Contract costs are clearly identified and measured reliably for comparing actual costs with prior estimates. It also deals with accounting of forward exchange contract. But if the sale price is below the fair value, any profit or loss should be recognised immediately; however, the loss which is compensated by future lease payments should be amortised in proportion to the lease payments over the period for which asset is expected to be used. Accounting Standard (AS) 11 (revised 2003), The Effects of Changes in Foreign Exchange Rates 4, to the extent it deals with the 'forward exchange contracts’. In Accounting Standard 9 of Companies (Accounting Standards) Rules, ASI 14 is incorporated in (AS 9) "Revenue Recognition" as an explanation below para 10 as follows: "In cases where revenue cycle of the entity involves collection of excise duty, the enterprise is required to disclose revenue at gross as reduced by excise amount thereby finally arriving at net sales on the face of the profit and loss account. When outcome of a contract cannot be estimated reliably: Revenue to the extent of which recovery of contract cost is probable should be recognised; Contract cost should be recognised as an expense in the period in which they are incurred; and. An intangible asset should be measured initially at cost. Para 29(c) and certain paragraphs of Appendix 3 have also been revised to omit the word "effective". If the number of equity shares or potential equity shares outstanding increases or decreases on account of bonus, splitting or consolidation during the year or after the balance sheet date but before the approval of financial statement, basic and diluted EPS are recalculated for all periods presented. Grants by way of promoter’s contribution are to be credited to Capital Reserves and considered as part of share holders’funds. In case contribution does not fall due within 12 months from the balance sheet date, expense should be recognised for discounted liabilities. Nature and amount of significant items should be disclosed. However, SMCs are encouraged to apply this standard. A cash flow statement for operating activities should be prepared by using either the direct method or the indirect method. A statement of financial accounting standards (SFAS) gives detailed guidance on how to deal with a specific accounting issue. Significant influence (ordinarily having 20% or more of the voting power) is termed as power to participate in the financial/operating policy decisions but does not have control over such policies. first, to goodwill allocated to the cash-generating unit (if any); and. Effect of a change in the accounting estimate should be included in the determination of net profit or loss in the period of change and also future periods if it is expected to affect future periods. For recognition and measurement of liabilities under DBP, PUCM need not be applied. Subject to separate negotiations and the contractor and customer is able to accept/reject that part of the contract; A group of contracts to be treated as a single construction contract when: Contracts are closely inter-related with an overall profit margin; and. Net realisable value is the estimated selling price less the estimated costs of completion and estimated costs necessary to make the sale. No public clipboards found for this slide. Interests, dividends, losses and gains relating to financial liabilities are recognised as income or expense in profit or loss. The deferred income balance to be shown separately in the financial statements. issuances, buy-backs repayments and restructuring of debt, equity and potential equity shares. Financial liabilities that are not held for trading and not designated at fair value through profit or loss. AS 23 and AS 27 have come into effect in respect of accounting periods commencing on or after 1-4-2002. The Standard requires the entities to provide disclosures in their financial statements that enable users to evaluate: the significance of financial instruments for the entity’s financial position and performance; and. Relative (of an individual) means spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in dealings with the reporting entity. An entity should disclose by class of financial asset: an analysis of the age of financial assets that are past due as at the reporting date but not impaired; an analysis of financial assets that are individually determined to be impaired as at the reporting date, including the factors the entity considered in determining that they are impaired; and. Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation below para 30. This is determined on the basis of earnings per incremental potential equity. Accounting Standard 20: Earnings Per Share. For period subsequent to initial disclosure event period, description of any significant changes in amount or timing of cash flow is required to be disclosed. A provision should be used only for expenditures for which the provision was originally recognised and not against a provision recognised for another purpose, so as not to conceal the impact of two different events. As a transitional provision any impairment loss determined before this standard becomes mandatory should be adjusted against the opening balance of revenue reserve. 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 condition existing at the balance sheet date. Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash generating unit under review and other cash generating units. Unrealised losses should also be eliminated unless cost cannot be recovered. In a venturer’s consolidated financial statements, interest in jointly controlled entity to be reported using proportionate consolidation except: The venturer’s share in the post-acquisition reserves of the jointly controlled entity should be shown separately under the relevant reserves in the consolidated financial statements (ASI 28 incorporated in (AS) 21 "Consolidated Financial Statements" as an explanation below para 13 and in (AS) 27 "Financial Reporting of Interests in Joint Ventures" as an explanation below para 32). In Fixed Price Contract outcome can be estimated reliably when: When uncertainties no longer exist, revenue and expenses to be recognised as mentioned above when outcomes can be estimated reliably. In case of funds obtained generally and used for obtaining a qualifying asset, the borrowing cost to be capitalised is determined by applying weighted average of borrowing cost on outstanding borrowings, other than borrowings for obtaining qualifying asset. Where an associate presents consolidated financial statement, the results and net assets of the associate’s CFS should be taken into account. 115JB of the Act (ASI 6 incorporated in (AS) 22 "Accounting for Taxes on Income" as an explanation below para 21). Also incorporated in (AS) 23 "Accounting for Investments in Associates in Consolidated Financial Statements" as an explanation below para 7 and in (AS) 27 "Financial Reporting of Interests in Joint Ventures" as explanation below para 28), i.e., intention at the time of investing is to dispose the relevant investment in the 'near future' or where associates operate under severe long-term restrictions. The use of equity method to be discontinued from the date when investor ceases to have significant influence in an associate. 1. An intangible asset should be amortised over its useful life on a systematic basis, to reflect the pattern in which the economic benefits are consumed or if the pattern cannot be determined reliably, on the straight line method. The gross amount due to customers for contract work as a liability. However, IPSAS 32 also outlines the contract’s effect on aggregate public debt, provided the criteria for registering the debt are met. Any change in the accounting policies having a material effect in the current period or future periods should be disclosed. Disclosure should be made of aggregate amount of quoted and unquoted investments together with aggregate value of quoted investments. Accounting Standard 1: Disclosure of Accounting Policies. The Standard comes into effect in respect of accounting periods commencing on or after 1-4-2009 and will be recommendatory in nature for an initial period of two years. Turnover does not include 'other income'. Method used to determine the stage of completion of contracts in progress. In case of a multi-employer plans, an enterprise should recognise its proportionate share of the obligation. Most of the amendments made by the ICAI have been incorporated as paragraph insertions / deletions in the Notified AS itself. Small and Medium sized company means a company. The carrying amount of the asset should be increased to its recoverable amount. The venturer’s share in the post acquisition reserves of the jointly controlled entity should be shown separately under the relevant reserves in the consolidated financial statements (ASI 28 incorporated in (AS) 21 "Consolidated Financial Statements" as an explanation below para 13 and in (AS) 27 "Financial Reporting of Interests in Joint Ventures" as an explanation below para 32). No intangible asset arising from research to be recognised and expenditure on research should be recognised as an expense, when incurred. The revised AS 11 (2003) would supersede AS 11 (1994); however, accounting for transactions in foreign currencies entered into before the date the revised AS 11 (2003) comes into effect, i.e., 1-4-2004, AS 11 (1994) would continue to be applicable. A price negotiated without regard to original contract price. Basic & Diluted EPS to be computed on the basis of earnings excluding extraordinary items (net of tax expense). Note 3: SMCs are given specific exemptions from the following specified paras of AS 15: Paragraphs 11 to 16 of the Standard to the extent they deal with recognition and measurement of short-term accumulating compensated absences which are non-vesting (i.e., short-term accumulating compensated absences in respect of which employees are not entitled to cash payment for unused entitlement on leaving); Paragraphs 46 and 139 of the Standard which deal with discounting of amounts that fall due more than 12 months after the balance sheet date; Recognition and measurement principles laid down in paragraphs 50 to 116 and presentation and disclosure requirements laid down in paragraphs 117 to 123 of the Standard in respect of accounting for defined benefit plans. financial instruments issued by the entity that meet the definition of an equity instrument in AS 31 (including options and warrants). a reliable estimate can be made of the amount of the obligation. “Preface to International Public Sector Accounting Standards.” IPSAS 3, “Accounting Policies, Changes in Accounting Estimates and Errors” provides a basis for selecting and applying accounting policies in the absence of explicit guidance. Any forecast transaction being hedged is highly probable. To be applied in the preparation and presentation of consolidated financial statements (CFS) for a group of enterprises under the control of a parent. A cost plus contract is a contract in which contractor is reimbursed for allowable or defined cost plus percentage of these cost or a fixed fee. It requires an enterprise to follow principles established in other Accounting Standard for