ventures of theAssociates and joint ventures of thereporting entity; investing party orreporting entity; investing party or venturerventurer ininrespect of which reporting enterprise is anrespect of which reporting enterprise is anassociate or a joint venture;associate or a joint venture;

c)c) Individuals owning voting power giving themIndividuals owning voting power giving themcontrol or significant influence;control or significant influence;

d)d) key management personnel and theirkey management personnel and their

relatives; andrelatives; and

e)e) enterprises over which any of the persons inenterprises over which any of the persons in(c) or (d) are able to exercise significant(c) or (d) are able to exercise significantinfluence.influence.

A ti St d d 18Accounting Standard 18 R l t dRelated






Relative of an individual means spouse, son,Relative of an individual means spouse, son,daughter, brother, sister, father and motherdaughter, brother, sister, father and motherwho may be expected to influence, or bewho may be expected to influence, or beinfluenced by, that individual in dealings withinfluenced by, that individual in dealings withthe reporting entity.the reporting entity.

Parties are considered related if one partyParties are considered related if one partyhas ability to control or exercise significanthas ability to control or exercise significantinfluence over the other party in makinginfluence over the other party in making

financial and/or operating decisions.financial and/or operating decisions.

A ti St d d 18Accounting Standard 18 R l t dRelated






Following are not considered related parties:Following are not considered related parties:

a)a) two companies merely because of commontwo companies merely because of commondirector;director;

b)b)

customer, supplier, franchiser, distributor orcustomer, supplier, franchiser, distributor orgeneral agent merely by virtue of economicgeneral agent merely by virtue of economicindependence; andindependence; and

c)c) financiers, trade unions, public utilities,financiers, trade unions, public utilities,government departments and bodies merelygovernment departments and bodies merelyby virtue of their normal dealings with theby virtue of their normal dealings with theenterprise.enterprise.





g


Where there are transactions between the relatedWhere there are transactions between the relatedparties, following information is to be disclosed;parties, following information is to be disclosed;

a)a) name of the related party;name of the related party;

b)b) nature of relationships;nature of relationships;

c)c) nature of transactions and its volume (as an amountnature of transactions and its volume (as an amountor its proportion);or its proportion);

d)d) amount or appropriate provision outstandingamount or appropriate provision outstandingpertaining to related parties, provision for doubtfulpertaining to related parties, provision for doubtfuldebts from related parties, amounts written off ordebts from related parties, amounts written off orwritten back in respect of debts due from or towritten back in respect of debts due from or torelated parties.related parties.

Accounting Standard 18Accounting Standard 18 RelatedRelated






Names of the related party and nature of related partyNames of the related party and nature of related party

relationship to be disclosed even where there are norelationship to be disclosed even where there are no

transactions but the control exists.transactions but the control exists.

Items of similar nature may be aggregated by type ofItems of similar nature may be aggregated by type of

the related party. The type of related party for thethe related party. The type of related party for thepurpose of aggregation of items of a similar naturepurpose of aggregation of items of a similar nature

implies related party relationships. Materialimplies related party relationships. Material

transactions,transactions, i.ei.e more than 10% of related partymore than 10% of related partytransactions are not to be clubbed in an aggregatedtransactions are not to be clubbed in an aggregated

disclosure. The related party transactions which aredisclosure. The related party transactions which are

not entered in the normal course of the businessnot entered in the normal course of the business

would ordinarily be considered material.would ordinarily be considered material.

Accounting Standard 18Accounting Standard 18 RelatedRelated






A nonA non--executive director is not a keyexecutive director is not a keymanagement person for the purpose of thismanagement person for the purpose of thisstandard unless he is in a position to exercisestandard unless he is in a position to exercisesignificant influence by virtue of owning ansignificant influence by virtue of owning aninterest in the voting power or he isinterest in the voting power or he is

responsible and has the authority for directingresponsible and has the authority for directingand controlling the activities of the reportingand controlling the activities of the reportingenterprise. Mere participation in the policyenterprise. Mere participation in the policydecision making process will not attract AS18.decision making process will not attract AS18.

