tag:blogger.com,1999:blog-14523053366810881212024-03-11T03:21:05.681+00:00Indian AccountingA blog about account,as,depreciation,as 6,cost accounting, financial accounting,indAS,revenue recognition,IAS and AS-9,as 19,as 29 and Accounting.Unknownnoreply@blogger.comBlogger78125tag:blogger.com,1999:blog-1452305336681088121.post-62689352114349891512099-12-31T17:24:00.000+00:002018-06-02T17:27:11.826+00:00AS - Accounting Standards in IndiaAS in india is used for Short form of Accounting Standard by all commerce or finance students and professionals.<br />
<br />
In indian accounting blog everything is explained about <b>AS</b> in very short and meaningful way.<br />
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<h2>
<b>WHAT IS AS</b></h2>
Accounting standards are written , policy documents issued by expert accounting<br />
body or by Government or other regulatory authorities covering the aspects of recognition, measurement, treatment, presentation and disclosure of accounting transaction in the financial statement.<br />
<br />
<br />
The main purpose of formulating accounting standard is to standardize the diverse accounting policies with a view to eliminate to the extent possible the in-comparability of information provided in financial statements and add reliability to such financial statements.<br />
<br />
To discuss on whether such standards are necessary in present days it will be beneficial to go through the advantages and disadvantages which they are said to provide.<br />
<h2>
<b><br /></b></h2>
<h2>
<b>APPLICABILITY OF AS</b></h2>
A three tier classification has been framed to ensure compliance of accounting standards for reporting enterprises.<br />
<br />
<b>Level I Enterprises:</b><br />
<ul>
<li>Enterprises whose equity or debt securities are listed whether in India or outside India.</li>
<li>Enterprises which are in the process of listing their equity or debt securities as evidenced by the Board resolution in this regard.</li>
<li>Banks including co-operative banks</li>
<li>Financial institutions</li>
<li>Enterprises carrying insurance business</li>
<li>Enterprises whose turnover exceeds Rs.50 crores</li>
<li>Enterprises having borrowings in excess of Rs.10 crores at any time during the accounting period.</li>
<li>Holding companies and subsidiaries of enterprises falling under any one of the categories mentioned above.</li>
</ul>
<br />
<b>Level II Enterprises:</b><br />
<ul>
<li>Enterprises whose turnover exceeds Rs.40 lakhs but does not exceed Rs.50 crores.</li>
<li>Enterprises having borrowings in excess of Rs.1 crore but not in excess of Rs.10 crores at any time during the accounting period.</li>
<li>Holding companies and subsidiaries of enterprise falling under any one of the categories mentioned above.</li>
</ul>
<br />
<b>Level III Enterprises:</b><br />
<br />
<i>Enterprises which are not covered under Level I and Level II.</i><br />
Accounting Standard Applicability (Based on the three tier classification)<br />
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<tr class="alt">
<td colspan="1" rowspan="1">AS 3,17,18,24,</td>
<td colspan="1" rowspan="1">Not applicable to Level II and Level III enterprises in<br />
their entirety.</td>
</tr>
<tr>
<td colspan="1" rowspan="1">AS 19,20,29</td>
<td colspan="1" rowspan="1">All enterprises but relaxation given to Level I and Level II<br />
enterprises for certain disclosure requirements.</td>
</tr>
<tr class="alt">
<td colspan="1" rowspan="1">AS 21,23,27</td>
<td colspan="1" rowspan="1">Not applicable to Level II and Level III enterprises</td>
</tr>
<tr class="alt">
<td colspan="1" rowspan="1">AS 25</td>
<td colspan="1" rowspan="1">Not mandatorily applicable to Level II and Level III<br />
enterprises</td>
</tr>
<tr class="alt">
<td colspan="1" rowspan="1">AS 30,31,32</td>
<td colspan="1" rowspan="1">W.e.f. accounting periods commencing on or after 1-4-2009<br />
and will be recommendatory in nature for an initial period<br />
of two years.</td>
</tr>
</tbody>
</table>
It will be mandatory for on or after 1-4-2011 for all commercial, industrial and business entities except to a Small and Medium-sized Entity.</div>
Unknownnoreply@blogger.com21tag:blogger.com,1999:blog-1452305336681088121.post-78894918393341102822099-12-30T09:56:00.008+00:002023-05-19T10:19:43.220+00:00List of Accounting Standards<div>
<span style="font-size: medium;">This is the complete list of 32 </span><span style="font-size: medium;"><a href="http://www.indianaccounting.in/2012/04/accounting-standard-and-applicabilty.html" target="_blank">accounting standards</a> mandatory in india</span><span style="font-size: large;"> </span><span style="font-size: x-large;">.</span>This list of accounting standards has been updated from ICAI website and link has been provided for which Notes or Summary of respective accounting standards available on <a href="https://facebook.com/indianaccounting" target="_blank">Indian Accounting</a> blog.<br />
As we all know Accounting standards are written , policy documents issued by expert accounting body or by Government or other regulatory authorities covering the aspects of recognition, measurement, treatment, presentation and disclosure of accounting transaction in the financial statement.<br />
<br />
The main purpose of formulating accounting standard is to standardize the diverse accounting policies with a view to eliminate to the extent possible the in-comparability of information provided in financial statements and add reliability to such financial statements. To discuss on whether such standards are necessary in present days it will be beneficial to go through the advantages and disadvantages which they are said to provide.<br />
<br />
<span style="font-size: small;">Few A.S have more than one summary or notes, like revenue Recognition and accounting standard 1, Link is given inside their respective Summary or Notes.</span></div><div><span style="font-size: small;"><br /></span></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgezN1m38PqPU4_VGWfdl_lItG22iPB21m-o1hvPmq_13w5KsXedDF_qRN4yE7Op6dtjCtW7HxqEIxnNV9grCxW60ASFG8SIs8LtHRYqm9-e8OIJEiv7Kzgz2OuuJi66plK7JxHg_tjrPS6/s320/Indian-Accounting-Standards.webp" style="margin-left: 1em; margin-right: 1em;"><img alt="list of IndianAccounting standards" border="0" data-original-height="320" data-original-width="295" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgezN1m38PqPU4_VGWfdl_lItG22iPB21m-o1hvPmq_13w5KsXedDF_qRN4yE7Op6dtjCtW7HxqEIxnNV9grCxW60ASFG8SIs8LtHRYqm9-e8OIJEiv7Kzgz2OuuJi66plK7JxHg_tjrPS6/w295-h320/Indian-Accounting-Standards.webp" title="list of Indian accounting standards" width="295" /></a></div><span style="font-size: small;"><br /></span></div><div><span style="font-size: small;"><br /></span></div>
<div>
<a href="http://www.indianaccounting.in/2012/04/accounting-standard-and-applicabilty.html" target="_blank">Accounting Standard and it's Applicability</a></div><div><br />
<a href="https://indianaccounting.blogspot.in/2017/12/as1-disclosure-of-accounting-policies.html" target="_blank">AS 1 Disclosure of Accounting Policies</a><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2015/07/as-2-valuation-of-inventory.html" target="_blank">AS 2 Valuation of Inventories</a></div><div>
<div><br />
<a href="http://indianaccounting.blogspot.in/2012/02/as-3-cash-flow-statement.html" target="_blank">AS 3 Cash Flow Statements</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/03/as-4-contingencies-and-events-occurring.html" target="_blank">AS 4 Contingencies and Events Occurring After Balance Sheet Date</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/03/as-5-net-profit-or-loss-for-period.html" target="_blank">AS 5 Net profit or Loss for the period, Prior Period Items and Changes in Accounting Policies</a></div><div><br /></div>
<div>
<a href="https://indianaccounting.blogspot.in/2016/06/as-7-construction-contract.html" target="_blank">AS 7 Construction Contracts</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/03/as-9-revenue-recognition.html" target="_blank">AS 9 Revenue Recognition</a></div><div><br /></div>
<div>
<a href="https://indianaccounting.blogspot.in/2017/12/as-10-property-plant-and-equipment.html" target="_blank">AS 10 Property, Plant and Equipment</a></div><div><br /></div>
<div>
<a href="https://indianaccounting.blogspot.in/2012/12/accounting-standard-11-effects-of.html" target="_blank">AS 11 The Effects of Changes in Foreign Exchange Rates</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/05/as-12-accounting-for-government-grants.html" target="_blank">AS 12 Government Grants</a></div><div><br /></div>
<div>
<a href="https://indianaccounting.blogspot.in/2017/12/as-13-accounting-for-investment.html" target="_blank">AS 13 Accounting for Investments</a></div><div><br /></div>
<div>
<a href="https://indianaccounting.blogspot.in/2017/11/as-14-accounting-for-amalgamations.html" target="_blank">AS 14 Accounting for Amalgamations</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/12/as-15-employee-benefits.html" target="_blank">AS 15 Employee Benefits</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/04/as-16-borrowing-costs.html" target="_blank">AS 16 Borrowing Costs</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/04/as-17-segmental-reporting.html" target="_blank">AS 17 Segment Reporting</a></div><div><br /></div>
