Accounting standards

ACCOUNTING STANDARDS
Accounting Standards are formulated with a view to harmonize different accounting policies and practices in use in a
country. The objective of Accounting Standards is, therefore, to reduce the accounting alternatives in the
preparation of financial statements within the bounds of rationality, thereby ensuring comparability of financial
statements of different enterprises with a view to provide meaningful information to various users of financial
statements to enable them to make informed economic decisions.
Recognizing the need for international harmonization of accounting standards, in 1973, the International Accounting
Standards Committee (IASC) was established. It may be mentioned here that the IASC has been reconstituted as the
International Accounting Standards Board (IASB). The objectives of IASC included promotion of the International
Accounting Standards for worldwide acceptance and observance so that the accounting standards in different
countries
are harmonized. In recent years, need for international harmonization of Accounting Standards followed in different
countries has grown considerably as the cross-border transfers of capital are becoming increasingly common.

The Institute of Chartered Accountants of India (ICAI) being a member body of the IASC, constituted the Accounting
Standards Board (ASB) on 21st April, 1977, with a view to harmonize the diverse accounting policies and practices in
use in India. After the avowed adoption of liberalization and globalization as the corner stones of Indian economic
policies in
early ‘90s, and the growing concern about the need of effective corporate governance of late, the Accounting
Standards have increasingly assumed importance. While formulating accounting standards, the ASB takes into
consideration the applicable laws, customs, usages and business environment prevailing in the country. The ASB also
gives due consideration to International Financial Reporting Standards (IFRSs)/ International Accounting Standards
(IASs) issued by IASB and tries to integrate them, to the extent possible, in the light of conditions and practices
prevailing in India.

Composition of the Accounting Standards Board
The composition of the ASB is broad-based with a view to ensuring participation of all interest groups in the
standard-setting process. These interest-groups include industry, representatives of various departments of
government and regulatory authorities, financial institutions and academic and professional bodies. Industry is
represented on the ASB by their apex level associations, viz., Associated Chambers of Commerce & Industry
(ASSOCHAM), Confederation of Indian Industries (CII) and Federation of Indian Chambers of Commerce and Industry
(FICCI). As regards government departments and regulatory authorities, Reserve Bank of India, Ministry of Company
Affairs, Comptroller & Auditor General of India, Controller General of Accounts and Central Board of Excise and
Customs are represented on the ASB. Besides these interest-groups, representatives of academic and professional
institutions such as Universities, Indian Institutes of Management, Institute of Cost and Works Accountants of India
and Institute of Company Secretaries of India are also represented on the ASB. Apart from these interest groups,
certain elected members of the Central Council of ICAI are also on the ASB.

Compliance with Accounting Standards
Accounting Standards issued by the ICAI have legal recognition through the Companies Act, 1956, whereby every
company is required to comply with the Accounting Standards and the statutory auditors of every company are
required to report whether the Accounting Standards have been complied with or not. Also, the Insurance
Regulatory and Development Authority (IRDA) (Preparation of Financial Statements and Auditor’s Report of
Insurance Companies)
Regulations, 2000 requires insurance companies to follow the Accounting Standards issued by the ICAI. The
Securities and Exchange Board of India (SEBI) and the Reserve Bank of India also require compliance with the
Accounting Standards issued by the ICAI from time to time.

The Accounting Standards-setting Process
The accounting standard setting, by its very nature, involves reaching an optimal balance of the requirements of
financial information for various interest-groups having a stake in financial reporting. With a view to reach
consensus, to the extent possible, as to the requirements of the relevant interest-groups and thereby bringing about
general acceptance of the Accounting Standards among such groups, considerable research, consultations and
discussions with the representatives of the relevant interest-groups at different stages of standard formulation

becomes necessary. The standard-setting procedure of the ASB, as briefly outlined below, is designed in such a way
so as to ensure such consultation and discussions:
Identification of the broad areas by the ASB for formulating the Accounting Standards.
Constitution of the study groups by the ASB for preparing the preliminary drafts of the
proposed Accounting Standards.
Consideration of the preliminary draft prepared by the study group by the ASB and revision,
if any, of the draft on the basis of deliberations at the ASB.
Circulation of the draft, so revised, among the Council members of the ICAI and 12 specified
outside bodies such as Standing Conference of Public Enterprises (SCOPE), Indian Banks’
Association, Confederation of Indian Industry (CII), Securities and Exchange Board of India
(SEBI), Comptroller and Auditor General of India (C& AG), and Department of Company
Affairs, for comments.
Meeting with the representatives of specified outside bodies to ascertain their views on the
draft of the proposed Accounting Standard.
Finalization of the Exposure Draft of the proposed Accounting Standard on the basis of
comments received and discussion with the representatives of specified outside bodies.
Issuance of the Exposure Draft inviting public comments.
Consideration of the comments received on the Exposure Draft and finalization 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 draft Accounting Standard by the Council of the Institute, and if found
necessary, modification of the draft in consultation with the ASB.
The Accounting Standard, so finalized, is issued under the authority of the Council.

The Accounting Standards as given by the ASB are listed below:

AS 1 Disclosure of Accounting Policies
AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring after the Balance Sheet Date
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes inAccounting Policies
AS 6 Depreciation Accounting
AS 7 Construction Contracts
AS 8 Accounting for Research and Development (Withdrawn pursuant toAS 26 becoming mandatory)
AS 9 Revenue Recognition
AS 10 Accounting for Fixed Assets
AS 11 The Effects of Changes in Foreign Exchange Rates
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 15 Employee Benefits
AS 16 Borrowing Costs
AS 17 Segment Reporting
AS 18 Related Party Disclosures
AS 19 Leases
AS 20 Earnings Per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income
AS 23 Accounting for Investments in Associates in Consolidated Financial Statements
AS 24 Discontinuing Operations
AS 25 Interim Financial Reporting
AS 26 Intangible Assets
AS 27 Financial Reporting of Interests in Joint Ventures
AS 28 Impairment of Assets
AS 29 Provisions, Contingent Liabilities and Contingent Assets
AS 30 Financial Instruments: Recognition and Measurement

AS 31 Financial Instruments: Presentation
AS 32 Financial Instruments: Disclosures

An explanation pertaining to each Accounting Standard is given below:

AS1 Disclosure Of Accounting Policies:(Issued in 1979 & Mandatory from 1st April, 1991)
a) All significant accounting policies adopted in the preparation and presentation of financial statements should be
disclosed.
b) The disclosure of the significant accounting policies as such should form part of the financial statements and the
significant accounting policies should normally be disclosed in one place.
c) Any change in the accounting policies which has a material effect in the current period or which is reasonably
expected to have a material effect in later periods should be disclosed. In the case of a change in accounting policies
which has a material effect in the current period, the amount by which any item in the financial statements is
affected by such change should also be disclosed to the extent ascertainable. Where such amount is not
ascertainable, wholly or in part, the fact should be indicated.
d) If the fundamental accounting assumptions, viz. Going Concern, Consistency and Accrual are followed in financial
statements, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact
should be disclosed.

AS 2 Valuation of Inventories (Originally Issued in June, 1981, Revised & Mandatory from 1st April, 1999)
A primary issue in accounting for inventories is the determination of the value at which inventories are carried in the
financial statements until the related revenues are recognised.This Statement deals with the determination of such
value, including the ascertainment of cost of inventories and any write-down thereof to net realizable value.
Inventories are assets:
(a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
Measurement of Inventories
a)Inventories should be valued at the lower of cost and net realizable value.
b) 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.

AS 3 Cash Flow Statements(Issued June, 1981, Revised & Effective from 1st April, 1997 &Mandatory from 1st April,
2004)
Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis to
assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilise
those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise
to generate cash and cash equivalents and the timing and certainty of their generation. The Statement deals with
the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a
cash
flow statement which classifies cash flows during the period from operating, investing and financing activities.
1. An enterprise should prepare a cash flow statement and should present it for each period for which financial
statements are presented.
2. The cash flow statement should report cash flows during the periodclassified by operating, investing and
financing activities.
The following terms are used in this Statement with the meanings specified:
Cash comprises cash on hand and demand deposits with banks.
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-producing activities of the enterprise and other activities that are not
investing or financing activities.
Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash
equivalents.

