A comparative analysis between Indian GAAP

and Indian Accounting Standards

A Project Submitted to
University of Mumbai for partial completion of the degree of
Master in Commerce
Under the Faculty of Commerce

By

Roll no.
Under the Guidance of
Dr Shraddha Shukla
 Certificate
This is to certify that Ms/Mr Kedia Aryeman Ajaykumar Tripti has worked and duly
completed her/his Project Work for the degree of Master in Commerce under the
Faculty of Commerce in the subject of Research Methodology and her/his project is
entitled, “A comparative analysis between Indian GAAP and Indian accounting
standards” under my supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of any
University.
It is his own work and facts reported by her/his personal findings and investigations.

Seal of the Name and Signature of

College Guiding Teacher

Date of submission:
 Declaration by learner

I the undersigned Miss / Mr. Kedia Aryeman Ajaykumar Tripti here by, declare that
the work embodied in this project work titled “A comparative analysis
between Indian GAAP and Indian accounting standards”, forms my own contribution
to the research work carried out under the guidance of Dr Shraddha Shukla is a result
of my own research work and has not been previously submitted to any other
University for any other Degree/ Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

 Acknowledgment

To list who all have helped me is difficult because they are so numerous and the depth
is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to
do this project.

I would like to thank my Principal, Dr Minu Madlani for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator Dr Jagruti Darji, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide

Dr Shraddha Shukla whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference
books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my Parents and Peers who supported
me throughout my project.
 INDEX

CHAPTER TITLE OF CHAPTER PAGE

NO. NO.

1 INTRODUCTION 1

2 RESEARCH METHODOLOGY 5

3 INDIAN GAAP: 8
ACCOUNTING
STANDARDS
4 INDIAN ACCOUNTING STANDARD 39

5 COMPARITIVE ANALYSIS OF INDIAN 48

GAAP AND IND AS

6 CONCLUSION 102

7 BIBLIOGRAPHY 103
 CHAPTER 1

INTRODUCTION

STATEMENT OF PROBLEM:

Indian GAAP i.e. Accounting Standards issued by ICAI are not in line with the IFRS.
Indian Accounting Standards (Ind-AS) are IFRS converged standards issued by the
Central Government of India under the supervision and control of Accounting
Standards Board (ASB) of ICAI and in consultation with National Advisory
Committee on Accounting Standards (NACAS). The researcher aims to study the
convergence and difference between Indian GAAP and Indian Accounting Standard.
After going through existing literature of the library reviewing various articles from
everywhere and knowledgeable discussion with the concerned respected guide and by
following the existing circumstances, the researcher has selected this topic, after
considering available information, data, existing literate, external sources of
information and other inclusive source.

INDIAN GAAP i.e. ACCOUNTING STANDARDS

INTRODUCTION

Accounting Standards (ASs) are written policy documents issued by the Government
with the support of other regulatory bodies (e.g., Ministry of Corporate Affairs (MCA)
issuing Accounting Standards for corporates in consultation with National Advisory
Committee on Accounting Standards (NACAS)) covering the aspects of recognition,
measurement, presentation and disclosure of accounting transactions in the financial
statements. The ostensible purpose of the standard setting bodies is to promote the
dissemination of timely and useful financial information to investors and certain other
stakeholders having an interest in the company’s economic performance. Accounting
Standards reduce the accounting alternatives in the preparation of financial statements
within the bounds of rationality, thereby, ensuring comparability of financial
statements of different enterprises.
Accounting Standards deal with the following:

(i) recognition of events and transactions in the financial statements,

(ii) measurement of these transactions and events,
(iii) presentation of these transactions and events in the financial statements in
a manner that is meaningful and understandable to the reader, and

1
 (iv) the disclosure relating to these transactions and events to enable the public
at large and the stakeholders and the potential investors in particular, to get
an insight into what these financial statements are trying to reflect and
thereby facilitating them to take prudent and informed business decisions.

Accounting Standards standardize diverse accounting policies with a view to

(i) Eliminate the non-comparability of financial statements and thereby

improving the reliability of financial statements, to the maximum possible
extent, and
(ii) Provide a set of standard accounting policies, valuation norms and
disclosure requirements.

The standard policies are intended to reflect a consensus on accounting policies to be

used in different identified area, e.g. inventory valuation, capitalisation of costs,
depreciation and amortisation, etc. Since it is not possible to prescribe a single set of
policies for any specific area that would be appropriate for all enterprises, it is not
enough to comply with the standards and state that they have been followed. In other
words, one must also disclose the accounting policies used in preparation of financial
statements. (See AS 1, Disclosure of Accounting Policies given in Appendix I of this
Module). For example, an enterprise should disclose which of the permitted cost
formula (FIFO, Weighted Average, etc.) has actually been used for ascertaining
inventory costs.
In addition to improving credibility of accounting data, standardisation of accounting
procedures improves comparability of financial statements, both intra-enterprise and
inter-enterprise. Such comparisons are very effective and most widely used tools for
assessment of enterprise’s financial health and performance by users of financial
statements for taking economic decisions, e.g., whether or not to invest, whether or
not to lend and so on.
The intra-enterprise comparison involves comparison of financial statements of same
enterprise over number of years. The intra-enterprise comparison is possible if the
enterprise uses same accounting policies every year in drawing up its financial
statements. The inter-enterprise comparison involves comparison of financial
statements of different enterprises for same accounting period. This is possible only
when comparable enterprises use similar accounting policies in preparation of
respective financial statements (or in case the policies are slightly different, the same
is disclosed in the financial statements). The disclosure of accounting policies allows
a user to make appropriate adjustments while comparing the financial statements of
comparable enterprises.
Another advantage of standardisation is reduction of scope for creative accounting.
The creative accounting refers to twisting of accounting policies to produce financial
statements favourable to a particular interest group. For example, it is possible to
overstate profits and assets by capitalising revenue expenditure or to understate them
by writing off a capital expenditure against revenue of current accounting period.
Such practices can be curbed only by framing policies for capitalisation, particularly

2
 for the borderline cases where it is possible to have divergent views. The accounting
standards provide adequate guidance in this regard.
In brief, the accounting standards aim at improving the quality of financial reporting
by promoting comparability, consistency and transparency, in the interests of users of
financial statements. Good financial reporting not only promotes healthy financial
markets, it also helps in reduction of the cost of capital because investors can have
faith in financial reports and consequently perceive lesser risks.

BENEFITS OF ACCOUNTING STANDARDS

Accounting Standards seek to describe the accounting principles, the valuation

techniques and the methods of applying the accounting principles in the preparation
and presentation of financial statements so that they may give a true and fair view.
The following are the benefits of Accounting Standards:

(i) Standardisation of alternative accounting treatments: Accounting

Standards reduce to a reasonable extent or eliminate altogether confusing
variations in

the accounting treatment followed for the purpose of preparation of

financial statements.
(iii) Requirements for additional disclosures: There are certain areas where
important information is not statutorily required to be disclosed. Standards
may call for disclosure beyond that required by law.
(iv) Comparability of financial statements: The application of accounting
standards would facilitate comparison of financial statements of different
companies situated in India and facilitates comparison, to a limited extent,
of financial statements of companies situated in different parts of the
world. However, it should be noted in this respect that differences in the
institutions, traditions and legal systems from one country to another give
rise to differences in Accounting Standards adopted in different countries.

Since Accounting Standards are principle based, application of Accounting Standards

becomes judgemental in case of complex business transactions. Accounting
Standards have to be read in line with the legal requirements, i.e., in case of any
conflict, Statute would prevail over Accounting Standards.

3
 INDIAN ACCOUNTING STANDARDS

INTRODUCTION

Indian Accounting Standards are converged standards for IFRS (International

Financial Reporting Standards). Ind AS are documents and policies that provide
principles for recognition, measurement, treatment, presentation and disclosures of
accounting transactions in the Ind AS financial statements.
For example: Ind AS 16 on Property, Plant and Equipment (PPE) will provide
principles on the criteria on the basis of which PPE is recognised, what all cost will
form part of PPE, how to treat those cost and how to present PPE in the financial
statement and relevant disclosures. Ind AS are prepared keeping IFRS in mind, in
actual these are IFRS in their converged form. There are 41 Ind AS notified till now.

OBJECTIVES

Before the introduction of Ind AS, financial statements were prepared on the basis of
Accounting Standards (AS) which were not in line with the standards and principles
applicable globally (IFRS). Due to this, investors were not able to assess and compare
the financial position of Indian companies with other global companies. In order to
make the financial statements uniform, Ind AS were introduced which are converged
form of IFRS (global standards). Moreover, introduction of Ind AS will bring
consistency in the accounting practices and principles followed by companies in India
and other companies across world, leading to enhanced accessibility and acceptability
of financial statements by global investors.

BENEFITS

Ind AS have many benefits, some of which are discussed below:

• Wider acceptability: Since Ind AS are converged form of IFRS which are
widely acceptable and will give confidence to the user of financial statements.

• Comparability of Financials: Financial statements prepared using Ind AS

are easily comparable with the financial statements prepared by companies
of other countries.

4
• Changes in standards as per economic situations: Principles of Ind AS are
revised/modified in case there is any major change in economy. Ind AS 29
is ‘Financial
Reporting in hyperinflationary Economies’ which deals with situations related to
inflation.

• Attracts Foreign Investment: Adopting Ind AS may attract foreign investors

to invest in Indian Companies as that will ensure better comparability with
similar companies across the globe.

• Saves financial statement preparation cost: For multinational companies, it

will be beneficial as it will be able to use the same accounting standards in all
the markets in which they operate. This will save preparation costs of
aligning financial statements of Indian company with other operations.

5
 CHAPTER 2

RESEARCH METHODOLOGY

Research methodology is a process used to collect information and data, this data is
used for the purpose of making decisions. This information can be in the form of
primary data or secondary data. The study has been done mainly on the basis of
secondary data and information available from websites, books and published works
and reports.

OBJECTIVE OF THE STUDY

The primary objective of study is explaining the difference between the Indian GAAP
i.e. Accounting Standards and Indian Accounting Standard. This study also aims to
find out the contribution of Indian GAAP and Indian Accounting standard in setting
accounting standard.

1. To understand the impact of Indian GAAP and Indian Accounting Standard.

2. To examine the implication of Indian GAAP and Indian Accounting Standard.

3. To theoretically compare Indian GAAP and Indian Accounting Standard.

SCOPE OF THE STUDY

1. I am preparing this project “A Comparative Analysis Indian GAAP and Indian
Accounting Standard.” to provide a broad understanding of some key
differences between Indian GAAP and Indian Accounting Standard. The
preparation of financial statements complying with Indian Accounting Standard
is the responsibility of the management and accordingly this paper does not
replace the need for professional judgment having regard to relevant standards
and other requirements.

2. Study the accounting standard of Indian GAAP and Indian Accounting

Standard and understand their treatment in the financial accounting of any
business.

6
LIMITATION OF THE STUDY
Due to constraints of time and resources, the study is likely to suffer from certain
limitation. Some of the limitation are mentioned below so that the finding of the study
may be understood in a proper perspective.

The limitation are as follows: -

1. The study is based on the secondary data and the limitation of using secondary
data may affect the results.
2. This study shows the comparison about the Indian GAAP and Indian
Accounting Standard, it does not show which accounting standard is better and
which should be adopted.

SOURCE OF DATA
1. This study will be based on secondary data.

2. Other information related to Impact of Indian Accounting Standard will be

collected from the secondary sources like internet newspaper etc.

3. The theoretical contents are gathered purely from eminent textbooks and references.

SIGNIFICANCE OF THE PROBLEM

“A Comparative Analysis Indian GAAP and Indian Accounting Standards" states

the difference between the accounting treatment by both the accounting standards.
Some aspects of accounting procedures are not covered in Accounting standards.

The study is important in major aspects as under

• It can give understanding of practical approach or implementation overview

• It gives comparative overview of Indian GAAP and Indian Accounting Standards

in India. So, the significance of the study is to high.

• Further some observation may be useful to academicians, company people, and

policy makers.

7
 • The applicability of Indian GAAP and Indian Accounting Standards.

• Through the research work improve the analytical power of the researcher and
knowledge regarding various tools and techniques.

SELCTION OF PROBLEM
Accounting standards are used as regulatory mechanisms for preparation of financial
reports in almost all the countries of the world. With the world growing at a faster
pace, every company wants to expand itself. One of the easiest forms of expanding
oneself is by mergers and acquisitions. But one of the biggest problem for company is
to handle the accounts of the merging of acquiring company. This problem manly
arises while two international companies merge or acquire the other. The stage of
convergence will help uniform the financial statements. The ideas of converging
Indian GAAP to Indian Accounting Standard is to overcome the unforeseeable
challenges and to harmonize with financial reporting worldwide. This paper provides
an insight into the revised framework of Indian AS. The objective of this paper is to
examine the relationship between Indian GAAP and IND AS and its treatment through
different models of measurement, accounting treatment.

STATEMENT OF PROBLEM
Indian GAAP i.e. Accounting Standards issued by ICAI are not in line with the IFRS.
Indian Accounting Standards (Ind-AS) are IFRS converged standards issued by the
Central Government of India under the supervision and control of Accounting
Standards Board (ASB) of ICAI and in consultation with National Advisory
Committee on Accounting Standards (NACAS). The researcher aims to study the
convergence and difference between Indian GAAP and Indian Accounting Standard.
After going through existing literature of the library reviewing various articles from
everywhere and knowledgeable discussion with the concerned respected guide and by
following the existing circumstances, the researcher has selected this topic, after
considering available information, data, existing literate, external sources of
information and other inclusive source.

Researcher has framed following problem for this work.

“A Comparative Analysis between Indian GAAP and Indian Accounting

Standards"

8
 CHAPTER 3

INDIAN GAAP: ACCOUNTING STANDARDS

INTRODUCTION
Accounting Standards establish rules relating to recognition, measurement and
disclosures thereby ensuring that all enterprises that follow them are comparable and
that their financial statements are true, fair and transparent. High-quality accounting
standards are a necessary and important element of a sound capital market system. In
public capital markets such as those in the United States. High-quality accounting
standards reduce uncertainty and increase overall efficiency and investor’s confidence
by requiring that financial report provide decision useful information that is relevant,
reliable, comparable and transparent once confined by national borders transactions in
today’s capital market often are driven by a demand for and supply of capital that
transcends national boundaries. With the increase in cross-border capital rising and
investment transactions comes an increasing demand for a set of high-quality
international accounting standards that could be used as a basis for financial reporting
worldwide.
“Accounting Standards are written policy documents issues by the expert accounting
body or by government or other regulatory body covering the aspects of recognition,
measurement, presentation and disclosure of accounting transactions in financial
statement.”

INDIAN GAAP
Indian GAAP i.e. Accounting Standards are the statements of code of practice of the
regulatory accounting bodies that are to be observed in the preparation of financial
statements. In layman terms accounting standards are the written documents issued by
the expert’s institutes or other regulatory bodies covering various aspects of
measurement treatment, presentation and disclosure of accounting transactions.

ISSUING BODY OF ACCOUNTING STANDARDS IN INDIA

The Institute of Chartered Accountants of India (ICAI) reorganizing the need to
harmonies the diverse accounting policies and practices at present in use in India
constituted Accounting Standard Board (ASB) on April 21, 1977. The main role of
ASB is to formulate accounting standards from time to time.

ABOUT ICAI
The Institute of Chartered Accountants of India (ICAI) is a statutory body established
under the Chartered Accountants act 1949. (Act No. XXXXVIII of 1949) for the
regulation of the profession of Chartered Accountants in India. During its 61 years of

9
 existence, ICAI has achieved recognition as a premier accounting body not only in the
country but also globally, for its contribution in the fields of education, professional
development maintenance of high accounting, auditing and ethical standards. ICAI
now is the second largest accounting body in the whole world.

STANDARDS SETTING PROCESS

The Institute of Chartered Accountants of India (ICAI), being a premier accounting
body in the country, took upon itself the leadership role by constituting the
Accounting Standards Board (ASB) in 1977. The ICAI has taken significant
initiatives in the issuing of Accounting Standards to ensure that the standard-setting
process is fully consultative and transparent. The ASB considered the International
Accounting Standards (IASs)/ International Financial Reporting Standards (IFRSs)
while framing Indian Accounting Standards (ASs) and tried to integrate them, in the
light of the applicable laws, customs, usages and business environment in the country.
The composition of ASB includes representatives of industries (namely,
ASSOCHAM, CII, FICCI), regulators, academicians, government departments, etc.
Although ASB is a body constituted by the Council of the ICAI, it (ASB) is
independent in the formulation of accounting standards and Council of the ICAI is not
empowered to make any modifications in the draft accounting standards formulated
by ASB without consulting with the ASB. It may be noted that ASB is a committee
under Institute of Chartered Accountants of India (ICAI) which consists of
representatives from government department, academicians, other professional bodies
viz. ICSI, ICAI, representatives from ASSOCHAM, CII, FICCI, etc. National
Advisory Committee on Accounting Standards (NACAS) recommend these standards
to the Ministry of Corporate Affairs (MCA). MCA has to spell out the accounting
standards applicable for companies in India.
The standard-setting procedure of Accounting Standards Board (ASB) can be briefly
outlined as follows:

• Identification of broad areas by ASB for formulation of AS.

• Constitution of study groups by ASB to consider specific projects and to prepare

preliminary drafts of the proposed accounting standards. The draft normally
includes objective and scope of the standard, definitions of the terms used in the
standard, recognition and measurement principles wherever applicable and
presentation and disclosure requirements.

• Consideration of the preliminary draft prepared by the study group of ASB

and revision, if any, of the draft on the basis of deliberations.
• Circulation of draft of accounting standard (after revision by ASB) to the Council
members of the ICAI and specified outside bodies such as Ministry of Corporate
Affairs (DCA), Securities and Exchange Board of India (SEBI), Comptroller and
Auditor General of India (C&AG), Central Board of Direct Taxes (CBDT), Standing
Conference of Public Enterprises (SCOPE), etc. for comments.

10
 • Meeting with the representatives of the specified outside bodies to ascertain their
views on the draft of the proposed accounting standard.
• Finalisation of the exposure draft of the proposed accounting standard and its
issuance inviting public comments.

• Consideration of comments received on the exposure draft and finalisation of the

draft accounting standard by the ASB for submission to the Council of the ICAI
for its consideration and approval for issuance.
• Consideration of the final draft of the proposed standard and by the Council of the
ICAI, and if found necessary, modification of the draft in consultation with the
ASB is done.

• The accounting standard on the relevant subject (for non-corporate entities) is then
issued by the ICAI. For corporate entities the accounting standards are issued by
The Central Government of India.

