Call Girls Hebbal Just Call 👗 7737669865 👗 Top Class Call Girl Service Bangalore
Accounting standard
1. Simplified
- CA Kaustubh Deshpande
CA Kaustubh Deshpande 1
2. There are 45 Paragraphs
Contents
Objective
Scope
Definitions
Foreign currency transaction-Initial
recognition, subsequent reporting and exchange
difference
Integral and non-integral operations
Forward Contracts
Disclosure
CA Kaustubh Deshpande 2
3. In order to include foreign currency
transactions and foreign operations in the
financial statements of an enterprise’s
reporting currency
Therefore this standard should be applied for
Accounting for transactions in foreign currency
Translating the financial statement of foreign
operations
CA Kaustubh Deshpande 3
4. Average rate- exchange rates in force during
a period
Closing
rate- exchange rate at the balance
sheet date
Foreigncurrency- currency other than
reporting currency
CA Kaustubh Deshpande 4
5. Foreignoperation is a
subsidiary, associate, joint venture or branch
–the activities of which are conducted in a
country other than the country of the
reporting enterprise
Monetary items are money held and assets
and liabilities to be received or paid in fixed
determinable amounts of money
Reportingcurrency is the currency used in
presenting the financial statements
CA Kaustubh Deshpande 5
6. Initial transaction should be recorded at the spot exchange
rate or average rate (week or month )
Average rate cant be used if exchange rates significantly
fluctuate
At subsequent Balance Sheet Date – Monetary items should
be reported using the closing rate. However where closing
rate is not reasonable or realistic –relevant monetary items
be reported in the reporting currency at the amount which
is likely to be realised or disburse.
At subsequent Balance Sheet Date -Non-monetary items be
reported at historical cost which is derived by applying
the exchange rate at the date of transaction
CA Kaustubh Deshpande 6
7. Exchange difference arising on settlement of
monetary asset is recognised in profit and
loss account
Reporting monetary item at rates different
from those at which they were initially
recorded
Exception to above is Net investment in Non-
integral foreign operations
CA Kaustubh Deshpande 7
8. Classification of foreign operations (FO)
Integral operations
Non-integral operations
Following are the indications that foreign
operation is non-integral
The activities of FO are carried out with significant
autonomy
Transaction with reporting enterprise are not high
FO are financed mainly from its own operations
Cost of material labour etc are settled in the local
currency
Sales are mainly in foreign currencies
There is an active local market
CA Kaustubh Deshpande 8
9. Integral foreign operation-foreign operations
should be translated as mention above
(initial ,subsequent balance sheet)
Exchange difference be accounted in profit
and loss account
Non integral operations
Asset and liabilities (monetary and non-
monetary)- Closing rate
Income and expense- at the date of transaction
or average rate
Exchange difference should be accumulated in
Foreign currency translation reserve till
disposal(FCTR)
Equity and Surplus of profit and loss account be
reported at historical cost
CA Kaustubh Deshpande 9
10. FCTRbalance on disposal of operation be
recognised in profit and loss account
Changein classification of a Foreign
Operation
Integral- Non integral: exchange difference
arising on the translation of non-monetary asset
at the date of reclassification- accumulated in
FCTR
Non-integral Integral: translated amounts for
non-monetary items at the date of
reclassification are considered as historical cost
for the period and subsequent periods
Accumulated exchange difference are carried in
balance sheet till the disposal of FO
CA Kaustubh Deshpande 10
11. Gainsand losses on foreign currency
transactions and FO may have associated tax
effects – Accounting as per AS-22
CA Kaustubh Deshpande 11
12. Forward contract means agreement to
exchange different currencies at a forward
rate
Forward rate is exchange rate for exchange
of two currencies at a specified future date
Forward Contract which is not intended for
trading or speculation purposes –premium or
discount should be amortised over period of
contract.