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.

AS 4 Contingencies and Events Occurring after the Balance Sheet Date(Originally issued November, 1982 &
Commencement & Effective 1st April, 1995)
The following terms are used in this Statement with the meanings specified:
a) A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be known or
determined only on the occurrence, or non-occurrence, of one or more uncertain future events.
b) Events occurring after the balance sheet date are those significant events, both favourable and unfavourable, that
occur between the balance sheet date and the date on which the financial statements are approved by the Board of
Directors in the case of a company, and, by the corresponding approving authority in the case of any other entity.
Contingencies
The amount of a contingent loss should be provided for by a charge in the statement of profit and loss if:
(a) 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
(b) a reasonable estimate of the amount of the resulting loss can be made.
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 is not appropriate.

AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies (Originally issued
November, 1982, Commencing & Mandatory from 1st April, 1996)
The objective of this Statement is to prescribe the classification and disclosure of certain items in the statement of
profit and loss so that all enterprises prepare and present such a statement on a uniform basis. This enhances the
comparability of the financial statements of an enterprise over time and with the financial statements of other
enterprises. Accordingly, this Statement requires the classification and disclosure of extraordinary and prior period
items, and the disclosure of certain items within profit or loss from ordinary activities. It also specifies the accounting
treatment for changes in accounting estimates and the disclosures to be made in the financial statements regarding
changes in accounting policies.

AS 6 Depreciation Accounting (Originally Issued in November, 1982, Commencing & Mandatory from 1st April, 1995)
The depreciable amount of a depreciable asset should be allocated on a systematic basis to each accounting period
during the useful life of the asset. The depreciation method selected should be applied consistently from period to
period. A change from one method of providing depreciation to another should be made only if the adoption of the
new
method is required by statute or for compliance with an accounting standard or if it is considered that the change
would result in a more appropriate preparation or presentation of the financial statements of the enterprise.
Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from
use, effluxion of time or obsolescence through technology and market changes. Depreciation is allocated so as to
charge a fair proportion of the depreciable amount in each accounting period during the expected useful life of the
asset. Depreciation includes amortisation of assets whose useful life is predetermined.
Depreciable assets are assets which
(i) are expected to be used during more than one accounting period; and
(ii) have a limited useful life; and
(iii) are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for
administrative purposes and not for the purpose of sale in the ordinary course ofbusiness.
Useful life is either (i) the period over which a depreciable asset is expected to be used by the enterprise; or (ii) the
number of production or similar units expected to be obtained from the use of the asset by the enterprise.
Depreciable amount of a depreciable asset is its historical cost, or other amount substituted for historical cost in the
financial statements, less the estimated residual value.

AS 7 Construction Contracts (Originally Issued in December, 1983, Commencement & Mandatory from 1 st April,
2003)

The objective of this Statement is to prescribe the accounting treatment of revenue and costs associated with
construction contracts. Because of the nature of the activity undertaken in construction contracts, the date at which
the contract activity is entered into and the date when the activity is completed usually fall into different accounting
periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue
and contract costs to the accounting periods in which construction work is performed. This Statement uses the
recognition criteria established in the Framework for the Preparation and Presentation of Financial Statements to
determine when contract revenue and contract costs should be recognized as revenue and expenses in the
statement of profit and loss. It also provides practical guidance on the application of these criteria.
A construction contract is a contract specifically negotiated for the construction of an asset or a combination of
assets that are closely interrelated or interdependent in terms of their design, technology and function or their
ultimate purpose or use.

AS 8 Accounting for Research and Development (Withdrawn pursuant to AS 26 becoming mandatory) (Revised in
2002)
Accounting Standard (AS) 8, Accounting for Research and Development, is withdrawn from the date of AS 26,
Intangible Assets, becoming mandatory for respective enterprises.

AS 9 Revenue Recognition ( Issued in 1985, Mandatory from 1st April, 1991)
Revenue recognition is mainly concerned with the timing of recognition of revenue in the statement of profit and
loss of an enterprise. The amount of revenue arising on a transaction is usually determined by agreement between
the parties involved in the transaction.
Revenue is the 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 others of enterprise
resources yielding interest, royalties and dividends.
Revenue from sales or service transactions should be recognized.
Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends.
The use by others of such enterprise resources gives rise to:
(i) interest—charges for the use of cash resources or amounts due to the enterprise;
(ii) royalties—charges for the use of such assets as know-how, patents, trademarks and copyrights;
(iii) dividends—rewards from the holding of investments in shares.

AS 10 Accounting for Fixed Assets (Issued in 1985, Effective & Mandatory from 1st April, 1991)
Financial statements disclose certain information relating to fixed assets. In many enterprises these assets are
grouped into various categories, such as land, buildings, plant and machinery, vehicles, furniture and fittings,
goodwill, patents, trademarks and designs. This statement deals with accounting forsuch fixed assets. Fixed assets
often comprise a significant portion of the total assets of an enterprise, and therefore are important in the
presentation of financial position. Furthermore, the determination of whether an expenditure represents an asset or
an expense can have a material effect on an enterprise’s reported results of operations.
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.

AS 11 The Effects of Changes in Foreign Exchange Rates(Originally Issued in 1989
An enterprise may carry on activities involving foreign exchange in two ways. It may have transactions in foreign
currencies or it may have foreign operations. In order to include foreign currency transactions and foreign
operations in the financial statements of an enterprise, transactions must be expressed in the enterprise’s reporting
currency and the financial statements of foreign operations must be translated into the enterprise’s reporting
currency.
This Statement should be applied:
(a) in accounting for transactions in foreign currencies; and
(b) in translating the financial statements of foreign operations.
Foreign currency is a currency other than the reporting currency of an enterprise.
Reporting currency is the currency used in presenting the financial statements.
Foreign operation is a subsidiary , associate , joint venture or branch of the reporting enterprise, the activities of
which are based or conducted in a country other than the country of the reporting enterprise.

AS 12 Accounting for Government Grants (Originally Issued in 1991, Effective from 1st April, 1992, Mandatory from
1st April, 1994)
This Statement deals with accounting for government grants. Government grants are sometimes called by other
names such as subsidies, cash incentives, duty drawbacks, etc. The receipt of government grants by an enterprise is
significant for preparation of the financial statements for two reasons. Firstly, if a government grant has been
received, an appropriate method of accounting therefor is necessary. Secondly, it is desirable to give an indication of
the extent to
which the enterprise has benefited from such grant during the reporting period. This facilitates comparison of an
enterprise’s financial statements with those of prior periods and with those of other enterprises.
Government refers to government, government agencies and similar bodies whether local, national or international.
Government grants are assistance by government in cash or kind to an enterprise for past or future compliance with
certain conditions. They exclude those forms of government assistance which cannot reasonably have a value placed
upon them and transactions with government which cannot be distinguished from the normal trading transactions
of the enterprise.

AS 13 Accounting for Investments (Originally Issued in 1993, Mandatory from 1st April, 1995)
This Statement deals with accounting for investments in the financial statements of enterprises and related
disclosure requirements. An enterprise should disclose current investments and long term investments distinctly in
its financial statements. The cost of an investment should include acquisition charges such as brokerage, fees and
duties. An enterprise holding investment properties should account for them as long term investments.
Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for
capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not
‘investments’.
A current investment is an investment that is by its nature readily realizable and is intended to be held for not more
than one year from the date on which such investment is made.
A long term investment is an investment other than a current investment.

AS 14 Accounting for Amalgamations (Issued in 1994, Effective & Mandatory from 1st April, 1995)
This statement deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves.
This statement is directed principally to companies although some of its requirements also apply to financial
statements of other enterprises.
An amalgamation may be either –
(a) an amalgamation in the nature of merger, or
(b) an amalgamation in the nature of purchase.
Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute
which may be applicable to companies.