Earlier, ASB used to issue Accounting Standard Interpretations which address

questions that arise in course of application of standard. These were, therefore, issued
after issuance of the relevant standard. Authority of the accounting standard
interpretation (ASIs) was same as that of the accounting standard (AS) to which it
relates. However, after notification of Accounting Standards by the Central
Government for the companies, where the consensus portion of ASI was merged as
‘Explanation’ to the relevant paragraph of the Accounting Standard, the Council of
ICAI also decided to merge the consensus portion of ASI as ‘Explanation’ to the
relevant paragraph of the Accounting Standard issued by them. This initiative was
taken by the Council of the ICAI to harmonise both the set of standards, i.e.,
Accounting Standards issued by the ICAI and Accounting Standards notified by the
Central Government. It may be noted that as per Section 133 of the Companies Act,
2013, the Central Government may prescribe the standards of accounting or any
addendum thereto, as recommended by the Institute of Chartered Accountants of
India, constituted under section 3 of the Chartered Accountants Act, 1949, in
consultation with and after examination of the recommendations made by the National
Advisory Committee on Accounting Standards (NACAS).

STATUS OF ACCOUNTING STANDARDS

It has already been mentioned that the Accounting Standards are developed by the
Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India
and are issued under the authority of its Council. The Institute not being a legislative
body can enforce compliance with its standards only by its members. Also, the
standards cannot override laws and local regulations. The Accounting Standards are
nevertheless made mandatory from the dates specified in respective standards and are
generally applicable to all enterprises, subject to certain exception as stated below.
The implication of mandatory status of an Accounting Standard depends on whether
the statute governing the enterprise concerned requires compliance with the
11
 Accounting Standards. The Companies Act had earlier notified 28 accounting
standards and mandated the corporate entities to comply with the provisions stated
therein. However, in 2016 the MCA has withdrawn AS 6. Hence, effectively there are
now only 27 notified Accounting Standards as per the Companies (Accounting
Standards) Rules, 2006 (as amended in 2016).

LIST OF ACCOUNTING STANDARD

1. AS-1 — DISCLOSURE OF ACCOUNTING POLICIES
Significant Accounting Policies followed in preparation of accounts be disclosed at
one place along with the financial statements. Any change and financial impact of
such change should be disclosed. If fundamental assumptions (going concern,
consistency and accrual) are not followed, the fact to be disclosed. Going concern
assumption is assessed for a foreseeable period of one year. Accounting Policies
adopted by the enterprise should represent true and fair view of the state of affairs of
the financial statements.
Major considerations governing selection and application of accounting policies are:

i. Prudence
ii. Substance over form iii. Materiality.

2. AS-2 — VALUATION OF INVENTORIES (REVISED)

The cost of inventories should comprise all costs of purchase, costs of conversion and
other costs incurred in bringing the inventories to their present location and condition.
Inventories are valued at lower of cost or net realisable value. Specific identification
method is required when goods are not ordinarily interchangeable. In other
circumstances, the enterprise may adopt either weighted average cost method or FIFO
methods whichever approximates the fairest possible approximation of cost incurred.
Standard Costing Method or Retail Inventory Method can be adopted only as a
technique of measurement provided where the results of these measurements
approximate the results that would be arrived at after adopting specific identification
method or weighted average method or FIFO method as may be applicable to the
circumstances.
The financial statements should disclose: (a) the accounting policies adopted in
measuring inventories, including the cost formula used; and (b) the total carrying
amount of inventories and its classification appropriate to the enterprise.

3. AS-3 — CASH FLOW STATEMENTS

The standard sets out the requirement that where the cash flow statement is presented,
it shall disclose a movement in "cash and cash equivalents" segregating various
transactions into operating, investing and financing activity. It requires certain specific
items to be addressed in the cash flows and certain supplemental disclosures for
noncash transactions.
Cash comprises cash on hand and demand deposits with banks.

12
Cash equivalents are short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes
in value.
Cash flows are inflows and outflows of cash and cash equivalents.

Operating activities are the principal revenue-generating activities of the enterprise

and other activities that are not investing or financing activities. Examples, cash
receipts from the sale of goods and the rendering of services; cash receipts from
royalties, fees, commissions and other revenue; cash payments to suppliers for goods
and services; cash payments to and on behalf of employees.
Investing activities are the acquisition and disposal of long-term assets and other
investments not included in cash equivalents. Examples, cash payments to acquire
fixed assets (including intangibles). These payments include those relating to
capitalised research and development costs and self-constructed fixed assets; cash
receipts from disposal of fixed assets (including intangibles); cash payments to
acquire shares, warrants or debt instruments of other enterprises and interests in joint
ventures (other than payments for those instruments considered to be cash equivalents
and those held for dealing or trading purposes).
Financing activities are activities that result in changes in the size and composition of
the owners’ capital (including preference share capital in the case of a company) and
borrowings of the enterprise. Example, cash proceeds from issuing shares or other
similar instruments; cash proceeds from issuing debentures, loans, notes, bonds, and
other short- or long-term borrowings; and cash repayments of amounts borrowed.
Additionally certain items are required to be disclosed separately, like Income Tax,
Dividends, etc. The enterprise can choose either direct method or indirect method for
presentation of its cash flows.
Cash flows arising from transactions in a foreign currency should be recorded in an
enterprise’s reporting currency by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency at the date of
the cash flow. A rate that approximates the actual rate may be used if the result is
substantially the same as would arise if the rates at the dates of the cash flows were
used. The effect of changes in exchange rates on cash and cash equivalents held in a
foreign currency should be reported as a separate part of the reconciliation of the
changes in cash and cash equivalents during the period.

4. AS-4 - CONTINGENCIES AND EVENTS OCCURRING AFTER

THE BALANCE SHEET DATE

Contingencies: The amount of a contingent loss should be provided for by a charge in

the statement of profit and loss if it is probable that future events will confirm that,
after taking into account any related probable recovery, an asset has been impaired or
a liability has been incurred as at the balance sheet date, and a reasonable estimate of
the amount of the resulting loss can be made. The existence of a contingent loss
should be disclosed in the financial statements if either of the conditions in above
paragraph is not met, unless the possibility of a loss is remote.
Contingent gains should not be recognised in the financial statements.

13
Events occurring after the Balance Sheet Date

Assets and liabilities should be adjusted for events occurring after the balance sheet
date that provide additional evidence to assist the estimation of amounts relating to
conditions existing at the balance sheet date or that indicate that the fundamental
accounting assumption of going concern (i.e., the continuance of existence or
substratum of the enterprise) is not appropriate.
Dividends stated to be in respect of the period covered by the financial statements,
which are proposed or declared by the enterprise after the balance sheet date but
before approval of the financial statements, should be adjusted.
Disclosure should be made in the report of the approving authority of those events
occurring after the balance sheet date that represent material changes and
commitments affecting the financial position of the enterprise.
Disclosure

If disclosure of contingencies is required by paragraph 11 of the Statement, the

following information should be provided: the nature of the contingency, the
uncertainties which may affect the future outcome, an estimate of the financial effect,
or a statement that such an estimate cannot be made. If disclosure of events occurring
after the balance sheet date in the report of the approving authority is required by the
Standard then it shall disclose; the nature of the event, an estimate of the financial
effect, or a statement that such an estimate cannot be made.

5. AS-5 - NET PROFIT/LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS

AND CHANGES IN ACCOUNTING POLICIES

Prominent definitions includes: Ordinary activities are any activities which are
undertaken by an enterprise as part of its business and such related activities in which
the enterprise engages in furtherance of, incidental to, or arising from, these activities.
Extraordinary items are income or expenses that arise from events or transactions that
are clearly distinct from the ordinary activities of the enterprise and, therefore, are not
expected to recur frequently or regularly. Prior period items are income or expenses
which arise in the current period as a result of errors or omissions in the preparation
of the financial statements of one or more prior periods. Accounting policies are the
specific accounting principles and the methods of applying those principles adopted
by an enterprise in the preparation and presentation of financial statements.
Accounting treatment and disclosures

Ordinary Activities : When items of income and expense within profit or loss from
ordinary activities are of such size, nature or incidence that their disclosure is relevant
to explain the performance of the enterprise for the period, the nature and amount of
such items should be disclosed separately.
Extraordinary Items should be disclosed in the statement of profit and loss as a part of
net profit or loss for the period. The nature and the amount of each extraordinary item
should be separately disclosed in the statement of profit and loss in a manner that its
impact on current profit or loss can be perceived.
Prior Period : The nature and amount of prior period items should be separately
disclosed in the statement of profit and loss in a manner that their impact on the
14
current profit or loss can be perceived.
Accounting Estimate : The effect of a change in an accounting estimate should be
included in the determination of net profit or loss in; (a) the period of the change, if
the change affects the period only; or (b) the period of the change and future periods,
if the change affects both.
Accounting Policy : Any change in an accounting policy which has a material effect
should be disclosed. The impact of, and the adjustments resulting from, such change,
if material, should be shown in the financial statements of the period in which such
change is made, to reflect the effect of such change. Where the effect of such change
is not ascertainable, wholly or in part, the fact should be indicated. If a change is made
in the accounting policies which has no material effect on the financial statements for
the current period but which is reasonably expected to have a material effect in later
periods, the fact of such change should be appropriately disclosed in the period in
which the change is adopted.
A change in accounting policy consequent upon the adoption of an Accounting
Standard should be accounted for in accordance with the specific transitional
provisions, if any, contained in that Accounting Standard. However, disclosures
required by paragraph 32 of the Statement should be made unless the transitional
provisions of any other Accounting Standard require alternative disclosures in this
regard.
Where any policy was applied to immaterial items in any earlier period but the item is
material in the current period, the change in accounting policy, if any, shall not be
treated as a change in accounting policy and accordingly no disclosure is required e.g.,
gravity booked on cash basis in earlier period for relatively insignificant number of
employees which in current period has become material and thus provided on basis of
report of Actuary.

6. AS-7 - ACCOUNTING FOR CONSTRUCTION CONTRACTS

It may be mentioned that the standard is applicable in accounting of contracts in the
books of the contractor. It is not applicable for construction project undertaken by the
entity on behalf of its own, for example, a builder constructing flats to be sold. It is
also not applicable to Service Contracts which are not related to the construction of
asset.
According to AS-7 (Revised) the enterprise should follow only percentage completion
method. Where in case the contract revenue or the stage of completion cannot be
determined reliably, the cost incurred on the contract may be carried forward as
workin-progress. All foreseen losses must be fully provided for. Under percentage of
completion method, appropriate allowance for future contingencies shall be made.
WIP, receipt of progressive payments, advances, retentions, receivables and certain
other items are required to be disclosed.

7. AS-8 - ACCOUNTING FOR RESEARCH AND DEVELOPMENT

Salaries, wages, personnel costs, depreciation, cost of materials and services, etc.
related to research and development, payment to outside institutions, reasonable
allocation of overhead costs and amortization of patents and licences be included in R
& D cost, and be disclosed in Profit & Loss Account.
Such cost to be charged as an expense unless the product or process is separately
15
identifiable. It may be then deferred for allocation in future years on systematic basis
and to be separately disclosed in Balance Sheet and reviewed at the end of each
accounting year. Once written off, it should not be reinstated. It may be mentioned
that the standard has been withdrawn w.e.f. 1-4-2004. The accounting provision of
this standard are taken.

8. AS-9 - REVENUE RECOGNITION

Revenue from sales or service transactions should be recognised when the
requirements as to performance as set out are satisfied, provided that at the time of
performance it is not unreasonable to expect ultimate collection. If at the time of
raising of any claim it is unreasonable to expect ultimate collection, revenue
recognition should be postponed.
In a transaction involving the sale of goods, performance should be regarded as being
achieved when the following conditions have been fulfilled:
(i) the seller of goods has transferred to the buyer the property in the goods
for a price or all significant risks and rewards of ownership have been
transferred to the buyer and the seller retains no effective control of the
goods transferred to a degree usually associated with ownership; and
(ii) no significant uncertainty exists regarding the amount of the consideration
that will be derived from the sale of the goods.

In a transaction involving the rendering of services, performance should be measured

either under the completed service contract method or under the proportionate
completion method, whichever relates the revenue to the work accomplished. Such
performance should be regarded as being achieved when no significant uncertainty
exists regarding the amount of the consideration that will be derived from rendering
the service. Revenue arising from the use of other enterprise resources yielding
interest, royalties and dividends should only be recognised when no significant
uncertainty as to measurability or collectability exists. These revenues are recognised
on the following bases:
• Interest: on a time proportion basis taking into account the amount outstanding
and the rate applicable.
• Royalties: on an accrual basis in accordance with the terms of the relevant
agreement.

• Dividends from investments in shares: when the owner’s right to

receive payment is established.

Disclosure

In addition to the disclosures required by Accounting Standard 1 on ‘Disclosure of

Accounting Policies’ (AS-1), an enterprise should also disclose the circumstances in
which revenue recognition has been postponed pending the resolution of significant
16
uncertainties. In cases where revenue cycle of the entity involves collection of excise
duty the enterprise is required to disclose revenue at gross as reduced by excise
amount thereby finally arriving net sales on the face of the profit and loss account.
The standard is followed by an appendix that though is not part of the Standard,
illustrate the application of the Standard to a number of commercial situation deals
with various situations in an endeavour to assist in clarifying application of the
Standard.

9. AS 10 – ACCOUNTING FOR FIXED ASSETS

This standard does not deal with accounting for the following items: Forests,
plantations and similar regenerative natural resources, wasting assets including
mineral rights, Expenditure on the exploration for and extraction of minerals, oil,
natural gas and similar non regenerative resources, Expenditure on real estate
development, livestock.
Fixed Assets: Asset is a source on which the entity has control and ownership. Fixed
asset is an asset held with the “intention” of being used for the purpose of producing
or providing goods or services and is not held for sale in the normal course of
business. In simple terms it’s the revenue generating source of an entity.
Gross book value: Gross book value of a fixed asset is its historical cost or other
amount which can be substituted for historical cost in the books of accounts.
Net book value: When we reduce the accumulated depreciation from gross book value
then it’s called as Net book value.
Net book value = Gross book value – accumulated amount of depreciation.

Fair market value: Fair market value is the price that would be agreed to in an open
and unrestricted market between knowledgeable and willing parties dealing at arm’s
length price who are fully informed and are not under any compulsion to transact.
Directly attributable costs: These are the costs that can be directly allocated to the
fixed assets
a. site preparation costs
b. initial delivery charges
c. handling costs
d. installation costs
e. professional fees, for example fees of architects and engineers for
construction of a fixed

Components forming part of fixed assets: The cost of an item of fixed asset comprises
its purchase price, including import duties and other non-refundable taxes and any
directly attributable cost of bringing the asset to its working condition for its intended
use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Self-Constructed fixed assets: They are valued like normal fixed assets but any
internally generated profit should be eliminated in arriving at the value to be shown in
the financial statements.
Repairs and Improvements: Frequently, it is very difficult to determine whether

17
subsequent expenditure related to fixed asset represents improvements that ought to be
added to the gross book value or repairs that ought to be charged to the profit and loss
statement.
1. Only expenditure that increases the future benefits from the existing asset
beyond its previously assessed standard of performance is included in the
gross book value, e.g., an increase in capacity.
2. Otherwise they should be booked as expenditure.

Exchange of fixed assets: When a fixed asset is acquired in exchange or in part

exchange for another asset, the cost of the asset acquired should be recorded either at
fair market value or at the net book value of the asset given up, adjusted for any
balancing payment or receipt of cash or other consideration. For these purposes fair
market value may be determined by reference either to the asset given up or to the
asset acquired, whichever is more clearly evident. Fixed asset acquired in exchange
for shares or other securities in the enterprise should be recorded at its fair market
value, or the fair market value of the securities issued, whichever is more clearly
evident.
Retirement and disposal:

1. Material items retired from active use and held for disposal should be stated
at the lower of their net book value and net realisable value and shown
separately in the financial statements.
2. Fixed asset should be eliminated from the financial statements on disposal or
when no further benefit is expected from its use and disposal
3. Losses arising from the retirement or gains or losses arising from disposal of
fixed asset which is carried at cost should be recognised in the profit and loss
statement.

Revaluation of fixed assets: An increase in net book value arising on revaluation of

fixed assets should be credited directly to owners’ interests under the head of
revaluation reserve, except that, to the extent that such increase is related to and not
greater than a decrease arising on revaluation previously recorded as a charge to the
profit and loss statement, it may be credited to the profit and loss statement. A
decrease in net book value arising on revaluation of fixed asset should be charged
directly to the profit and loss statement except that to the extent that such a decrease is
related to an increase which was previously recorded as a credit to revaluation reserve
and which has not been subsequently reversed.
Disclosure requirements:

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 1. Gross and net book values of fixed assets at the beginning and end of an
accounting period showing additions, disposals, acquisitions and other
movements;
2. Expenditure incurred on account of fixed assets in the course of construction
or acquisition; and
3. Revalued amounts substituted for historical costs of fixed assets, the method
adopted to compute the revalued amounts, then a ture of indices used, the
year of any appraisal made, and whether an external valuer was involved, in
case where fixed assets are stated at revalued amounts.

10. AS-11 (REVISED) - ACCOUNTING FOR EFFECTS OF CHANGES

IN FOREIGN EXCHANGE RATES
Applicable to all enterprises for which accounting period commences on or after
1-42004. It is applicable to transactions in foreign currency and translating financial
statements of foreign subsidiary/branches.
Monetary items denominated in Foreign Currency shall be reported using closing
rates.

Non-monetary items carried in terms of historical cost in foreign currency shall be

reported at the exchange rate on the date of the transaction.
Exchange differences shall be recognised as income/expenses in the period in which
they arise except in case of fixed assets and differences on account of forward
contracts.
Translation of foreign exchange transaction of revenue items except opening/closing
inventories and depreciation shall be made by applying rate at the date of the
transactions. For convenience purposes an average rate or weighted average rate may
be used, provided it approximates the rate of exchange. Opening and closing
inventories shall be translated at rates prevalent on opening and closing dates,
respectively and depreciation amount shall be converted by applying the rate used for
translation of the asset.
Translation gains and losses for branches/subsidiaries forming integral part of
operations of the entity shall be accounted as stated in above. However, translation
gains and losses for non-integral operations shall be directly credited to reserves. It
may be mentioned that that the method of arriving translation gains or losses shall be
different from that stated above; i.e., all assets and liabilities are converted at closing
rates and revenue items are converted at average rates, where it approximates the rates
at the date of transactions. Integral foreign operation is a foreign operation, the
activities of which are an integral foreign operation is a foreign operation, the
activities of which are an integral part of those of the reporting enterprise.
Exchange differences arising on repayment of liabilities incurred for purchase of fixed
assets shall be expensed through profit and loss account. {Note, in case of a Company
(read as required by Schedule VI), where the fixed asset is purchased from outside
India, the related exchange gains and loss, if any, are required to be capitalized}. Also
19
in case of a company, other exchange differences arising out of long-term monetary
items can be initially deferred and later amortized over the period up to March 31,
2012 or the life of the related long-term monetary asset whichever is lower with
corresponding adjustments in balance sheet through "Foreign Currency Monetary
Item Translation Difference Account".
Gains or losses on accounting of forward contracts is recognised through profit and
loss account (unless it relates to fixed assets as described in above for a Company).
However, measurement of gains or losses on forward contract depends upon the
intention for which it is taken. Where it is not for trading or speculative purposes the
premium/discount is amortised over the term of the contracts. Where these are held for
either speculative or trading purposes, the gain or loss is arrived at each reporting date
after comparing the FAIR VALUE of contract for its remaining term of maturity with
the carrying amount at the reporting date.
Profit/Loss on cancellation or renewal of forward exchange contract shall be
recognised as income/expenses of the respective period (unless it relates to fixed
assets as described in above for a Company).

