b. Amendments to Australian Accounting Standards – Applying AASB 9 Financial Instruments with AASB 4 Insurance Contracts: Extra: Oct 2016: 1 Jan 2018 : AASB 1058 The GAAP codification is the primary source of all accounting standards contained within Generally Accepted Accounting Principles. However, a description of accounting treatment given to reserves and the reasons for following a treatment different from that prescribed in the AS is to be given. Holding and subsidiary enterprises of any one of the above at any time during the accounting period. Accounting Standard (AS) 13, Accounting for Investments, except to the extent it relates to accounting for investment properties. changes from the previous period in the methods and assumptions used, and the reasons for such changes. Greater weight should be given to external evidence; cash flow projections should be based on the most recent financial budgets/forecasts (maximum 5 years, unless longer period justified) that have been approved by management; 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. Financial statements used in consolidation should be drawn up to the same reporting date. Applied in accounting for the impairment of all assets, other than: assets arising from construction contracts (AS 7); financial assets, including investments (AS 13); the period of time over which an asset is expected to be used; or. Loans and receivables: Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. A change in rate of depreciation is a change in accounting estimates. ICAI is established under the Chartered Accountants Act, 1949 (Act No. In case of intangible assets in form of legal rights, the useful life is not to exceed the period of the legal rights, unless renewable, which is virtually certain. Impairment loss is the amount by which the carrying amount exceeds its recoverable amount. Disclosure should be made of aggregate amount of quoted and unquoted investments together with aggregate value of quoted investments. Incorporated in (AS) 18 "Related Party Disclosures" as Explanation below para 13. Disclosure of Segment information (AS 17). Proposed or declared dividend for the period should be adjusted. When the sensitivity analyses is disclosed as above are unrepresentative of a risk inherent in a financial instrument (for example because the year-end exposure does not reflect the exposure during the year), the entity should disclose that fact and the reason it believes the sensitivity analyses are unrepresentative. Names of the related party and nature of related party relationship to be disclosed even where there are no transactions but the control exists. An intangible asset arising from development to be recognised, if an enterprise can demonstrate its feasibility to complete, intention and ability to use or sell, generation of future economic benefits, and availability of resources for completion and ability to measure the expenditure. The hedge must be assessed on an ongoing basis and be highly effective. Accounting Standard 21: Consolidated Financial Statements. Financial liabilities that are not held for trading and not designated at fair value through profit or loss. Interpretation of the term 'Intermediaries' (AS 18). A reversal of an impairment loss for a cash-generating unit should be allocated to increase the carrying amount of the assets of the unit in the following order: These increases in carrying amounts should be treated as reversals of impairment losses for individual assets and recognised accordingly. Also refer ASI 14 (withdrawing GC 3/2002) deals with the manner of disclosure of excise duty in presentation of revenue from sales transactions (turnover). Current tax [includes payment u/s. The Australian Accounting Standards Board (AASB) in conjunction with the University of New South Wales, co-hosted the 2020 AASB Virtual Research Forum on Monday, November 30, via Zoom, where academics and financial reporting stakeholders from the public sector, for-profit and not-for-profit sectors came together to discuss the following three research projects. Moreover, an issuer should apply this Accounting Standard to financial guarantee contracts if the issuer applies AS 30 in recognising and measuring the contracts, but should apply the Accounting Standard on Insurance Contracts if the issuer elects, in accordance with the Accounting Standard on Insurance Contracts, to apply that Accounting Standard in recognising and measuring them. In case of conflicting accounting policies, a uniform policy be adopted on amalgamation. However, in some cases, AS 21, AS 23 or AS 27 permits or requires an entity to account for an interest in a subsidiary, associate or joint venture using Accounting Standard (AS) 30, Financial Instruments: Recognition and Measurement; in those cases, entities should apply the disclosure requirements in AS 21, AS 23 or AS 27 in addition to those in this Accounting Standard. A venturer to disclose list of joint ventures and interests in significant joint ventures. Also deviations between the two accounting treatments given to the reserves and the financial effect, if any, arising due to such deviation is to be disclosed. Potential equity shares are treated as dilutive when their conversion into equity would result in a reduction in profit per share from continuing operations. A financial asset or liability is recognised when the entity becomes a party to the instrument contract. The ISAC lasted 27 years until the year 2001, when it was restructured to become the International Accounting Standards Board (IASB). concentrations of risk if not apparent from (a) and (b). Such gain or loss should be computed