AS 15 Employee Benefits ( Originally Issued in 1995, Revised in 2005, Effective & Mandatory from December 7,2005
The objective of this Statement is to prescribe the accounting and disclosure for employee benefits. The Statement
requires an enterprise to recognize:
(a) a liability when an employee has provided service in exchange for employee benefits to be paid in the future; and
(b) an expense when the enterprise consumes the economic benefit arising from service provided by an employee in
exchange for employee benefits.
This Statement should be applied by an employer in accounting for all employee benefits, except employee share-
based payments .
This Statement does not deal with accounting and reporting by employee benefit plans.
Employee benefits are all forms of consideration given by an enterprise in exchange for service rendered by
employees.

AS 16 Borrowing Costs (Effective & Mandatory from 1st April, 2000)
The objective of this Statement is to prescribe the accounting treatment for borrowing costs.
This Statement should be applied in accounting for borrowing costs.
This Statement does not deal with the actual or imputed cost of owners’ equity, including preference share capital
not classified as a liability.
Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. It
may include interest and commitment charges on bank borrowings and other short-term and long-term borrowings.

AS 17 Segment Reporting ( Effective from 1st April, 2001, Mandatory from 1st April, 2004)
The objective of this Statement is to establish principles for reporting financial information, about the different types
of products and services an enterprise produces and the different geographical areas in which it operates. Such
information helps users of financial statements:
(a) better understand the performance of the enterprise;
(b) better assess the risks and returns of the enterprise; and
(c) make more informed judgments about the enterprise as a whole.
Many enterprises provide groups of products and services or operate in geographical areas that are subject to
differing rates of profitability, opportunities for growth, future prospects, and risks. Information about different
types of products and services of an enterprise and its operations in different geographical areas - often called
segment information - is relevant to assessing the risks and returns of a diversified or multi-locational enterprise but
may not be determinable from the aggregated data. Therefore, reporting of segment information is widely regarded
as necessary for meeting the
needs of users of financial statements.
This Statement should be applied in presenting general purpose financial statements.
The requirements of this Statement are also applicable in case of consolidated financial statements.
An enterprise should comply with the requirements of this Statement fully and not selectively.

AS 18 Related Party Disclosures ( Effective from 1st April, 2001, Mandatory from 1st April, 2004)
The objective of this Statement is to establish requirements for disclosure of:
(a) related party relationships; and
(b) transactions between a reporting enterprise and its related parties
This Statement should be applied in reporting related party relationships and transactions between a reporting
enterprise and its related parties. The requirements of this Statement apply to the financial statements of each
reporting enterprise as also to consolidated financial statements presented by a holding company.
Related party - parties are considered to be related if at any time during the reporting period one party has the
ability to control the other party or exercise significant influence over the other party in making financial and/or
operating decisions.

AS 19 Leases (Commencement & Mandatory from 1st April, 2001)
The objective of this Statement is to prescribe, for lessees and lessors, the appropriate accounting policies and
disclosures in relation to finance leases and operating leases.
This Statement should be applied in accounting for all leases other than:
(a) lease agreements to explore for or use natural resources, such as oil, gas, timber, metals and other mineral rights;
(b)licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents &
copyrights; and
(c) lease agreements to use lands.
This Statement applies to agreements that transfer the right to use assets even though substantial services by the
lessor may be called for in connection with the operation or maintenance of such assets. On the other hand, this
Statement does not apply to agreements that are contracts for services that do not transfer the right to use assets
from one contracting party to the other.
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the
right to use an asset for an agreed period of time.

AS 20 Earnings Per Share (Commencement & Mandatory from 1st April, 2001)
The objective of this Statement is to prescribe principles for the determination and presentation of earnings per
share which will improve comparison of performance among different enterprises for the same period and among
different accounting periods for the same enterprise. The focus of this Statement is on the denominator of the
earnings per share calculation. Even though earnings per share data has limitations because of different accounting
policies used for determining ‘earnings’, a consistently determined denominator enhances the quality of financial
reporting.
This Statement should be applied by enterprises whose equity shares or potential equity shares are listed on a
recognized stock exchange in India. An enterprise which has neither equity shares nor potential equity shares which
are so listed but which discloses earnings per share should calculate and disclose earnings per share in accordance
with this
Statement.
An equity share is a share other than a preference share.

AS 21 Consolidated Financial Statements (Commencement from 1st April, 2001)
The objective of this Statement is to lay down principles and procedures for preparation and presentation of
consolidated financial statements. Consolidated financial statements are presented by a parent (also known as
holding enterprise) to provide financial information about the economic activities of its group. These statements are
intended to present financial information about a parent and its subsidiary(ies) as a single economic entity to show
the economic resources controlled by the group, the obligations of the group and results the group achieves with its
resources.
This Statement should be applied in the preparation and presentation of consolidated financial statements for a
group of enterprises under the control of a parent.
This Statement should also be applied in accounting for investments in subsidiaries in the separate financial
statements of a parent.
A subsidiary is an enterprise that is controlled by another enterprise (known as the parent).
A parent is an enterprise that has one or more subsidiaries.
Consolidated financial statements are the financial statements of a group presented as those of a single enterprise.

AS 22 Accounting for Taxes on Income ( Effective from 1st April, 2001)
The objective of this Statement is to prescribe accounting treatment for taxes on income. Taxes on income is one of
the significant items in the statement of profit and loss of an enterprise. In accordance with the matching concept,
taxes on income are accrued in the same period as the revenue and expenses to which they relate. Matching of such
taxes against revenue for a period poses special problems arising from the fact that in a number of cases, taxable
income may be significantly different from the accounting income. This divergence between taxable income and
accounting income arises due to two main reasons. Firstly, there are differences between items of revenue and
expenses as appearing in the statement of profit and loss and the items which are considered as revenue, expenses
or deductions for tax purposes. Secondly, there are differences between the amount in respect of a particular item
of revenue or expense as recognised in the statement of profit and loss and the corresponding amount which is
recognised for the computation of
taxable 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.
For the purposes of this Statement, taxes on income include all domestic and foreign taxes which are based on
taxable income.
Accounting income (loss) is the net profit or loss for a period, as reported in the statement of profit and loss, before
deducting income tax expense or adding income tax saving.
Taxable income (tax loss) is the amount of the income (loss) for a period, determined in accordance with the tax
laws, based upon which income tax payable (recoverable) is determined.

AS 23 Accounting for Investments in Associates in Consolidated Financial Statements (Issued in 2001, Effective from
1st, April, 2002)
The objective of this Statement is to set out principles and procedures for recognising, in the consolidated financial
statements, the effects of the investments in associates on the financial position and operating results of a group.
This Statement should be applied in accounting for investments in associates in the preparation and presentation of
consolidated financial statements by an investor.
This Statement does not deal with accounting for investments in associates in the preparation and presentation of
separate financial statements by an investor
An associate is an enterprise in which the investor has significant influence and which is neither a subsidiary nor a
joint venture of the investor.
Consolidated financial statements are the financial statements of a group presented as those of a single enterprise.

AS 24 Discontinuing Operations (Issued in 2002, Mandatory from 1st April, 2004)
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.
This Statement applies to all discontinuing operations of an enterprise.

The requirements related to cash flow statement contained in this Statement are applicable where an enterprise
prepares and presents a cash flow statement.
A discontinuing operation is a component of an enterprise:
(a) that the enterprise, pursuant to a single plan, is:
(i) 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
(ii) disposing of piecemeal, such as by selling off the component's assets and settling its liabilities individually; or
(iii) terminating through abandonment; and
(b) that represents a separate major line of business or geographical area of operations; and
(c) that can be distinguished operationally and for financial reporting purposes.

AS 25 Interim Financial Reporting (Effective from 1st April, 2002)
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.
This Statement does not mandate which enterprises should be required to present interim financial reports, how
frequently, or how soon after the end of an interim period. If an enterprise is required or elects to prepare and
present an interim financial report, it should comply with this Statement.
Interim period is a financial reporting period shorter than a full financial year.
Interim financial report means a financial report containing either acomplete set of financial statements or a set of
condensed financial statements (as described in this Statement) for an interim period.
During the first year of operations of an enterprise, its annual financial reporting period may be shorter than a
financial year. In such a case, that shorter period is not considered as an interim period.