11. AS-12 - ACCOUNTING FOR GOVERNMENT GRANTS

Grants should not be recognised unless reasonably assured to be realised. Grants
towards specific assets be presented as deduction from its gross value. Alternatively,
be treated as deferred income in Profit & Loss Account on rational basis over the
useful life of the asset when depreciable. For non-depreciable asset requiring
fulfilment of any obligations, it be credited to Profit & Loss Account during the
concerned period to fulfil obligations.
Balance of deferred income be disclosed appropriately as to promoter’s contribution,
be credited to capital reserves and considered as shareholders’ funds
Grants in the form of non-monetary assets given at concessional rate be accounted at
their acquisition cost. Asset given free of cost be recorded at nominal value.
Grants receivable as compensation of losses/expenses incurred be recognised and
disclosed in Profit & Loss Account in the year it is receivable and shown as
extraordinary item if appropriately read with AS-5.
Contingency related to grant be treated in accordance with AS-4. Grants when become
refundable, be shown as extraordinary item read with AS-5.
Grants related to revenue on becoming refundable be adjusted first against
unamortised deferred credit balance of the grant and then be charged to Profit & Loss
Account.
Grants against specific assets on becoming refundable be recorded by increasing the
value of the respective assets or by reducing Capital Reserve/Deferred Income balance
of the grant.

Grant to promoter’s contribution when refundable be reduced from the Capital

Reserve.

Accounting policy adopted for grants including method of presentation, extent of

recognition in financial statements, at concession/free of cost be disclosed.

12. AS-13 - ACCOUNTING FOR INVESTMENTS

Current investments and long-term investments shall be disclosed distinctly with
20
further sub-classification. Cost of investment to include acquisition charges, e.g.,
brokerage, fees and duties.
Current investments shall be disclosed at lower of costs and fair value. Long-term
investments shall be disclosed at cost.
Provision for decline (other than temporary) to be made.

Adequate disclosure is required for: the accounting policy adopted — classification of

investments — income from investments, profit/loss on disposal and changes in
carrying amount of such investment — aggregate amount of quoted and unquoted
investments giving aggregate market value of quoted investments.
Significant restrictions on right of ownership, realisation of investment and remittance
of income and proceeds of disposal thereof be disclosed.

13. AS-14 - ACCOUNTING FOR AMALGAMATION

The Accounting Standard is applicable only where it is made in pursuant to a scheme
sanctioned by statute.
The accounting method to be adopted depends whether the amalgamation is in the
nature of merger or not as defined in para 3(e) of the Standard. The definitions list out
five criteria, all of which must be satisfied for an amalgamation to be accounted on the
basis of "Pooling of Interest Method". If any criterion is not met then the
amalgamation is accounted on by using "Purchase Method". It may be mentioned that
these criteria relate to mode of payment of consideration of merger, shareholding
pattern pre and Post Merger, intention to carry-on business after the merger, pooling of
all assets and liabilities after the merger and an intention to continue to carry the
carrying amounts of assets and liability after the merger.
Under Purchase Method, all assets and liabilities of the transferor company is
recorded either at existing carrying amount or consideration is allocated to individual
identifiable assets and liabilities on basis of its fair values at date of amalgamation.
The excess or shortfall of consideration over value of net assets is recognised as
goodwill or capital reserve.
Under the Pooling of Interest Method, assets, liabilities and reserves of the transferor
company be recorded at existing carrying amount and in the same form as on date of
amalgamation. In case of conflicting accounting policies existing in transferor and
transferee company a uniform policy be adopted on amalgamation, as per AS-5.
Certain specific disclosures as discussed in the questionnaire below are required to be
made in financial statements after amalgamation. In case of amalgamation effected
after Balance Sheet date but before issue of financial statements of either party, the
event be only specifically disclosed and not given effect in such statements.

14. AS-15 - ACCOUNTING FOR RETIREMENT BENEFITS IN

THE FINANCIAL STATEMENT OF EMPLOYERS
The method of accounting of retirement benefits depends on the nature of retirement
benefits and in practice it may not be incorrect to say that it also depends on the mode
of funding.
On the basis of nature, a retirement benefit scheme can be classified either as defined
21
benefit plan or defined contribution plan.
Defined contribution schemes are schemes where the amounts to be paid as retirement
benefits are determined by contributions to a fund together with earnings thereon; e.g.,
provident fund schemes. Defined benefit schemes are retirement benefit schemes
under which amounts to be paid as retirement benefits are determinable usually by
reference to employee’s earnings and/or years of service; e.g., gratuity schemes.
For defined contribution schemes, contribution payable by employer is charged to
Profit & Loss Account.
For defined benefit schemes, accounting treatment will depend on the type of
arrangements which the employer has made.
If payment for retirement benefits is made out of employer’s funds, appropriate charge
to Profit & Loss Account to be made through a provision for accruing liability,
calculated according to actuarial valuation.
If liability for retirement benefit is funded through creation of trust, the excess/
shortfall of contribution paid against amount required to meet accrued liability as
certified by actuary is treated as pre-payment or charged to Profit & Loss Account.
If liability for retirement benefit is funded through a scheme administered by an
insurer, an actuarial certificate or confirmation from insurer is obtained. The excess/
shortfall of the contribution paid against the amount required to meet accrued liability
as confirmed by insurer is treated as pre-payment or charged to Profit & Loss
Account.
Any alteration in the retirement benefit cost should is charged or credited to Profit &
Loss Account and change in actuarial method is to be disclosed.

Financial statements to disclose method by which retirement benefit cost have been
determined.
The institute has issued AS-15 which is broadly on lines of IFRS-19. It is applicable
for accounting periods commencing after December 7, 2007. The Standard
improves the existing practices mainly in the following areas.
It is broad in its applicability as it covers all short-term and long-term employee
benefits. For example, annual paid leave (though not encashable), long-term service
rewards, subsidised goods or services, etc. are also covered
Additional disclosures are required in relation to any defined benefits plans including:

(i) The reconciliation of (opening to closing) of Projected Benefit Obligation.

(ii) The reconciliation of (opening to closing) of Fair Value of Plan Assets.
(iii) The reconciliation of (opening to closing) of Net Liability/Prepaid Asset.
(iv) Components of charge during the year.
(v) Principal actuarial assumptions.

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15. AS-16 - BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition, construction or
production of any qualifying asset (assets that takes a substantial period of time to get
ready for its intended use or sale) should be capitalised.
Borrowing costs that can be capitalised are interest and other costs that are directly
attributable to the acquisition, construction and production of a qualifying asset.
Income on the temporary investment of the borrowed funds to be deducted from
borrowing costs.
Capitalisation of borrowing costs should be suspended during extended periods in
which development is interrupted.
Capitalisation should cease when completed substantially or if completed in parts, in
respect of that part, all the activities for its intended use or sale are complete.
Statement does not deal with the actual or imputed cost of owner’s equity/preference
capital are treated as borrowing costs.
Financial statements to disclose accounting policy adopted for borrowing cost and
also the amount of borrowing costs capitalised during the period.

16. AS-17 — SEGMENT REPORTING

Requires reporting of financial information about different types of products and
services an enterprise provides and different geographical areas in which it operates.
A business segment is distinguishable component of an enterprise providing a product
or service or group of products or services that is subject to risks and returns that are
different from other business segments.
A geographical segment is distinguishable component of an enterprise providing
products or services in a particular economic environment that is subject to risks and
returns that are different from components operating in other economic environments.
Internal financial reporting system is normally the basis for identifying the segments.
The dominant source and nature of risk and returns of an enterprise should govern
whether its primary reporting format will be business segments or geographical
segments.
A business segment or geographical segment is a reportable segment if (a) revenue
from sales to external customers and from transactions with other segments exceed
10% of total revenues (external and internal) of all segments; or (b) segment result,
whether profit or loss is 10% or more of (i) combined result of all segments in profit
or (ii) combined result of all segments in loss whichever is greater in absolute amount;
or (c) segment assets are 10% or more of all the assets of all the segments.
If total external revenue attributable to reportable segment constitutes less than 75%
of total revenues then additional segments should be identified.
Under primary reporting format for each reportable segment the enterprise should
disclose external and internal segment revenue, segment result, amount of segment
assets and liabilities, cost of fixed assets, acquired, depreciation, amortisation of assets
and other non-cash expenses.
Reconciliation between information about reportable segments and information in
financial statements of the enterprise is also to be provided.
Secondary segment information is also required to be disclosed. This includes
information about revenues, assets and cost of fixed assets acquired.
When primary format is based on geographical segments, certain further disclosures
are required. Disclosures are also required relating to intra-segment transfers and
23
composition of the segment.
In case, by applying the definitions of ‘business segment’ and ‘geographical segment’,
contained in AS-17, it is concluded that there is neither more than one business
segment nor more than one geographical segment, segment information as per AS-17
is not required to be disclosed.
It may be mentioned that the illustrative disclosure attached to Standard as appendix
(though not forming part of the Standard) illustrate in detail; determination of
reportable segments, information about business segments and summary of required
disclosures.

17. AS-18 - RELATED PARTY DISCLOSURES

Parties are considered to be related if, at any time during the reporting period, one
party has ability to control or exercise significant influence over the other party in
making financial and/or operating decisions.
The statement deals with following related party relationships: (a) Enterprises that
directly or indirectly, through one more intermediaries, control or are controlled by or
are under common control with the reporting enterprise (b) Associates, Joint Ventures
of the reporting entity, investing party or venturer in respect of which reporting
enterprise is an associate or a joint venture, (c) Individuals owning voting power
giving control or significant influence over the enterprise and relatives of any such
individual, (d) Key management personnel and their relatives, and (e) Enterprises over
which any of the persons in (c) or (d) are able to exercise significant influence. Other
relationship is not covered by this Standard.
Following are not deemed related parties (a) Two companies simply because of
common director, (b) Customer, supplier, franchiser, distributor or general agent
merely by virtue of economic dependence; and (c) Financiers, trade unions, public
utilities, government departments and bodies merely by virtue of their normal dealings
with the enterprise.
Disclosure under the Standard is not required in the following cases (i) If such
disclosure conflicts with duty of confidentially under statute, duty cast by a regulator
or a component authority; (ii) In consolidated financial statements in respect of
intragroup transactions, and (iii) In case of State-controlled enterprises regarding
related party relationships and transactions with other State-controlled enterprises.
Relative (in relation to an individual) means spouse, son, daughter, brother, sister,
father and mother who may be expected to influence, or be influenced by, that
individual in dealings with the reporting entity.
Standard also defines inter alia control, significant influence, associate, joint venture
and key management personnel.
If there are transactions between the related parties, during the existence of
relationship, certain information is to be disclosed, viz.; name of the related party,
description of the nature of relationship, nature of transaction and its volume (as an
amount or proportion), other elements of transaction if necessary for understanding,
amount or appropriate proportion outstanding pertaining to related parties, provision
for doubtful debts from related parties, amounts written off or written back in respect
of debts due from or to related parties.
Names of the related party and nature of related party relationship to be disclosed
even where there are no transactions but the control exists.
Items of similar nature may be aggregated by type of the related party.

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18. AS-19 - LEASES
The Standard applies in accounting for all leases other than —

(a)lease agreements to explore for or use natural resources,

(b)licensing agreements for items such as motion pictures, films, video
recordings plays, etc. and
(c)lease agreements to use lands.

Leases are classified as finance lease or operating lease.

A finance lease is defined to mean a lease that transfers substantially all the risks and
rewards incidental to ownership of an asset. Examples of situations which normally
lead to a lease being classified as a finance lease are —
(a) lessor transferring the ownership at the end of the lease term,

(b) lessee has an option to purchase the asset at a price which is

sufficiently lower than the fair value at the date the option becomes
exercisable,
(c) lease term is for substantial part of economic life of the asset,
(d)present value of minimum lease payment at the inception of the lease is
substantially equal to the assets fair value and
(e)the asset leased is of specialised nature such that only lessee can use it
without major modifications made to it.

An operating lease is defined to mean a lease other than a finance lease.

Treatment in the books of lessee

In case of finance lease —

At the inception of the finance the lessee should recognise the lease as an asset and a
liability. The asset should be recognised at an amount equal to the fair value of leased
asset at the inception. If the fair value exceeds the present value of the minimum lease
payment from the stand point of the lessee, the amount to recorded as asset and
liability reckoned with the present value of the minimum lease payments that may be
calculated on the basis of interest rate implicit in the lease, if practicable to determine
and if not, then at lessee’s incremental borrowing rate.
Lease payments should be apportioned between finance charges and the reduction of
25
outstanding.

26
The depreciation policy for leased asset should be consistent with that for depreciable
assets that are owned. AS-6 (Depreciation Accounting) applies in such cases.
Disclosure should be made of —

(a) assets acquired under finance lease,

(b) net carrying amount at the balance sheet date,

(c) reconciliation between the total minimum lease payments at balance sheet

date and their present value,

(d) total minimum lease payments at balance sheet date and their present value

for periods specified,

(e) contingent rent recognised as income,
(f) the total of future minimum sub-lease payments expected to be received, and

(g) general description of significant leasing arrangements.

In case of operating lease —

The lease payments should be recognised as an expense on straight line basis, unless
other systematic basis is more representative of the time pattern of the user’s
benefit. Disclosures should be made of —

(a)the total of future minimum lease payments for the periods specified,
(b)the total of future minimum sub-lease payments expected to be received,
(c)lease payments recognised in the statement of Profit & Loss, with separate
amounts of minimum lease payments and contingent rents, (d) sub-lease
payments recognised in the statement of Profit & Loss, and (e) general
description of significant leasing arrangements.

Treatment in the books of lessor

In case of finance lease —

•The lessor should recognise the asset in its balance sheet as a receivable at an
amount equal to net investment in the lease.

•The recognition of finance income should be based on a pattern reflecting a constant

periodic return on the net investment of the lessor outstanding.
• In case of any reduction in the unguaranteed residual values, income allocation over
the remaining lease term should be revised.

• Initial direct cost is either recognised immediately in the profit and loss statement or
allocated against the finance income over the lease term.
27
• Disclosure should be made of —

(a) total gross investment in lease and the present value of the minimum lease
payments at specified periods and a reconciliation thereof at the balance sheet
date,
(b) unearned finance income,
(c) accruing unguaranteed residual value benefit,
(d) accumulated provision for uncollectible minimum lease payments receivable,
(e) contingent rent recognised,
(f) general description of significant leasing arrangements and (g) accounting
policy adopted in respect of initial direct costs.

In case of operating lease —

Lessors to present an asset given on lease under fixed assets. Lease income should be
recognised on a straight-line basis over the lease term or other systematic basis, if
representative of the time pattern over which benefit derived gets diminished.
Costs, including depreciation, incurred are recognised as an expense.
Initial direct cost is either deferred and allocated to income over the lease term in
proportion to rent income recognised or are recognised immediately in the profit and
loss statement.
Disclosure should be made of —

(a) gross carrying amount of the leased assets, accumulated depreciation and
impairment loss at the balance sheet date and depreciation and impairment loss
recognised or reversed for the period,
(b) the future minimum lease payments in aggregate and for the periods specified,
(c) total contingent rent recognised as income,
(d) a general description of the significant leasing arrangements, and (e)
accounting policy for initial direct costs.

Lease by manufacturer or dealer

The manufacturer or dealer lessor should recognise the transaction in accordance with
policy followed for outright sales. Initial direct costs should be recognised as an
expense at the inception of the lease. Artificial low rates of interests are quoted, profit
on sale should be restricted to that which would apply if a commercial rate of interest
were charged.

•Sale and leaseback transactions

If the transaction of sale and leaseback results in a finance lease, any excess or

28
deficiency of sale proceeds over the carrying amount, it should be deferred and
amortised over the lease term in proportion to the depreciation of the leased assets.
If the transaction result in an operating lease and it is clearly established to be at fair
value, profit or loss should be recognised immediately. If the sale price is below the
fair value, any profit or loss should be recognised immediately, except that, if the loss
is compensated by future lease payments at market price, it should be deferred and
amortised in proportion to the lease payments over the period for which asset is
expected to be used. If the sales price is above fair value, the excess over the fair value
should be deferred and amortised over period of expected use of asset.
In an operating lease, if the fair value at the time of sale and leaseback transaction is
less than the carrying amount of the asset, a loss equal to the amount of the difference
between the carrying amount and fair value should be recognised immediately.

19. AS-20 — EARNINGS PER SHARE

Basic and diluted EPS is required to be presented on the face of Profit and Loss
Statement with equal prominence for all the periods presented. EPS is required to be
presented even when it is negative.
Basic EPS should be calculated by dividing net profit or loss for the period
attributable to equity shareholders by weighted average of equity shares outstanding
during the period.
In arriving earnings attributable to equity shareholders preference dividend for the
period and the attributable tax are to be excluded.
The weighted average number of shares, for all the periods presented, is adjusted for
bonus issue or any element thereof in rights issue, share split and consolidation of
shares.
For calculating diluted EPS, net profit or loss attributable to equity shareholders and
the weighted average number of shares are adjusted for the effects of dilutive potential
equity shares (i.e., assuming conversion into equity of all dilutive potential equity).
Potential equity shares are treated as dilutive when, and only when, their conversion
into equity would result in a reduction in profit per share from continuing ordinary
operations.
The effects of anti-dilutive potential equity shares are ignored in calculating diluted
EPS.
For the purpose of calculating diluted EPS, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of shares
outstanding during the period should be adjusted for the effects of all dilutive potential
equity shares.
The amounts of earnings used as numerators for computing basic and diluted EPS and
a reconciliation of those amounts with Profit and Loss Statement, the weighted
average number of equity shares used as the denominator in calculating the basic and
diluted EPS and the reconciliation between the two EPS and the nominal value of
shares along with EPS per share figure need to be disclosed.

20. AS-21 - CONSOLIDATED FINANCIAL STATEMENTS

To be applied in the preparation and presentation of consolidated financial statements
for a group of enterprises under the control of a parent.