Accounting Standard 19Accounting Standard 19 –– LeasesLeases




Accounting Standard 19 Accounting Standard 19 – Leases Leases

Applies in accounting for all leases other thanApplies in accounting for all leases other thanleases to explore for or use natural resources,leases to explore for or use natural resources,licensing agreements for items such aslicensing agreements for items such as

motion picture films, video recordings playsmotion picture films, video recordings playsetc and lease for use of lands.etc and lease for use of lands.

A lease is classified as a finance lease or as aA lease is classified as a finance lease or as a

operating lease.operating lease.

A finance lease is one where risks andA finance lease is one where risks andrewards incident to the ownership arerewards incident to the ownership aretransferred substantially; otherwise it is antransferred substantially; otherwise it is anoperating lease.operating lease.

Accounting Standard 19 Accounting Standard 19 – – Leases Leases




gg

Treatment of finance lease in books of lessee:Treatment of finance lease in books of lessee:

At the inception, lease should beAt the inception, lease should be recognisedrecognisedas an asset and a liability at lower of fair valueas an asset and a liability at lower of fair value

of leased asset and the present value ofof leased asset and the present value ofminimum lease payments.minimum lease payments.

Lease payments should be appropriatedLease payments should be appropriatedbetween finance charge and the reduction ofbetween finance charge and the reduction ofoutstanding liability so as to produce aoutstanding liability so as to produce aconstant periodic rate of interest on theconstant periodic rate of interest on the

balance of the liability.balance of the liability.

Depreciation policy for leased asset should beDepreciation policy for leased asset should beconsistent with that for other ownedconsistent with that for other owned

depreciable assets and are to be calculateddepreciable assets and are to be calculatedas per AS6.as per AS6.





gg

Treatment of finance lease in books ofTreatment of finance lease in books of lessorlessor::

TheThe lessorlessor shouldshould recogniserecognise the asset as athe asset as areceivable equal to net investment in lease.receivable equal to net investment in lease.

Finance income should be based on patternFinance income should be based on patternreflecting a constant periodic return on netreflecting a constant periodic return on netinvestment in lease.investment in lease.

Manufacturing/dealerManufacturing/dealer lessorlessor shouldshould recogniserecognisesales as outright sales. Ifsales as outright sales. If artificallyartifically lowlow

interest rates quoted, profit should beinterest rates quoted, profit should becalculated as if commercial rates of interestcalculated as if commercial rates of interestwere charged. Initial direct costs should bewere charged. Initial direct costs should beexpensed.expensed.





gg

Treatment of operating lease in books ofTreatment of operating lease in books of

lessee:lessee:

Lease payments should beLease payments should be recognisedrecognised asasan expense on straight line basis or otheran expense on straight line basis or othersystematic basis, if appropriate.systematic basis, if appropriate.





gg

Treatment of operating lease in books ofTreatment of operating lease in books of lessorlessor::

LessorLessor should present an asset given onshould present an asset given on

lease under fixed assets and lease incomelease under fixed assets and lease incomeshould beshould be recognisedrecognised on a straighton a straight--line basisline basis

or other systematic basis, if appropriate.or other systematic basis, if appropriate.

Costs including depreciation should beCosts including depreciation should be

recognisedrecognised as an expense.as an expense.

Initial direct costs are either deferred overInitial direct costs are either deferred over

lease term orlease term or recognisedrecognised as expenses.as expenses.



Accounting Standard 20 Accounting Standard 20 – – Earnings Earnings




g g

per Share per Share

Basic EPS is calculated by dividing net profitBasic EPS is calculated by dividing net profitor loss for the period attributable to equityor loss for the period attributable to equity

shareholders by weighted average number ofshareholders by weighted average number ofequity shares outstanding during the period.equity shares outstanding during the period.Basic & diluted EPS to be computed on theBasic & diluted EPS to be computed on thebasis of earnings excluding extraordinarybasis of earnings excluding extraordinary

items (net of tax).items (net of tax).

Earnings attributable to equity shareholdersEarnings attributable to equity shareholdersare after the preference dividend for theare after the preference dividend for theperiod and the attributable tax.period and the attributable tax.





per Share per Share

Weighted average number of shares is adjusted forWeighted average number of shares is adjusted for

bonus issue, share split and consolidation of shares.bonus issue, share split and consolidation of shares.