AS 26 Intangible Assets (Effective & Mandatory from 1st April, 2003)
The objective of this Statement is to prescribe the accounting treatment for intangible assets that are not dealt with
specifically in another Accounting Standard. This Statement requires an enterprise to recognize an intangible asset if,
and only if, certain criteria are met. The Statement also specifies how to measure the carrying amount of intangible
assets and requires certain disclosures about intangible assets.
Enterprises frequently expend resources, or incur liabilities, on the acquisition, development, maintenance or
enhancement of intangible resources such as scientific or technical knowledge, design and implementation of new
processes or systems, licences, intellectual property, market knowledge and trademarks (including brand names and
publishing titles). Common examples of items encompassed by these broad headings are computer software,
patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licences, import quotas,
franchises,
customer or supplier relationships, customer loyalty, market share and marketing rights. Goodwill is another
example of an item of intangible nature which either arises on acquisition or is internally generated.
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.
An asset is a resource:
(a) controlled by an enterprise as a result of past events; and
(b) from which future economic benefits are expected to flow to the enterprise.

AS 27 Financial Reporting of Interests in Joint Ventures (Effective & Mandatory from 1st April, 2002)
The objective of this Statement is to set out principles and procedures for accounting for interests in joint ventures
and reporting of joint venture assets, liabilities, income and expenses in the financial statements of venturers and
investors.
This Statement should be applied in accounting for interests in joint ventures and the reporting of joint venture
assets, liabilities, income and expenses in the financial statements of venturers and investors, regardless of the
structures or forms under which the joint venture activities take place.
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity, which is
subject to joint control.

A venturer is a party to a joint venture and has joint control over thatjoint venture.
An investor in a joint venture is a party to a joint venture and does not have joint control over that joint venture.

AS 28 Impairment of Assets (Issued in 2002, Effective & Mandatory from 1st April, 2004)
The objective of this Statement is to prescribe the procedures that an enterprise applies to ensure that its assets are
carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its
carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is
described as impaired and this Statement requires the enterprise to recognise an impairment loss. This Statement
also specifies when an enterprise should reverse an impairment loss and it prescribes certain disclosures for
impaired assets.
The Standard doesn’t apply to assets arising from or included in AS2, AS7, AS13, AS22.
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.

AS 29 Provisions, Contingent Liabilities and Contingent Assets(Issued in 2003, Effective & Mandatory from 1st April,
2004)
The objective of this Statement is to ensure that appropriate recognition criteria and measurement bases are applied
to provisions and contingent liabilities and that sufficient information is disclosed in the notes to the financial
statements to enable users to understand their nature, timing and amount. The objective of this Statement is also to
lay down appropriate accounting for contingent assets.
This Statement should be applied in accounting for provisions and contingent liabilities and in dealing with
contingent assets, except:
(a) those resulting from financial instruments that are carried at fair value;
(b) those resulting from executory contracts, except where the contract is onerous ;
(c) those arising in insurance enterprises from contracts with policy-holders; and
(d) those covered by another Accounting Standard.
A provision is a liability which can be measured only by using a substantial degree of estimation.
A contingent liability is:
(a) a possible obligation that arises from past events and the existence of which will be confirmed only by the
occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the
obligation;
(ii) a reliable estimate of the amount of the obligation cannot be made.
A contingent asset is a possible asset that arises from past events the existence of which will be confirmed only by
the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the
enterprise.

AS 30 Financial Instruments: Recognition and Measurement (Effective from 1 April, 2009, Mandatory from 1st April,
2011
The objective of this Standard is to establish principles for recognising and measuring financial assets, financial
liabilities and some contracts to buy or sell non-financial items. Requirements for presenting information about
financial instruments are in Accounting Standard (AS) 31, Financial Instruments: Presentation. Requirements for
disclosing information about financial instruments are in Accounting Standard (AS) 32, Financial Instruments:
Disclosures.
This Standard should not applied to:
Those interests in subsidiaries, associates and joint ventures that are accounted for under AS 21, AS 23 or AS 27.
This Standard should be applied to those contracts to buy or sell a non-financial item that can be settled net in cash
or another financial instrument, or by exchanging financial instruments, as if the contracts were financial
instruments, with the exception of contracts that were entered into and continue to be held for the purpose of the
receipt or delivery of a nonfinancial item in accordance with the entity's expected purchase, sale or usage
requirements.

AS 31 Financial Instruments: Presentation(Effective from 1st April, 2009, Mandatory from 1stApril, 2011)

The objective of this Standard is to establish principles for presenting financial instruments as liabilities or equity and
for offsetting financial assets and financial liabilities. It applies to the classification of financial instruments, from the
perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related
interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be
offset.
This Standard should be applied to those contracts to buy or sell a non-financial item that can be settled net in cash
or another financial instrument, or by exchanging financial instruments, as if the contracts were financial
instruments, with the exception of contracts that were entered into and continue to be held for the purpose of the
receipt or delivery of a nonfinancial item in accordance with the entity’s expected purchase, sale or usage
requirements.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
A financial asset is any asset that is:
(a) cash;
(b) an equity instrument of another entity;
(c) a contractual right

AS 32 Financial Instruments: Disclosures (Effective from 1st April, 2009, Mandatory from 1st April, 2011)
The objective of this Standard is to require entities to provide disclosures in their financial statements that enable
users to evaluate:
(a) the significance of financial instruments for the entity’s financial position and performance; and
(b) 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.
The principles in this Accounting Standard complement the principles for recognising, measuring and presenting
financial assets and financial liabilities in Accounting Standard (AS) 30, Financial Instruments: Recognition and
Measurement and Accounting Standard (AS) 31, Financial Instruments: Presentation.
This Accounting Standard applies to recognised and unrecognised financial instruments. Recognised financial
instruments include financial assets and financial liabilities that are within the scope of AS 30. 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).

In 1973, the International Accounting Standards Committee (IASC) was established. It may be mentioned here that
the IASC has been reconstituted as the International Accounting Standards Board (IASB). The objectives of IASC
included promotion of the International Accounting Standards for worldwide acceptance and observance so that the
accounting standards in different countries are harmonized. In recent years, need for international harmonization of
Accounting Standards followed in different countries has grown considerably as the cross-border transfers of capital
are becoming increasingly common.
International Accounting Standards (IASs) were issued by the IASC from 1973 to 2000. The IASB replaced the IASC in
2001. Since then, the IASB has amended some IASs and has proposed to amend others, has replaced some IASs with
new International Financial Reporting Standards (IFRSs), and has adopted or proposed certain new IFRSs on topics
for which there was no previous IAS. Through committees, both the IASC and the IASB also have issued
Interpretations of Standards.
IASB's Objectives
(a) to develop, in the public interest, a single set of high quality, understandable and enforceable global accounting
standards that require high quality, transparent and comparable information in financial statements and other
financial reporting to help participants in the world's capital markets and other users make economic decisions;
(b) to promote the use and rigorous application of those standards; and

(c) in fulfilling the objectives associated with (a) and (b), to take account of, as appropriate, the special needs of small
and medium-sized entities and emerging economies; and
(d) to bring about convergence of national accounting standards and International Accounting Standards and
International Financial Reporting Standards to high quality solutions.