29
Control means the ownership of more than one-half of the voting power of an
enterprise or control of the composition of the board of directors or such other
governing body.
Control of composition implies power to appoint or remove all or a majority of
directors. Consolidated financial statements to be presented in addition to separate
financial statements.
All subsidiaries, domestic and foreign to be consolidated except where control is
intended to be temporary or the subsidiary operates under severe long-term restriction
impairing transfer of funds to the parent.
Consolidation to be done on a line by line basis by adding like items of assets,
liabilities, income and expenses which involve.
Elimination of cost to the parent of the investment in the subsidiary and the parent’s
portion of equity of the subsidiary at the date of investment.

Excess of cost over parent’s portion of equity, to be shown as goodwill.

Where cost to the parent is less than its portion, of equity, difference to be shown as
capital reserve. Minority interest in the net income to be adjusted against income of
the group.
Minority interest in net assets to be shown separately as a liability.

Intra group balances and intra-group transactions and resulting unrealised profits
should be eliminated in full. Unrealised losses should also be eliminated unless cost
cannot be recovered.
Where two or more investments are made in a subsidiary, equity of the subsidiary to
be generally determined on a step by step basis.
Financial statements used in consolidation should be drawn up to the same reporting
date. If reporting dates are different, adjustments for the effects of significant
transactions/events between the two dates to be made.
Consolidation should be prepared using same accounting policies. If the accounting
policies followed are different, the fact should be disclosed together with
proportion of such items.
In the year in which parent subsidiary relationship ceases to exist, consolidation to be
made up-to-date of cessation.
Disclosure is to be of all subsidiaries giving name, country of incorporation,
residence, proportion of ownership and voting power if different, nature of
relationship between parent and subsidiary, effect of the acquisition and disposal of
subsidiaries on the financial position, names of subsidiaries whose reporting dates are
different than that of the parent.
When the consolidated statements are presented for the first-time figures for the
previous year need not be given.
While preparing consolidated financial statements, the tax expense to be shown in the
consolidated financial statements should be the aggregate of the amounts of tax
expense appearing in the separate financial statements of the parent and its
subsidiaries.
‘Near Future’ should be considered as not more than twelve months from acquisition
of relevant investments unless a longer period can be justified on the basis of facts and
circumstances of the case.
When there is more than one investor in a company in which one of the investors

30
controls the composition of board of directors and some other investor holds more
than half of the voting power, both these investors are required to consolidate the
accounts of the investee in accordance with this Standard.
Note: Not all the notes appearing in standalone financial statements is required to be
disclosed in the consolidated financial statements. Typically notes that are not required
to be included are, managerial remuneration, CIF value of import, capacity,
quantitative details, etc.

21. AS-22 - ACCOUNTING FOR TAXES ON INCOME

This statement should be applied in accounting for taxes on income. This includes the
determination of the amount of the expense or saving related to taxes on income in
respect of an accounting period and the disclosure of such an amount in the financial
statements.
The expense for the period, comprising current tax and deferred tax should be
included in the determination of the net profit or loss for the period.
Deferred tax should be recognised for all the timing differences, subject to the
consideration of prudence in respect of deferred tax assets as set out in paragraph
below.
Except in the situations stated in paragraph 5, deferred tax assets should be recognised
and carried forward only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such deferred tax
assets can be realised.
Where an enterprise has unabsorbed depreciation or carry forward of losses under tax
laws, deferred tax assets should be recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future taxable income will
be available against which such deferred tax assets can be realised.
Current tax should be measured at the amount expected to be paid to (recovered from)
the taxation authorities, using the applicable tax rates and tax laws.
Deferred tax assets and liabilities should be measured using the tax rates and tax laws
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets and liabilities should not be discounted to their present value.

The carrying amount of deferred tax assets should be reviewed at each balance sheet
date. An enterprise should write-down the carrying amount of a deferred tax asset to
the extent that it is no longer reasonably certain or virtually certain, as the case may be
that sufficient future taxable income will be available against which deferred tax asset
can be realised. Any such write down may be reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be that sufficient future taxable
income will be available.
An enterprise should offset assets and liabilities representing current tax if the
enterprise:
(a) Has a legally enforceable right to set off the recognised amounts; and
(b) Intends to settle the asset and the liability on a net basis.
An enterprise should offset deferred tax assets and deferred tax liabilities if:

(a) The enterprise has a legally enforceable right to set off assets

against liabilities representing current tax; and

31
 (b) The deferred tax assets and the deferred tax liabilities relate to taxes on

income levied by the same governing taxation laws.

Deferred tax assets and liabilities should be distinguished from assets and liabilities
representing current tax for the period. Deferred tax assets and liabilities should be
disclosed under a separate heading in the balance sheet of the enterprise, separately
from current assets and current liabilities.
The break-up of deferred tax assets and deferred tax liabilities into major components
of the respective balances should be disclosed in the notes to accounts.
The nature of the evidence supporting the recognition of deferred tax assets should be
disclosed, if an enterprise has unabsorbed depreciation or carry forward of losses
under tax laws.
On the first occasion that the taxes on income are accounted for in accordance with
this statement, the enterprise should recognise, in the financial statement, the deferred
tax balance that has accumulated prior to the adoption of this statement as deferred tax
asset/liability with a corresponding credit/charge to the revenue reserve, subject to the
consideration of prudence in case of deferred tax assets. The amount so credited/
charged to the revenue reserve should be the same as that which would have resulted
if this statement had been in effect from the beginning.

22. AS-23 - ACCOUNTING FOR INVESTMENT IN ASSOCIATES

IN CONSOLIDATED FINANCIAL STATEMENT

This statement should be applied in accounting for investments in associates in the

preparation and presentation of consolidated financial statements by an investor. An
investment in an associate should be accounted for in a consolidated financial
statement under the equity method except when:
(a) The investment is acquired and held exclusively with a view to its subsequent
disposal in the near future, or

(b) The associate operates under severe long-term restrictions that significantly
impair its ability to transfer funds to its investors. Investment in such
associates should be accounted for in accordance with the Accounting
Standard (AS)-13, Accounting for Investments. The reason for not
applying the equity methods in accounting for investments in an associate
should be disclosed in the consolidated financial statements.

An investor should discontinue the use of equity method from the date that:

(a) It ceases to have significant influence in an associate but retains, either in

whole or in part, its investments, or

32
(b) The use of the equity method is no longer appropriate because the associate
operates under severe long-term restrictions that significantly impair its ability
to transfer funds to the investors. From the date of discontinuing the use of
equity method, investments in such associates should be accounted for in
accordance with Accounting Standard (AS)-13, Accounting for Investments.
For this purpose, the carrying amount of investments at that date should be
regarded as the cost thereafter.

Goodwill/capital reserve arising on the acquisition of an associate by an investor

should be included in the carrying amount of investment in the associate but should be
disclosed separately.
In using equity method for accounting for investment in an associate, unrealised
profits and losses resulting from transactions between the investor (or its consolidated
subsidiaries) and the associate should be eliminated to the extent of the investor’s
interest in the associate. Unrealised losses should not be eliminated if and to the extent
the cost of the transferred asset cannot be recovered.
The carrying amount of investment in an associate should be reduced to recognise a
decline, other than temporary, in the value of the investment, such reduction being
determined and made for each investment individually.
In addition to the disclosures required by paragraphs 2 and 4, an appropriate listing
and description of associates including the proportion of ownership interest and, if
different, the proportion of voting power held should be disclosed in the consolidated
financial statements.
Investments in associates accounted for using the equity method should be classified
as long-term investments and disclosed separately in the consolidated balance sheet.
The investor’s share of the profits or losses of such investments should be disclosed
separately in the consolidated statement of profit and loss. The investor’s share of any
extraordinary or prior period items should also be separately disclosed.
The name(s) of the associate(s) of which reporting date(s) is/are different from that of
the financial statements of an investor and the differences in reporting dates should
be disclosed in the consolidated financial statements.
In case an associate uses accounting policies other than those adopted for the
consolidated financial statements for transactions and events in similar circumstances
and it is not practicable to make appropriate adjustments to the associate’s financial
statements, the fact should be disclosed along with a brief description of the
differences in the accounting policies.
On the first occasion when investment in an associate is accounted for in consolidated
financial statements in accordance with this statement, the carrying amount of
investment in the associate should be brought to the amount that would have resulted
had the equity method of accounting been followed as per this statement since the
acquisition of the associate. The corresponding adjustment in this regard should be
made in the retained earnings in the consolidated financial statements.
Adjustments to the carrying amount of investment in an associate arising from
changes in the associate’s equity that have not been included in the statement of profit
33
and loss of the associate should be directly made in the carrying amount of investment
without routing it through the consolidated statement of profit and loss. The
corresponding debit/credit should be made in the relevant head of the equity interest in
the consolidated balance sheet. For example, in case the adjustment arises because of
revaluation of fixed assets by the associate, apart from adjusting the carrying amount
of investment to the extent of proportionate share of the investor in the revalued
amount, the corresponding amount of revaluation reserve should be shown in the
consolidated balance sheet.

23. AS-24 - DISCONTINUING OPERATIONS

The objective of this statement is to establish principles for reporting information
about discontinuing operations, thereby enhancing the ability of users of financial
statements to make projections of an enterprise’s cash flows, earnings-generating
capacity, and financial position by segregating information about discontinuing
operations from information about continuing operations.
A discontinuing operation is a component of an enterprise that the enterprise, pursuant
to a single plan, is: (1) disposing of substantially in its entirety, such as by selling the
component in a single transaction or by demerger or spin-off of ownership of the
component to the enterprise’s shareholders; or (2) disposing of piecemeal, such as by
selling off the component’s assets and settling its liabilities individually; or (3)
terminating through abandonment; and that represents a separate major line of
business or geographical area of operations; and that can be distinguished
operationally and for financial reporting purposes.
With respect to a discontinuing operation, the initial disclosure event is the occurrence
of one of the following, whichever occurs earlier (a) the enterprise has entered into a
binding sale agreement for substantially all of the assets attributable to the
discontinuing operation; or (b) the enterprise’s board of directors or similar governing
body has both (i) approved a detailed, formal plan for the discontinuance and (ii)
made an announcement of the plan.
An enterprise should apply the principles of recognition and measurement that are set
out in other Accounting Standards for the purpose of deciding as to when and how to
recognise and measure the changes in assets and liabilities and the revenue, expenses,
gains, losses and cash flows relating to a discontinuing operation.
When an enterprise disposes of assets or settles liabilities attributable to a
discontinuing operation or enters into binding agreements for the sale of such assets or
the settlement of such liabilities, it should include, in its financial statements, the
following information when the events occur (a) for any gain or loss that is recognised
on the disposal of assets or settlement of liabilities attributable to the discontinuing
operation, (i) the amount of the pre-tax gain or loss and (ii) income tax expense
relating to the gain or loss; and (b) the net selling price or range of prices (which is
after deducting expected disposal costs) of those net assets for which the enterprise
has entered into one or more binding sale agreements, the expected timing of receipt
of those cash flows and the carrying amount of those net assets on the balance sheet
date.Any disclosures required by this statement should be presented separately for
each discontinuing operation.

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24. AS-25 — INTERIM FINANCIAL REPORTING

Accounting Standard (AS)-25, ‘Interim Financial Reporting’, issued by the Council of

the Institute of Chartered Accountants of India, comes into effect in respect of
accounting periods commencing on or after 1-4-2002. If an enterprise is required to
prepare and present an interim financial report, it should comply with this Standard.
The objective of this Statement is to prescribe the minimum content of an interim
financial report and to prescribe the principles for recognition and measurement in a
complete or condensed financial statements for an interim period. Timely and reliable
interim financial reporting improves the ability of investors, creditors, and others to
understand an enterprise’s capacity to generate earnings and cash flows, its financial
condition and liquidity.
Interim period is a financial reporting period shorter than a full financial year. Interim
financial report means a financial report containing either a complete set of financial
statements or a set of condensed financial statements (as described in this Statement)
for an interim period.
An interim financial report should include, at a minimum, the following components
(a) condensed balance sheet;
(b) condensed statement of profit and loss;
(c) condensed cash flow statement; and (d) selected
explanatory notes.

An enterprise should include the following information, as a minimum, in the notes to

its interim financial statements, if material and if not disclosed elsewhere in the
interim financial report:
(a)a statement that the same accounting policies are followed in the interim financial
statements as those followed in the most recent annual financial statements or, if those
policies have been changed, a description of the nature and effect of the change;
(b)explanatory comments about the seasonality of interim operations;

(c) the nature and amount of items affecting assets, liabilities, equity, net income, or
cash flows that are unusual because of their nature, size, or incidence, net profit or
loss for the period, prior period items and changes in accounting policies);
(d) the nature and amount of changes in estimates of amounts reported in prior interim
periods of the current financial year orchanges in estimates of amounts reported in
prior financial years, if those changes have a material effect in the current interim
period;
(e) issuances, buy-backs, repayments and restructuring of debt, equity and potential
equity shares; (f) dividends, aggregate or per share (in absolute or percentage terms),
separately for equity shares and other shares;
(f) segment revenue, segment capital employed (segment assets minus segment
liabilities) and segment result for business segments or geographical segments,
whichever is the enterprise’s primary basis of segment reporting (disclosure of
segment information is required in an enterprise’s interim financial report only if
the enterprise is required, in terms of AS-17, Segment Reporting, to disclose
segment information in its annual financial statements);
(g) the effect of changes in the composition of the enterprise during the interim period,

35
such as amalgamations, acquisition or disposal of subsidiaries and long-term
investments, restructurings, and discontinuing operations; and
(h) material changes in contingent liabilities since the last annual balance sheet date.
Interim reports should include interim financial statements (condensed or complete)
for periods as
(a) balance sheet as of the end of the current interim period and a comparative balance
sheet as of the end of the immediately preceding financial year;
(b) statements of profit and loss for the current interim period and cumulatively for
the current financial year to date, with comparative statements of profit and loss for
the comparable interim periods (current and year-to-date) of the immediately
preceding financial year;
(c) cash flow statement cumulatively for the current financial year to date, with a
comparative statement for the comparable year-to-date period of the
immediately preceding financial year.
An enterprise should apply the same accounting policies in its interim financial
statements as are applied in its annual financial statements, except for accounting
policy changes made after the date of the most recent annual financial statements that
are to be reflected in the next annual financial statements. However, the frequency of
an enterprise’s reporting (annual, half-yearly, or quarterly) should not affect the
measurement of its annual results. To achieve that objective, measurements for interim
reporting purposes should be made on a year-to-date basis.
Users may refer four appendices attached to the Standard (which though not a part of
the Standard) set out detailed illustrations explaining inter alia;
1. Illustrative format of Condensed Balance Sheet, Condensed Profit and Loss
Account, Condensed Cash Flows.
2. Illustration of periods required to be presented.
3. Examples of applying the recognition and measurement principles.

Examples of use of estimates. _ It may be mentioned that the companies required to

disclose quarterly results are not required to follow the disclosure-related
requirements of the Standard. Thus, presentation format is not mandatory. However,
it is a normal practice to adopt the recognition and measurement principles.

25. AS-26 - INTANGIBLE ASSETS

The Standard is applicable w.e.f. April 1, 2003, to enterprises that are listed companies
and/or having turnover exceeding Rs. 50 crores. For all other enterprises these are
applicable from April 1, 2004.
This Standard should be applied by all enterprises in accounting for intangible assets,
except intangible assets that are covered by another Accounting Standard; financial
assets; mineral rights and expenditure on the exploration for, or development and
extraction of minerals, oil, natural gas and similar non-regenerative resources;
intangible assets arising in insurance enterprises from contracts with policyholders
and expenditure in respect of termination benefits.
Prominent concepts introduced/emphasised by the standard includes; An asset is a
resource; (a) controlled by an enterprise as a result of past events; and (b) from which

36
future economic benefits are expected to flow to the enterprise. An intangible asset is
an identifiable non-monetary asset, without physical substance, held for use in the
production or supply of goods or services, for rental to others, or for administrative
purposes. Research is original and planned investigation undertaken with the prospect
of gaining new scientific or technical knowledge and understanding. Development is
the application of research findings or other knowledge to a plan or design for the
production of new or substantially improved materials, devices, products, processes,
systems or services prior to the commencement of commercial production or use.
An acquired intangible asset is recognised if it is (a) identifiable, (b) controllable by
enterprise, (c) where future benefit is expected and (d) cost of acquisition can be
measured reliably.
Expenditure incurred on internally generated intangible asset is expensed to the extent
that it related to Research Phase.
An intangible asset arising from development (or from the development phase of an
internal project) should be recognised if, and only if, an enterprise can demonstrate all
of the following:
1. The technical feasibility of completing the intangible asset so that it will be
available for use or sale;
2. Its intention to complete the intangible asset and use or sell it;
3. Its ability to use or sell the intangible asset;
4. How the intangible asset will generate probable future economic benefits.
Among other things, the enterprise should demonstrate the existence of a
market for the output of the intangible asset or the intangible asset itself or, if it
is to be used internally, the usefulness of the intangible asset;
5. The availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
6. Its ability to measure the expenditure attributable to the intangible asset during
its development reliably.

The standard is supplemented with two appendix one of which covers exhaustive
illustration on accounting of website development cost and software generated for
internal use and other one covers various examples on application of various aspect of
the standard.

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26. AS-27 - FINANCIAL REPORTING OF INTERESTS IN JOINT VENTURES

The standards defines what is a joint venture. Some of the important concepts
includes; joint venture is a contractual arrangement whereby two or more parties
undertake an economic activity, which is subject to joint control. Joint control is the
contractually agreed sharing of control over an economic activity.
Control is the power to govern the financial and operating policies of an economic
activity so as to obtain benefits from it.
Proportionate consolidation is a method of accounting and reporting whereby a
venturer’s share of each of the assets, liabilities, income and expenses of a jointly
controlled entity is reported as separate line items in the venturer’s financial
statements.
The accounting treatments depends on the nature of joint venture which can be one of
the three, i.e. Jointly Controlled Entity or Jointly Controlled Operations or Jointly
Controlled Assets.
In respect of its interests in jointly controlled operations, a venturer should recognise
in its separate financial statements and consequently in its consolidated financial
statements: (a) the assets that it controls and the liabilities that it incurs; and (b) the
expenses that it incurs and its share of the income that it earns from the joint venture.
In respect of its interest in jointly controlled assets, a venture should recognise, in its
separate financial statements, and consequently in its consolidated financial
statements: its share of the jointly controlled assets, classified according to the nature
of the assets; any liabilities which it has incurred; its share of any liabilities incurred
jointly with the other venture’s in relation to the joint venture; any income from the
sale or use of its share of the output of the joint venture, together with its share of any
expenses incurred by the joint venture; and any expenses which it has incurred in
respect of its interest in the joint venture.
In respect of jointly controlled operations the accounting treatment depends upon
whether it is to be accounted in stand-alone financial statements or consolidated
financial statement. In case of standalone financial statements, the investments are
accounted at cost in accordance with AS-13 whereas in case of consolidated financial
statements where these are prepared (or required to be prepared) the investment in
joint venture is accounted using proportionate consolidation method unless these are
subsidiaries in which case these are consolidated under AS-21.