In case of rights issue at price lower than fair value,In case of rights issue at price lower than fair value,there is an embedded bonus element for whichthere is an embedded bonus element for which

adjustment is made.adjustment is made.

For calculating diluted EPS, net profit or lossFor calculating diluted EPS, net profit or lossattributable to equity shareholders and the weightedattributable to equity shareholders and the weighted

average number of shares are adjusted for the effectsaverage number of shares are adjusted for the effects

of dilutive potential equity shares (of dilutive potential equity shares (i.ei.e, assuming, assumingconversion into equity of all dilutive potential equity.conversion into equity of all dilutive potential equity.

Potential equity shares are treated as dilutive whenPotential equity shares are treated as dilutive when

their conversion into equity would result in a reductiontheir conversion into equity would result in a reductionin profit per share from continuing operations.in profit per share from continuing operations.





per Share per Share

Effect of antiEffect of anti--dilutive potential equity share isdilutive potential equity share is

ignored in calculating diluted EPS.ignored in calculating diluted EPS.

In calculating diluted EPS each issue ofIn calculating diluted EPS each issue of

potential equity share is consideredpotential equity share is considered

separately and in sequence from the mostseparately and in sequence from the mostdilutive to the least dilutive. This is determineddilutive to the least dilutive. This is determined

on the basis of earnings per incrementalon the basis of earnings per incremental

potential equity.potential equity.





per Share per Share

If the number of equity shares or potentialIf the number of equity shares or potential

equity shares outstanding increases orequity shares outstanding increases or

decreases on account of bonus, splitting ordecreases on account of bonus, splitting orconsolidation during the year or after theconsolidation during the year or after the

balance sheet date but before the approval ofbalance sheet date but before the approval of

financial statements, basic and diluted EPSfinancial statements, basic and diluted EPS

are recalculated for all periods presented. Theare recalculated for all periods presented. The

fact is also disclosed.fact is also disclosed.

Nominal value of shares is disclosed alongNominal value of shares is disclosed along

with EPS.with EPS.


f T If T I




for Taxes on Income for Taxes on Income

Differences between taxable income andDifferences between taxable income andaccounting income to be classified intoaccounting income to be classified into

permanent differences and timing differences.permanent differences and timing differences.

Permanent differences are those differencesPermanent differences are those differencesbetween taxable income and accountingbetween taxable income and accounting

income, which originate in one period and doincome, which originate in one period and donot get reversed subsequently.not get reversed subsequently.

Timing differences are those differencesTiming differences are those differences

between taxable income and accountingbetween taxable income and accountingincome for a period that originate in oneincome for a period that originate in oneperiod and are capable of reversal in one orperiod and are capable of reversal in one or

more subsequent period.more subsequent period.


f T If T I





Deferred tax should beDeferred tax should be recognisedrecognised for allfor alltiming differences, subject to thetiming differences, subject to the

consideration of prudence in respect ofconsideration of prudence in respect ofdeferred tax assets.deferred tax assets.

In case of carry forward losses, DTA is to beIn case of carry forward losses, DTA is to be

recognisedrecognised only if there is virtual certaintyonly if there is virtual certaintysupported by convincing evidence of futuresupported by convincing evidence of futuretaxable income.taxable income. UnrecognisedUnrecognised DTA isDTA isreassessed at each balance sheet date.reassessed at each balance sheet date.Virtual certainty refers to the fact that there isVirtual certainty refers to the fact that there ispractically no doubt regarding thepractically no doubt regarding thedetermination of availability of the futuredetermination of availability of the future

taxable income.taxable income.


f T If T I





In respect of loss under capital gains, DTAIn respect of loss under capital gains, DTAshall beshall be recognisedrecognised only to the extent thatonly to the extent that

there is a virtual certainty of sufficient futurethere is a virtual certainty of sufficient futuretaxable capital gain.taxable capital gain.

Tax expense of the period, comprises ofTax expense of the period, comprises of

current tax and deferred tax.current tax and deferred tax.