Premium or discount is difference between
spot rate on the date of contract and
forward rate
CA Kaustubh Deshpande 12
13. Forward contracts to which previous
conditions does not apply:
Difference between the forward rate available at
the reporting date for the remaining maturity
and the contracted forward rate
Difference is recognised in profit and loss
account
No premium or discount is accounted
CA Kaustubh Deshpande 13
14. Foreign exchange gain loss- Separate in
profit and loss
FCTR in balance sheet along with
reconciliation with opening and closing
balance
There is change in classification of significant
foreign operation:
Nature of the change in classification
The reason
Impact on shareholders fund and profit and loss
account
CA Kaustubh Deshpande 14
15. There are 34 paragraphs
Contents
Objective
Scope
Definitions
Recognitions
Re-assessment of unrecognised Deferred Tax Asset
(‘DTA)
Measurement
Review of DTA
Presentation and disclosures
Transitional Provisions
CA Kaustubh Deshpande 15
16. Matching Concept
The Objective of accounting taxes as per AS-22 is
to achieve or comply with matching concept
Scope
Determination of the amount of tax expense or
saving on income in respect of an accounting
period and its disclosure
Whether it is applicable for domestic and foreign
taxes?
CA Kaustubh Deshpande 16
17. Accounting income (loss)- Net Profit or loss
for a period, as reported
Taxable
income (tax loss)- Income (loss)
determined in accordance with tax laws
Currenttax -is the amount of income tax
payable (recoverable) determined as per tax
laws
Deferred tax –tax effect of timing differences
CA Kaustubh Deshpande 17
18. Timingdifference are those differences
between taxable income and accounting
income for a period that originate in one
period and capable of reversal in one or
more subsequent periods.
Unabsorbed depreciation and carry forward
losses
CA Kaustubh Deshpande 18
19. Taxexpense for the period should comprise
of Current tax and deferred tax
Deferred tax should be recognised on all
timing differences.(Subject to para 15-18)
Deferred tax in respect of timing differences
reversing during tax holiday periods is not to
be recognised
FIFO to apply for above explanation
CA Kaustubh Deshpande 19
20. Virtual Certainty-
Convincing Evidence
Reasonable certainty of realisation
History
Estimated profits
Reassessment of DTA – At each Balance Sheet
date
CA Kaustubh Deshpande 20
21. Taxrates and tax laws that have been
enacted or substantively enacted
Incase tax is payable u/s 115JB –
Applicability of AS-22 ?
Ifanswer is affirmative, which rates to be
applied for measurement of deferred tax as
per AS-22
No discounting
CA Kaustubh Deshpande 21
22. Off set
Legally enforceable right to set off
Same governing taxation laws
Otherwise Separate disclosure in balance sheet
Break-up of DTA and DTL in notes to accounts
Nature of the evidence supporting the virtual certainty
CA Kaustubh Deshpande 22
23. Revenue reserve- Prior to the adoption of
this standard
CA Kaustubh Deshpande 23
24. There are 51 Paragraphs
Contents
Objective
Scope
Definitions
Presentation
Basic EPS
Diluted EPS
Restatement
Disclosure
CA Kaustubh Deshpande 24
25. All companies i.e. SME and Non SME
However disclosure of Diluted EPS is not
mandatory for SME companies.
Inthe consolidated financial statements EPS
should be presented on the basis of
consolidated information.
Comparison of performance among different
enterprises and among different accounting
periods for same enterprise
CA Kaustubh Deshpande 25
26. Anequity share is a share other than a
preference share.
Preferenceshare is a share carrying
preferential rights
A potential equity share is a financial
instrument or other contract that entitles, or
may entitle, its holder to equity.
CA Kaustubh Deshpande 26
27. present basic and diluted EPS for each class
of equity shares that has different right to
share in the net profit for the period.
Itshould be presented on the face of the
statement of Profit and Loss account.
Itshould be disclosed for all periods
presented.
Negative EPS should also be disclosed
CA Kaustubh Deshpande 27
28. Basic EPS
Net profit or loss attributable to shareholders
Weighted average number of equity shares
outstanding during the year
Net profit or loss attributable to shareholder
should be after deducting preference dividends
and any attributable tax thereto
If there are more than one class of equity
shares, net profit or loss for the period is
apportioned according to dividend rights
CA Kaustubh Deshpande 28
29. Weighted average shares are weighted with
time factor
Weighted average shares outstanding during
the period and for all periods be adjusted for
all events except potential equity
shares, that have changed the number of
equity shares outstanding, without a
corresponding change in resources
CA Kaustubh Deshpande 29
30. Diluted EPS
Net profit or loss attributable to shareholders
Weighted average number of shares outstanding
during the period should be adjusted for the effect of
all dilutive potential equity shares.