<div><a href="https://www.indianaccounting.in/2023/05/as-18-related-party-disclosure-with-examples.html" target="_blank">AS 18 Related Party Disclosures</a></div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/05/as-19-leases.html" target="_blank">AS 19 Leases</a></div><div><br /></div>
<div><a href="https://www.indianaccounting.in/2023/05/accounting-standard-as-20-eps.html" target="_blank">AS 20 Earnings Per Share</a></div><div><br /></div>
<div><a href="https://www.indianaccounting.in/2023/05/accounting-standard-as-21-consolidated-financial-statement.html" target="_blank">AS 21 Consolidated Financial Statements</a></div><div><br /></div>
<div>
<a href="https://indianaccounting.blogspot.in/2012/03/as-22-accounting-for-taxes-on-income.html" target="_blank">AS 22 Accounting for Taxes on Income</a></div><div><br /></div>
<div>
AS 23 Accounting for Investments in Associates</div><div><br /></div>
<div>
<a href="http://indianaccounting.blogspot.in/2012/03/as-24-discontinuing-operations.html" target="_blank">AS 24 Discontinuing Operations</a></div><div><br /></div>
<div>
AS 25 Interim Financial Reporting</div><div><br /></div>
<div>
AS 26 Intangible Assets</div><div><br /></div>
<div>
AS 27 Financial Reporting of Interests in Joint Ventures</div><div><br /></div>
<div><a href="https://www.indianaccounting.in/2023/04/accounting-standard-as-28-impairment-of-assets.html" target="_blank">AS 28 Impairment of Assets</a></div><div><br /></div>
<div><a href="http://indianaccounting.blogspot.in/2012/03/as-29-provisions-contigent-liabilities.html" target="_blank">AS 29 Provisions, Contingent Liabilities and Contingent Assets</a></div><div><br />
<div><a href="https://www.indianaccounting.in/2023/04/accounting-standard-as-30.html" target="_blank">AS 30 Financial Instruments Recognition and Measurement </a></div>
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<a href="https://indianaccounting.blogspot.in/2012/12/all-accounting-standards-at-glance-part.html" target="_blank"><span style="color: red;">All Accounting Standard at a Glance</span></a><br />
<a href="https://indianaccounting.blogspot.in/2012/11/important-question-and-answers-on.html" target="_blank"><span style="color: red;">Important Question and Answers on Accounting Standard</span></a><br />
<a href="https://indianaccounting.blogspot.in/2017/11/accounting-principles-rules.html" target="_blank"><span style="color: red;">Concepts and Principles of Accounting</span></a></div>
</div></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-76277082832361319292099-12-29T05:57:00.004+00:002021-12-31T04:49:20.528+00:00Accounting Standard - 9 :REVENUE RECOGNITION Summary<div class="MsoNormal" style="margin-left: 2.5in; mso-line-height-alt: 0pt;">
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;"><span style="color: blue; font-weight: 700;">Objective</span></span><br />
<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">A.S 9 deals with the basis for recognition of revenue in the statement of profit and loss of an enterprise. </span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">The <a href="http://indianaccounting.blogspot.in/2012/04/accounting-standard-and-applicabilty.html" target="_blank">Accounting Standard</a> is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">The sale of goods,</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">The rendering of services, and</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">The use by others of enterprise resources yielding interest, royalties and dividends.</span></div>
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<span style="color: blue; font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Applicability</span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">This Accounting Standard does not deal with the following aspects of revenue recognition to which special considerations(i.e, separate standard has been issued to govern the same) apply:</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Revenue arising from construction contracts;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Revenue arising from hire-purchase, lease agreements;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Revenue arising from government grants and other similar subsidies;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Revenue of insurance companies arising from insurance contracts.</span></div>
</li>
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<span style="font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Examples</span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;"> of items not included within the definition of “revenue” for the purpose of this Standard are:</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Realised or unrealised gains resulting from non-current assets like appreciation in the value of fixed assets;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Unrealised holding gains resulting from the change in value of current assets, and the natural increases in agricultural and forest products;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Realised or unrealised gains from changes in foreign exchange rates and adjustments arising on the translation of foreign currency financial statements;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Realised gains resulting from the discharge of an obligation at less than its carrying amount;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Unrealized gains resulting from the restatement of the carrying amount of an obligation.</span></div>
</li>
</ul>
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<span style="font-family: "arial";"><span style="white-space: pre-wrap;"><br /></span></span></div><div style="text-align: center;"><span style="background-color: #04ff00; color: red;"><b>Read <a href="http://www.indianaccounting.in/2017/11/as9-practical-questions.html" target="_blank">Practical Questions and Answers on AS-9</a></b></span></div>
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<span style="color: blue; font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Revenue</span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from ;</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">the sale of goods,</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">the rendering of services, and</span></div>
</li>
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<span style="vertical-align: baseline; white-space: pre-wrap;">the use by others of enterprise resources yielding interest, royalties and dividends.</span></div>
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<span style="color: blue; font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Recognition of Revenue</span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">In general revenue from sale or service is to be recognized at the time of sale or rendering of service.</span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">However, if at the time of rendering of service or at the time of sale there is significant </span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">uncertainty in ultimate collection of the revenue, then the revenue recognition should be postponed to the date of collection. </span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">And if the uncertainty arises subsequent to recognizing the revenue then separate provision is to be created to reflect the uncertainty rather than to adjust the amount of revenue originally recorded.</span></div>
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<span style="font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Recognition on sale of goods</span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">Revenue is recognized on the fulfillment of following conditions:</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">The seller of goods has transferred to the buyer</span></div>
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</ul>
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<span style="vertical-align: baseline; white-space: pre-wrap;">The property in the goods for a price or</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">All significant risks and rewards of ownership and the seller retains no effective control of the goods.</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods.</span></div>
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</ul>
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<span style="font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Recognition on rendering of services</span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">Revenue recognition on rendering of services is measured by either of the two methods:</span></div>
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<span style="vertical-align: baseline; white-space: pre-wrap;">Completed service contract method</span></div>