27. AS-28 — IMPAIRMENT OF ASSETS

This Standard should be applied in accounting for the impairment of all assets, other
than: 1) Inventories (see AS-2, Valuation of Inventories); 2) Assets arising from
construction contracts (see AS-7, Accounting for Construction Contracts); 3) Financial
assets, including investments that are included in the scope of AS-13, Accounting for
Investments; and 4) Deferred tax assets (see AS-22, Accounting for Taxes on Income).
— Prominent concepts introduced by the standards includes: An impairment loss is
the amount by which the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s net selling price and its value in use. —
Value in use is the present value of estimated future cash flows expected to arise from
the continuing use of an asset and from its disposal at the end of its useful life. _
Carrying amount is the amount at which an asset is recognised in the balance sheet
after deducting any accumulated depreciation (amortisation) and accumulated
38
impairment losses thereon. A cash-generating unit is the smallest identifiable group of
assets that generates cash inflows from continuing use that are largely independent of
the cash inflows from other assets or groups of assets.
Corporate assets are assets other than goodwill that contribute to the future cash flows
of both the cash-generating unit under review and other cash-generating units.
At each balance sheet date it needs to be assessed as to whether there is triggering
event that requires the impairment testing to be made. Triggering event shall be
assessed based on external information like fall in interest rate or industry growth rate,
change in law, etc., and internal information like forecasts, obsolescence, damage, etc.
Where there is a triggering event the impairment loss needs to be assessed at the level
of each Cash Generating Unit. Where all the assets of the enterprise are allocated to
cash generating unit, only bottom-up testing method is applied and in case there is
some portion of asset that is not allocated or corporate assets, then bottom-up testing
method coupled with and followed by top-down testing method is applied.
In measuring value in use, the Standard specifies certain factors that needs to be
considered in arriving the discount rate and cash flow projection.
Discount rate shall be independent of capital structure of the enterprise or its
incremental borrowing cost. As a starting point, the enterprise may take into account
the following rates: the enterprise’s weighted average cost of capital determined using
techniques such as the Capital Asset Pricing Model; the enterprise’s incremental
borrowing rate; and other market borrowing rates. These rates are adjusted: to reflect
the way that the market would assess the specific risks associated with the projected
cash flows; and to exclude risks that are not relevant to the projected cash flows.
Consideration is given to risks such as country risk, currency risk, price risk and cash
flow risk
Cash flow projections should be based on reasonable and supportable assumptions
that represent management’s best estimate of the set of economic conditions that will
exist over the remaining useful life of the asset. Greater weight should be given to
external evidence; cash flow projections should be based on the most recent financial
budgets/forecasts that have been approved by management. Projections based on these
budgets/forecasts should cover a maximum period of five years, unless a longer period
can be justified; and cash flow projections beyond the period covered by the most
recent budgets/forecasts should be estimated by extrapolating the projections based on
the budgets/forecasts using a steady or declining growth rate for subsequent years,
unless an increasing rate can be justified. This growth rate should not exceed the long-
term average growth rate for the products, industries, or country or countries in which
the enterprise operates, or for the market in which the asset is used, unless a higher
rate can be justified. Project cash flows shall not consider impact of future capital
expenditure or restructuring unless these are committed.
Reversal of impairment loss is allowed to an extent that would be additional carrying
amount of asset had there be no impairment.
However, in case of reversal of impairment loss relating to goodwill additional
condition needs to be satisfied.
The detailed text of the standard spreads across 124 paragraphs and is supplemented
with 8 examples (which are not part of the Standard). Users are expected to go
through it in detail before applying the Standard.

39
28. AS-29 — PROVISIONS, CONTINGENT LIABILITIES
AND CONTINGENT ASSETS
The Standard prescribes the accounting and disclosure for all provisions, contingent
liabilities and contingent assets, except:
(a) Those resulting from financial instruments that are carried at fair value;
(b) Executory contracts are contracts under which neither party has performed any
of its obligations or both parties have partially performed their obligations to
an equal extent;
(c) Those arising in insurance entities from contracts with its policyholders; or (d)
Those covered by another Standard.

Provisions

The Standard defines provisions as a liability which can be measured only by using a
substantial degree of estimation. — A provision should be recognised when, and
only when:
1. An entity has a present obligation (legal or constructive) as a result of a past
event;
2. It is probable (i.e., more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation; and
3. A reliable estimate can be made of the amount of the obligation. The
Standard notes that it is only in extremely rare cases that a reliable estimate
will not be possible.

The amount recognised as a provision should be the best estimate of the expenditure
required to settle the present obligation at the balance sheet date.
The provisions shall not be discounted.

Gains from the expected disposal of assets should not be taken into account, even if
the expected disposal is closely linked to the event giving rise to the provision.
An entity may expect reimbursement of some or all of the expenditure required to
settle a provision (for example, through insurance contracts, indemnity clauses or
suppliers’ warranties). An entity should: (a) recognise a reimbursement when, and
only when, it is virtually certain that reimbursement will be received if the entity
settles the obligation. The amount recognised for the reimbursement should not
exceed the amount of the provision; and (b) recognise the reimbursement as a separate
asset. In the income statement, the expense relating to a provision may be presented
net of the amount recognised for a reimbursement.
Provisions should be reviewed at each balance sheet date and adjusted to reflect the
current best estimate. If it is no longer probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, the provision
should be reversed.
A provision should be used only for expenditures for which the provision was

40
originally recognised.
Provisions should not be recognised for future operating losses. An expectation
of future operating losses is an indication that certain assets of the operation may
be impaired. In this case, an entity tests these assets for impairment under AS-28
Impairment of Assets.
The Standard defines a restructuring as a programme that is planned and controlled by
management, and materially changes either: (a) the scope of a business undertaken by
an entity; or (b) the manner in which that business is conducted.
A provision for restructuring costs is recognised only when the general
recognition criteria for provisions are met.

Contingent Liabilities

The Standard defines a contingent liability as:

(a) A possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the entity; or

(b) A present obligation that arises from past events but is not recognised because
it is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; or the amount of the obligation cannot
be measured with sufficient reliability.

An entity should not recognise a contingent liability.

41
 CHAPTER 4

INDIAN ACCOUNTING STANDARD

NEED FOR CONVERGENCE TOWARDS GLOBAL STANDARDS

The last decade has witnessed a sea change in the global economic scenario. The
emergence of trans-national corporations in search of money, not only for fuelling
growth, but to sustain on-going activities has necessitated raising of capital from all
parts of the world, cutting across frontiers.
Each country has its own set of rules and regulations for accounting and financial
reporting. Therefore, when an enterprise decides to raise capital from the markets
other than the country in which it is located, the rules and regulations of that other
country will apply and this in turn will require that the enterprise is in a position to
understand the differences between the rules governing financial reporting in the
foreign country as compared to its own country of origin. Therefore, translation and
re-instatements are of utmost importance in a world that is rapidly globalising in all
ways. Further, the accounting standards and principle need to be robust so that the
larger society develops degree of confidence in the financial statements, which are put
forward by organisations.
International analysts and investors would like to compare financial statements based
on similar accounting standards, and this has led to the growing support for an
internationally accepted set of accounting standards for cross-border filings. The
harmonization of financial reporting around the world will help to raise confidence of
investors generally in the information they are using to make their decisions and
assess their risks.
Also, a strong need was felt by legislation to bring about uniformity, rationalisation,
comparability, transparency and adaptability in financial statements. Having a
multiplicity of accounting standards around the world is against the public interest. If
accounting for the same events and information produces different reported numbers,
depending on the system of standards that are being used, then it is self-evident that
accounting will be increasingly discredited in the eyes of those using the numbers. It
creates confusion, encourages error and facilitates fraud. The cure for these ills is to
have a single set of global standards, of the highest quality, set in the interest of
public. Global Standards facilitate cross border flow of money, global listing in
different stock markets and comparability of financial statements.
The convergence of financial reporting and Accounting Standards is a valuable
process that contributes to the free flow of global investment and achieves substantial
benefits for all capital market stakeholders. It improves the ability of investors to
compare investments on a global basis and, thus, lower their risk of errors of
judgment. It facilitates accounting and reporting for companies with global operations
and eliminates some costly requirements say reinstatement of financial statements. It
has the potential to create a new standard of accountability and greater transparency
provides value to all market participants including regulators. It reduces operational
challenges for accounting firms and focuses their value and expertise around an
increasingly unified set of standards. It creates an unprecedented opportunity for
standard setters and other stakeholders to improve the reporting model. For the
companies with joint listings in both domestic and foreign country, the convergence is
42
 very much significant.

INDIAN ACCOUNTING STANDARDS

Indian Accounting Standards (Ind AS) are IFRS converged standards issued by the
Central Government of India under the supervision and control of Accounting
Standards Board (ASB) of ICAI and in consultation with National Advisory
Committee on Accounting Standards (NACAS).
ASB is a committee under Institute of Chartered Accountants of India (ICAI) which
consists of representatives from government department, academicians, other
professional bodies viz. ICSI, ICAI, representatives from ASSOCHAM, CII, FICCI,
etc. National Advisory Committee on Accounting Standards (NACAS) recommend
these standards to the Ministry of Corporate Affairs (MCA). MCA has to spell out the
Accounting Standards applicable for companies in India.
Ind AS are named and numbered in the same way as the corresponding International
Financial Reporting Standards (IFRS).

SIGNIFICANCEOF IND AS (IFRS CONVERGED

STANDARDS)

In the present era of globalisation and liberalisation, the world has become an
economic village. The globalisation of the business world, the structures and the
regulations, which support it, as well as the development of e-commerce make it
imperative to have a single globally accepted financial reporting system. A number of
multi-national companies are establishing their businesses in various countries with
emerging economies and vice versa. The entities in emerging economies are
increasingly accessing the global markets to fulfill their capital needs by getting their
securities listed on the stock exchanges outside their country. Capital markets are,
thus, becoming integrated consistent with this world-wide trend. More and more
Indian companies are being listed on overseas stock exchanges. The use of different
accounting frameworks in different countries, which require inconsistent treatment
and presentation of the same underlying economic transactions, creates confusion for
users of financial statements. This confusion leads to inefficiency in capital markets
across the world. Therefore, increasing complexity of business transactions and
globalisation of capital markets call for a single set of high-quality accounting
standards.
High standards of financial reporting underpin the trust investors place in financial
and non-financial information. Thus, the case for a single set of globally accepted
accounting standards has prompted many countries to pursue convergence of national
accounting standards with IFRS.

HISTORY OF IFRS - CONVERGED INDIAN ACCOUNTING

STANDARDS (IND AS)

First Step towards IFRS

43
The Institute of Chartered Accountants of India (ICAI) being the accounting
standards- setting body in India, way back in 2006, initiated the process of moving
towards the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) with a view to enhance
acceptability and transparency of the financial information communicated by the
Indian corporates through their financial statements. This move towards IFRS was
subsequently accepted by the Government of India.
The Government of India in consultation with the ICAI decided to converge and not
to adopt IFRS issued by the IASB. The decision of convergence rather than adoption
was taken after the detailed analysis of IFRS requirements and extensive discussion
with various stakeholders. Accordingly, while formulating IFRS converged Indian
Accounting Standards (Ind AS), efforts have been made to keep these Standards, as
far as possible, in line with the corresponding IAS/IFRS and departures have been
made where considered absolutely essential. These changes have been made
considering various factors, such as, various terminology related changes have been
made to make it consistent with the terminology used in law, e.g., ‘statement of profit
and loss’ in place of ‘statement of profit and loss and other comprehensive income’
and ‘balance sheet’ in place of ‘statement of financial position’. Certain changes have
been made considering the economic environment of the country, which is different as
compared to the economic environment presumed to be in existence by IFRS.

Government of India - Commitment to IFRS Converged Ind AS

Consistent, comparable and understandable financial reporting is essential to develop

a robust economy. With a view to achieve international benchmarks of financial
reporting, the Institute of Chartered Accountants of India (ICAI), as a proactive role
in accounting, set out to introduce Indian Accounting Standards (Ind AS) converged
with the International Financial Reporting Standards (IFRS). This endeavour of the
ICAI is supported by the Government of India.
Initially Ind AS were expected to be implemented from the year 2011. However,
keeping in view the fact that certain issues including tax issues were still to be
addressed, the Ministry of Corporate Affairs decided to postpone the date of
implementation of Ind AS.
In July 2014, the Finance Minister of India at that time, Shri Arun Jaitely ji, in his
Budget Speech, announced an urgency to converge the existing accounting standards
with the International Financial Reporting Standards (IFRS) through adoption of the
new Indian Accounting Standards (Ind AS) by the Indian companies.
Pursuant to the above announcement, various steps have been taken to facilitate the
implementation of IFRS - converged Indian Accounting Standards (Ind AS). Moving
in this direction, the Ministry of Corporate Affairs (MCA) has issued the Companies
(Indian Accounting Standards) Rules, 2015 vide Notification dated February 16, 2015
covering the revised roadmap of implementation of Ind AS for companies other than
Banking companies, Insurance Companies and NBFCs and Indian Accounting
Standards (Ind AS). As per the Notification, Indian Accounting Standards (Ind AS)
converged with International Financial Reporting Standards (IFRS) shall be
implemented on voluntary basis from 1st April, 2015 and mandatorily from 1st April,
2016. Separate road-maps have been prescribed for implementation of Ind AS to
Banking, Insurance companies and NBFCs respectively.

44
WHAT ARE CARVE OUTS/INS IN IND AS?

The Government of India in consultation with the ICAI decided to converge and not to
adopt IFRS issued by the IASB. The decision of convergence rather than adoption was
taken after the detailed analysis of IFRS requirements and extensive discussion with
various stakeholders.
Accordingly, while formulating IFRS converged Indian Accounting Standards (Ind
AS), efforts have been made to keep these Standards, as far as possible, in line with
the corresponding IAS/IFRS and departures have been made where considered
absolutely essential. These changes have been made considering various factors, such
as
• Various terminology related changes have been made to make it consistent
with the terminology used in law, e.g., ‘statement of profit and loss’ in place
of ‘statement of comprehensive income’ and ‘balance sheet’ in place of
‘statement of financial position’.
• Removal of options in accounting principles and practices in Ind AS vis-a-vis
IFRS, have been made to maintain consistency and comparability of the
financial statements to be prepared by following Ind AS. However,
these changes will not result into carve outs.
• Certain changes have been made considering the economic environment of the
country, which is different as compared to the economic environment
presumed to be in existence by IFRS. These differences are due to differences
in economic conditions prevailing in India. These differences which are in
deviation to the accounting principles and practices stated in IFRS, are
commonly known as ‘Carve-outs’.

LIST OF INDIAN ACCOUNTING STANDARD

Ind AS 101 –
First-time adoption of Ind AS Its main objective is to prepare first financial statements
as per Ind AS containing high quality information that is transparent, comparable and
prepared at economical cost, suitable starting point for accounting in accordance with
Ind AS.

Ind AS 102 – Share Based payments

It deals with accounting of share-based payment transactions and reflect effect of such
payment on profit or loss and financial statements of entity.

45
Ind AS 103 – Business Combination
It applies to transaction or other event that meets the definition of a business
combination. This standard helps in improving the relevance, reliability and
comparability of the information that a reporting entity provides in its financial
statements about a business combination and its effects.
Ind AS 104 – Insurance Contracts

This standard specifies financial reporting for insurance contracts by insurer entity.

Ind AS 105 – Non-Current Assets Held for Sale and Discontinued

Operations
This standard specifies accounting for assets held for sale, and presentation and
disclosure of discontinued operations.

Ind AS 106 – Exploration for and Evaluation of Mineral Resources

This standard specifies financial reporting for exploration and evaluation of mineral
resources.

Ind AS 107 – Financial Instruments: Disclosures

This standard require entities to provide disclosures related to financial instruments
that will enable users to evaluate significance of financial instruments for entity's
financial position and performance and nature and extent of risks arising from
financial instruments to which the entity is exposed during the period and at the end of
the reporting period, and how the entity manages those risks.

Ind AS 108 – Operating Segments

This standard discloses information to enable users of its financial statements to
evaluate the nature and financial effects of the business activities in which it engages
and the economic environments in which it operates.

Ind AS 109 – Financial Instruments

This Standard establish principles for financial reporting of financial assets and
financial liabilities that will present relevant and useful information to users of
financial statements for their assessment of the amounts, timing and uncertainty of an
entity's future cash flows.

Ind AS 110 – Consolidated Financial Statements

This standard establish principles for the presentation and preparation of consolidated
financial statements when an entity controls one or more other entities.

Ind AS 111 – Joint Arrangements

This standard establish principles for financial reporting by entities that have an
interest in arrangements that are controlled jointly (known as joint arrangements).

Ind AS 112 – Disclosure of Interests in Other Entities

This standard requires an entity to disclose information that enable users of its
financial statements nature risk and effect of such interest in other entities.

46
Ind AS 113 – Fair Value Measurement
This standard defines fair value, set outs framework for measuring fair value and
disclosures about fair value measurements. Such fair measurement principle will
apply when another Ind AS requires or permits use of fair value.

Ind AS 114 – Regulatory Deferral Accounts

This Standard specifies financial reporting requirements for regulatory deferral
account balances that arise when an entity provides goods or services to customers at
a price or rate that is subject to rate regulation.

Ind AS 115 – Revenue from Contracts with Customers

This Standard establishes principles that an entity shall apply to report useful
information to users of financial statements about nature, amount, timing and
uncertainty of revenue and cash flows arising from a contract with a
customer.

Ind AS 1 – Presentation of Financial Statements

This standard sets out overall requirements for presentation of financial statements,
guidelines for their structure and minimum requirements for their content to ensure
comparability.

Ind AS 2 – Inventories Accounting

Its deals with accounting of inventories such as measurement of inventory, inclusions
and exclusions in its cost, disclosure requirements, etc.

Ind AS 7 – Statement of Cash Flows

It deals with cash received or paid during the period from operating, financing and
investing activities. It also shows any change in the cash and cash equivalents of any
entity.

Ind AS 8 – Accounting Policies, Changes in Accounting Estimates and

Errors
It prescribes criteria for selecting and changing accounting policies together with
accounting treatments and disclosures.