Net profit or loss attributable to shareholder means
adjusted to the extent of interest or dividend
accounted on potential equity share and its tax effect
Allotment money pending is treated as dilutive
potential equity shares.
Dilutive potential shares should be deemed to be
have been converted into equity at the beginning of
the period.
CA Kaustubh Deshpande 30
31. EPSbefore and after extra-ordinary items
Numerator
Denominator
Nominal value of share
CA Kaustubh Deshpande 31
32. There are 27 paragraphs
Contents
Objective
Scope
Definitions
Related Party issues
Disclosures
CA Kaustubh Deshpande 32
33. Disclosure of:
Related party relationship
Transaction between enterprise and related
party
It is applicable to all reporting enterprise as also
to consolidated financial statements.
CA Kaustubh Deshpande 33
34. Enterprises directly or indirectly under common
control with the reporting enterprise
Associates and Joint ventures of the reporting
enterprise and the investing party or venturer
Individuals owning directly or indirectly an
interest in the voting power of the reporting
enterprise and relatives of such individuals
Key management personnel and relatives of such
person
Enterprises over which any person mentioned in
above two points is able to have significant
influence.
CA Kaustubh Deshpande 34
35. A statute or regulator or a similar competent
authority governing -an enterprise prohibit the
enterprise to disclose certain information
which is required to be disclosed.
o No disclosure of intra group transactions in
Consolidated financial statements
o No disclosure of transactions between enterprise
controlled by different states
CA Kaustubh Deshpande 35
36. Related party- one party has control or
significant influence over the other party
Related party transaction – a transfer of
resources or obligation whether or not a
price is charged
Control- ownership, control of the
composition of the board of
directors, Substantial interest
Key management personnel- persons having
authority and responsibility for
planning, directing and controlling the
activities of reporting enterprise
CA Kaustubh Deshpande 36
37. Relative-
in relation to individual means-
spouse, son, daughter, father, mother who
may be expected to influence.
CA Kaustubh Deshpande 37
38. Names of the related parties
Nature of the related party relationship
Irrespective of whether or not there have
been transactions between related parties
Nature of transaction
Volume of transactions as an amount or
appropriate proportion
Outstanding items pertaining to related
parties at the balance sheet date.
Amounts written off or back in respect of
debts due from or to related parties
CA Kaustubh Deshpande 38
39. There are 100 paragraphs
Contents
Objective
Scope
Intangible Asset
Recognition and measurement
Subsequent expenditure
Amortisation
CA Kaustubh Deshpande 39
40. Standard prescribes the accounting
treatment for intangible assets that are not
dealt by another accounting standard
Itdoes not apply to a) Intangibles –Another
AS b) financial assets c) Mineral rights d)
Contract with policyholder- In insurance
companies e) expenditure in respect of
Termination benefits
CA Kaustubh Deshpande 40
41. Intangible asset is an identifiable non-
monetary asset without physical substance
An asset is a resource 1) controlled by
enterprise as a result of past events 2) from
which future economic benefits are expected
to flow.
Research is original and planned investigation
with object of gaining new technical
knowledge
Development is the application of research
findings to produce the intangible asset
CA Kaustubh Deshpande 41
42. Amortisation is the systematic allocation of
the depreciable amount of an intangible
asset over its useful life.
CA Kaustubh Deshpande 42
43. Software, patents, copyrights, Customer
list, marketing rights, motion film etc
There could be cases where both tangible
and intangible elements exists and
inseparable.
Whether AS-10 or AS-26 is applicable- Which
element is predominant
Now ever items mentioned above may not
meet the definition of intangible
CA Kaustubh Deshpande 43
44. Identifiable
– Separability is not necessary
condition for identifiable asset
Future economic benefits
Control-power to obtain future economic
benefits and restrict the access of others to
those resources.
Examples – 1) Marketing rights (Future benefits and
Copyright) 2) Skilled Staff (future benefits and
control?) 3) customer Contracts ?