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<li dir="ltr" style="font-family: arial; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="vertical-align: baseline; white-space: pre-wrap;">Proportionate completion method</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">Whichever relates the revenue to the work accomplished. Such performance should be regarded as being achieved when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service.</span></div><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><br /></div><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><b><span style="background-color: #04ff00; color: red;">Read <a href="http://www.indianaccounting.in/2012/03/as-9-revenue-recognition.html" target="_blank">Best Note on Accounting Standard-9</a> </span></b></div><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends.</span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">It should only be recognized when no significant uncertainty as to measurability or collectability exists. These revenues are recognized on the following basis:</span></div>
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<span style="font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Interest</span><span style="vertical-align: baseline; white-space: pre-wrap;"> - on a time proportion basis taking into account the amount outstanding and the rate applicable.</span></div>
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<span style="font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Royalties</span><span style="vertical-align: baseline; white-space: pre-wrap;"> - on an accrual basis in accordance with the terms of the relevant agreement.</span></div>
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<li dir="ltr" style="font-family: arial; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Dividends</span><span style="vertical-align: baseline; white-space: pre-wrap;"> - when the owner’s right to receive is established</span></div>
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<span style="color: blue; font-family: "arial"; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Disclosures</span></div>
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<span style="font-family: "arial"; vertical-align: baseline; white-space: pre-wrap;">In addition to the disclosures required by <a href="https://indianaccounting.blogspot.in/2012/01/as-1.html">AS 1 on ‘Disclosure of AccountingPolicies</a>’, an enterprise should also disclose the circumstances in which revenue recognition has been postponed because of significant uncertainties.</span><span style="font-family: "arial"; font-size: 18pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
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<span style="color: red; font-family: "arial"; font-size: 18pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Also Read Notes on :</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2017/11/as-14-accounting-for-amalgamations.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 14 :Accounting for Amalgamation</span></a></div>
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</ol>
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<ol start="2" style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2017/12/as-10-property-plant-and-equipment.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 10 : Property , Plant and Equipment</span></a></div>
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</ol>
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<ol start="3" style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 2 : Valuation of Inventory</span></a></div>
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</ol>
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<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;"><a href="http://www.indianaccounting.in/2017/12/as-13-accounting-for-investment.html" style="text-decoration-line: none;">Accounting Standard 13 : Accounting for Investment</a></span></div>
</li>
</ol>
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-3708077618213697172099-12-28T09:42:00.002+00:002021-12-30T12:21:44.969+00:00Accounting Standard – 13 ACCOUNTING FOR INVESTMENTS<h2 style="clear: both; text-align: left;">
<span style="color: red;">Applicability of AS 13</span></h2>
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<div dir="ltr" id="docs-internal-guid-5e9d86c8-487f-5bdf-a89e-6efac23850b1" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">This Statement does not deal with:</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The bases for recognition of interest, dividends and rentals earned on investments which are covered by <a href="http://indianaccounting.blogspot.in/2012/03/as-9-revenue-recognition.html" target="_blank">Accounting Standard 9. </a></span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Operating or finance leases covered by <a href="http://indianaccounting.blogspot.in/2012/05/as-19-leases.html"><span id="goog_34228381"></span>Accounting Standard 19. <span id="goog_34228382"></span></a></span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Investments of retirement benefit plans and life insurance enterprises covered by<a href="http://indianaccounting.blogspot.in/2012/12/as-15-employee-benefits.html" target="_blank"> Accounting Standard 15</a> </span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><span style="font-size: 11pt; white-space: pre-wrap;">Mutual funds and/or the related asset management companies, banks and public.</span></li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><span style="font-size: 11pt; white-space: pre-wrap;">Financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 2013.</span></li>
</ul>
</h2>
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<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Definitions under AS 13</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Investments</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> 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’.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Current investment</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> 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.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Long term investment</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> is an investment other than a current investment.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Fair value</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction. Under appropriate circumstances, market value or net realizable value provides an evidence of fair value.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Market value</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Current Investments</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">A </span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">current Investment</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> 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.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The carrying amount for current investments is the lower of cost and fair value.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Fair Value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction. Under appropriate circumstances, market value or net realisable value provides an evidence of fair value.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Market Value is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Any reduction to fair value and any reversals of such reductions are included in the statement of profit and loss.</span></div>
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<span style="font-family: "arial";"><span style="font-size: 14.6667px; white-space: pre-wrap;"><br /></span></span></div>
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<span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Long Term Investments</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">A long-term investment is an investment other than a current investment.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Long term investments are usually carried at cost.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">If there is a permanent decline in the value of a long term investment; the carrying amount is reduced to recognize the decline.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The reduction in carrying amount is charged to the statement of profit and loss.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The reduction in carrying amount is reversed when there is a rise in the value of the investment, or if the reasons for the reduction no longer exist.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
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<span style="font-family: "arial";"><span style="font-size: 14.6667px; white-space: pre-wrap;"><br /></span></span></div>
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<span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Cost of Investments</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Broker, fees and duties</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> - The cost of an investment includes acquisition charges such as brokerage, fees and duties.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
</ul>
<div>
<span style="font-family: "arial";"><span style="font-size: 14.6667px; white-space: pre-wrap;"><br /></span></span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Non-cash consideration</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">-If an investment is acquired, or partly acquired, by the issue of shares or other securities or another asset, the acquisition cost is the fair value of the securities issued or assets given up. The fair value may not necessarily be equal to the nominal or par value of the securities issued. It may be appropriate to consider the fair value of the investment acquired if it is more clearly evident.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