Ind AS 10 – Events after Reporting Period It deals with any adjusting or non-
adjusting event occurring after reporting date and

Ind AS 12 – Income Taxes

This standard prescribes accounting treatment for income taxes. The principal issue in
accounting for income taxes is how to account for the current and future tax

Ind AS 16 – Property, Plant and Equipment

This standard prescribes accounting treatment for Property, Plant And Equipment
47
(PPE) such as recognition of assets, determination of their carrying amounts and the

48
depreciation charges and impairment losses to be recognised in relation to them.

Ind AS 17 – Leases
This standard prescribes appropriate accounting policies and principle for lessees and
lessors.

Ind AS 19 – Employee Benefits

This standard prescribes accounting and disclosure requirements relating to employee
benefits.

Ind AS 20 – Accounting for Government Grants and Disclosure of

Government Assistance

This Standard shall be applied in accounting for and in disclosure of, government
grants and in disclosure of other forms of government assistance.

Ind AS 21 – The Effects of Changes in Foreign Exchange Rates

This Standard prescribes how to include foreign currency transactions and foreign
operations in the financial statements of an entity and how to translate financial
statements into a presentation currency.

Ind AS 23 – Borrowing Costs

It provides borrowing cost incurred on qualifying asset should form part of that asset,
it also guides on which finance cost should be capitalised, conditions for
capitalisation, time of commencement and cessation of capitalisation of borrowing
cost.

Ind AS 24 – Related Party Disclosures

This standard ensures that an entity's financial statements contains necessary
disclosures to draw attention to the possibility that its financial position and profit or
loss may have been affected by the existence of related parties and by transactions and
outstanding balances.

Ind AS 27 – Separate Financial Statements

This Standard prescribes accounting and disclosure requirements for investments in
subsidiaries, joint ventures and associates when an entity prepares separate financial
statements.

Ind AS 28 – Investments in Associates and Joint Ventures

This standard prescribes accounting for investments in associates and to set out
requirements for the application of equity method when accounting for investments in
associates and joint ventures.

Ind AS 29 – Financial Reporting in Hyperinflationary Economies

This standard will gives inclusive list of characteristics that will categorise an
economy as hyper inflationary and reporting of operating results and financial
position.
49
Ind AS 32 – Financial Instruments: Presentation
This Standard establishes principles for presenting financial instruments as liabilities
or equity and for offsetting financial assets and financial liabilities.

Ind AS 33 – Earnings per Share

This Standard prescribe principles for the determination and presentation of earnings
per share

Ind AS 34 – Interim Financial Reporting

This Standard prescribes minimum content of an interim financial report and
principles for recognition & measurement in complete or condensed financial
statements for an interim period.

Ind AS 36 – Impairment of Assets

This Standard prescribe procedures that an entity applies to ensure that an asset’s
carrying amount is not more than its recoverable amount.

Ind AS 37 – Provisions, Contingent Liabilities and Contingent Assets

This Standard ensures that appropriate recognition criteria and measurement bases are
applied to provisions, contingent liabilities and contingent assets and proper
disclosures are made in the notes to enable users to understand their nature, timing and
amount.

Ind AS 38 – Intangible Assets

This Standard prescribes accounting treatment for intangible assets. It specifies
conditions for recognition of intangible asset and how to measure carrying amount at
which intangible asset should be recognised.

Ind AS 40 – Investment Property

This Standard prescribes accounting treatment for investment property and related
disclosure requirements.

Ind AS 41 – Agriculture
This Standard prescribes accounting treatment and disclosures related to agricultural
activity.

50
4.6 ROADMAP TO IND AS
The Ind AS shall be applicable to the companies as follows:

(i) On voluntary basis for financial statements for accounting periods beginning

on or after April 1, 2015, with the comparatives for the periods ending 31st

March, 2015 or thereafter;

(ii) On mandatory basis for the accounting periods beginning on or after April
1, 2016, with comparatives for the periods ending 31st March, 2016, or
thereafter, for the companies specified below:

(a) Companies whose equity and/or debt securities are listed or are in the process of

listing on any stock exchange in India or outside India and having net worth of Rs.

500 Crore or more.

(b) Companies other than those covered in (ii) (a) above, having net worth of Rs.

500 Crore or more.

(c) Holding, subsidiary, joint venture or associate companies of

companies covered under (ii) (a) and (ii) (b) above.

(iii) On mandatory basis for the accounting periods beginning on or after April 1,
2017, with comparatives for the periods ending 31st March, 2017, or thereafter,
for the companies specified below:
(a) Companies whose equity and/or debt securities are listed or are in the process

of being listed on any stock exchange in India or outside India and having net

worth of less than rupees five hundred Crore.

(b) Companies other than those covered in paragraph (ii) and paragraph (iii)(a)

above that is unlisted companies having net worth of two hundred and fifty

crore or more but less than rupees five hundred Crore.

(c) Holding, subsidiary, joint venture or associate companies of

companies covered under paragraph (iii) (a) and (iii) (b) above.

However, Companies whose securities are listed or in the process of listing on SME

51
exchanges shall not be required to apply Ind AS. Such companies shall continue to

comply with the existing Accounting Standards unless they choose otherwise.

(iv) Once a company opts to follow the Indian Accounting Standards (Ind AS),
it shall be required to follow the Ind AS for all the subsequent financial
statements.

(v) Companies not covered by the above roadmap shall continue to apply existing
Accounting Standards prescribed in Annexure to the Companies (Accounting
Standards) Rules, 2006.

52
 CHAPTER 5

COMPARATIVE ANALYSIS OF INDIAN GAAP AND IND AS

IND AS 1 AS 1

Presentation of Financial Disclosure of Accounting Policies

Statements
1 IND AS 1 deals with presentation of AS 1 deals with disclosure of
financial statements. accounting policies.

2 Scope is wider. Scope is comparatively narrow.

3 Explicit statement in the financial

statements of compliance with all
the Indian Accounting Standards.
Further, Ind AS 1 allows deviation
from a requirement of an accounting
standard.

4 Requires presentation and provides Such bifurcation is not required.

criteria for classification of Current /
Non- Current assets / liabilities.

5 Prohibits presentation of any item as No such prohibition.

extraordinary Item in the statement
of profit and loss or in the notes.

6 Requires disclosure of judgments

made by management while framing
of accounting polices. Also, it
requires disclosure of key
assumptions about the future and
other sources of measurement
uncertainty.
7 Requires classification of expenses to No specific restriction.
be presented based on nature of
expenses.

53
8 Requires presentation of balance
sheet as at the beginning of the
earliest period when
an entity applies an accounting
policy retrospectively or makes a
retrospective restatement of items in
the financial statements, or when it
reclassifies items in its financial
statements.

9 Requires the financial statements to

include a Statement of Changes in
Equity to be shown as a part of the
balance sheet.

IND AS 2 AS 2

Inventories Valuation of Inventories

1 Deals with the subsequent No such provision.

recognition of cost/carrying amount
of inventories as an expense,

2 Provides explanation with regard to AS 2 does not contain such

inventories of service providers. anExplanation.

3 Explains that inventories do not Does not contain specific explanation

include machinery spares which can in respect of such Spares.
be used only in connection with an
item of fixed asset and whose use is
expected to be irregular.

4 Ind AS 2 defines fair value and Does not contain the definition of fair
provides an explanation in respect of value.
distinction between ‘net realisable
value’ and ‘fair value’.

54
5 Provides detailed guidance in case of Does not deal with such reversal.
subsequent assessment of net
realisable value. Also deals with the
reversal of the write-down of
inventories to net realisable value to
the extent of the amount of original

write-down, and the recognition and

disclosure thereof in the financial
statements

6 Excludes from its scope only the Excludes from its scope such types of
measurement of inventories held by inventories.
producers of agricultural and forest
products, agricultural produce after
harvest, and minerals and mineral
products though it provides guidance
on measurement of such inventories.

7 Does not specifically state so and
requires the use of consistent cost
formulas for all inventories having a
similar nature and use to the entity.
Specifically provides that the formula
used in determining the cost of an
item of inventory should reflect the
fairest possible approximation to the
cost incurred in bringing the items of
inventory to their present location
and condition.

8 Requires more disclosures Comparatively requires less

disclosure.

IND AS 7 AS 3

Statement of Cash Flows Cash Flow Statements

1 Specifically includes bank overdrafts Existing AS 3 is silent on this aspect

which are repayable on demand as a
part of cash and cash equivalents.

55
2 Treatment of cash payments to Does not contain such requirements.
manufacture or acquire assets held
for rental to others and subsequently
held for sale in the ordinary course
of business as cash flows from
operating activities

3 Treatment of cash receipts from rent Does not contain such requirements
and subsequent sale of such assets as
cash flow from operating activity

4 Specifically requires adjustment of Does not contain such requirements

the profit or loss for the effects of
‘undistributed profits of associates
and non- controlling interests’ while
determining the net cash flow from
operating activities
5 Does not contain such requirements Cash flows associated with
extraordinary activities to be
separately classified as arising from
operating, investing and financing
activities

6 Requires to disclose the amount of Does not contain such requirements

cash and cash equivalents and other
assets and liabilities in the
subsidiaries or other businesses over
which control is obtained or lost

7 Requires to classify cash flows Does not contain such requirements

arising from changes in ownership
interests in a subsidiary that do not
result in a loss of control as cash
flows from financing activities

8 Uses the term ‘functional currency’ Uses the term instead of ‘reporting
instead of ‘reporting currency’ currency’

56
9 Requires more disclosures
IND AS 8
Accounting Policies, Changes in
Accounting Estimates & Errors
1 Objective of Ind AS 8 is to prescribe
the criteria for selecting and
changing accounting policies,
together with the accounting
treatment and disclosure of changes
in accounting policies, changes in
accounting estimates and
corrections of errors.
2 Intends to enhance the relevance
and reliability of an entity’s
financial statements and the
comparability of those financial
statements over time and with the
financial statements of other
entities.
3 Restricts the definition of
accounting policies to specific
accounting principles and the
methods of applying those
principles
4 Such situation is not mentioned.
Comparatively requires less
disclosure.
AS 5
Net Profit or Loss for the Period,
Prior
Period Items, and Changes in
Accounting Policies
Objective is to prescribe the
classification and disclosure of
certain items in the statement of
profit and loss for uniform
preparation and presentation of
financial statements.
Broadens the definition to include
bases, conventions, rules and
practices (in addition to principles)
applied by an entity in the
preparation and presentation of
financial statements.
Allows the situation where change in
accounting policy is required by
statute.
57
5 Specifically states that an entity Does not contain such requirements
shall select and apply its accounting
policies consistently for similar
transactions, other events and
conditions, unless an Ind AS
specifically requires or permits

categorisation of items for which

different policies may be
appropriate.

6 Requires that changes in accounting Does not specify how change in

policies should be accounted for accounting policy should be
with retrospective effect subject to accounted for.
limited exceptions

7 Uses the term errors and relates it to Defines prior period items as
errors or omissions arising from a incomes or expenses which arise in
failure to use or misuse of reliable the current period as a result of
information (in addition to errors or omissions in the
mathematical mistakes, mistakes in preparation of financial statements
application of accounting policies of one or more prior periods.
etc.) that was available when the
financial statements of the prior
periods were approved for issuance
and could reasonably be expected to
have been obtained and taken into
account in the preparation and
presentation of those financial
statements.

8 Specifically states that errors include Does not contain such requirements
frauds.

58
9 Requires rectification of material
prior period errors with
retrospective effect subject to
limited exceptions.
10 Requires more disclosures
IND AS 10
Events occurring after the
reporting period
1 Material non-adjusting events are
required to be disclosed in the
financial statements.
2 Dividend proposed or declared after
the reporting period, cannot be
recognised as a liability in the
financial statements because it does
not meet the criteria of a present
obligation as per Ind AS 37. Such
dividend is required to be disclosed
in the notes in the financial
statements as per Ind AS 1
3 If after the reporting date, it is
determined that the fundamental
accounting assumption of going
concern is no longer appropriate, Ind
AS 10 requires a fundamental
change in the basis of accounting.
Requires the rectification of prior
period items with prospective effect.
Comparatively requires less
disclosure.
AS 4
Contingencies and Events
occurring after the balance sheet
date
Requires the same to be disclosed in
the report of approving authority
The same is required to be adjusted in
financial statements
Requires assets and liabilities to be
adjusted for events occurring after
the balance sheet date that indicate
that the fundamental accounting
assumption of going concern is not
appropriate.
59
 IND AS 11
Construction Contracts
1 No such specific reference to
Borrowing Cost.
2 Requires that contract revenue shall
be measured at fair value of
consideration received/receivable.
3 Appendix A of Ind AS 11 deals with
accounting aspects involved in
Service Concession Arrangements
and Appendix B of Ind AS 11 deals
with disclosures of such
arrangements.
IND AS 12
Income Taxes
1 Based on balance sheet approach. It
requires recognition of tax
consequences of differences between
the carrying amounts of assets and
liabilities and their tax base.
AS 7
Construction Contracts
Includes borrowing costs as per AS
16, Borrowing Costs, in the costs that
may be attributable to contract
activity in general and can be
allocated to specific contracts
Does not recognise fair value concept
as contract revenue is measured at
consideration received/receivable
Does not deal with accounting for
Service
Concession Arrangements
AS 22
Taxes on Income
Based on income statement
approach. It requires recognition of
tax consequences of differences
between taxable income and
accounting income.
60
2 Deferred tax asset is recognised for
all deductible temporary differences
to the extent that it is probable that
taxable profit will be available
against which the deductible
temporary difference can be utilised,
the criteria for recognising deferred
tax assets arising from the carry
forward of unused tax losses and tax
credits are the same that for
recognising deferred tax assets
arising from deductible temporary
differences. However, the existence
of unused tax losses is strong
evidence that future taxable profit
may not be available. Therefore,
when an entity has a history of
recent losses, the entity recognises a
deferred tax asset arising from
Deferred tax assets are recognised
and carried forward only to the extent
that there is a reasonable certainty
that sufficient future taxable income
will be available against which such
deferred tax assets can be realised.
Where deferred tax asset is
recognised against unabsorbed
depreciation or carry forward of
losses under tax laws, it is recognised
only to the extent that there is virtual
certainty supported by convincing
evidence that sufficient future taxable
income will be available against
which such deferred tax assets can be
realised.

unused tax losses or tax credits only

to the extent that the entity has
sufficient taxable temporary
differences or there is convincing
other evidence that sufficient taxable
profit will be available against which
the unused tax losses or unused tax
credits can be utilised by the entity

3 Current and deferred tax are Does not specifically deal with this
recognised as income or an expense aspect.
and included in profit or loss for the
period, except to the extent that the
tax arises from a transaction or event
which is recognised outside profit or
loss, either in other comprehensive
income or directly in equity, in those
cases tax is also recognised in other
comprehensive income or in equity,
as appropriate.

61
4 Disclosure requirements are more Comparatively less detailed.
detailed.
5 Provides guidance that deferred tax Does not deal with this aspect.
asset/liability arising from
revaluation of assets shall be
measured on the basis of tax
consequences from the sale of asset
rather than through use.

6 Provides guidance as to how an Does not deal with this aspect.

entity should account for the tax
consequences of a change in its tax
status or that of its shareholders.

7 The concept of virtual certainty does Explains virtual certainty supported

not exist in Ind AS 12, this by convincing evidence.
explanation is not included.

8 Does not specifically deal with these Specifically provides guidance

situations. regarding recognition of deferred tax
in the situations of Tax Holiday
under Sections 80-IA and 80- IB and
Tax Holiday under Sections 10A and
10B of the Income Tax Act,
1961.Provides guidance regarding
recognition of deferred tax asset in
case of loss under the head ‘capital
gains’.

9 Does not specifically deal with this Specifically provides guidance

aspect. regarding tax rates to be applied in
measuring deferred tax assets/
liability in a situation where a
company pays tax under section
115JB.

IND AS 16 IND AS 10 & 6

Property, Plant & Equipment Accounting for Fixed Assets and

Depreciation Accounting

62
1 Ind AS 16 also deals with
depreciation of property, plant and
equipment
2 Ind AS 16 does not exclude such
developers from its scope
Presently covered by AS 6.
Specifically excludes accounting for
real estate developers from its scope

3 Lays down the following criteria Does not lay down any specific
recognition criteria for recognition of
which should be satisfied for
a fixed asset.
recognition of items of property,
plant and equipment:(a) it is
probable that future economic
benefits associated with the item
will flow to the entity, and

(b) the cost of the item can be

measured reliably.

4 Initial costs as well as the Subsequent expenditures related to

subsequent costs are evaluated on
the same recognition principles to
determine whether the same should
be recognised as an item of
property, plant and equipment.
an item of fixed asset are capitalised
only if they increase the future
benefits from the existing asset
beyond its previously assessed
standard of performance.

5 Requires that major spare parts Only those spares are required to be
qualify as property, plant and capitalised which can be used only in
equipment when an entity expects to connection with a fixed asset and
use them during more than one whose use is expected to be irregular.
period and when they can be used
only in connection with an item of
property, plant and equipment.

63
6 Based on the component approach.
Under this approach, each major
part of an item of property plant and
equipment with a cost that is
significant in relation to the total
cost of the item is depreciated
separately.
7 The cost of major inspections
should be capitalised with
consequent derecognition of any
remaining carrying amount of the
cost of the previous inspection.
8 Ind AS 16 requires that the initial
estimate of the costs of dismantling
and removing the item and restoring
the site on which it is located should
be included in the cost of the
respective item of property plant and
equipment.
9 Requires an entity to choose either
the cost model or the revaluation
model as its accounting policy and
to apply that policy to an entire class
of property plant and equipment. It
requires that under revaluation
model, revaluation be made with
reference to the fair value of items
of property plant and equipment. It
also requires that revaluations
should be made with sufficient
regularity to ensure that the carrying
amount does not differ materially
from that which would be
determined using fair value at the
balance sheet date.
It recognises the said approach in
only one paragraph by stating that
accounting for a tangible fixed asset
may be improved if total cost thereof
is allocated to its various parts. Apart
from this, neither existing AS 10 nor
existing AS 6 deals with the aspects
such as separate depreciation of
components, capitalising the cost of
replacement, etc.
Does not deal with this aspect.
Does not contain any such
requirement.
Recognises revaluation of fixed
assets. However, the revaluation
approach adopted therein is ad hoc in
nature, as it does not require the
adoption of fair value basis as its
accounting policy or revaluation of
assets with regularity. It also
provides an option for selection of
assets within a class for revaluation
on systematic basis.
64
10 Provides that the revaluation surplus
included in equity in respect of an
item of property plant and
equipment may be transferred to the
retained earnings when the asset is
derecognised. This may involve
transferring the whole of the surplus
when the asset is retired or disposed
of. However, some of the surplus
may be transferred as the asset is
used by an entity. In such a case, the
amount of the surplus transferred
would be the difference between the
depreciation based on the revalued
carrying amount of the asset and
depreciation based on its original
cost. Transfers from revaluation
surplus to the retained earnings are
not made through profit or loss.
11 With regard to self-constructed
assets, Ind AS 16, specifically states
that the cost of abnormal amounts of
wasted material, labour, or other
resources incurred in the
construction of an asset is not
included in the cost of the assets.
As compared to the above, neither
existing AS 10 nor existing AS 6
deals with the transfers from
revaluation surplus. To deal with this
aspect, the Institute issued a
Guidance Note on Treatment of
Reserve Created on Revaluation of
Fixed Assets. The Guidance Note
provides that if a company has
transferred the difference between
the revalued figure and the book
value of fixed assets to the
‘Revaluation Reserve’ and has
charged the additional depreciation
related thereto to its profit and loss
account, it is possible to transfer an
amount equivalent to accumulated
additional depreciation from the
revaluation reserve to the profit and
loss account or to the general reserve
as the circumstances may permit,
provided suitable disclosure is made
in the accounts. However, the said
Guidance Note also recognises that it
would
be prudent not to charge the
additional depreciation arising due to
revaluation against the revaluation
reserve.
Existing AS 10 while dealing with
self- constructed fixed assets does
not mention the same.
65
12 Provides that the cost of an item of Existing AS 10 does not contain this
property, plant and equipment is the requirement.
cash price equivalent at the
recognition date. If payment is
deferred beyond normal credit
terms, the difference between the
cash price equivalent and the total
payment is recognised as interest
over the period of credit unless such
interest is capitalised in accordance
with Ind AS 16. Similarly, the
concept of cash price equivalent has
been followed in case of disposal of
fixed assets also.