CA Kaustubh Deshpande 44
45. IA should be recognised only if : future economic
benefits will flow and cost of the asset can be
measured
Separate acquisition- Purchase price including
other incidental expenses
Acquisition as a part of amalgamation-
Amalgamation in the nature of purchase is
accounted as per AS-14. (Standard does not talk
about amalgamation in the nature of merger)
Option I- Fair vale in active market, Option II-
ALP , Option III- Discounted future cash flows.
If separate value cant be ascertained then it will
be included in goodwill
CA Kaustubh Deshpande 45
46. Goodwill –Does not meet the definition of IA
Other assets
It should meet the basic requirements of IA and
measurement
Therefore an enterprise classifies the generation
of the asset into a) research phase b)
development phase
CA Kaustubh Deshpande 46
47. Expenditure incurred in this phase does not
qualify for capitalisation, so it should be
expensed .
Reason:Research phase does not
demonstrate that an IA exists from which
future economic benefits are probable.
Research activities means: obtaining new
knowledge, search for
alternatives, design, evaluation etc
CA Kaustubh Deshpande 47
48. IA
arising from development phase should be
recognised if:
Technical feasibility
Intention to complete asset and use or sell it
Future economic benefits
Ability to measure the expenditure
CA Kaustubh Deshpande 48
49. Objective – to prescribe accounting treatment of
borrowing costs.
Scope –
• This standard should be applied in accounting of
borrowing costs
• This standard does not deal with actual or imputed
cost of owner’s equity, including preference share
capital not classified as a liability
CA Kaustubh Deshpande 49
50. Borrowing Costs – interest and other costs incurred by
an entity in connection with borrowing of funds and
may include costs like interest and commitment
charges paid to bank, finance charges against finance
lease, exchange differences arising from foreign
currency borrowings, etc.
Qualifying Asset – an asset that necessarily takes a
substantial period of time to get ready for its intended
use or sale. E.g. Manufacturing plants, power
generation facilities, investment properties. Assets
that are ready for intended use or sale when acquired
also are not qualifying assets
CA Kaustubh Deshpande 50
51. The borrowing costs can be treated as follows –
1. Capitalize and include in the cost of the asset - if
the conditions for capitalizing are satisfied.
2. Charge to Profit and Loss – If the borrowing costs
would have been avoided if expenditure on
Qualifying Asset had not been made
Conditions for Capitalization of Borrowing Costs –
a. Qualifying Asset will give Future Economic Benefits
b. Costs to be capitalized can be measured reliably
CA Kaustubh Deshpande 51
52. To the extent funds are borrowed specifically for the
purpose of obtaining a qualifying asset, amount of
borrowing costs should be capitalized and determined
in following manner –
i. Capitalization Rate = Actual Borrowing Costs
ii. Amount of Borrowing Cost = Actual Borrowing Cost
(less) Income on Temporary Investment of those
borrowings
CA Kaustubh Deshpande 52
53. To the extent funds are borrowed generally and used
for obtaining qualifying asset, the amount of
borrowing cost eligible for capitalization will be
determined by applying a capitalization rate to the
expenditure on that asset.
Capitalization Rate = Weighted Average of Borrowing
Costs
The borrowing costs should not exceed actual costs
incurred
CA Kaustubh Deshpande 53
54. Capitalization as a part of cost should commence
when ALL of the following conditions are satisfied –
1. Expenditure for the acquisition, construction or
production of a qualifying asset is being incurred
2. Borrowing costs are being incurred
3. Activities that are necessary to prepare the asset for
its intended use or sale are in progress
CA Kaustubh Deshpande 54
55. Capitalization of Borrowing Costs should be suspended
when –
1. Extended periods in which active development is
interrupted
2. Natural Calamity has occurred
(flood, earthquake, etc.) which would hamper the
development of Qualifying Asset
Capitalization is not normally suspended when
substantial technical or administrative work is being
carried out or temporary delay is a necessary part of
getting the asset ready
CA Kaustubh Deshpande 55
56. Capitalization of Borrowing Costs should cease when –
1. Substantially all activities necessary to prepare the
Qualifying Asset for its intended use or sale are
complete
2. When the construction of a qualifying asset is
completed in parts and a completed part is capable
of being used while construction continues for the
other parts, capitalization of borrowing costs in
relation to a part should cease when substantially all
the activities necessary to prepare that part for its
intended use or sale are complete
CA Kaustubh Deshpande 56
57. Financial statement should disclose –
1. The accounting policy adopted for borrowing
costs
2. The amount of borrowing costs capitalized
during the period
CA Kaustubh Deshpande 57
58. There are 146 paragraphs
Contents
Objective
Scope
Definitions
Short term employee benefits and recognition
Post employment benefits
Long term benefits
Termination benefits
CA Kaustubh Deshpande 58
59. Thestandard requires an enterprise to
recognise:
A liability when an employee has provided
service in exchange for employee benefits to be
paid
An expense when enterprise consumes the
economic benefit arising from service provided
by an employee in exchange for employee
benefits.