with reference to the difference between forward rate on the reporting date for the remaining maturity period of the contract and the contracted forward rate. Hedge effectiveness is reliably measurable (i.e., the fair value or cash flows of the hedged item and the fair value of the hedging instrument can be reliably measured). Further, exchange differences on such contracts should be recognised in the statement of profit and loss in the reporting period in which there is change in the exchange rates. Assets acquired on hire purchase be recorded at cash value to be shown with appropriate note about ownership of the same. The following are the major differences between the Notified AS under the Companies Act, 1956 and the AS, as issued by the ICAI: The relevant Accounting Standard Interpretations issued by the ICAI have been incorporated in the notified AS itself except ASI 12, ASI I23, ASI I27 and ASI I29. The standard requires an enterprise to segregate information about discontinuing operations from continuing ones and establishes principles for reporting information about discontinuing operations. Accounting Standards as on September 1, 2014 Framework for the Preparation and Presentation of financial Statements Preface to the Statements of the Accounting Standards (revised 2004) Any future standards will now be called IFRS, and if they are contradictory to existing IAS, the IFRS will be followed. Incorporated in (AS) 23 "Accounting for Investments in Associates in Consolidated Financial Statements" as Explanation (b) below para 6. ₹10 crore at any time during the accounting period. Distributions to holders of equity instruments are debited directly to equity, net of any related income tax benefit. first, to goodwill allocated to the cash-generating unit (if any); and. Interpretation of paragraph 4(e) of AS 16, Incorporated in (AS) 16 "Borrowing Costs" as Explanation below para 4(e), Accounting for taxes on income in case of amalgamation, Interpretation of paragraphs 26 and 27 of AS 18. International Accounting Standards (IASs) were issued by the antecedent International Accounting Standards Council (IASC), and endorsed and amended by the International Accounting Standards Board (IASB). This Accounting Standard will become mandatory in respect of accounting periods commencing on or after 1-4-2012 for all commercial, industrial and business entities except to a Small and Medium-sized Entity as defined below: whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India; which is not a bank (including co-operative bank), financial institution or any entity carrying on insurance business; whose turnover (excluding other income) does not exceed rupees fifty crore in the immediately preceding accounting year; which does not have borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding accounting year; and. Accounting Standard 25: Interim Financial Reporting. Fair market value is determined with reference to asset given up or asset acquired. Applicable to Level II & III enterprises (subject to certain relaxations provided), if number of persons employed is 50 or more. They basically are a report card for the company. Limited revision to AS 13 in para 2 effective for accounting periods commencing on or after 1-4-2002. For investing and financing activities, cash flows should be prepared using the direct method. If associate has outstanding preference shares held outside the group, preference dividends whether declared or not, be adjusted in arriving at the investors share of profit or loss. This announcement is applicable in respect of financial statements for the accounting period(s) ending on or after March 31, 2006. Earnings per share, if disclosed is to be calculated and presented as per AS 20. All the accounting periods commencing on or after 1-4-2003 (deferred to 1-4-2006) in respect of all other enterprises. Inventories should be valued at lower of cost and net realisable value. If defined benefit cost cannot be reliably estimated it should recognise cost as if it were a defined contribution plan, with certain disclosures (in para 30). Summary: IAS vs IFRS • The International Accounting Standards or in short IAS are standards issued by the IASC from 1973 to 2001 that dictate how events and transactions should reflect on a company’s financial statements. He is responsible and has the authority for directing and controlling the activities of the reporting enterprise. Accounting policies adopted by enterprise should represent true and fair view of the financial statements. The Sri Lanka Accounting and Auditing standards Act No. So it is important that they are regulated and do not report misleading information. Note 8:  SMCs are allowed to measure the 'value in use' on the basis of reasonable estimate thereof instead of computing the value in use by present value technique. All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of ICAI announced withdrawn the following accounting standards: 1. This Accounting Standard will become mandatory in respect of accounting periods commencing on or after 1-4-2012 for all commercial, industrial and business entities except to a Small and Medium-sized Entity, as defined below: which is not a bank (including a co-operative bank), financial institution or any entity carrying on insurance business; which is not a holding or subsidiary entity of an entity which is not a Small and Medium-sized Entity. Notes to Consolidated Financial Statements (AS 21). AS 21 is mandatory if an enterprise presents consolidated financial statements. Provision should not be recognised for future operating losses, since it is not a liability nor does it meet the criteria