Deferred tax assets and liabilities should beDeferred tax assets and liabilities should bemeasured using the tax rates and tax lawsmeasured using the tax rates and tax laws

that have been enacted or substantiallythat have been enacted or substantiallyenacted by the balance sheet date andenacted by the balance sheet date andshould not be discounted to their presentshould not be discounted to their present

value.value.


f T If T I





Deferred tax assets and liabilities in respect ofDeferred tax assets and liabilities in respect oftiming differences which originate during thetiming differences which originate during the

tax holiday period and reverse during the taxtax holiday period and reverse during the taxholiday period, should not beholiday period, should not be recognisedrecognised totothe extent deduction from the total income ofthe extent deduction from the total income ofan enterprise is allowed during the tax holidayan enterprise is allowed during the tax holiday

period. However, if timing differences reverseperiod. However, if timing differences reverseafter the tax holiday period, DTA and DTLafter the tax holiday period, DTA and DTLshould beshould be recognisedrecognised in the year in whichin the year in which

timing differences originate.timing differences originate.

Accounting Standard 24 Accounting Standard 24 – – Discontinuing Discontinuing




OperationsOperations

The standard requires an enterprise toThe standard requires an enterprise tosegregate information about discontinuingsegregate information about discontinuingoperations from continuing one andoperations from continuing one andestablishes principles for reportingestablishes principles for reportinginformation about discontinuing operations.information about discontinuing operations.

A discontinuing operation is a part of anA discontinuing operation is a part of anenterprise:enterprise:

a)a) which is being disposed off or abandonedwhich is being disposed off or abandonedpursuant to a single coordinated plan;pursuant to a single coordinated plan;

b)b) it represents separate line of business orit represents separate line of business or

geographical area of operations; andgeographical area of operations; and






c)c) can be distinguished operationally and forcan be distinguished operationally and for

financial reporting.financial reporting.All these three conditions need to be satisfiedAll these three conditions need to be satisfied

simultaneously.simultaneously.

The statement does not establish anyThe statement does not establish anyrecognition and measurement principles. Itrecognition and measurement principles. It

requires enterprise to follow principlesrequires enterprise to follow principlesestablisedestablised in other accounting standard forin other accounting standard forthe purpose of changes in assets, liabilities,the purpose of changes in assets, liabilities,

revenue, expenses etc.revenue, expenses etc.






An enterprise should give these informationAn enterprise should give these information

in its financial statements beginning with thein its financial statements beginning with thefinancial period in which thefinancial period in which the ‘‘Initial disclosureInitial disclosureeventevent’’ occurs:occurs:

a)a) description of continuing operations;description of continuing operations;

b)b) segment in which it is reported as per AS17;segment in which it is reported as per AS17;

c)c) date and nature of initial disclosure event;date and nature of initial disclosure event;

d)d) time by which the discontinuation is expectedtime by which the discontinuation is expected

to be completed;to be completed;






a)a) the carrying amounts of the assets to bethe carrying amounts of the assets to be

disposed of;disposed of;b)b) revenue, expenses, prerevenue, expenses, pre--tax profit/loss,tax profit/loss,

incomeincome--tax in relation to the ordinarytax in relation to the ordinary

activities of identified discontinuingactivities of identified discontinuingoperations.operations.

On disposal of assets or settlement ofOn disposal of assets or settlement ofliabilities, disclosure is required for gain/lossliabilities, disclosure is required for gain/lossrecognisedrecognised on disposal/settlement andon disposal/settlement and

income tax expenses thereto.income tax expenses thereto.






On entering into a binding contract for sale ofOn entering into a binding contract for sale ofassets, disclosure is required for net sellingassets, disclosure is required for net sellingprice after deducting expected disposal cost,price after deducting expected disposal cost,the expected timing of cash flow and thethe expected timing of cash flow and thecarrying amount of assets on the balancecarrying amount of assets on the balance

sheet date.sheet date.

For period subsequent to initial disclosureFor period subsequent to initial disclosureevent period, description of any significantevent period, description of any significant

changes in amount or timing of cash flow ischanges in amount or timing of cash flow isrequired to be disclosed.required to be disclosed.