</ul>
<div>
<span style="font-family: "arial";"><span style="font-size: 14.6667px; white-space: pre-wrap;"><br /></span></span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Interest, dividend etc</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> - Interest, dividends and other receivables in connection with an investment are generally regarded as income, being the return on the investment. However, in some circumstances, such inflows represent a recovery of cost and do not form part of income. If it is difficult to make such an allocation, the cost of investment is normally reduced by dividends receivable only if they clearly represent a recovery of a part of the cost.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
</ul>
<div>
<span style="font-family: "arial";"><span style="font-size: 14.6667px; white-space: pre-wrap;"><br /></span></span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Right Shares</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> - When right shares offered are subscribed for, the cost of the right shares is added to the carrying amount of the original holding. If rights are not subscribed for but are sold in the market, the sale proceeds are taken to the profit and loss statement. However, where the investments are acquired on cum-right basis and the market value of investments immediately after their becoming ex-right is lower than the cost for which they were acquired, it may be appropriate to apply the sale proceeds of rights to reduce the carrying amount of such investments to the market value.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
</ul>
<div>
<span style="font-family: "arial";"><span style="font-size: 14.6667px; white-space: pre-wrap;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Carrying Amount of Investments</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">With respect to Current Investments</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">The more prudent and appropriate method is to carrying current investments individually at the lower of</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Cost and</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Fair value</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">Any reduction to fair value and any reversals of such reductions are included in the Profit & Loss Statement.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">With respect to Long-term Investments</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">Long-term investments are usually carried at cost. They are carried at a lower cost when there is a decline, other than temporary in nature. The resultant reduction in the carrying amount is charged to the profit and loss statement. The reduction in carrying amount is reversed when there is a rise in the value of the investment, or if the reasons for the reduction no longer exist.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Disposal of Investments</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">On disposal of an investment, the difference between the carrying amount and the disposal</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">proceeds, net of expenses, is recognized in the profit and loss statement.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Reclassification of Investments</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">Where long-term investments are reclassified as current investments, transfers are made at the lower of cost and carrying amount at the date of transfer.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">Where investments are reclassified from current to long-term, transfers are made at the lower of cost and fair value at the date of transfer.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="color: red; font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Disclosure</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">The following disclosures are to be made in financial statements in relation to investments:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The accounting policies applied to determine carrying amount of investments.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The amounts included in profit and loss statement for:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Interest, dividends (showing separately dividends from subsidiary companies)</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: circle; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Rentals on investments (showing separately such income from long term and current investments)</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: circle; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Amount of income tax deducted at source being included under Advance Taxes Paid.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: circle; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Profits and losses on disposal of current investments and changes in carrying amount of such investments.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: circle; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Profits and losses on disposal of long term investments and changes in the carrying amount of such investments.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
</ul>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Significant restrictions on the right of ownership, realisability of investments or the remittance of income and proceeds of disposal.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The aggregate amount of quoted and unquoted investments, giving the aggregate market value of quoted investments.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Other disclosures as specifically required by the relevant statute governing the enterprise.</span></div>
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-21014549338530026362099-12-28T04:44:00.003+00:002023-05-04T01:35:31.138+00:00Accounting Standard -10 Property, Plant and Equipment (Revised)<h2>
<span style="color: black; font-size: large;"><span style="font-weight: normal;">This is </span>revised accounting standard 10<span style="font-weight: normal;"> Property,Plant and Equipment(PPE),which has replaced </span><a href="http://www.indianaccounting.in/2012/03/as-6-depreciation-accounting.html" style="font-weight: normal;" target="_blank">AS 6 </a><span style="font-weight: normal;">Depreciation and </span><a href="http://indianaccounting.blogspot.in/2012_03_12_archive.html" style="font-weight: normal;" target="_blank">AS 10</a><span style="font-weight: normal;"> Accounting for fixed assets. This revision of AS 10 has been made to be as par with </span><a href="https://newindianaccountingstandards.blogspot.com/2023/05/ind-as-16-notes-examples.html" target="_blank">IndAS 16</a><span style="font-weight: normal;"> and </span><a href="http://www.indianaccounting.in/2017/12/ifrs-ind-gaap.html" style="font-weight: normal;" target="_blank">IFRS</a><span style="font-weight: normal;">.</span></span> </h2>
<h2>
<b style="color: red; font-size: x-large;">Accounting Standard 10 : Property, Plant And Equipment.</b></h2>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">1.</span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Property, plant and equipment are tangible</span></div>
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<span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;"> items that:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Are expected to be used during more than a period of twelve months.</span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">*Bearer plant is a plant that</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Is used in the production or supply of agricultural produce; </span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Is expected to bear produce for more than a period of twelve months; and</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">* </span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Biological Asset</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> is a living animal or plant.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">*</span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Agricultural Produce</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> is the harvested product of biological assets of the enterprise.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">2. The cost of an item of property, plant and equipment should be recognized as an asset if, and only if:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> It is probable that future economic benefits associated with the item will flow to the enterprise; and </span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> The cost of the item can be measured reliably.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">3. Items such as spare parts, stand-by equipment and servicing equipment are recognized in accordance with this Standard when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">4. This Standard does not prescribe the unit of measure for recognition, i.e., what constitutes an item of property, plant and equipment.