The following standards are issued by IASC:

IAS 1: Presentation of Financial Statements.
IAS 2: Inventories
IAS 3: Consolidated Financial Statements Originally issued 1976, effective 1 Jan 1977. Superseded in 1989 by IAS 27
and IAS 28
IAS 4: Depreciation Accounting Withdrawn in 1999, replaced by IAS 16, 22, and 38, all of which were issued or
revised in 1998
IAS 5: Information to Be Disclosed in Financial Statements Originally issued October 1976, effective 1 January 1997.
Superseded by IAS 1 in 1997
IAS 6: Accounting Responses to Changing Prices Superseded by IAS 15, which was withdrawn December 2003
IAS 7: Cash Flow Statements
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors
IAS 9: Accounting for Research and Development Activities – Superseded by IAS 38 effective 1.7.99
IAS 10: Events After the Balance Sheet Date
IAS 11: Construction Contracts
IAS 12: Income Taxes
IAS 13: Presentation of Current Assets and Current Liabilities – Superseded by IAS 1.
IAS 14: Segment Reporting (superseded by IFRS 8 on 1 January 2008)
IAS 15: Information Reflecting the Effects of Changing Prices – Withdrawn December 2003
IAS 16: Property, Plant and Equipment
IAS 17: Leases
IAS 18: Revenue
IAS 19: Employee Benefits
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance
IAS 21: The Effects of Changes in Foreign Exchange Rates
IAS 22:Business Combinations – Superseded by IFRS 3 effective 31 March 2004
IAS 23: Borrowing Costs
IAS 24: Related Party Disclosures
IAS 25: Accounting for Investments – Superseded by IAS 39 and IAS 40 effective 2001
IAS 26: Accounting and Reporting by Retirement Benefit Plans
IAS 27: Consolidated Financial Statements
IAS 28: Investments in Associates
IAS 29: Financial Reporting in Hyperinflationary Economies
IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions – Superseded by IFRS 7
effective 2007
IAS 31: Interests in Joint Ventures
IAS 32: Financial Instruments: Presentation (Financial instruments disclosures are in IFRS 7 Financial Instruments:
Disclosures, and no longer in IAS 32)
IAS 33: Earnings Per Share
IAS 34: Interim Financial Reporting
IAS 35: Discontinuing Operations – Superseded by IFRS 5 effective 2005
IAS 36: Impairment of Assets
IAS 37: Provisions, Contingent Liabilities and Contingent Assets
IAS 38: Intangible Assets
IAS 39: Financial Instruments: Recognition and Measurement
IAS 40: Investment Property
IAS 41: Agriculture

IAS 1: Presentation of Financial Statements( Last Amended on 16 June, 2011, Effective from 1st July, 2012)
The objective of general purpose financial statements is to provide information about the financial position, financial
performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions. To

meet that objective, financial statements provide information about an entity's assets, liabilities, equity, income and
expenses, including gains and losses, contributions by and distributions to owners, cash flows.
Applies to all general purpose financial statements based on International Financial Reporting Standards.General
purpose financial statements are those intended to serve users who are not in a position to require financial reports
tailored to their particular information needs.

IAS 2: Inventories ( Last Amended in 2003, Effective from 1st July, 2005)
The objective of IAS 2 is to prescribe the accounting treatment for inventories. It provides guidance for determining
the cost of inventories and for subsequently recognising an expense, including any write-down to net realisable
value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
Inventories include assets held for sale in the ordinary course of business (finished goods), assets in the production
process for sale in the ordinary course of business (work in process), and materials and supplies that are consumed
in production (raw materials).
Inventories are required to be stated at the lower of cost and net realisable value (NRV).

IAS 3 Consolidated Financial Statements – Originally issued 1976, effective 1 Jan 1977. Superseded in 1989 by IAS 27
and IAS 28

IAS 4 Depreciation Accounting – Withdrawn in 1999, replaced by IAS 16, 22, and 38, all of which were issued or
revised in 1998

IAS 5 Information to Be Disclosed in Financial Statements – Originally issued October 1976, effective 1 January
1997. Superseded by IAS 1 in 1997

IAS 6 Accounting Responses to Changing Prices – Superseded by IAS 15, which was withdrawn December 2003

IAS 7: Cash Flow Statements (Revised in April, 2009, Effective from 1st January,2010)
The objective of IAS 7 is to require the presentation of information about the historical changes in cash and cash
equivalents of an entity by means of a statement of cash flows, which classifies cash flows during the period
according to operating, investing, and financing activities.
All entities that prepare financial statements in conformity with IFRSs are required to present a statement of cash
flows.
The statement of cash flows analyses changes in cash and cash equivalents during a period. Cash and cash
equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments that
are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value.
Guidance notes indicate that an investment normally meets the definition of a cash equivalent when it has a
maturity of three months or less from the date of acquisition. Equity investments are normally excluded, unless they
are in substance a cash equivalent (e.g. preferred shares acquired within three months of their specified redemption
date). Bank overdrafts which are repayable on demand and which form an integral part of an entity's cash
management are also included as a component of cash and cash equivalents.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors(Revised in 2003, Effective from 1st January,
2005)
The objective of this Standard 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. The Standard is intended 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.
Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in
preparing and presenting financial statements.
A change in accounting estimate is an adjustment of the carrying amount of an asset or liability, or related expense,
resulting from reassessing the expected future benefits and obligations associated with that asset or liability.

IAS 9: Accounting for Research and Development Activities – Superseded by IAS 38 effective 1.7.99

IAS 10: Events After the Balance Sheet Date ( Revised in 2003, Effective from 1st January, 2005)
The objective of this Standard is to prescribe:

(a) when an entity should adjust its financial statements for events after the reporting period; and
(b) the disclosures that an entity should give about the date when the financial statements were authorised for issue
and about events after the reporting period.
Event after the reporting period: An event, which could be favourable or unfavourable, that occurs between the end
of the reporting period and the date that the financial statements are authorised for issue.

Adjusting event: An event after the reporting period that provides further evidence of conditions that existed at the
end of the reporting period, including an event that indicates that the going concern assumption in relation to the
whole or part of the enterprise is not appropriate.

Non-adjusting event: An event after the reporting period that is indicative of a condition that arose after the end of
the reporting period.

IAS 11: Construction Contracts (Revised in 1993, Effective from 1st January, 1995)
The objective of this Standard is to prescribe the accounting treatment of revenue and costs associated with
construction contracts. Because of the nature of the activity undertaken in construction contracts, the date at which
the contract activity is entered into and the date when the activity is completed usually fall into different accounting
periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue
and contract costs to the accounting periods in which construction work is performed.
A construction contract is a contract specifically negotiated for the construction of an asset or a group of interrelated
assets.

IAS 12: Income Taxes ( Revised in December, 2010, Effective from 1st January, 2012)
The objective of this Standard is to prescribe the accounting treatment for income taxes. For the purposes of this
Standard, income taxes include all domestic and foreign taxes which are based on taxable profits. Income taxes also
include taxes, such as withholding taxes, which are payable by a subsidiary, associate or joint venture on
distributions to the reporting entity.

IAS 13: Presentation of Current Assets and Current Liabilities – Superseded by IAS 1

IAS 14: Segment Reporting (superseded by IFRS 8 on 1 January 2009)

IAS 15: Information Reflecting the Effects of Changing Prices – Withdrawn December 2003

IAS 16: Property, Plant and Equipment( Revised in May, 2008, Effective from 1st January, 2009)
The objective of this Standard is to prescribe the accounting treatment for property, plant and equipment so that
users of the financial statements can discern information about an entity’s investment in its property, plant and
equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment
are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and
impairment losses to be recognised in relation to them.

IAS 17: Leases(Revision in April, 2009, Effective from 1st January, 2010)
The objective of this Standard is to prescribe, for lessees and lessors, the appropriate accounting policies and
disclosure to apply in relation to leases. The classification of leases adopted in this Standard is based on the extent to
which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. A lease is classified
as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as
an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
IAS 17 applies to all leases other than lease agreements for minerals, oil, natural gas, and similar regenerative
resources and licensing agreements for films, videos, plays, manuscripts, patents, copyrights, and similar items.
A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset. The lease
payment and the sale price are usually interdependent because they are negotiated as a package. The accounting
treatment of a sale and leaseback transaction depends upon the type of lease involved.

IAS 18: Revenue(Revised and Effective from 16th April, 2009)
The primary issue in accounting for revenue is determining when to recognise revenue. Revenue is recognized when
it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This

Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognised.
It also provides practical guidance on the application of these criteria.

Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary
activities of an entity when those inflows result in increases in equity, other than increases relating to
contributions from equity participants.
This Standard shall be applied in accounting for revenue arising from the following transactions and events:
(a) the sale of goods;
(b) the rendering of services; and
(c) the use by others of entity assets yielding interest, royalties and dividends.

IAS 19: Employee Benefits ( Revised in June 2011, Effective from 1st January, 2013)
Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.
The objective of this Standard is to prescribe the accounting and disclosure for employee benefits. The Standard
requires an entity to recognise:
(a) a liability when an employee has provided service in exchange for employee benefits to be paid in the future; and
(b) an expense when the entity consumes the economic benefit arising from service provided by an employee in
exchange for employee benefits.
IAS 19 applies to (among other kinds of employee benefits):
wages and salaries
compensated absences (paid vacation and sick leave)
profit sharing plans
bonuses
medical and life insurance benefits during employment
housing benefits
free or subsidised goods or services given to employees
pension benefits
post-employment medical and life insurance benefits
long-service or sabbatical leave
'jubilee' benefits
deferred compensation programs
termination benefits.
Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled
within twelve months after the end of the period in which the employees render the related service.
Post-employment benefits are employee benefits (other than termination benefits) which are payable after the
completion of employment.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (Revised in May, 2008,
Effective from 1st January, 2009)
This Standard shall be applied in accounting for, and in the disclosure of, government grants and in the disclosure of
other forms of government assistance. However, it does not cover government assistance that is provided in the
form of benefits in determining taxable income. It does not cover government grants covered by IAS 41 Agriculture,
either. [IAS 20.2] The benefit of a government loan at a below-market rate of interest is treated as a government
grant. [IAS 20.10A]
Government grants are assistance by government in the form of transfers of resources to an entity in return for past
or future compliance with certain conditions relating to the operating activities of the entity.
Government assistance is action by government designed to provide an economic benefit specific to an entity or
range of entities qualifying under certain criteria.

IAS 21: The Effects of Changes in Foreign Exchange Rates (Revised in January, 2008, 1st July, 2009)
An entity may carry on foreign activities in two ways. It may have transactions in foreign currencies or it may have
foreign operations. In addition, an entity may present its financial statements in a foreign currency. The objective of
this Standard is to prescribe 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. The principal issues
are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial
statements.

Functional currency is the currency of the primary economic environment in which the entity operates. The primary
economic environment in which an entity operates is normally the one in which it primarily generates and expends
cash.
Foreign currency is a currency other than the functional currency of the entity. Spot exchange rate is the exchange
rate for immediate delivery.
Exchange difference is the difference resulting from translating a given number of units of one currency into another
currency at different exchange rates.
Net investment in a foreign operation is the amount of the reporting entity’s interest in the net assets of that
operation.

IAS 22:Business Combinations – Superseded by IFRS 3 effective 31 March 2004

IAS 23: Borrowing Costs (Revised in May, 2008, Effective from 1st January, 2009)
The objective of IAS 23 is to prescribe the accounting treatment for borrowing costs. Borrowing costs include
interest on bank overdrafts and borrowings, amortisation of discounts or premiums on borrowings, finance charges
on finance leases and exchange differences on foreign currency borrowings where they are regarded as an
adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form
part of the cost of that asset. Other borrowing costs are recognised as an expense.
Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

IAS 24: Related Party Disclosures
The objective of this Standard is to ensure that an entity’s financial statements contain the disclosures necessary 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 with such parties.
A related party transaction is a transfer of resources, services or obligations between related parties, regardless
of whether a price is charged.

IAS 25: Accounting for Investments – Superseded by IAS 39 and IAS 40 effective 2001

IAS 26: Accounting and Reporting by Retirement Benefit Plans
This Standard shall be applied in the financial statements of retirement benefit plans where such financial
statements are prepared.
Retirement benefit plans are arrangements whereby an entity provides benefits for employees on or after
termination of service (either in the form of an annual income or as a lump sum) when such benefits, or the
contributions towards them, can be determined or estimated in advance of retirement from the provisions of a
document or from the entity's practices.
Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement benefits
are determined by contributions to a fund together with investment earnings thereon. The financial statements of a
defined contribution plan shall contain a statement of net assets available for
benefits and a description of the funding policy.
Defined benefit plans are retirement benefit plans under which amounts to be paid as retirement benefits are
determined by reference to a formula usually based on employees’ earnings and/or years of service.

IAS 27: Consolidated Financial Statements
The objective of IAS 27 is to enhance the relevance, reliability and comparability of the information that a parent
entity provides in its separate financial statements and in its consolidated financial statements for a group of entities
under its control.
Consolidated financial statements are the financial statements of a group presented as those of a single economic
entity. A group is a parent and all its subsidiaries.
A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another
entity (known as the parent). Control is the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.

IAS 28: Investments in Associates
This Standard shall be applied in accounting for investments in associates. However, it does not apply to investments
in associates held by:
(a) venture capital organisations, or
(b) mutual funds, unit trusts and similar entities including investment-linked insurance funds that upon initial
recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted
for in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Such investments shall be
measured at fair value in accordance with IAS 39, with changes in fair value recognised in profit or loss in the period
of the change.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is
not control or joint control over those policies.

IAS 29: Financial Reporting in Hyperinflationary Economies
This Standard shall be applied to the financial statements, including the consolidated financial statements, of any
entity whose functional currency is the currency of a hyperinflationary economy.The financial statements of an
entity whose functional currency is the currency of a hyperinflationary economy shall be stated in terms of the
measuring unit current at the end of the reporting period.
The restatement of financial statements in accordance with this Standard requires the use of a general price index
that reflects changes in general purchasing power. It is preferable that all entities that report in the currency of the
same economy use the same index.
When an economy ceases to be hyperinflationary and an entity discontinues the preparation and presentation of
financial statements prepared in accordance with this Standard, it shall treat the amounts expressed in the
measuring unit current at the end of the previous reporting period as the basis for the carrying amounts in its
subsequent financial statements.

IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions – Superseded by IFRS 7
effective 2007

IAS 31: Interests in Joint Ventures
This Standard shall be applied in accounting for interests in joint ventures and the reporting of joint venture assets,
liabilities, income and expenses in the financial statements of venturers and investors, regardless of the structures or
forms under which the joint venture activities take place. However, it does not apply to venturers’ interests in jointly
controlled entities held by:
(a) venture capital organisations, or
(b) mutual funds, unit trusts and similar entities including investment-linked insurance funds that upon initial
recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted
for in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is
subject to joint control.
A venturer is a party to a joint venture and has joint control over that joint venture.

IAS 32: Financial Instruments: Presentation (Financial instruments disclosures are in IFRS 7 Financial Instruments:
Disclosures, and no longer in IAS 32)
The objective of this Standard is to establish principles for presenting financial instruments as liabilities or equity and
for offsetting financial assets and financial liabilities. It applies to the classification of financial instruments, from the
perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related
interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be
offset.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities.

IAS 33: Earnings Per Share
The objective of this Standard is to prescribe principles for the determination and presentation of earnings per share,
so as to improve performance comparisons between different entities in the same reporting period and between

different reporting periods for the same entity. The focus of this Standard is on the denominator of the earnings per
share calculation. This Standard shall be applied by entities whose ordinary shares or potential ordinary shares are
publicly traded and by entities that are in the process of issuing ordinary shares or potential ordinary shares in public
markets. An entity that discloses earnings per share shall calculate and disclose earnings per share in accordance
with this Standard.
An ordinary share is an equity instrument that is subordinate to all other classes of equity instruments.
A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary
shares.

IAS 34: Interim Financial Reporting
The objective of this Standard is to prescribe the minimum content of an interim financial report and to prescribe the
principles for recognition and measurement in 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 entity’s capacity to generate earnings and cash flows and its financial condition and liquidity. This Standard
applies if an entity is required or elects to publish an interim financial report in accordance with International
Financial Reporting Standards.
Interim financial report means a financial report containing either a complete set of financial statements (as
described in IAS 1 Presentation of Financial Statements (as revised in 2007)) or a set of condensed financial
statements (as described in this Standard) for an interim period.
Interim periodis a financial reporting period shorter than a full financial year.