The disclosures to continue up to the period in whichThe disclosures to continue up to the period in which

the discontinuance is completed;the discontinuance is completed; i.ei.e, discontinuance, discontinuance

plan is substantially completed or abandoned.plan is substantially completed or abandoned.

In case discontinuance plan is abandoned, theIn case discontinuance plan is abandoned, the

disclosure is required of this fact, reason thereforedisclosure is required of this fact, reason thereforeand its effect on the financial statements.and its effect on the financial statements.

Disclosure of preDisclosure of pre--tax profit/loss from ordinarytax profit/loss from ordinary

activities of the discontinuing operation, income taxactivities of the discontinuing operation, income taxexpenses related thereto, preexpenses related thereto, pre--tax gain/losstax gain/loss

recognisedrecognised on the disposal/settlement to be made onon the disposal/settlement to be made on

the face of profit and loss account.the face of profit and loss account.






All disclosures should be separatelyAll disclosures should be separately

presented for each discontinuing operation.presented for each discontinuing operation.

Comparative information for prior periods toComparative information for prior periods tobe rebe re--stated tostated to seggregateseggregate discontinuingdiscontinuing

operations.operations.

In the interim financial report, disclosure isIn the interim financial report, disclosure is

required for any significant activities or eventrequired for any significant activities or eventand any significant changes in the amount orand any significant changes in the amount ortiming of cash flows relating to disposal/ timing of cash flows relating to disposal/

settlement.settlement.

Accounting Standard 26 Accounting Standard 26 – – Intangible Intangible

AA t




Assets Assets

Not applicable to intangibles covered by otherNot applicable to intangibles covered by otherAS, financial assets, mineral rights/ AS, financial assets, mineral rights/

expenditure on exploration etc, intangibleexpenditure on exploration etc, intangibleassets arising in insurance enterprises fromassets arising in insurance enterprises fromcontracts with policy holders and also tocontracts with policy holders and also toexpenditure in respect of termination benefits.expenditure in respect of termination benefits.

An intangible asset is an identifiable nonAn intangible asset is an identifiable non--monetary asset, without physical substance,monetary asset, without physical substance,held for use in the production or supply ofheld for use in the production or supply ofgoods or services, for rental to others, or forgoods or services, for rental to others, or foradministrative purposes.administrative purposes.


A tA t




Assets Assets

As asset is a resource controlled by an enterprise asAs asset is a resource controlled by an enterprise asa result of past events and from which futurea result of past events and from which future

economic benefits are expected to flow to theeconomic benefits are expected to flow to theenterprise.enterprise.

An intangible asset is to beAn intangible asset is to be recognisedrecognised if, only if:if, only if:

a)a) future economic benefits will flow; andfuture economic benefits will flow; and

b)b) the cost of the asset can be measured reliably.the cost of the asset can be measured reliably.

An intangible asset should be measured initially atAn intangible asset should be measured initially atcost. Probability of future economic benefits to becost. Probability of future economic benefits to beassessed using reasonable and supportableassessed using reasonable and supportableassumptions.assumptions.


A tA t




Assets Assets

Internally generated goodwill, brands, publishingInternally generated goodwill, brands, publishing

titles etc should not betitles etc should not be recognisedrecognised as an asset.as an asset.

No intangible asset arising from research should beNo intangible asset arising from research should be

recognisedrecognised and expenditure on research should beand expenditure on research should be

recognisedrecognised as an expense, when incurred.as an expense, when incurred.

An intangible asset arising from development to beAn intangible asset arising from development to be

recognisedrecognised, if and only if, an enterprise, if and only if, an enterprise

demonstrates:demonstrates:

a)a) its feasibility to complete;its feasibility to complete;

b)b)

intention and ability to use or sell;intention and ability to use or sell;


A tA t




Assets Assets

c)c) generation of future economic benefits; andgeneration of future economic benefits; and

d)d) availability of resources for completion and ability toavailability of resources for completion and ability to

measure the expenditure.measure the expenditure.

Subsequent expenditure to be added to cost only ifSubsequent expenditure to be added to cost only ifit is probable that the expenditure will generateit is probable that the expenditure will generate

future benefits in excess of the original estimates.future benefits in excess of the original estimates.