</span><span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;">Thus, judgment is required in applying the recognition criteria to specific circumstances of an enterprise. </span><span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;">An example of a ‘unit of measure’ can be a ‘project’ of construction of a manufacturing plant rather than individual assets comprising the project in appropriate cases for the purpose of capitalization of expenditure incurred during construction period. Similarly</span><span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;">, it may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies and to apply the criteria to the aggregate value. An enterprise may decide to expense an item which could otherwise have been included as property, plant and equipment, because the amount of the expenditure is not material.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">5. An enterprise evaluates under this recognition principle all its costs on property, plant and equipment at the time they are incurred. These costs include costs incurred:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Initially to acquire or construct an item of property, plant and equipment; and </span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Subsequently to add to, replace part of, or service it.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Initial Costs</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">The acquisition of property, plant and equipment which does not, directly increases the future economic benefits but may be necessary for an enterprise to obtain the future economic benefits from its other assets. </span><span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;">Such items of property, plant and equipment qualify for recognition as assets because they enable an enterprise to derive future economic benefits from related assets in excess of what could be derived had those items not been acquired. </span></div>
<span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;"> For example, a chemical manufacturer may install new chemical handling processes to comply with environmental requirements for the production and storage of dangerous chemicals; related plant enhancements are recognized as an asset because without them the enterprise is unable to manufacture and sell chemicals.</span><br />
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Subsequent Costs</span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Repairs and Maintenance</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">An enterprise does not recognize in the carrying amount of an item of property, plant and equipment the costs of the day-to-day servicing of the item. Rather, these costs are recognized in the statement of profit and loss as incurred. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Costs of day-to-day servicing are primarily the costs of labor and consumables, and may include the cost of small parts. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> The purpose of such expenditures is often described as for the ‘repairs and maintenance’ of the item of property, plant and equipment.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Replacements</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">Parts of some items of property, plant and equipment may require replacement at regular intervals. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> For example, an aircraft interiors such as seats and galleys may require replacement several times during the life of the aircraft. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> An enterprise recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if the recognition criteria are met. The carrying amount of those parts that are replaced is derecognized.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Inspection</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">A condition of continuing to operate an item of property, plant and equipment (for example, an aircraft) may be performing regular major inspections for faults regardless of whether parts of the item are replaced. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> When each major inspection is performed, its cost is recognized in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Any remaining carrying amount of the cost of the previous inspection is derecognized.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Measurement at Recognition</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">6. An item of property, plant and equipment that qualifies for recognition as an asset should be measured at its cost.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">The cost of an item of property, plant and equipment comprises:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> It's purchase price, including import duties and non –refundable purchase taxes,, after deducting trade discounts and rebate .</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> The initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, referred to as ‘decommissioning, restoration and similar liabilities’, the obligation for which an enterprise incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> The amount recognized as provision should be the best estimates of the expenditure required to settle the present obligation at the balance sheet date. The discount rate should be a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">7. Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Therefore the following costs are not included in the carrying amount of an item of property, plant and equipment:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at less than full capacity;</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Initial operating losses, such as those incurred while demand for the output of an item builds up; and </span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Costs of relocating or reorganizing part or all of the operations of an enterprise.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">8. Some operations occur in connection with the construction or development of an item of property, plant and equipment, but are not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> These incidental operations may occur before or during the construction or development activities.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> For example, income may be earned through using a building site as a car park until construction starts. Because incidental operations are not necessary to bring an item to the location and condition necessary for it to be capable of operating in the manner intended by management, the income and related expenses of incidental operations are recognized in the statement of profit and loss and included in their respective classifications of income and expense.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">9. The cost of a self-constructed asset is determined using the same principles as for an acquired asset. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> If an enterprise makes similar assets for sale in the normal course of business, the cost of the asset is usually the same as the cost of constructing an asset for sale (see <a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" target="_blank">AS 2</a>). </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Therefore, any internal profits are eliminated in arriving at such costs. Similarly, the cost of abnormal amounts of wasted material,labor, or other resources incurred in self-constructing an asset is not included in the cost of the asset. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> AS 16, Borrowing Costs, establishes criteria for the recognition of interest as a component of the carrying amount of a self-constructed item of property, plant and equipment.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">10. Bearer plants are accounted for in the same way as self-constructed items of property, plant and equipment before they are in the location and condition necessary to be capable of operating in the manner intended by management. Consequently, references to ‘construction’ in this Standard should be read as covering activities that are necessary to cultivate the bearer plants before they are in the location and condition necessary to be capable of operating in the manner intended by management.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Measurement of Cost</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">11. The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period of credit unless such interest is capitalized in accordance with <a href="http://indianaccounting.blogspot.in/2012/04/as-16-borrowing-costs.html" target="_blank">AS 16</a>.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">12. The cost of an item acquired in exchange of another asset of property, plant and equipment is measured at fair value. If the acquired item(s) is/are not measured at fair value, Its /their cost is measured at the carrying amount of the asset(s) given up.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">13. Where several items of property, plant and equipment are purchased for a consolidated price, the consideration is apportioned to the various items on the basis of their respective fair values at the date of acquisition. In case the fair values of the items acquired cannot be measured reliably, these values are estimated on a fair basis as determined by competent valuer.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Measurement after Recognition</span><br />