CA Kaustubh Deshpande 59
60. Short term benefits plan
Post employment benefit
Long term employee benefits
Termination benefits
CA Kaustubh Deshpande 60
61. Employee benefits- consideration given by an
enterprise in exchange of service rendered
by employee
Short term employee benefit- employee
benefits which fall due within twelve months
after the end of the period
Post employment benefits- employee
benefits which are payable after the
completion of employment
Long term employee benefits- Employee
benefits which do not fall due wholly within
twelve months after the end of the period
CA Kaustubh Deshpande 61
62. Termination benefits: Benefits payable as a
result of either- terminate an employee’s
employment before the normal retirement
and VRS
CA Kaustubh Deshpande 62
63. Examples: Salary, wages, performance
bonus, compensated absences (within
twelve), non monetary benefits (medical
care, cars, etc)
Recognition:Undiscounted amount of short
term employee benefits to be paid in
exchange of services
In case of non vesting compensated absences
( Only exemption to SMC)
CA Kaustubh Deshpande 63
64. Post employment benefits are classified
Defined contribution plan
Obligation is limited to the amount that it agrees to
contribute to the fund
Recognition: contribution payable to defined
contribution payable. However where contribution
so not fall due within 12 month its should be
discounted (Except SMC) as per para 78 (Market
yield on gov. bonds)
Defined Benefit plan
Obligation is to provide the agreed benefit to current
and former employees
Recognition: Actuarial Valuation
CA Kaustubh Deshpande 64
65. Example:Long term compensated
absences, long service benefits,
Recognition: Actuarial valuation
CA Kaustubh Deshpande 65
66. Recognition
Enterprise has a present obligation as a result of
a past event
Probable that an outflow
Reliable estimate
Where termination benefits fall due more than
12 months – It should be discounted as per para
78
CA Kaustubh Deshpande 66
67. There are 35 paragraphs
Contents
Definitions
Classification of investments
Cost of investments
Carrying amount of investments
Disposal of investments
Reclassification of investment
CA Kaustubh Deshpande 67
68. Standard does not deal with
1) recognition of interest, dividend
2) Asset management companies, banks and
public financial institution
CA Kaustubh Deshpande 68
69. Investments are assets held by an enterprise
for earning income by way of
dividend, interest etc.
A Current investment –by nature readily
realisable and is intended to be held for not
more than one year
A long term investment- other than current
CA Kaustubh Deshpande 69
70. Current investment
Long term investment
Cost of Investment
Cost plus acquisition charges
Investment acquired in exchange of asset- Fair value
of asset given up
Interest bearing investment- Pre-acquisition interest
and post-acquisition interest
CA Kaustubh Deshpande 70
71. Long term investment
At cost
Other than temporary decline –recorded in Profit
and Loss account
Reversal if revival of investment
Current investment
Lower of cost or fair value
CA Kaustubh Deshpande 71
72. Netdifference on disposal of investment is
recorded in Profit and loss account.