An intangible asset should be carried at its cost lessAn intangible asset should be carried at its cost lessany accumulatedany accumulated amortisationamortisation and accumulatedand accumulatedimpairment losses. Impairment loss is the amountimpairment losses. Impairment loss is the amountby which the carrying amount exceeds itsby which the carrying amount exceeds itsrecoverable amount.recoverable amount.


A tA t




Assets Assets

An intangible asset should beAn intangible asset should be amortisedamortised overover

its useful life on a systematic basis, to reflectits useful life on a systematic basis, to reflect

the pattern in which the economic benefits arethe pattern in which the economic benefits areconsumed or if the pattern cannot beconsumed or if the pattern cannot be

determined reliably, on the straight linedetermined reliably, on the straight line

method.method.

Useful life is period of time over which anUseful life is period of time over which an

asset is expected to be used or the number ofasset is expected to be used or the number ofproduction units expected to be obtained fromproduction units expected to be obtained from

the asset.the asset.


A tAss ts




Assets Assets

There is a rebuttable presumption for useful life of anThere is a rebuttable presumption for useful life of an

intangible asset will not exceeding ten years from theintangible asset will not exceeding ten years from the

date it is available for use. In case of intangibledate it is available for use. In case of intangibleassets in the form of legal rights, the useful life is notassets in the form of legal rights, the useful life is not

to exceed the period of the legal rights, unlessto exceed the period of the legal rights, unless

renewable, which is virtually certain.renewable, which is virtually certain.

The recoverable amount of each intangible asset toThe recoverable amount of each intangible asset to

be estimated at each year end.be estimated at each year end.

An intangible asset to beAn intangible asset to be derecognisedderecognised on disposal oron disposal or

when no future economic benefits are expected fromwhen no future economic benefits are expected from

its use and gain or lossits use and gain or loss recognisedrecognised..


A tAssets




Assets Assets


a)a) for each class of intangibles, their useful lives or thefor each class of intangibles, their useful lives or the

amortisationamortisation rates used;rates used;

b)b) AmortisationAmortisation amount and methods used;amount and methods used;

c)c) carrying amount (gross and net), any additions,carrying amount (gross and net), any additions,retirements, impairment lossesretirements, impairment losses recognisedrecognised ororreversed and any other change.reversed and any other change.

d)d) In case of useful life of an intangible assetIn case of useful life of an intangible asset

exceeding ten years, proper disclosure of theexceeding ten years, proper disclosure of thereasons for the same should be given.reasons for the same should be given.

e)e) Research and development expenditureResearch and development expenditure recognisedrecognised

asas asas expense to be disclosed.expense to be disclosed.

Accounting Standard 28 Accounting Standard 28 – – Impairment Impairment

f A tf A t




of Assets of Assets

Applicable for impairment of all assets other than:Applicable for impairment of all assets other than:

a)a) Inventories;Inventories;

b)b) assets arising from construction contracts;assets arising from construction contracts;

c)c) financial assets, including investments; andfinancial assets, including investments; and

d)d) deferred tax assets.deferred tax assets.

Impairment loss should beImpairment loss should be recognisedrecognised for a cashfor a cashgenerating unit if, and only if, its recoverablegenerating unit if, and only if, its recoverable

amount is less than its carrying amount. Theamount is less than its carrying amount. Theimpairment loss should be allocated to reduce theimpairment loss should be allocated to reduce thecarrying amount of the assets of the unit in thecarrying amount of the assets of the unit in thefollowing order:following order:

a)a) first, to goodwill allocated to the cashfirst, to goodwill allocated to the cash--generatinggeneratingunit (if any); andunit (if any); and


f A tf A t




of Assets of Assets

a)a) then to the other assets of the unit on a prothen to the other assets of the unit on a pro--rataratabasis based on the carrying amount of each asset inbasis based on the carrying amount of each asset inthe unit.the unit.

Recoverable amount is the higher of an assetRecoverable amount is the higher of an asset’’s nets netselling price and its value in use.selling price and its value in use.

An impairment loss is the amount by which theAn impairment loss is the amount by which thecarrying amount of an asset exceeds its recoverablecarrying amount of an asset exceeds its recoverableamount.amount.