<span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;">14. An enterprise should choose either the cost model or the revaluation model as its accounting policy and should apply that policy to an entire class of property, plant and equipment.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Cost Model</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">15. After recognition as an asset, an item of property, plant and equipment should be carried at its cost less any accumulated depreciation and any accumulated impairment losses.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Revaluation Model</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">16. After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably should be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Revaluations should be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">17. The fair value of items of property, plant and equipment is usually determined from market-based evidence by appraisal that is normally undertaken by professionally qualified valuers. If there is no market-based evidence of fair value, an enterprise may need to estimate fair value using an income approach (for example, based on discounted cash flow projections) or a depreciated replacement cost approach.</span><br />
<span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; text-indent: -20.55pt; white-space: pre-wrap;">18. The frequency of revaluations depends upon the changes in fair values of the items of property, plant and equipment being revalued. Some items of property, plant and equipment experience significant and volatile changes in fair value, thus necessitating annual revaluation. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Such frequent revaluations are unnecessary for items of property, plant and equipment with only insignificant changes in fair value. Instead, it may be necessary to revalue the item only every three or five years.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">19. When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to their valued amount. At the date of the revaluation, the asset is treated in one of the following ways:</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> The gross carrying amount is restated proportionately to the change in the carrying amount. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses; or</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> The accumulated depreciation is eliminated against the gross carrying amount of the asset.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">20. If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs should be revalued.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">A class of property, plant and equipment is a grouping of assets of a similar nature and use in operations of an enterprise. The following are examples of separate classes:</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> land;</span></div>
</li>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> land and buildings;</span></div>
</li>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> machinery;</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> ships;</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> aircraft;</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> motor vehicles;</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> furniture and fixtures;</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> office equipment; and</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> bearer plants.</span></div>
</li>
</ul>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">21. An increase in the carrying amount of an asset arising on revaluation should be credited directly to owners ’interests under the heading of revaluation surplus However, the increase should be recognized in the statement of profit and loss to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">22. A decrease in the carrying amount of an asset arising on revaluation should be charged to the statement of profit and loss. However, the decrease should be debited directly to owners’ interests under the heading of revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">23. The revaluation surplus included in owners’ interests in respect of an item of property, plant and equipment may be transferred to the revenue reserves when the asset is derecognized. This may involve transferring the whole of the surplus when the asset is retired or disposed of. However, some of the surplus may be transferred as the asset is used by an enterprise. In such a case, the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on its original cost. Transfers from revaluation surplus to the revenue reserves are not made through the statement of profit and loss.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Depreciation</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">24. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item should be depreciated separately.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 11pt; text-indent: -20.55pt;"><br /></span></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 11pt; text-indent: -20.55pt;">25. An enterprise allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates each such part separately. For example, it may be appropriate to depreciate separately the airframe and engines of an aircraft, whether owned or subject to a finance lease. This is popularly called component accounting.</span></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">A significant part of an item of property, plant and equipment may have a useful life and a depreciation method that are the same as the useful life and the depreciation method of another significant part of that same item. Such parts may be grouped in determining the depreciation charge.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">The remainder consists of the parts of the item that are individually not significant. If an enterprise has varying expectations for these parts, approximation techniques may be necessary to depreciate the remainder in a manner that faithfully represents the consumption pattern and/or useful life of its parts.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">26. Charge for each period should be recognized in the statement of profit and loss unless it is included in the carrying amount of another asset.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Depreciable Amount and Depreciation Period</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">27. The depreciable amount of an asset should be allocated on a systematic basis over its useful life.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">28. The residual value and the useful life of an asset should be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) should be accounted for as a change in an accounting estimate in accordance with Accounting Standard 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">29. Depreciation is recognized even if the fair value of the asset exceeds its carrying amount, as long as the asset’s residual value does not exceed its carrying amount. Repair and maintenance of an asset do not negate the need to depreciate it. The depreciable amount of an asset is determined after deducting its residual value. The residual value of an asset may increase to an amount equal to or greater than its carrying amount. If it does, depreciation charge of the asset is zero unless and until its residual value subsequently decreases to an amount below its carrying amount.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">30. Depreciation of an asset begins when it is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is retired from active use and is held for disposal and the date that the asset is derecognized. </span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"> Therefore, depreciation does not cease when the asset becomes idle or is retired from active use (but not held for disposal) unless the asset is fully depreciated. However, under usage methods of depreciation, the depreciation charge can be zero while there is no production.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">31. All the following factors are considered in determining the useful life of an asset: </span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> expected usage of the asset.</span></div>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> expected physical wear and tear,</span></div>
</li>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> technical or commercial obsolescence,</span></div>