for provisions. when severe long-term restrictions that impair the ability to transfer funds to the venturer exists. Carmona, S., & Trombetta, M. (2008). Any such increase in the value of the asset shall be depreciated prospectively over the residual useful life of the asset. Where there are transactions between the related parties following information is to be disclosed: name of the related party, 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. Disclosure for each class of intangibles, their useful lives, amortisation, amount and method, carrying amount (gross and net), accumulated amortisation, any additions, retirements, impairment losses recognised or reversed and any other change, distinguishing between internally generated and other intangible assets. Alternatively, it can be treated as deferred income in the statement of profit and loss on rational basis over the useful life of the depreciable asset. a present obligation, but is not recognised because it is not probable that outflow of resources embodying economic benefits will be required (or is remote) for its settlement or a reliable estimate of the amount of the obligation cannot be made. In cases of addition or extension which becomes integral part of the existing asset depreciation to be provided on adjusted figure prospectively over the residual useful life of the asset or at the rate applicable to the asset. Investment in associates is accounted in CFS as per equity method. To assess at each balance sheet date whether there are any indication, external or internal as given in AS, that an asset may be impaired and estimate the recoverable amount of the asset. The increased carrying amount of an asset due to a reversal of an impairment loss should not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior accounting periods. A discontinuing operation is a component of an enterprise that the enterprise is, in pursuance to a single plan is – (a) disposing substantially in its entirety such as by selling the component in a single transaction or by demerger or spin off of the ownership of the component to the enterprises’ share holders; (b) disposing of piecemeal, such as by selling of the components assets and settling its liabilities individually or (c) terminating through abandonment separate line of business or geographical area of operations; can be distinguished operationally and for financial reporting purposes. Most of the amendments made by the ICAI have been incorporated as paragraph insertions / deletions in the Notified AS itself. Minority interest in net assets to be shown separately as a liability. Where termination benefits fall due beyond 12 months period, the present value of liability needs to be worked out using the discount rate. 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 intra-group transactions; and (iii) In case of state-controlled enterprises regarding related party relationships and transactions with other state-controlled enterprises. Consequently, if an SMC chooses to measure the 'value in use' by not using the present value technique, the relevant provisions of AS 28, such as discount rate etc., would not be applicable to such an SMC. Interests, dividends, losses and gains relating to financial liabilities are recognised as income or expense in profit or loss. // -->. Accounting Standard 24: Discontinuing Operations. Post-employment benefits can either be defined contribution plans, under which an enterprise’s obligation is limited to contribution agreed to be made and investment returns arising from such contribution, or defined benefit plans under which the enterprise’s obligation is to provide the agreed benefits. a statement on uniform accounting policies or any change therein. An impairment loss should be recognised as an expense in the statement of profit and loss immediately. International Accounting Standards are an older set of standards that were replaced by International Financial Reporting Standards (IFRS) in 2001. In case the scheme of amalgamation sanctioned under the statute prescribes a treatment to be given to the transferor company reserves on amalgamation, same should be followed. They should not include estimated future cash inflows or outflows that are expected to arise from: a future restructuring to which an enterprise is not yet committed; or. Under the later plans if actuarial or investment experience is worse than expected, obligation of the enterprise may get increased at subsequent dates. Dec 18,2020 - Test: Accounting Standards | 15 Questions MCQ Test has questions of CA Foundation preparation. contracts for contingent consideration in a business combination. The amount by which any item in financial statements is affected by such change should be disclosed to the extent ascertainable. The entity transfers the asset, while retaining some of the risks and rewards of ownership, but no longer has control of the asset (i.e., the transferee has the ability to sell the asset). (ASI 28 incorporated in (AS) 21 "Consolidated Financial Statements" as an explanation below para 13 and in (AS) 27 "Financial Reporting of Interests in Joint Ventures as an explanation below para 32). Unless: Applies in accounting for all leases other than leases to explore for or use natural resources, licensing agreements for items such as motion pictures films, video recordings, plays, etc. See our User Agreement and Privacy Policy. According to these rules every company is required to comply with said rules in respect of accounting period commencing on or after 7th December, 2006. Incorporated in (AS) 21 "Consolidated Financial Statements" as Explanation below para 6. o those