Value in use is the present value of estimated futureValue in use is the present value of estimated futurecash flows expected to arise from the continuingcash flows expected to arise from the continuinguse of an asset and from its disposal at the end ofuse of an asset and from its disposal at the end ofits useful life.its useful life.


f A tf A t




of Assets of Assets

In measuring value in use:In measuring value in use:

a)a) cash flow projections should be based oncash flow projections should be based on

assumptions that represent managementassumptions that represent management’’s bests best

estimate of the set of economic conditions that willestimate of the set of economic conditions that will

exist over the remaining useful life of the asset.exist over the remaining useful life of the asset.

Greater weight should be given to external evidence;Greater weight should be given to external evidence;

b)b) cash flow projections should be based on the mostcash flow projections should be based on the most

recent financial budgets/forecasts (maximum 5recent financial budgets/forecasts (maximum 5

years unless longer period can be justified) thatyears unless longer period can be justified) that

have been approved by management;have been approved by management;


f A tof Assets




of Assets of Assets

c)c) Cash flow projections beyond the period covered byCash flow projections beyond the period covered by

the most recent budgets/forecasts should bethe most recent budgets/forecasts should be

estimated by extrapolating the projections based onestimated by extrapolating the projections based onthe budgets/forecasts using a steady or decliningthe budgets/forecasts using a steady or declining

growth rate for subsequent years, unless angrowth rate for subsequent years, unless an

increasing rate can be justified. This growth rateincreasing rate can be justified. This growth rate

should not exceed the longshould not exceed the long--term average growthterm average growth

rate for the products, industries, or country orrate for the products, industries, or country or

countries in which the enterprise operates, or for thecountries in which the enterprise operates, or for the

market in which the asset is used, unless a highermarket in which the asset is used, unless a higherrate can be justified.rate can be justified.


f A tof Assets




of Assets of Assets

Estimates of future cash flows should include:Estimates of future cash flows should include:

a)a) projections of cash inflows from the continuing useprojections of cash inflows from the continuing use

of the asset;of the asset;

b)b) projections of cash outflows that are necessarilyprojections of cash outflows that are necessarily

incurred to generate the cash inflows fromincurred to generate the cash inflows fromcontinuing use of the asset (including cash outflowscontinuing use of the asset (including cash outflows

to prepare the asset for use) and that can beto prepare the asset for use) and that can be

directly attributed, or allocated on a reasonable anddirectly attributed, or allocated on a reasonable and

consistent basis, to the asset; andconsistent basis, to the asset; and

c)c) net cash flows if any to be received (or paid) for thenet cash flows if any to be received (or paid) for the

disposal of the asset at the end of its useful life.disposal of the asset at the end of its useful life.


of Assetsof Assets




of Assets of Assets

Future cash flows should be estimated for the assetFuture cash flows should be estimated for the assetin its current condition. They should not includein its current condition. They should not includeestimated future cash inflows or outflows that areestimated future cash inflows or outflows that areexpected to arise from:expected to arise from:

a)a) a future restructuring to which the enterprise is nota future restructuring to which the enterprise is not

yet committed; oryet committed; or

b)b) future capital expenditure that will improve orfuture capital expenditure that will improve orenhance the asset in excess of its originallyenhance the asset in excess of its originally

assessed standard of performance.assessed standard of performance.

Estimates of future cash flows should not include;Estimates of future cash flows should not include;(a) cash inflows or outflows from financing activities;(a) cash inflows or outflows from financing activities;

or (b) income tax receipts or payments.or (b) income tax receipts or payments.


of Assetsof Assets




of Assets of Assets

The estimate of net cash flows to be received (orThe estimate of net cash flows to be received (or

paid) for the disposal of an asset at the end of itspaid) for the disposal of an asset at the end of its

useful life should be the amount that is expected touseful life should be the amount that is expected tobe obtained from the disposal of the asset in an armbe obtained from the disposal of the asset in an arm’’ss

length transaction between knowledgeable, willinglength transaction between knowledgeable, willing

parties, after deducting the estimated costs ofparties, after deducting the estimated costs of

disposal.disposal.