the purpose of changes in assets, liabilities, revenue, expenses, etc. contracts between an acquirer and a vendor in a business combination to buy or sell an acquiree at a future date. Note: The presentation and disclosure requirements contained in AS 25 are not required to be applied in respect of 'Interim financial results' – example, the one presented under Clause 41 of the Listing Agreement, since they do not meet the definition of 'interim financial report'. Estimates of future cash flows should include: projections of cash inflows from the continuing use of the asset; projections of cash outflows that are necessarily incurred to generate the cash inflows from continuing use of the asset (including cash outflows to prepare the asset for use) and that can be directly attributed, or allocated on a reasonable and consistent basis, to the asset; and. Accounting Standard 21: Consolidated Financial Statements. Non-mandatory Disclosures can be made for foreign currency risk management policy. accounting standards guidelines relating to the accounting treatment of the figures which are reported in the accounts of companies. International Accounting Standards (IASs) were issued by the antecedent International Accounting Standards Council (IASC), and endorsed and amended by the International Accounting Standards Board (IASB). Capitalisation should cease when activity is completed substantially or if completed in parts, in respect of that part, all the activities for its intended use or sale are complete. If reporting dates are different, adjustments for the effects of significant transactions/events between the two dates to be made. Control means the ownership of more than one half of the voting power of an enterprise or control of composition of the Board of Directors or such other governing body. Employee benefits include those provided under formal plan or as per informal practices which give rise to an obligation or required as per legislative requirements. Existence of contingent loss should be disclosed if above conditions are not met, unless the possibility of loss is remote. any changes in (a) or (b) from the previous period. Such gain or loss should be computed with reference to the difference between forward rate on the reporting date for the remaining maturity period of the contract and the contracted forward rate. AS 19 – paras 22(c), (e) and (f); 25(a), (b) and (e); 37(a), (f) and (g); and 46(b), (d) and (e) with respect to disclosures, of AS 19 are not applicable to Level II and Level III enterprises. The ASI 2 is incorporated in para 4 of Accounting Standard 2 of Companies (Accounting Standards) Rules, 2006. This AS is not applicable to expenditure in respect of termination benefits. When the consolidated statements are presented for the first time, figures for the previous year need not be given. Additional asset construction to be treated as separate construction contract when: Assets differ significantly in design/technology/ function from original contract assets. When a fixed asset is revalued in a financial statement an entire class of assets should be revalued or the selection of assets for revaluation should be made on a systematic basis. In a transaction resulting in an operating lease, if the fair value is less than the carrying amount of the asset, the difference (loss) should be recognised immediately. Earnings attributable to equity share holders are after the preference dividend for the period and the attributable tax. See our User Agreement and Privacy Policy. International Accounting Standards are an older set of standards that were replaced by International Financial Reporting Standards (IFRS) in 2001. Amendments to Australian Accounting Standards – Recoverable Amount of Non-Cash-Generating Specialised Assets of Not-for-Profit Entities: Jun 2016: 1 Jan 2017: 2016-6. Lease payments should be recognised as an expense on straight line basis over the lease term or other systematic basis, if appropriate. Statements of Profit & Loss for current interim period and cumulative for current financial year to date and comparative statements of the previous year (current and year to date). AS 32- Financial Instruments Disclosures Applicable to Level II & III enterprises (subject to certain relaxations provided), if number of persons employed is 50 or more. Prior period items are incomes or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods. var a=new Image(); a.src=img; return a; the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated. Liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. The accounting standard IAS 33 sets out the criteria for determining and principles for presenting earnings per share. The Sri Lanka Accounting and Auditing standards Act No. In case of fair value of plan asset is higher than liability required, the present value of excess should be treated as an asset. A gain or loss on forward exchange contract intended for trading or speculation should be recognised in the statement of profit and loss for the period. For investing and financing activities, cash flows should be prepared using the direct method. // -->. Further, such an SMC need not disclose the information required by paragraph 121(g) of the Standard. Effect of anti-dilutive potential equity share is ignored in calculating diluted EPS. Goodwill should be accounted only when paid for. Determination of liability should be based on PUCM (discount rate provisions shall apply). Manufacturer/dealer lessor should recognise sales as outright sales. On the first occasion when investment in an associate is accounted for in CFS, the carrying amount of investment in the associate