Sale proceeds
Carrying cost
CA Kaustubh Deshpande 72
73. Longterm to Current- transfer is made at
lower of carrying amount and cost on the
date of transfer
Current to long term- transfer is made at the
lower of cost and fair vale on the date of
transfer
CA Kaustubh Deshpande 73
74. Accounting policies- for carrying amount
Separatedisclosure of income earned on
investment and profit or loss on disposal of
current and long term investment
Significant restrictions on the right of
ownership
Aggregateamount of quoted and un quoted
investment along with aggregate amount of
market value
CA Kaustubh Deshpande 74
75. Costincurred for development of IA should
be identified and accounted
Expenditure on an intangible item that was
initially recognised as an expense by
reporting enterprise in previous financial
statement should not be recognised as part
of the cost of an intangible asset at a later
date.
CA Kaustubh Deshpande 75
76. Future economic benefits in excess of its
originally assessed standard of performance.
Expenditure can be measured and attributed
to the cost.
CA Kaustubh Deshpande 76
77. Usefullife
Rebuttable presumption 10 years
Hence if evidence for more than 10 years.
CA Kaustubh Deshpande 77
78. There are 125 Paragraphs
Contents
Scope
Definitions
Identifying an asset – Impairment
Measurement of recoverable
Net selling price
Value in use
Recognition and measurement of impairment loss
Cash generating Units
CA Kaustubh Deshpande 78
79. Standard does apply to:
Inventories
assets arising from construction contracts,
Financial assets
deferred tax asset
CA Kaustubh Deshpande 79
80. Recoverable amount- Higher of an asset’s net
selling price and its value in use
Valuein use is the present value of estimated
future cash flows from the use of an asset
and disposal
SMChas an option not to calculate present
value for deriving the value in use.
CA Kaustubh Deshpande 80
81. Net selling price is the amount obtainable from
the sale of an asset in an arms length transaction
An impairment loss is the amount by which the
carrying amount of an asset exceeds its
recoverable amount.
Cash generating unit is the smallest identifiable
group of assets that generates cash flows from
continuing use that are largely independent of
the cash inflows from other assets or group of
assets.
CA Kaustubh Deshpande 81
82. At
each balance sheet date enterprise should
whether there is any indication that an asset
may be impaired.
External information
Assets market value has been declined
Changes in technology, economics, legal
environment,
Carrying amount of net assets is more than
market capitalisation
CA Kaustubh Deshpande 82
83. Internal information
Physical damage of asset or outdated
Economic performance – based on internal
reproting
CA Kaustubh Deshpande 83
84. Higher of Value in use or net selling price
Net selling price
Best evidence for net selling price
Binding sale agreement
Traded in active market- market price less cost of
disposal
CA Kaustubh Deshpande 84
85. Value in use
Estimate the future cash flows
Cash flow projections should be based on reasonable
and supportable assumptions
Cash flows should be based on recent financial budget
Beyond the period covered by budget be estimated by
extrapolating the projections using growth rate
(Subsequent years)
Cash inflows should consider the amount receivable
(payable) for disposal of asset at the end of its useful
life
Apply discounting rate
CA Kaustubh Deshpande 85
86. Futurecash flows should be estimated on
current conditions:
Cash flows arising from restructuring or future
capital expenditure which will improve the asset
in its excess of its originally assessed standard
performance
Cash flows should not include financing activity
and income tax receipts and payment
As the discount rate is pre tax and should reflect
the time value of money hence above two points
should not be considered while determining
value in use. Discounting rate should also
consider the risk
CA Kaustubh Deshpande 86
87. If the recoverable amount is less than its
carrying value , asset should be reduced to
its recoverable value.
An impairment loss should be recognised as
an expense in the statement of Profit and
Loss account
After accounting for impairment loss, the
depreciation charge for the asset should be
calculated on the assets revised carrying
amount.
CA Kaustubh Deshpande 87
88. If an active market exists for the output produced by
an asset or a group of assets, this asset or group of
assets should be identified as a separate cash-
generating unit, even if some or all of the output is
used internally. If this is the case, management’s
best estimate of future market prices for the output
should be used:
(a) in determining the value in use of this cash-
generating unit, when estimating the future cash
inflows that relate to the internal use of the output;
and
(b) in determining the value in use of other cash-
generating units of the reporting enterprise, when
estimating the future cash outflows that relate to
the internal use of the output.
CA Kaustubh Deshpande 88