The discount rate should be a pre tax rate that reflectThe discount rate should be a pre tax rate that reflect

current market assessments of the time value ofcurrent market assessments of the time value ofmoney and the risks specific to the asset and shouldmoney and the risks specific to the asset and should

not reflect risks for which future cash flow estimatesnot reflect risks for which future cash flow estimates

have been adjusted.have been adjusted.


of Assetsof Assets




of Assets of Assets

An impairment loss should beAn impairment loss should be recognisedrecognised as anas anexpense in the profit and loss account immediately.expense in the profit and loss account immediately.Impairment loss is the reduction in carrying amount ofImpairment loss is the reduction in carrying amount ofthe assets to its recoverable amount.the assets to its recoverable amount.

If the estimated impairment loss is greater than theIf the estimated impairment loss is greater than the

carrying amount of the asset,carrying amount of the asset,

recogniserecognise

a liability if,a liability if,

and only if, required by another AS.and only if, required by another AS.

The depreciation/ The depreciation/ amortisationamortisation charge for the assetcharge for the asset

should be adjusted in future periods to allocate theshould be adjusted in future periods to allocate theassetasset’’s revised carrying amount, less its residuals revised carrying amount, less its residualvalue on a systematic basis over its remaining usefulvalue on a systematic basis over its remaining usefullife.life.


of Assetsof Assets




of Assets of Assets

A reversal of an impairment loss for an asset shouldA reversal of an impairment loss for an asset should

bebe recognisedrecognised as income immediately in profit andas income immediately in profit and

loss account. In case of revalued assets, the sameloss account. In case of revalued assets, the sameshould be treated as a revaluation increase as pershould be treated as a revaluation increase as per

AS10.AS10.

After a reversal of an impairment loss, theAfter a reversal of an impairment loss, thedepreciation (depreciation (amortisationamortisation) charge for the asset) charge for the asset

should be adjusted in future periods to allocate theshould be adjusted in future periods to allocate the

assetasset’’s revised carrying amount, less its residuals revised carrying amount, less its residualvalue (if any) on a systematic basis over its remainingvalue (if any) on a systematic basis over its remaining

useful life.useful life.



Accounting Standard 29 Accounting Standard 29 – – Provisions, Provisions,

Contingent Liabilities and ContingentContingent Liabilities and Contingent





Assets Assets

A contingent liability is notA contingent liability is not recognisedrecognised in thein the

financial statements but is disclosed.financial statements but is disclosed.

A contingent asset is notA contingent asset is not recognisedrecognised ininfinancial statements.financial statements.

The amount of provision should be the bestThe amount of provision should be the bestestimate of the expenditure required to settleestimate of the expenditure required to settle

the present obligation at the balance sheetthe present obligation at the balance sheetdate and should not be discounted to itsdate and should not be discounted to itspresent value.present value.







Assets Assets

The risks and uncertainties that inevitablyThe risks and uncertainties that inevitably

surround many events and circumstancessurround many events and circumstancesshould be taken into account in arriving at theshould be taken into account in arriving at thebest estimate of provision to avoid its under orbest estimate of provision to avoid its under or

over statement.over statement.

Expected future events, which are likely toExpected future events, which are likely toaffect the amount required to settle anaffect the amount required to settle an

obligation, may be important in measuringobligation, may be important in measuringprovisions.provisions.







Assets Assets

In the statement of profit and loss, the expenseIn the statement of profit and loss, the expense

relating to a provision may be presented net of therelating to a provision may be presented net of theamountamount recognisedrecognised for a reimbursement.for a reimbursement.

A provision should be used only for expenditures forA provision should be used only for expenditures for

which the provision was originallywhich the provision was originally recognisedrecognised and notand notagainst a provisionagainst a provision recognisedrecognised for another purpose,for another purpose,so as not to conceal the impact of two differentso as not to conceal the impact of two differentevents.events.

Provision should not beProvision should not be recognisedrecognised for futurefor futureoperating losses, since it is not a liability nor meet theoperating losses, since it is not a liability nor meet the

criteria for provisions.criteria for provisions.



Thank You Thank You

29 accounting standards1-29

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