13 Does not specifically deal with this Existing AS 10 specifically deals

aspect as these would basically be
covered by Ind AS 31 as jointly
controlled assets.
14 Does not specifically deal with this
situation.
with the fixed assets owned by the
entity jointly with others.
Specifically deals with the situation
where several assets are purchased
for a consolidated price. It provides
that the consideration should be
apportioned to the various assets on
the basis of their respective fair
values.

15 Requires that change in depreciation It is considered as a change in

method should be considered as a accounting policy and treated
change in accounting estimate and accordingly.
treated accordingly.

17 Requires that compensation from Does not specifically deal with this
third parties for items of property, aspect.
plant and equipment that were
impaired, lost or given up should be
included in the statement of profit
and loss when the compensation
becomes receivable.

66
18 Specifically provides that gains Existing AS 10 is silent on this
arising on derecognition of an item aspect.
of property, plant and equipment
should not be treated as revenue as
defined in AS 9.

19 Deals with the situation where No such provision is there in existing

entities hold the items of property, AS 10.
plant and equipment for rental to
others and subsequently sell the
same.

20 Does not deal with the assets ‘held
for sale’ because the treatment of
such assets is covered in Ind AS 105
Non-current Assets
Held for Sale and
Discontinued
Operations.
21 requires that if property, plant and
equipment is acquired in exchange
for a non-monetary asset, it should
be recognised at its fair value unless
(a) the exchange transaction lacks
commercial substance or (b) the fair
value of neither the asset received
nor the asset given up is reliably
measurable.
Deals with accounting for items of
fixed assets retired from active use
and held for sale.
The existing standard requires that
when a fixed asset is acquired in
exchange for another asset, its cost is
usually determined by reference to
the fair market value of the
consideration given. It may be
appropriate to consider also the fair
market value of the asset acquired if
this is more clearly evident.

22 Ind AS 16 includes Appendix A NA

which addresses how the changes in
the measurement of an existing
decommissioning, restoration and
similar liability that result from
changes in the estimated timing or
amount of the outflow of resources
embodying economic benefits
required to settle the obligation, or a
change in the discount rate, shall be
accounted for

67
23 Disclosure requirements of Ind AS
16 are significantly elaborate as
compared to AS 10/AS 6.

IND AS 17 AS 19

Leases Leases

1 Ind AS 17 does not have such scope The existing standard excludes leases
exclusion. It has specific provisions of land from its scope.
dealing with leases of land and
building applicable.

2 Further, Ind AS 17 is not applicable The existing standard does not

as the basis of measurement for contain such provisions.
property held by lessees/provided by
lessors under operating leases but
treated as investment property and
biological assets held by lessees/
provided by lessors under operating
dealt with in the Standard on
Agriculture.

3 The definition of residual value

appearing in the existing standard
has been deleted in Ind AS 17.

4 in respect of treatment of initial

direct costs incurred by a non-
manufacturer/non- dealer-lessor in
respect of a finance lease
(see point 5 below), the term ‘initial
direct costs’ has been specifically
defined in Ind AS 17 and definition
of the term ‘interest rate implicit in
the lease’ as per the existing standard
has been modified in Ind AS 17.

68
5 Makes a distinction between No such distinction.
inception of lease and
commencement of lease.
6 The lessee shall recognise finance As per the existing standard such
leases as assets and liabilities in recognition is at the inception of the
balance sheet at the commencement lease.
of the lease term
7 Requires current/non-current These matters are not addressed in the
classification of lease liabilities if existing standard.
such classification is made for other
liabilities. Also, it makes reference
to Ind AS 105, Non-current Assets
Held for Sale and Discontinued
Operations.

8 Ind AS 17 retains the deferral and
amortisation principle, it does not
specify any method of amortisation.
As per the existing standard, if a sale
and leaseback transaction results in a
finance lease, excess, if any, of the
sale proceeds over the carrying
amount shall be deferred and
amortised by the seller-lessee over
the lease term in proportion to
depreciation of the leased asset.

9 Provides guidance on accounting for The existing standard does not

incentives in the case of operating contain such guidance.
leases, evaluating the substance of
transactions involving the legal form
of a lease and determining whether
an arrangement contains a lease.

69
 IND AS 18
Revenue
1 Definition of ‘revenue’ is broad
compared to the definition of
‘revenue’ given in existing AS 9
because it covers all economic
benefits that arise in the ordinary
course of activities of an entity
which result in increases in equity,
other than increases relating to
contributions from equity
participants.
2 Revenue arising from agreements of
real estate development are
specifically scoped out
3 Requires the revenue to be measured
at fair value of the consideration
received or receivable
4 Specifically deals with the exchange
of goods and services with goods
and services of similar and
dissimilar nature
5 Requires recognition of revenue
using percentage of completion
method only
6 Requires interest to be recognised
using effective interest rate method.
7 Specifically provides guidance
regarding revenue recognition in
case the entity is under any
obligation to provide free or
discounted goods or services or
award credits to its customers due to
any customer loyalty programme.
AS 9
Revenue Recognition
Revenue is gross inflow of cash,
receivables or other consideration
arising in the course of the ordinary
activities of an enterprise from the
sale of goods, from the rendering of
services, and from the use by
othersof enterprise resources yielding
interest, royalties and dividends.
Existing AS 9 does not exclude the
same
Revenue is recognised at the nominal
amount of consideration receivable
This aspect is not dealt with in the
existing AS 9.
Completed Service Contract method
is permitted.
Requires the recognition of revenue
from interest on time proportion
basis.
Does not deal with this aspect.
70
8 Does not specifically deal with the Specifically deals with disclosure of
same. excise duty as a deduction from
revenue from sales transactions.

Ind AS 19 AS 15

Employees Benefits Employees Benefits

1 Employee benefits arising Does not deal with the same.

from
constructive obligations are also
covered
2 The term employee includes The term includes directors.
wholetime directors

3 Deals with situations where there is a Does not deal with it.
contractual agreement between a
multi- employer plan and its
participants that determines how the
surplus in the plan will be distributed
to the participants

4 Participation in a defined benefit Does not contain similar provisions.

plan sharing risks between various
entities under common control is a
related party transaction for each
group entity and some disclosures
are required in the separate or
individual financial statements of an
entity
5 Encourages, but does not require, an Does not require involvement of a
qualified actuary, does not
entity to involve a qualified actuary
specifically encourage the same.
in the measurement of all material
postemployment benefit obligations

6 Financial assumptions shall be based Does not clarify the same

on market expectations, at the end of
the reporting period, for the period
over which the obligations are to be
settled .

71
7 Requires recognition of the actuarial Requires recognition of the actuarial
gains and losses in other gains and losses immediately in the
comprehensive income, both for statement of profit and loss as
post-employment defined benefit income or expense.
plans and other long-term
employment benefit plans. The
actuarial gains and losses recognised
in other comprehensive income
should be recognised immediately in
retained earnings and should not be
reclassified to profit or loss in a
subsequent period.

Ind AS 20 AS 12

Accounting for Government Accounting for Government

Grants and Disclosure of Grants

Government
Assistance
1 Deals with the other forms of Does not deal with such government
government assistance which do not assistance.
fall within the definition of
government grants. It requires that
an indication of other forms of
government assistance from which
the entity has directly benefited
should be disclosed in the financial
statements.

72
2 Based on the principle that all
government grants would normally
have certain obligations attached to
them and these grants should be
recognised as income over the
periods which bear the cost of
meeting the obligation. It, therefore,
specifically prohibits recognition of
grants directly in the shareholders’
funds.
3 Does not recognise government
grants of the nature of promoters’
contribution.
4 Requires to to value non-monetary
grants at their fair value, since it
results into presentation of more
relevant information and is
conceptually superior as compared
to valuation at a nominal amount.
5 Requires presentation of such grants
in balance sheet only by setting up
the grant as deferred income. Thus,
the option to present such grants by
deduction of the grant in arriving at
at at its book value is not available
under Ind AS 20
Requires that in case the grant is in
respect of non depreciable assets, the
amount of the grant should be shown
as capital reserve which is a part of
shareholders’ funds. It further
requires that if a grant related to a
non-depreciable asset requires the
fulfilment of certain obligations, the
grant should be credited to income
over the same period over which the
cost of meeting such obligations is
charged to income. Also gives an
alternative to treat such grants as a
deduction from the cost of such asset.
Recognises that some government
grants have the characteristics similar
to those of promoters’ contribution.
It requires that such grants should be
credited directly to capital reserve
and treated as a part of shareholders’
funds.
Requires that government grants in
the form of nonmonetary assets,
given at a concessional rate, should
be accounted for on the basis of their
acquisition cost. In case a non-
monetary asset is given free of cost,
it should be recorded at a nominal
value.
Gives an option to present the grants
related to assets, including non-
monetary grants at fair value in the
balance sheet either by setting up the
grant as deferred income or by
deducting the grant from the gross
value of asset concerned in arriving
at at its book value.
73
6 Requires that loans received from a does not require such treatment.
government that have a below-
market rate of interest should be
recognised andmeasured in
accordance with Ind AS 39 (which
requires all loans to be recognised at
fair value, thus requiring interest to
be imputed to loans with a below-
market rate of interest)

Ind AS 21 AS 11

The Effects of Changes in Foreign The Effects of Changes in Foreign

Exchange Rates Exchange Rates

1 Excludes from its scope forward Does not such exclude accounting for
such contracts.
exchange contracts and other similar
financial instruments, which are
treated in
accordance with Ind AS 39
2 Based on functional currency Not based on functional currency

3 The factors to be considered in Based on integral foreign operations

determining an entity’s functional and non-integral foreign operations
currency are similar to the indicators approach for accounting for a foreign
in existing AS 11 to determine the operation
foreign operations as nonintegral
foreign operations. As a result,
despite the difference in the term,
there are no substantive differences
in respect of accounting of a foreign
operation.

4 Presentation currency can be Does not explicitly state so

different from local currency

74
5 Permits an option to recognise
exchange differences arising on
translation of certain long-term
monetary items from foreign
currency to functional currency
directly in equity. In this situation,
Ind AS 21 requires the accumulated
exchange differences to be
transferred to profit or loss in an
appropriate manner.
6 Permits an option to recognise
exchange differences arising on
translation of certain long-term
monetary items from foreign
currency to functional currency
directly in equity and to transfer the
same to profit or loss over the term
of such items.
Ind AS 23
Borrowing Costs
1 Does not require an entity to apply
this standard to borrowing costs
directly attributable to the
acquisition, construction or
production of a qualifying asset
measured at fair value.
Does not permit such a treatment.
Gives an option to the foreign
currency gains and losses to
recognise exchange differences
arising on translation of certain long-
term monetary items from foreign
currency to functional currency
directly in equity to be transferred to
profit or loss over the life of the
relevant liability/asset if such items
are not related to acquisition of fixed
assets upto 31st March 2011; where
such items are related to acquisition
of fixed assets,the foreign exchange
differences can be recognised as part
of the cost of the asset.
AS 16
Borrowing Costs
Does not provide for such scope
relaxation.
75
2 Excludes the application of this
Standard to borrowing costs directly
attributable to the acquisition,
construction or production of
inventories that are manufactured, or
otherwise produced, in large
quantities on a repetitive basis
3 Requires to calculate the interest
expense using the effective interest
rate method as described in Ind AS
39 Financial Instruments:
Recognition and
Measurement.
4 Explanation is not included in the Ind Gives
AS 23.
5 Provides that when the Standard on
Financial Reporting in
Hyperinflationary Economies is
applied, part of the borrowing costs
that compensates for inflation should
be expensed as required by
that Standard (and not capitalised in
respect of qualifying assets).
Does not provide for such scope
relaxation and is applicable to
borrowing costs related to all
inventories that require substantial
period of time to bring them in
saleable condition.
Borrowing Costs, inter alia, include
the following:(a) interest and
commitment charges on bank
borrowings and other short-term and
long-term borrowings; amortisation
of discounts or premiums relating to
borrowings; amortisation of ancillary
costs incurred in connection with the
arrangement of borrowings;
explanation for meaning
of
‘substantial period of time’ appearing
in the definition of the term
‘qualifying asset’.
Does not contain a similar
clarification because at present, in
India, there is no Standard on
Financial Reporting in
Hyperinflationary Economies.
76
6 Specifically provides that in some This specific provision is not there in
circumstances, it is appropriate to the existing AS.
include all borrowings of the parent
and its subsidiaries when computing
a weighted average of the borrowing
costs while in other circumstances, it
is appropriate for each subsidiary to
use a weighted average of the
borrowing costs applicable to its
own borrowings.

7 Requires disclosure of capitalisation Does not have this disclosure

rate used to determine the amount of requirement
borrowing costs eligible for
capitalisation.

Ind AS 24 AS 18

Related Party Disclosures Related Party Disclosures

1 Uses the term “a close member of Uses the term “relatives of an

that person’s family” individual”

2 Includes the persons specified Covers the spouse, son, daughter,

within the meaning of ‘relative’
under the Companies Act 1956 and
that person’s domestic
partner, children of that person’s
domestic partner and dependants of
that person’s domestic partner.
brother, sister, father and mother
who may be expected to influence,
or be influenced by, that individual
in his/her dealings with the reporting
enterprise. Hence, the definition as
per Ind AS 24 is much wider.

77
3 There is extended coverage of Defines state-controlled enterprise as
“an enterprise which is under the
Government Enterprises, as it
control of the Central Government
defines a government- related entity and/or any State Government(s)”.
as “an entity that is controlled,
jointly controlled or
significantly influenced by a
government.”
Further, “Government refers to
government, government agencies
and similar bodies whether local,
national or international.”
4 Covers KMP of the parent as well. Covers key management personnel
(KMP) of the entity only

5 There is extended coverage in case Co-venturers or co-associates are not

of joint ventures. Two entities are related to each others.
related to each other in both their
financial statements, if they are
either co-venturers or one is a
venturer and the other is an
associate.
6 Does not specifically mention this. Mentions that where there is an
inherent difficulty for management
to determine the effect of influences
which do not lead to transactions,
disclosure of such effects is not
required.

7 Specifically includes post- Does not specifically cover entities

employment benefit plans for the that are post-employment benefit
benefit of employees of an entity or plans, as related parties.
its related entity as related parties.

8 Requires an additional disclosure as No such requirement.

to the name of the next most senior
parent which produces consolidated
financial statements for public use

78
 9 Requires extended disclosures for Does not specifically require.
compensation of KMP under
different categories.

10 Requires “the amount of the Gives an option to disclose the

transactions” need to be disclosed, “Volume of the transactions either as
an amount or as an appropriate
proportion”.

11 Requires disclosures of certain Presently exempts the disclosure of

information by the government such information.
related entities

12 Does not include such clarificatory Includes clarificatory text, primarily

text and allows respective standards with regard to control, substantial
to deal with the same. interest (including 20% threshold),
significant influence (including 20%
threshold).

79
 Ind AS 27
Consolidated and Separate
Financial
Statements
1 Makes the preparation of
Consolidated Financial Statements
mandatory for a parent.
2 Does not mandate preparation of
separate financial statements.
3 Provides guidance for accounting
for investments in subsidiaries,
jointly controlled entities and
associates in preparing the separate
financial statements.
4 Does not give any such exemption
from consolidation except that if a
subsidiary meets the criteria to be
classified as held for sale, in that
case it shall be accounted for as per
Ind AS 105, Noncurrent Assets held
for Sale and Discontinued
Operations.
5 Does not explain the same.
6 Control is the power to govern the
financial and operating policies of
an entity so as to obtain benefits
from its activities.
AS 21
Consolidated Financial Statements
Does not mandate the preparation of
Consolidated Financial Statements
by a parent.
Consolidated Financial Statements
are prepared in addition to separate
financial statements
Does not deal with the same.
Subsidiary is excluded from
consolidation when control is
intended to be temporary or when
subsidiary operates under severe
long-term restrictions.
Explains where an entity owns
majority of voting power because of
ownership and all the shares are held
as stockin-trade, whether this
amounts to temporary control. Also
explains the term ‘near future’.
the definition of control given in the
existing AS 21 is rule-based, which
requires the ownership, directly or
indirectly through subsidiary(ies), of
more than half of the voting power
of an enterprise; or control
80

7 Existence and effect of potential
voting rights that are currently
exercisable or convertible are
considered when assessing whether
an entity has control over the
subsidiary.
8 Non-controlling interests shall be
presented in the consolidated
balance sheet within equity
separately from the parent
shareholders’ equity.
9 The length of difference in the
reporting dates of the parent and the
subsidiary should not be more than
three months.
10 Require the use of uniform
accounting policies.
of the composition of the board of
directors in the case of a company or
of the composition of the
corresponding governing body in
case of any other enterprise so as to
obtain economic benefits from its
activities.
For considering share ownership,
potential equity shares of the
investee held by investor are not
taken into account.
Minority interest should be
presented in the consolidated
balance sheet separately from
liabilities and equity of the parent’s
shareholders.
Permits the use of financial
statements of the subsidiaries drawn
upto a date different from the date of
financial statements of the parent
after making adjustments regarding
effects of significant transactions.
The difference between the reporting
dates should not be more than six
months.
Require the use of uniform
accounting policies. However,
existing AS 21 specifically states
that if it is not practicable to use
uniform accounting policies in
preparing the consolidated financial
statements, that fact should be
disclosed together with the
proportions of the items in the
consolidated financial statements to
81

Ind AS 28
Investments in Associates
1 Excludes from its scope,
investments in associates held by
venture capital organisations,
mutual funds, unit trusts and similar
entities including investmentlinked
insurance funds, which are treated
in accordance with Ind AS 39
2 Control is the power to govern the
financial and operating policies of
an entity so as to obtain benefits
from its activities.
3 The same has been defined as
‘power to participate in the financial
and operating policy decisions of
the investee but is not control or
joint control over those policies’.
which the different accounting
policies have been applied.
AS 23
Accounting for Investments in
Associates in Consolidated
Financial
Statements
Does not make such exclusion.
Definition of control given in the
existing AS 23 is rule-based, which
requires the ownership, directly or
indirectly through subsidiary(ies), of
more than half of the voting power
of an enterprise; or control of the
composition of the board of directors
in the case of a company or of the
composition of the corresponding
governing body in case of any other
entity so as to obtain economic
benefits from its activities.
‘Significant Influence’ has been
defined as ‘power to participate in
the financial and/or operating policy
decisions of the investee but is not
control over those policies’.
82
4 Existence and effect of potential
voting rights that are currently
exercisable or convertible are
considered when assessing whether
an entity has significant influence or
not.
For considering share ownership for
the purpose of significant influence,
potential equity shares of the
investee held by investor are not
taken into account.