</li>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> legal or similar limits on the use of the asset, such as the expiry dates of related leases.</span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">32. The useful life of an asset is defined in terms of its expected utility to the enterprise. The asset management policy of the enterprise may involve the disposal of assets after a specified time or after consumption of a specified proportion of the future economic benefits embodied in the asset. Therefore, the useful life of an asset may be shorter than its economic life. The estimation of the useful life of the asset is a matter of judgment based on the experience of the enterprise with similar assets.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">33. Land and buildings are separable assets and are accounted for separately, even when they are acquired together. With some exceptions, such as quarries and sites used for landfill, land has an unlimited useful life and therefore is not depreciated. Buildings have a limited useful life and therefore are depreciable assets. An increase in the value of the land on which a building stands does not affect the determination of the depreciable amount of the building.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">If the cost of land includes the costs of site dismantlement, removal and restoration, that portion of the land asset is depreciated over the period of benefits obtained by incurring those costs. In some cases, the land itself may have a limited useful life, in which case it is depreciated in a manner that reflects the benefits to be derived from it.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Depreciation Method</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">34. The depreciation method used should reflect the pattern in which the future economic benefits of the asset are expected to be consumed by the enterprise.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">35. The depreciation method applied to an asset should be reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method should be changed to reflect the changed pattern. Such a change should be accounted for as a change in an accounting estimate in accordance with <a href="http://indianaccounting.blogspot.in/2012/03/as-5-net-profit-or-loss-for-period.html" target="_blank">AS 5</a>.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">Changes in Existing Decommissioning, Restoration and Other Liabilities</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">36. The cost of property, plant and equipment may undergo changes subsequent to its acquisition or construction on account of changes in liabilities, price adjustments, changes in duties, changes in initial estimates of amounts provided for dismantling, removing, restoration and similar factors and included in the cost of the asset.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">37. If the related asset is measured using the cost model:</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">changes in the liability should be added to, or deducted from, the cost of the related asset in the current period. However the amount deducted from the cost of the asset should not exceed its carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess should be recognized immediately in the statement of profit and loss.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">38. If the related asset is measured using the revaluation model:</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">a decrease in the liability should be credited directly to revaluation surplus and an increase in the liability should be recognized in the statement of profit and loss.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">39. The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability should be recognized in the statement of profit and loss as they occur. This applies under both the cost model and the revaluation model.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Retirements</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">40. Items of property, plant and equipment retired from active use and held for disposal should be stated at the lower of their carrying amount and net realizable value. Any write-down in this regard should be recognized immediately in the statement of profit and loss.</span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-family: "arial"; font-size: 11pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">De-recognition</span><br />
<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">41. The carrying amount of an item of property, plant and equipment should be derecognized</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> on disposal; or </span></div>
</li>
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<span style="font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> when no future economic benefits are expected from its use or disposal.</span></div>
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</ul>
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<span style="font-family: "arial"; font-size: 11pt; vertical-align: baseline; white-space: pre-wrap;">The gain or loss arising from the de recognition of an item of property, plant and equipment should be included in the statement of profit and loss when the item is derecognized. Gains should not be classified as revenue, as defined in <a href="http://www.indianaccounting.in/2012/03/as-9-revenue-recognition.html" target="_blank">Accounting Standard 9, Revenue Recognition.</a></span><br />
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<span style="background-color: #fefdfa; color: red; font-family: "arial"; font-size: 18pt; font-weight: 700; text-indent: 0px; white-space: pre-wrap;">A</span><span style="background-color: #fefdfa; color: red; font-family: "arial"; font-size: 18pt; font-weight: 700; text-indent: 0px; white-space: pre-wrap;">lso Read Notes on :</span><br />
<ul style="background-color: #fefdfa; color: #4b4be3; font-family: Arial; font-size: 15.84px; text-align: start; text-decoration-line: none; text-indent: 0px; white-space: pre-wrap;">
<li><a href="http://www.indianaccounting.in/2017/11/as-14-accounting-for-amalgamations.html" style="color: #4b4be3; text-decoration-line: none;">A</a><a href="http://www.indianaccounting.in/2017/11/as-14-accounting-for-amalgamations.html" style="color: #4b4be3; text-decoration-line: none;">ccounting Standard 14 :Accounting for Amalgamatio</a>n</li>
</ul>
<ul style="background-color: #fefdfa; color: #4b4be3; font-family: arial; text-indent: 0px; white-space: pre-wrap;">
<li><span style="color: #1155cc; vertical-align: baseline;"><a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" style="color: #4b4be3;">Accounting Standard 2 : Valuation of Inventor</a>y</span></li>
</ul>
<ul style="background-color: #fefdfa; color: #4b4be3; font-family: Arial; text-align: start; text-decoration-line: none; text-indent: 0px; white-space: pre-wrap;">
<li><a href="http://www.indianaccounting.in/2017/12/as-13-accounting-for-investment.html" style="color: #4b4be3; text-decoration-line: none;">Accounting Standard 13 : Accounting for Investment</a></li>
</ul>
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<b></b>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-42905259269914302302099-03-01T13:00:00.001+00:002021-12-30T12:14:17.937+00:00AS-10 ACCOUNTING FOR FIXED ASSETS<h2>
<b><span style="color: red;">Accounting Standard-10 ACCOUNTING FOR FIXED ASSETS</span></b></h2>
<div>
<b>Please Note that this Accounting Standard on Accounting for Fixed Assets has now been deprecated , and new revised <a href="https://indianaccounting.blogspot.in/2017/12/as-10-property-plant-and-equipment.html" target="_blank">A.S - 10 Property,Plan and Equipment</a> has been issued by ICAI, You can read summary note on <a href="https://indianaccounting.blogspot.in/2017/12/as-10-property-plant-and-equipment.html" target="_blank">Revised Accounting Standard 10</a> and ICAI copy of revised A.S -10 <a href="https://resource.cdn.icai.org/46918asb36718-as10.pdf" target="_blank">Here.</a></b></div>
<span style="color: blue; font-size: large;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">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. (It is expected to be used for more than one accounting period.)</span><br />
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<b><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: blue;">The cost of fixed asset includes</span>:</span></b><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Purchase price</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Import Duties and other non-refundable taxes</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Direct cost incurred to bring the asset to its working condition</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Installation cost</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Professional fees like fees of architects</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• General overhead of enterprise when these expenses are specifically attributable to acquisition/preparation of fixed assets</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Any expenses before the commercial production, including cost of test run and experimental production</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Any expenses before the asset is ready for use not put to use</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Loss on deferred payment arising out of foreign currency liability</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Price adjustment, changes in duties and similar factors.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><br />