IAS 35: Discontinuing Operations – Superseded by IFRS 5 effective 2005

IAS 36: Impairment of Assets
The objective of this Standard is to prescribe the procedures that an entity applies to ensure that its assets are
carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its
carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is
described as impaired and the Standard requires the entity to recognise an impairment loss. The Standard also
specifies when an entity should reverse an impairment loss and prescribes disclosures.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and
its value in use.
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s
length transaction between knowledgeable, willing parties, less the costs of disposal.
Value in use is the present value of the future cash flows expected to be derived from an asset or cash generating
unit.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets
The objective of this Standard is to ensure that appropriate recognition criteria and measurement bases are applied
to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to
enable users to understand their nature, timing and amount.
A provision is a liability of uncertain timing or amount.
A contingent liability is 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.
A contingent asset is a possible asset 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.

IAS 38: Intangible Assets
The objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with
specifically in another Standard. This Standard requires an entity to recognise an intangible asset if, and only if,
specified criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and
requires specified disclosures about intangible assets.
An intangible asset is an identifiable non-monetary asset without physical substance.

IAS 39: Financial Instruments: Recognition and Measurement

The objective of this Standard is to establish principles for recognising and measuring financial assets, financial
liabilities and some contracts to buy or sell non-financial items. Requirements for presenting information about
financial instruments are in IAS 32 Financial Instruments: Presentation. Requirements for disclosing information
about financial instruments are in IFRS 7 Financial Instruments: Disclosures.
This Standard classifies financial instruments into the following four categories:
• A financial asset or financial liability at fair value through profit or loss
• Held-to-maturity investments
• Loans and receivables
• Available-for-sale financial assets.

IAS 40: Investment Property
The objective of this Standard is to prescribe the accounting treatment for investment property and related
disclosure requirements.
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by
the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for:
(a) use in the production or supply of goods or services or for administrative purposes; or
(b) sale in the ordinary course of business.
An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial
measurement.

IAS 41: Agriculture
The objective of this Standard is to prescribe the accounting treatment and disclosures related to agricultural
activity.
Agricultural activity is the management by an entity of the biological transformation and harvest of biological assets
for sale or for conversion into agricultural produce or into additional biological assets.
Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause
qualitative or quantitative changes in a biological asset.
A biological asset is a living animal or plant.
Agricultural produce is the harvested product of the entity’s biological assets.
Harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.

It may be noted that International Accounting Standards nos. 3, 4, 5, 6, 9, 13, 15, 22, 25, 30 and 35 have already
been withdrawn by the International Accounting Standards Board (IASB).

Differences Between International Accounting Standards & Accounting Standards Pertaining To India:
IAS 1: Presentation of Financial Statements
AS 1: Disclosure of Accounting Policies

AS 1 is based on the pre-revised IAS 1. AS 1 is presently under revision to bring it in line with the current IAS 1. The
Exposure Draft of the revised AS 1 is being finalised on the basis of the comments received on its limited exposure
amongst the specified outside bodies. The major differences between IAS 1 and the draft revised AS 1 are discussed
hereinafter.
1. Unlike IAS 1, the draft of revised AS 1 does not provide any option with regard to the presentation of ‘Statement
of Changes in Equity’. It requires statement showing all changes in the equity to be presented.

2. Unlike IAS 1, the draft of revised AS 1 does not provide any option with regard to additional disclosures regarding
share capital, e.g., number of shares authorised, issued, fully paid, etc. and regarding nature and purpose of
reserves, etc., to be made on the face of the balance sheet or in the notes.

IAS 2:Inventories
AS 2:Valuation of Inventories

AS 2 is based on IAS 2 (revised 1993). IAS 2 has been revised in 2003 as a part of the IASB’s improvement project.
Major differences between AS 2 and IAS 2 (revised 2003) are as follows:

1. IAS 2 specifically deals with costs of inventories of an enterprise providing services. However, keeping in view the
level of understanding that was prevailing in the country regarding the treatment of inventories of an enterprise
providing services at the time of last revision of AS 2, the same are excluded from the scope of AS 2.

2. Keeping in view the level of preparedness in the country at the time of last revision of AS 2, AS 2 requires lesser
disclosures as compared to IAS 2.

IAS 7:Cash Flow Statements
AS 3:Cash Flow Statements

AS 3 is based on the current IAS 7. The major differences between IAS 7 and AS 3 are as below:
1. In case of enterprises other than financial enterprises, unlike IAS 7, AS 3 does not provide any option with regard
to classification of interest paid. It requires interest paid to be classified as financing cash flows.

2. In case of enterprises other than financial enterprises, AS 3 does not provide any option with regard to
classification of interest and dividend received. It requires interest and dividend received to be classified as investing
cash flows.

3. AS 3 also does not provide any option regarding classification of dividend paid. It requires dividend paid to be
classified as financing cash flows.

IAS 10:Events After the Balance Sheet Date
AS 4:Contingencies and Events Occurring after the Balance Sheet Date

AS 4 is based on the pre-revised IAS 10 which dealt with the Contingencies as well as the Events Occurring After the
Balance Sheet Date. Recently, on the lines of IAS 37, the ICAI has issued AS 29. Pursuant to the issuance of 29, the
portion of AS 4 dealing with the Contingencies, except to the extent of impairment of assets not covered by other
accounting standards, stands superseded. AS 4 now deals with the Events After the Balance Sheet Date. AS 4 is
presently under revision to bring it in line with the corresponding IAS 10.

1. As per IAS 10, proposed dividend is a non-adjusting event. However, as per the Indian law governing companies,
provision for proposed dividend is required to be made, probably as a measure of greater accountability of the
company concerned towards investors in respect of payment of dividend. While attempts are made, from time to
time, at various levels, to persuade the Government for changes in law; it is a time-consuming process.

2. As per IAS 10, non-adjusting events, which are material, are required to be disclosed in the financial statements.
However as per AS 4, such disclosures are required to be made in the report of the approving authority and not in
the financial statements.

IAS 12:Income Taxes
AS 22:Accounting for Taxes on Income

Keeping in view the level of preparedness in the country at the time of issuance of AS 22, AS 22 was based on the
Income Statement Approach.
ICAI is revising AS 22 to bring it in line with IAS 12.

IAS 14:Segment Reporting
AS 17:Segment Reporting

AS 17 is based on the current IAS 14. The major differences between IAS 14 and AS 17 are described hereinafter.

1. IAS 14 prescribes certain additional disclosure requirements regarding enterprise’s share of profit or loss of
associates and joint ventures and regarding restatement of prior year information, etc. At the time of issuance of AS
17, there were no Accounting Standards in India dealing with accounting for investments in associates and joint
ventures, etc. Accordingly, these disclosures are not specifically covered in AS 17.
2. As per IAS 14, for a segment to qualify as a reportable segment, it is required for it to earn the majority of its
revenue from external customers in addition to meeting the 10% threshold criteria of revenue, operating results or
total assets required in AS 17.

IAS 16:Property, Plant and Equipment
AS 10:Accounting for Fixed Assets

1. In India, the law governing the companies prescribes minimum rates of depreciation. Keeping this in view, the
revised AS 10 recognises that depreciation rates prescribed by the statute would be the minimum rates of
depreciation.
Conceptual differences
2. As per IAS 16, all servicing equipments, whether major or minor, except servicing equipments which can be used
only in connection with an item of property, plant and equipment, are carried as inventory and recognised in the
statement of profit and loss, when consumed. Servicing equipments that can be used only in connection with an
item of property, plant and equipment are accounted for as property, plant and equipment. Keeping in view the
nature of servicing equipments as separate assets, draft of the AS 10 (revised) requires all servicing equipments to be
treated as property, plant and equipment.