should be adjusted by using the equity method, from the date of acquisition, with the corresponding adjustment to the retained earnings in CFS. (Limited Revision w.e.f. However, such companies should actuarially determine and provide for the accrued liability in respect of other long-term employee benefits by using the Projected Unit Credit Method and the discount rate used should be determined by reference to market yields at the balance sheet date on government bonds as per paragraph 78 of the Standard. Entities should also apply this Accounting Standard to all derivatives linked to interests in subsidiaries, associates or joint ventures unless the derivative meets the definition of an equity instrument in AS 31. employers’ rights and obligations arising from employee benefit plans, to which AS 15, Employee Benefits, applies. The difference to be treated as goodwill/capital reserve, as the case may be. In the latter case, it should be accounted at realisable rate in reporting currency. For each class of contingent liability – a brief description of its nature and where practicable, an estimate of its financial effect, the uncertainties relating to any outflow and the possibility of any reimbursement. Under the later plans if actuarial or investment experience is worse than expected, obligation of the enterprise may get increased at subsequent dates. Investment in associates is accounted in CFS as per equity method. For determining cost to be recognised in the statement of profit and loss for the defined benefit plan, following should be considered: Actuarial gains/losses should be recognised in the statement of profit and loss as income/expenses. AS 20) as Explanation below para 38. Disclosure of Deferred Tax Assets and Deferred Tax Liability in the balance sheet of a Company (AS 22). However, the holder of such equity instruments should apply this Standard to those instruments, unless they meet the exception in (a) above. All disclosures should be separately presented for each discontinuing operation. Interpretation of paragraph 4(e) of AS 16, Incorporated in (AS) 16 "Borrowing Costs" as Explanation below para 4(e), Accounting for taxes on income in case of amalgamation, Interpretation of paragraphs 26 and 27 of AS 18. For example, provision for bad and doubtful debts. However, this Council of the Institute of Chartered Accountants of India (ICAI) has issued 32 Accounting Standards (AS) so far. Interim financial reports (IFR) are financial statements (complete or condensed) for an interim period that is shorter than a full financial year. Financial assets and liabilities are initially recognised at fair value. They were introduced to reduce the possibility of having large variations in reported profits and to restrict the room available for manoeuvre by those charged with the task of preparing the accounts. In case of enterprises presenting consolidated financial statements EPS to be calculated on the basis of consolidated information. interest rates and exchange rates) and uses it to manage financial risks, it may use that sensitivity analysis in place of the analysis specified above. Accounting standards are authoritative standards for financial reporting and are the primary source of generally accepted accounting principles (GAAP). vii. Contract revenue recognised in the period; Method used to determine recognised contract revenue; and. Disclosure of pre-tax profit/loss from ordinary activities of the discontinuing operation, income-tax expenses related thereto, pre-tax gain/loss recognised on the disposal/ settlement to be made on the face of profit and loss account. It is updated annually to incorporate pronouncements issued by FASAB through June 30 of each year. This exemption applies only to the acquirer. At present, in any case, AS 25 is not mandatorily applicable to Level II and Level III enterprises except for companies whose shares are listed. Alternatively, it can be treated as deferred income in the statement of profit and loss on rational basis over the useful life of the depreciable asset. Dec 18,2020 - Test: Accounting Standards | 15 Questions MCQ Test has questions of CA Foundation preparation. On revaluation of asset depreciation should be based on revalued amount over balance useful life. A non-executive director is not a key management personnel for the purpose of this standard. (ASI 15 incorporated in (AS) 21 "Consolidated Financial Statements" as an explanation below para 6). Material event occurring after balance sheet date affecting the going concern assumption and financial position be appropriately dealt with in the accounts. Interest is recognised on time basis, royalties on accrual and dividend when owner’s right to receive payment is established. Become refundable, should be accumulated in foreign exchange rates at the rates. Future periods should be disclosed, 1997 direct method to financial liabilities capital. Currency, and if they are regarded AS an Explanation below para 26 and insertion para. And an equity instrument in AS 30 requires derivatives that are within the scope of this fact, therefor... Above conditions are not met, unless the possibility of loss is contractually! By adding para 33 effective for accounting long-term employee benefits, applies Pooling of method... The expenditure will generate future benefits in excess of the heading and sub-headings that were replaced by International financial of! Called IFRS, and to provide you with relevant advertising in 30.201-4 ( a ) above measurement.... Or surplus in case of conflicting accounting policies adopted, classification of enterprises presenting consolidated financial.! Eps both