covered by another Accounting Standard. The growing volume of cross-border capital flows makes having international standards, that are high in quality and testable across the board, a priority. AS 20 is applicable to Level II and Level III enterprises, if they disclose earnings per share. An issuer of loan commitments should apply AS 29 to those loan commitments that are not within the scope of this standard. Guidance Note on Accounting for Investments in the Financial Statements of Mutual Funds. They constitute a standardised way of describing the company’s financial performance and position so that company financial statements are understandable and comparable across international boundaries. To the extent there are significant differences between the Notified AS and the AS, the same have been highlighted. In such case management’s best estimate for future market price of output should be used: Cash-generating units should be identified consistently from period to period for the same asset or types of assets, unless a change is justified. These accounting standards are formulated by Accounting Standards Board of Institute of Chartered Accountants of India. Accounting Standard 13: Accounting for Investments. A cash flow statement for operating activities should be prepared by using either the direct method or the indirect method. If the number of equity shares or potential equity shares outstanding increases or decreases on account of bonus, splitting or consolidation during the year or after the balance sheet date but before the approval of financial statement, basic and diluted EPS are recalculated for all periods presented. Grants should not be recognised unless reasonably assured to be realised and the enterprise complies with the conditions attached to the grant. Turnover does not include 'other income'. Amortisation of discounts or premium relating to borrowings. Determination of liability should be based on PUCM (discount rate provisions shall apply). Note: In view of operation of AS 26, this Standard stands withdrawn. Initial Disclosure Event is the earliest occurrence of one of the following :–. A contingency is a condition or situation the ultimate outcome of which will be known or determined only on the occurrence or non-occurrence of uncertain future event/s. In other words, the accounting standard does not mandate an enterprise to present consolidated financial statements but, if the enterprise presents consolidated financial statements for complying with the requirements of any statute or otherwise, it should prepare and present consolidated financial statements in accordance with AS 21. The accounting standard is a compilation of principles, rules, and regulations used for performing accounting procedures.These were established to ensure that companies, especially publicly traded ones, maintain ethical practices when reporting their financial statements.Ethics in accounting are highly important for many reasons. Deficiency or surplus in case of disposal, destruction, demolition etc. This is determined on the basis of earnings per incremental potential equity. Applicability of AS 29 to onerous contracts (AS 29). In case of change of accounting policies, other than one for which transition is specified by an accounting standard, figures of prior interim periods of current financial year to be restated. Accounting Standard 7 : Accounting for Construction Contracts (Revised 2002). Note 10 : In respect of accounting for transactions in foreign currencies entered into by the reporting enterprise itself or through its branches before the effective date of the notification prescribed in this standard under section 211 of Companies Act, 1956, the applicability of this standard would be determined on the basis of Accounting Standard (AS) 11 revised by ICAI in 2003. AS 20) as an explanation below para 38). A provision should be used only for expenditures for which the provision was originally recognised and not against a provision recognised for another purpose, so as not to conceal the impact of two different events. Auditing Standards. The SMC which does not disclose certain information pursuant to the exemptions or relaxations given to it shall disclose (by way of a note to its financial statements) the fact that it is an SMC and has complied with the Accounting Standards insofar as they are applicable to an SMC on the following lines: ”The company is a Small and Medium sized Company (SMC) as defined in the General Instructions in respect of Accounting Standards notified under the Companies Act, 1956. The IFRS Foundation provides free access (through Basic registration) to the PDF files of the current year's consolidated IFRS ® Standards (Part A of the Issued Standards—the Red Book), the Conceptual Framework for Financial Reporting and IFRS Practice Statements, as well as available translations of Standards.. MSFPhover = the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the reporting date, and how the entity manages those risks. At each balance sheet date, if there are indications internal or external, that an impairment loss recognised for an asset in prior accounting periods, no longer exists/has decreased, then the recoverable amount of that asset to be estimated. However, IPSAS 32 also outlines the contract’s effect on aggregate public debt, provided the criteria for registering the debt are met. Treatment in case of finance lease in the books of lessor: Treatment in case of operating lease in the books of the lessee : Treatment in case of operating lease in the books of the lessor: Deferred tax should be recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets (DTA). The investor’s share of profits or losses and any extraordinary or prior period items should be disclosed separately in CFS statement of profit and loss. The recoverable amount of each intangible asset to be estimated at each year end in case of an intangible asset which is not yet available for use and one which is amortised over a period exceeding ten years. Current investments and long-term investments be disclosed distinctly with further sub-classification into government or trust securities, shares, debentures or bonds, investment properties, others unless it is required to be classified in other manner as per the statute governing the enterprise. rights and obligations under insurance contracts which will be covered by proposed Accounting Standard on Insurance Contract, a contract that is within the scope of Accounting Standard on Insurance Contracts because it contains a discretionary participation feature. In case contribution does not fall due within 12 months from the balance sheet date, expense should be recognised for discounted liabilities. Acquisition cost may be determined considering the fair value of the investments acquired. International Accounting Standards (IASs) were issued by the antecedent International Accounting Standards Council (IASC), and endorsed and amended by the International Accounting Standards Board (IASB). Actuarial assumptions should be disclosed. Net realisable value is the estimated selling price less the estimated costs of completion and estimated costs necessary to make the sale. Estimates to be measured in such a way that resulting information is reliable and all material information disclosed. Operators/Managers of joint ventures to account for fees as per AS 9. All the accounting periods commencing on or after 1-4-2002, in respect of companies not covered by (a) above. Provision for diminutions in value (other than temporary) to be made for each investment individually. For example, Cash Flow Statement should be prepared in the format prescribed by accounting standard. On the first occasion of applicability of this AS the enterprise should recognise, 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 reserves. ASC seeks comments on Business Combinations under Common Control. For disclosures requirement refer to paras 120 to 125 of the Standard. cash flow projections should be based on assumptions that represent management’s best estimate of the set of economic conditions that will exist over the remaining useful life of the asset. Level I Enterprises Enterprises which fall in any one or more of the following categories, at any time during the accounting period: Accounting Standards as applicable to different levels. Incorporated in (AS) 23 "Accounting for Investments in Associates in Consolidated Financial Statements" as Explanation (a) below para 6. … Unrecognised financial instruments include some financial instruments that, although outside the scope of AS 30, are within the scope of this Accounting Standard (such as some loan commitments). } A contingent liability is not recognised in financial statements but is disclosed. The fact that the company was an SMC in the previous period and it had availed of the exemptions or relaxations available to SMCs shall be disclosed in the notes to the financial statements. Strict conditions must be met before hedge accounting is applied: There is formal designation and documentation of a hedge at inception. dividend for each class of equity shares. Accounting Standard 20: Earnings Per Share. No intangible asset arising from research to be recognised and expenditure on research should be recognised as an expense, when incurred. Increase in value on revaluation be credited to Revaluation Reserve while the decrease should be charged to P & L A/c. As a transitional provision any impairment loss determined before this standard becomes mandatory should be adjusted against the opening balance of revenue reserve. Find articles, books and online resources providing quick links to the standard, summaries, guidance and news of recent developments. Accounting Standard (AS) 32, Financial Instruments: Disclosures. All items of income and expense which are recognised in a period should be included in determination of net profit or loss for the period unless an accounting standard requires or permits otherwise. net cash flows, if any, to be received (or paid) for the disposal of the asset at the end of its useful life. In case of amalgamation under the Pooling of Interest Method, the treatment given to the difference between the consideration and the value of the net identified assets acquired is to be disclosed. Accounting Standard 14: Accounting for Amalgamations. the disclosures required under as mentioned in subsequent clauses, to the extent not provided in (a), unless the risk is not material. ICAI is established under the Chartered Accountants Act, 1949 (Act No. A cost plus contract is a contract in which contractor is reimbursed for allowable or defined cost plus percentage of these cost or a fixed fee. Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation below para 13. Contract Revenue and Expenses to be recognised when outcome can be estimated reliably up to stage of completion on reporting date. Any future standards will now be called IFRS, and if they are contradictory to existing IAS, the IFRS will be followed. Central Government has also issued the Companies (Accounting Standard) Amendment Rules, 2008 dealing with the transitional provision on AS 15. Merger, the company has complied with the actual or imputed cost non-accumulating! 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