5 Requires application of equity Requires application of the equity

method in financial statements other
than separate financial statements
even if the investor does not have
any subsidiary.
No such exemption is provided in
Ind AS 28.
6 existing AS 23 is where the associate
method only when the entity has
subsidiaries and prepares
Consolidated Financial
Statements.
One of the exemptions from
applying equity method in the
operates under severe long-term
restrictions that significantly impair
its ability to transfer funds to the
investee.

7 The same is to be accounted for at In separate financial statements,

cost or in accordance with Ind AS 39 investment in an associate is not
accounted for as per the equity
Financial method, the same is accounted for in
Instruments: Recognition accordance with existing AS 13,
and Accounting for investments.
Measurement.
8 Length of difference in the reporting Permits the use of financial
dates of the investor and the statements of the associate drawn
associate should not be more than upto a date different from the date of
three months unless it is financial statements of the investor
impracticable. when it is impracticable to draw the
financial statements of the associate
upto the date of the financial
statements of the investor. There is
no limit on the length of difference
in the reporting dates of the investor
and the associate.

83
 9 Require that similar accounting
policies should be used. in case an
associate uses different accounting
policies for like transactions,
appropriate adjustments shall be
made to the accounting policies of
the associate.
10 Provides that the investor’s financial
statements shall be prepared using
uniform accounting policies for like
transactions and events in similar
circumstances unless it is
impracticable to do so.
11 Carrying amount of investment in
the associate as well as its other
long term interests in the associate
that, in substance form part of the
investor’s net investment in the
associate shall be considered for
recognising investor’s share of
losses in the associate
12 Requires that after application of
equity method, including recognising investment in an associate should be
the
associate’s losses, the requirements investment.
of Ind AS 39 shall be applied to
determine whether it is necessary to
recognise any additional impairment
loss.
Require that similar accounting
policies should be used. in case an
associate uses different accounting
policies for like transactions,
appropriate adjustments shall be
made to the accounting policies of
the associate.
Provides exemption to this that if it
is not possible to make adjustments
to the accounting policies of the
associate, the fact shall be disclosed
along with a brief description of the
differences between the accounting
policies.
Investor’s share of losses in the
associate is recognised to the extent
of carrying amount of investment in
the associate.
Requires that the carrying amount of
reduced to recognise a decline, other
than temporary, in the value of the
84
 Ind AS 31
Interests in Joint Ventures
1 Specifically excludes joint venture
investments made by venture capital
organizations, mutual funds, unit
trusts and similar entities including
investment- linked insurance funds
which are treated in accordance with
Ind AS 39 Financial Instruments:
Recognition and
Measurement.
2 Does not recognise such cases
keeping in view the definition of
control
3 Prescribes the use of proportionate
consolidation method only.
4 Requires proportionate consolidation
of jointly controlled entities, even if
the venturer does not have any
subsidiary in financial statements
other than separate financial
statements.
AS 27
Financial Reporting of Interests in
Joint
Ventures
Does not make such exclusion.
Provides that in some exceptional
cases, an enterprise by a contractual
arrangement establishes joint control
over an entity which is a subsidiary
of that enterprise within the meaning
of AS 21. In those cases, the entity is
consolidated under AS 21 by the said
enterprise, and is not treated as a
joint venture.
Provides that a venturer can
recognise its interest in jointly
controlled entity using either
proportionate consolidation method
or equity method.
Requires application of the
proportionate consolidation method
only when the entity has subsidiaries
and prepares Consolidated Financial
Statements.
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5 Recognised at cost or in accordance
with Ind AS 39.
6 This explanation has not been given
in Ind AS 31 , as such situations are
now covered by Ind AS 105, Non-
current Assets Held for Sale and
Discontinued Operations.
7 The same has not been dealt with in
Ind AS 31.
8 Specifically deals with the venturer’s Does not deal with this aspect.
accounting for non-monetary
contributions to a jointly controlled
entity.
Ind AS 32
Financial Instruments:
Presentation
1 Does not exempt such contracts.
2 Includes the definition of puttable
instruments and deals with the same.
3 Does not include deposits and
advances in common examples of
financial assets and financial
liabilities.
In case of separate financial
statements interest in jointly
controlled entity is accounted for as
per AS 13, Accounting for
Investments, i.e., at cost less
provision for other than temporary
decline in the value of investment.
Regarding the term ‘near future’ used
in an exemption given from applying
proportionate consolidation method,
ie, where the investment is acquired
and held exclusively with a view to
its subsequent disposal in the near
future.
Provides clarification regarding
disclosure of venturer’s share in post-
acquisition reserves of a jointly
controlled entity.
AS 31
Financial Instruments:
Presentation
Does not apply to contracts for
contingent consideration in a
business combination in case of
acquirers.
Does not deal with the same.
AS 31 includes the same.
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4 Specifies conditions for offsetting a Does not specify the same.
financial liability or financial asset.

5 Requires that in some circumstances, Does not mention this aspect.

because of the differences between
interest and dividends with respect
to matters such as tax deductibility,
it is desirable to disclose them
separately in the statement of profit
and loss. Disclosures of the tax
effects are made in accordance with
Ind AS
12.
6 Specifically mentions that the related Does not mention so.
amount of income taxes recognised
directly in equity is included in the
aggregate amount of current and
deferred income tax credited or
charged to equity that is disclosed
under Ind AS 12, Income
Taxes.
7 As an exception to the definition of This exception is not provided in AS
‘financial liability’ in paragraph 11 31.
(b) (ii), Ind AS 32 considers the
equity conversion option embedded
in a convertible bond denominated in
foreign currency to acquire a fixed
number of entity’s own equity
instruments as an equity instrument
if the exercise price is fixed in any
currency.

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 Ind AS 33 AS 20

Earnings per Share Earnings per Share

1 Deals with the same. Does not specifically deal with

2 Requires presentation of basic and
diluted EPS from continuing and
discontinued operations separately.
options held by the entity on its
shares, e.g., purchased options,
written put option etc.
Does not require any such disclosure.

3 As per Ind AS 1, Presentation of Requires the disclosure of EPS with

Financial Statements, no item can be and without extraordinary items.
presented as extraordinary item, Ind
AS 33 does not require the aforesaid
disclosure.

Ind AS 34 AS 25

Interim Financial Reporting Interim Financial Reporting

1 Applies only if an entity is required If an entity is required or elects to

or elects to prepare and present an prepare and present an interim
interim financial report in financial report, it should comply
accordance with Accounting with that standard.
Standards. Consequently, it is
specifically stated in Ind AS 34 that
the fact that an entity may not have
provided interim financial reports
during a particular financial year or
may have provided interim financial
reports that do not comply with the
revised standard does not prevent
the entity’s annual financial
statements from conforming to
Accounting Standards if they
otherwise do so.

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2 The term ‘complete set of financial
statements’ appearing in the
definition of interim financial report
has been expanded. The said term
includes balance sheet as at the
beginning of the earliest
comparative period when an entity
applies an accounting policy
retrospectively or makes a
retrospective restatement of items in
its financial statements, or when it
reclassifies items in its financial
statements.
3 Prohibits reversal of impairment
loss recognised in a previous interim
period in respect of goodwill or an
investment in either an equity
instrument or a financial asset
carried at cost.
4 States that it neither requires nor
prohibits the inclusion of the
parent’s separate statements in the
entity’s interim report prepared on a
consolidated basis.
5 Additionally requires the above
information in respect of methods of
computation followed.
The contents of an interim financial
report include, at a minimum, a
condensed balance sheet, a
condensed statement of profit and
loss, a condensed cash flow
statement and selected explanatory
notes. Ind AS 34 requires, in
addition to the above, a condensed
statement of changes in equity for
the period which is presented as a
part of the balance sheet.
There is no such specific prohibition.
If an entity’s annual financial report
included the consolidated financial
statements in addition to the separate
financial statements, the interim
financial report should include both
the consolidated financial statements
and separate financial statements,
complete or condensed.
Requires the Notes to interim
financial statements, (if material and
not disclosed elsewhere in the
interim financial report), to contain a
statement that the same accounting
policies are followed in the interim
financial statements as those
followed in the most recent annual
financial statements or, in case of
change in those policies, a
description of the nature and effect
of the change.
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6 Requires furnishing of information,
in interim financial report, on
dividends paid, aggregate or per
share separately for equity and other
shares.
Requires furnishing information, in
interim financial report, of
dividends, aggregate or per share (in
absolute or percentage terms), for
equity and other shares.

7 Requires furnishing of information Requires furnishing of information

on both contingent liabilities and
contingent assets, if they are
significant.
8 No reference to extraordinary items.
on contingent liabilities only,
Reference to extraordinary items (in
the context of materiality) in the
existing standard is deleted

9 Requires that, where an interim Does not contain these requirements.

financial report has been prepared in
accordance with the requirements of
the revised standard, that fact should
be disclosed. Further, an interim
financial report should not be
described as complying with
Accounting Standards unless it
complies with all of the
requirements of Accounting
Standards. (The latter statement is
applicable when interim financial
statements are prepared on complete
basis instead of ‘condensed basis’).

10 Additionally requires restatement of A change in accounting policy, other

the comparable interim periods of
prior financial years that will be
restated in annual financial
statements in accordance with Ind
AS 8, subject to special provisions
when such restatement is
impracticable.
than one for which the transitional
provisions are specified by a new
Standard, should be reflected by
restating the financial statements of
prior interim periods of the current
financial year.

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 Ind AS 39 AS 30

Financial Instruments: Financial Instruments: Recognition

Recognition and
Measurement
1 States that a financial asset or
financial liability at fair value
through profit or loss is classified as
held for trading if ‘on initial
recognition it is part of a portfolio of
identified financial instruments…’.
and
Measurement
States that a financial asset or
financial liability at fair value
through profit or loss is classified as
held for trading if ‘it is part of a
portfolio of identified financial
instruments that are managed
together and for which there is
evidence of a recent actual pattern of
short-term profit-taking’.

2 Ind AS 39 states that ‘an entity shall
not reclassify a derivative out of the
fair value through profit or loss
category while it is held or Issued.
AS 30 states that an entity should not
reclassify a financial instrument into
or out of the fair value through profit
or loss category while it is held or
issued’

3 Specifically states that ‘if a financial Does not specify so.

asset is reclassified in accordance
with paragraphs 50B, 50D or 50E,
and the entity subsequently increases
its estimates of future cash receipts
as a result of increased
recoverability of those cash receipts,
the effect of that increase shall be
recognised as an adjustment to the
effective interest rate from the date
of the change in estimate rather than
as an adjustment to the carrying
amount of the asset at the date of the
change in estimate.’

4 If an entity is unable to measure Does not specify so.

separately the embedded derivative
that would have to be separated on
reclassification of a hybrid
(combined) contract out of the fair
value through profit or loss category,
that

91
 reclassification is prohibited. In such
circumstances the hybrid (combined)
contract remains classified as at fair
value through profit or loss in its
entirety.’

5 Any forward contracts between an Does not specify so.

acquirer and a selling shareholder to
buy or sell an acquiree that will
result in a business combination at a
future acquisition date. The term of
the forward contract should not
exceed a reasonable period normally
necessary to obtain any required
approvals and to complete the
transaction.’

6 ‘for hedge accounting purposes, only Does not specify so.

assets, liabilities, firm commitments
or highly probable forecast
transactions that involve a party
external to the entity can be
designated as hedged items. It
follows that hedge accounting can be
applied to transactions between
entities or segments in the same
group only in the individual or
separate financial statements of
those entities or segments and not in
the consolidated financial statements
of the group.’

7 If a hedge of a forecast transaction Does not specify so.

subsequently results in the
recognition of a financial asset or a
financial liability, the associated
gains or losses that were recognised
in other comprehensive income in
accordance with paragraph 95 shall
be reclassified from equity to profit
or loss as a reclassification
adjustment (see Ind AS 1)

92
 in the same period or periods during
which the hedged forecast cash
flows affects profit or loss (suchas in
the periods that interest income or
interest expense is recognised).
However, if an entity expects that all
or a portion of a loss recognised in
other comprehensive income will not
be recovered in one or more future
periods, it shall reclassify into profit
or loss as a reclassification
adjustment the amount that is not
expected to be recovered.’

8 Does not exempt contracts for Provides an exemption.

contingent consideration in a
business combination from its scope

Ind AS 103 AS 14

Business Combinations Accounting for Amalgamations

1 Wider scope Narrow scope

2 Prescribes only the acquisition There are two methods of accounting

method for each business
combination.
3 Requires the acquired identifiable
assets liabilities and non-controlling
interest to be recognised at fair value
under acquisition method.
for amalgamation. The pooling of
interest method and the purchase
method.
The acquired assets and liabilities are
recognised at their existing book
values or at fair values under the
purchase method.

4 Requires that for each business
combination, the acquirer shall
measure any non-controlling interest
in the acquiree either at fair value or
at the non-controlling
States that the minority interest is the
amount of equity attributable to
minorities at the date on which
investment in a

93
 interest’s proportionate share of the
acquiree’s identifiable net assets.
5 The goodwill is not amortised but
tested for impairment on annual
basis in accordance with Ind AS 36
6 Deals with reverse acquisitions
7 The consideration the acquirer
transfers in exchange for the
acquiree includes any asset or
liability resulting from a contingent
consideration arrangement.
Ind AS 105
Non-current Assets Held for Sale
and
Discontinued Operations
1 Specifies the accounting for non-
current assets held for sale, and the
presentation and disclosure of
discontinued operations.
2 Discontinued operation is a
component of an entity that either
has been disposed of or is classified
as held for sale.
3 The sale should be expected to
qualify for recognition as a
completed sale within one year from
the date of classification with certain
exceptions
subsidiary is made and it is shown
outside shareholders’ equity.
Requires that the goodwill arising on
amalgamation in the nature of
purchase is amortised over a period
not exceeding five years.
Does not deal with the same
Does not provide specific guidance on
this aspect.
AS 24
Discontinuing Operations
Establishes principles for reporting
information about discontinuing
operations. It does not deal with the
non-current assets held for sale; fixed
assets retired from active used and
held for sale,
There is no concept of discontinued
operations but it deals with
discontinuing operations.
Does not specify any time period in
this regard as it relates to
discontinuing operations
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 Ind AS 107
Financial Instruments: Disclosures
1 Does not apply to contracts for
contingent consideration in a
business combination in case of
acquirers.
2 Excludes from its scope
puttable
instruments dealt with by Ind AS 32
Ind AS 108
Operating Segments
1 Identification of segments under Ind
AS 108 is based on ‘management
approach’ i.e. operating segments are
identified based on the internal
reports regularly reviewed by the
entity’s chief operating decision
maker.
2 Requires disclosures of revenues
from external customers for each
product and service. With regard to
geographical information, it requires
the disclosure of revenues from
customers in the country of domicile
and in all foreign countries, non-
current assets in the country of
domicile and all foreign countries. It
also requires disclosure of
information about major customers
AS 32
Financial Instruments: Disclosures
Does not exempt such contracts.
Does not exclude the same from its
scope.
AS 17
Segment Reporting
Requires identification of two sets of
segments—one based on related
products and services, and the other
on geographical areas based on the
risks and returns approach. One set is
regarded as primary segments and
the other as secondary segments.
Disclosures in existing AS 17 are
based on the classification of the
segments as primary or secondary
segments. Disclosure requirements
for primary segments are more
detailed as compared to secondary
segments.
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 CHAPTER 6
CONCLUSION

The accounting standards aim at improving the quality of financial reporting by

promoting comparability, consistency and transparency, in the interests of users of
financial statements. The ICAI has, so far, issued twenty nine Accounting Standards.
However, AS 6 on ‘Depreciation Accounting’ has been withdrawn on revision of AS
10 ‘Property, Plant and Equipment and AS 8 on ‘Accounting for Research and
Development’ has been withdrawn consequent to the issuance of AS 26 on ‘Intangible
Assets’. Thus effectively, there are 27 Accounting Standards at present.
As per the Notification, Indian Accounting Standards (Ind AS) converged with
International Financial Reporting Standards (IFRS) shall be implemented on voluntary
basis from 1st April, 2015 and mandatorily from 1st April, 2016. Separate roadmaps
have been prescribed for implementation of Ind AS to Banking, Insurance companies
and NBFCs respectively.
In the scenario of globalisation, India cannot insulate itself from the developments
taking place worldwide. In India, so far as the ICAI and the Government authorities
and various regulators such as Securities and Exchange Board of India and Reserve
Bank of India are concerned, the aim has always been to comply with the IFRS to the
extent possible with the objective to formulate sound financial reporting standards.
Indian Accounting Standards (Ind-AS) are IFRS converged standards issued by
the Central Government of India under the supervision and control of Accounting
Standards Board (ASB) of ICAI and in consultation with National Advisory
Committee on Accounting Standards (NACAS).

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 CHAPTER 7

BIBLIOGRAPHY

1. Study Material issued by the ICAI

2. http://www.mca.gov.in/Ministry/pdf/PressRelease_06012015.pdf

3. http://www.indaslab.com/blog/ind-as-summary/

4. https://taxguru.in/chartered-accountant/difference-ind-existing.html

5. https://en.wikipedia.org/wiki/Indian_Accounting_Standards

6. https://en.wikipedia.org/wiki/Accounting_standard

7. https://www.charteredclub.com/ind-as-the-indian-desi-version-of-ifrs/

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