IAS 17:Leases
AS 19:Leases

AS 19 is based on IAS 17 (revised 1997). IAS 17 has been revised in 2004. The major differences between IAS 17 and
AS 19(revised 2004) are described hereinafter.
1. Keeping in view the peculiar land lease practices in the country, lease agreements to use lands are specifically
excluded from the scope of AS 19 whereas IAS 17 does not contain this exclusion.
2. IAS 17 specifically provides that the Standard shall not be applied as the basis of measurement for:
(a) property held by lessees that is accounted for as investment property;
(b) investment property provided by lessors under operating leases;
(c) biological assets held by lessees under finance leases; or
(d) biological assets provided by lessors under operating leases

IAS 19:Employee Benefits
AS 15:Employee Benefits

AS 15 is based on the current IAS 19. The major differences between IAS 19 and AS 15 are described hereinafter.

Difference due to removal of alternatives
1. Unlike IAS 19, AS 15 does not provide any option with regard to recognition of actuarial gains and losses. It
requires such gains and losses to be recognised immediately in the statement of profit and loss.
Conceptual Difference
2. Regarding recognition of termination benefits as a liability, it is felt that merely on the basis of a detailed formal
plan, it would not be appropriate to recognise a provision since a liability cannot be considered to be crystallised at
this stage. Accordingly, AS 15 provides criteria for recognition of a provision for liability in respect of termination
benefits on the basis of the general criteria for recognition of provision as per AS 29, Provisions, Contingent Liabilities
and Contingent Assets (corresponding to IAS 37).
It may be noted that the IASB has recently issued an Exposure Draft of the proposed Amendments to IAS 19 whereby
the criteria regarding recognition of termination benefits as a liability are proposed to be amended. The Exposure
Draft proposes that voluntary termination benefits should be recognised when employees accept the entity’s offer
of those benefits. We, in our comments on the Exposure Draft, have pointed out that in a country such as India,
such a requirement would give erroneous results since the schemes generally have the following characteristics in
terms of the steps involved in implementing the scheme:

(i) Announcement of the scheme by an employer, which is considered as an ‘invitation to offer’ to the employees
rather than the offer to the employees for voluntary termination of their services.
(ii) Employees tender their applications under the scheme. This does not confer any right to the employees under
the scheme to claim termination benefits. In other words, tendering of application by an employee is considered as
an ‘offer’ in response to ‘invitation to offer’, rather than acceptance of the offer by the employee.
(iii) The acceptance of the offer made by the employees as per (ii) above by the management.
Keeping in view the above, we have suggested that as per the above scheme, liabilities with regard to voluntary
termination benefits should be recognized at the time when the management accepts the offer of the employees
rather than at the time the employees tender their applications in response to the ‘invitation to offer’ made by the
management.

IAS 20:Accounting for Government Grants and Disclosure of Government Assistance
AS 12:Accounting for Government Grants

AS 12 is being revised to bring it in line with IAS 20.
The Exposure Draft of the proposed revised AS 12 has been issued for public comments
There is no major difference between the Exposure Draft of the standard and IAS 20.

IAS 21:The Effects of Changes in Foreign Exchange Rates
AS 11:The Effects of Changes in Foreign Exchange Rates

1. AS 11 is based on the integral and non-integral foreign operations approach, i.e., the approach which was
followed in the earlier IAS 21 (revised 1993).
2. The current IAS 21, which is based on ‘Functional Currency’ approach, gives similar results as that under pre-
revised IAS 21, which was based on integral /non-integral foreign operations approach. Accordingly, there are no
significant differences between IAS 21 and AS 11.
3. The current AS 11 has recently become effective, i.e., from 1-4-2004. It is felt that some experience should be
gained before shifting to the current IAS 21.

IAS 24:Related Party Disclosures
AS 18:Related Party Disclosures

AS 18 is based on IAS 24 (reformatted 1994) and following are the major differences between the two.
1. According to AS 18, as notified by the Government, a non-executive director of a company should not be
considered as a key management person by virtue of merely his being a director unless he has the authority and
responsibility for planning, directing and controlling the activities of the reporting enterprise. However, IAS 24
provides for including non-executive director in key management personnel.
2. In AS 18 the term ‘relative’ is defined as “the spouse, son, daughter, 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”
whereas the comparable concept in IAS 36 is that of ‘close members of the family of an individual’ who are “those
family members who may be expected to influence, or be influenced by, that individual in their dealings with the
entity. They may include:
(a) the individual’s domestic partner and children;
(b) children of the individual’s domestic partner; and
(c) dependants of the individual or the individual’s domestic partner.”

IAS 27:Consolidated and Separate Financial Statements
AS 21:Consolidated Financial Statements

AS 21 is based on IAS 27 (revised 2000). Revisions made to IAS 27 /IAS 27 R are being looked into by the ASB of the
ICAI.
1. Keeping in view the requirements of the law governing the companies, AS 21 defines control as ownership of
more than one-half of the voting power of an enterprise or as control over the composition of the governing body of
an enterprise so as to obtain economic benefits. This definition is different from IAS 27, which defines control as
“the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities”.
Conceptual Differences

2. AS 21, at present, makes reference to AS 13, Accounting for Investments, with regard to the accounting for an
investment in a subsidiary in the separate financial statements. On the issuance of the proposed Accounting
Standard 30 on ‘Financial Instruments: Recognition and Measurement’, AS 13 would stand withdrawn. Keeping this
in view, the Exposure Draft for the limited revision to AS 21, which has recently been issued, proposes to include
accounting for investment in subsidiary in the separate financial statements in AS 21.
IAS 27 provides the following two options with regard to accounting for an investment in a subsidiary:
(i) at cost; or
(ii) in accordance with IAS 39.
When an investment in a subsidiary is accounted for in accordance with IAS 39, the same is included in the ‘available
for sale’ category.

IAS 31:Interests in Joint Ventures
AS 27:Financial Reporting of Interests in Joint Ventures

AS 27 is based on the IAS 31 (revised 2000). Revisions made to IAS 31 are being looked into by the ASB of the ICAI.
Difference due to removal of alternatives
1.Unlike IAS 31, AS 27 does not provide any option for accounting of interests in jointly controlled entities in the
consolidated financial statements of the venturer. It requires proportionate consolidation to be followed and
venturer’s share of each of the assets, liabilities, income and expenses of a jointly controlled entity to be reported as
separate line items.

IAS 33:Earnings Per Share
AS 20:Earnings Per Share

AS 20 is based on the IAS 33 (issued 1997). Revisions made to IAS 33 are being looked into by the ASB of the ICAI.
Differences due to level of preparedness
1. As per IAS 33 revised, basic and diluted amounts per share for the discontinued operation are required to be
disclosed. However AS 20 does not require such disclosures.
2. IAS 33 revised requires the disclosure of antidilutive instruments also which is not required by AS 20.
IAS 34:Interim Financial Reporting
AS 25:Interim Financial Reporting

1. In India, at present, the statement of changes in equity is not presented in the annual financial statements since,
as per the law, this information is required to disclosed partly in the profit and loss account below the line and partly
in the balance sheet and schedules thereto. Keeping this in view, unlike IAS 34, AS 25 presently does not require
presentation of the condensed statement of changes in equity. However as a result of proposed revision to AS 1,
limited revision to AS 25 has also been proposed, which requires to present the condensed statement of changes in
equity as part of condensed financial statements and limited exposure for the same has been made.
2. Keeping in view the legal and regulatory requirements prevailing in India, AS 25 provides that in case a statute or a
regulator requires an enterprise to prepare and present interim information in a different form and/or contents,
then that format has to be followed. However, the recognition and measurement principles as laid down in AS 25
have to be applied in respect of such information.

IAS 36:Impairment of Assets
AS 28:Impairment of Assets

AS 28 is based on the IAS 36 (issued 1998). At the time of issuance of AS 28, there was no major difference between
AS 28 and IAS 36.
IASB, pursuant to its project on Business Combinations, has made certain changes in IAS 36 which are clarificatory in
nature and/or relate to the Intangible Assets having indefinite life.

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