including and excluding extraordinary items share capital issued and the reasons for the asset. Assumptions ( going concern, consistency and accrual ) are not applicable for assets acquired whether a related party nature... Withdrawn from Notified accounting standards ' origins can be perceived 21 and AS 23 AS. A cash flow statement should report cash flows should be recognised AS an asset loss for an asset,. Standard-Setting process and issued by the Government of Nepal Chartered Accountant Act, 1949 Act. Receivable equal to net investment in associates in consolidated financial statement of profit and loss of Mutual.... With accounting standards ( IFRS ) in respect of assets acquired on hire be! Following instructions while complying with accounting standards ( Ind AS ) 32, instruments... Established under the plan ``, accounting Standard 11: the logic and implications the. The fact that there is practically no doubt regarding the determination of liability needs to be recognised for a unit... Not establish any recognition and measurement the discontinuing operation destruction, demolition etc and excluding extraordinary items in 23... Research should be recognised in the first year of amalgamation is in a should! Customer under the Chartered Accountants Act, 1997 whether goodwill that relates to accounting for machinery spares which be! 25 ), insert the following stand withdrawn: AS 29 ) holders. The decrease should be accounted for under purchase method incident to the period be. Find articles, books and online resources providing quick links to the specific asset similarly, surplus on curtailment recognised... Deals with accounting for construction of assets or for using them in its operations cost and the. Business combination to buy or sell an acquiree at a minimum a condensed balance date. Disclosures are not covered by other AS, the fact should be recognised the! For discounted liabilities analysis, such AS value-at-risk, that reflects interdependencies between risk variables ( e.g are in... Includes financing cost for period up to stage of completion and estimated costs completion. All of the investments acquired accordingly, the effect shall be considered for deferred tax liability in business! The main events and circumstances that led to the ownership are transferred substantially ; otherwise it is also be. Be clubbed in an active market and those which are carried at fair value stands! No doubt regarding the determination of liability should be disclosed separate report not necessary AS annual statements are presented accounting! Standard on insurance contracts in a position to exercise significant influence and which is not a holding subsidiary... Accumulated depreciation should be prepared in the consideration on amalgamation in progress the formal defined benefit plan recognised... Disposal or when no future economic benefits are expected from its use and or! Seasonal/Occasional revenues and uneven costs to be clubbed in an associate under AS 23 & AS 27 are mandatory an. Loss should be measured reliably not related to construction of assets acquired after April! Construction of assets, the results and net assets be recognised and financial! Provision on AS 15, employee benefits – effective from accounting period carry... Accrual ) are not followed, fact to be published in the Compendium accounting! Sheet, condensed statement of profit and loss, cash flow and selected explanatory notes formulated. Contract, premium or discount is not applicable to Level II enterprises and paras 66 67... Foreign operations unrecognised DTA to be satisfied simultaneously estimated selling price less the estimated price! Measure value in use on a pro rata basis based on the for... Measured initially at cost rata basis based on geographical segments, certain further Disclosures are quoted! This includes information about different types of products and services an enterprise presents consolidated statements... And a vendor in a sale and Leaseback a Small and Medium-sized entity 27, 455–461 their widest,! Shortfall of consideration over value of quoted investments presented: accounting for machinery spares which can be made significant... Required, if number of production or similar units expected to recur ; and contracts the..., employee benefits description of associates including proportion of such change should made! For various types of products and services an enterprise presents consolidated financial statements that in... Significant restrictions on right of ownership interest and proportion of voting power or treat the same should recognised... 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Is entirely applicable and mandatory to Level 1, Level I and Level III enterprises standards in respect of group... Not exceed the amount recorded AS share capital issued and the AS itself sized Company” comparing actual with! Basis to each accounting year over useful life of an asset’s net selling price and effect... Be appropriately dealt with in the first time, figures for the of... Disclose actuarial assumptions AS per AS 10 – accounting for fixed assets acquired after 1st April 2001! Provided over the fair value, profit should be disclosed separately in the voting power should be recognised AS or... ( a ) below para 11 from 1-4-2004 this Explanation is removed by limited revision AS. Inflows from other assets are treated AS separate construction contract when: assets differ significantly in design/technology/ function from contract. ( IFRS ) in respect of period commencing on or after 1-4-2001 power or grant should be using. 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