<b><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: blue;">The cost of fixed asset is deducted with</span>:</span></b><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Trade discounts and rebates</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Sale proceeds of test run production</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Amount of government grants received/receivable against fixed assets (See <a href="https://indianaccounting.blogspot.in/2012/05/as-12-accounting-for-government-grants.html" target="_blank">AS- 12</a>)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Gain on deferred payment arising out of foreign currency liability</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="color: blue; font-family: "arial" , "helvetica" , sans-serif;"><b>Similarly, historical cost of self constructed fixed assets will include:</b></span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">All cost which are directly related to the specific asset</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">All costs that are attributable to the construction activity should be allocated to fixed assets</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Any internal profit included in the cost should be eliminated.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Any expenses incurred on asset between date of ready for use and put to use is either charged to P&L A/c or treated as deferred revenue expenditure to be amortised in 3-5 years after commencement of production.</span></li>
</ul>
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<span style="color: blue;"><b><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></b></span>
<span style="color: blue;"><b><span style="font-family: "arial" , "helvetica" , sans-serif;">When fixed asset is acquired in exchange for another asset, the cost of the asset acquired should be recorded</span></b></span><br />
<b><span style="font-family: "arial" , "helvetica" , sans-serif;">- either at, fair market value</span></b><br />
<b><span style="font-family: "arial" , "helvetica" , sans-serif;">- or at, the net book value of the assets given up</span></b><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">For this purpose, fair market value may be determined by reference either to the asset given up or to the asset acquired, whichever is more clearly evident.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Fixed asset acquired in exchange for shares or other securities should be recorded at FMV of assets given up or asset acquired, whichever is more clearly evident. (i.e the option of recording the asset at net book value of asset given up is closed).</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: red;">Fair market value</span> is the price that would be agreed to in an open and unrestricted market between knowledgeable and willing parties dealing at arm’s length distance. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Subsequent expenditures related to an item of fixed asset should be added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Material items retired from active use and held for disposal should be stated at the lower of their net book value and net realizable value and shown separately. Fixed assets should be eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Profit/loss on such disposal or writing off is recognized in the profit and loss account.</span><br />
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<span style="color: blue; font-family: "arial" , "helvetica" , sans-serif;"><b>REVALUATION</b></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">When the fixed assets are revalued, these assets are shown at revalued price. Revaluation of fixed assets should be restricted to the net recoverable amount of fixed asset.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">When a fixed asset is revalued, an entire class of assets should be revalued or selection of assets for revaluation should be made on a systematic basis. That basis must be disclosed.</span><br />
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<b><span style="font-family: "arial" , "helvetica" , sans-serif;">Accounting treatment of revaluation under different situation:</span></b><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">When revaluation is made upward</span></i><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Fixed Assets A/c Dr</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Revaluation Reserve</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">When revaluation is made downward</span></i><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">P&L A/c Dr</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Fixed Assets</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">When revaluation is made upward subsequent to previous upward revaluation</span></i><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Fixed Assets A/c Dr</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Revaluation Reserve</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">When revaluation is made downward subsequent to previous upward revaluation</span></i><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Revaluation Reserve A/c Dr (To the extent of carrying amount of R.R)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">P&L A/c Dr (Balancing Figure)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Fixed assets</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">When revaluation is made upward subsequent to previous downward revaluation</span></i><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Fixed assets A/c Dr </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To P&L A/c (To the extent of </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">previous downward revaluation)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Revaluation Reserve (Balancing Figure)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">When revaluation is made downward subsequent to previous downward revaluation</span></i><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">P& L A/c Dr</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Fixed Assets</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<i><span style="color: blue; font-family: "arial" , "helvetica" , sans-serif;"><b>Accounting treatment on disposal of Fixed Assets:</b></span></i><br />
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">On sale of fixed assets</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Bank A/c Dr</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">P & L A/c Dr (If Loss)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To Fixed Assets</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">To P & L A/c (If Profit)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">On sale of fixed assets where upward revaluation has taken place</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">On disposal of a previously revalued item of fixed asset, the difference between net disposal proceeds and the net book value is normally charged or credited to the profit and loss account except that, to the extent such a loss is related to an increase which was previously recorded as a credit to revaluation reserve and which has not been subsequently reversed or utilized, it is charged directly to that account. The amount standing in revaluation reserve following the retirement or disposal of an asset which relates to that asset may be transferred to general reserve.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In the case of fixed assets owned by the enterprise jointly with others, the extent of the enterprise’s share in such assets, and the proportion of the original cost, accumulated depreciation and WDV should be stated in the B/S.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Alternatively, the pro rata cost of such jointly owned assets may be grouped together with similar fully owned assets with an appropriate disclosure thereof.</span><br />
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<b><span style="font-family: "arial" , "helvetica" , sans-serif;">Only purchased goodwill should be recorded in books.</span></b><br />
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<b><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="color: blue;">Disclosure</span>:</span></b><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Gross and net book value of fixed assets at the beginning and end of period showing additions and disposals</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "arial" , "helvetica" , sans-serif;">• Revalued amounts substituted for historical costs of fixed assets, the method adopted to compute the same and whether an external valuer was involved.</span><br />
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<ol start="3" style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 2 : Valuation of Inventory</span></a></div>
</li>
</ol>
<br />
<ol start="4" style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2017/12/as-13-accounting-for-investment.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 13 : Accounting for Investment</span></a></div>
</li>
</ol>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-84679864038520377262098-12-04T09:15:00.000+00:002019-08-11T08:19:24.760+00:00Accounting Standard -1 DISCLOSURE OF ACCOUNTING POLICIES (Summary)<div class="MsoNormal">
<h2>
<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: black;">We have written short note on Accounting Standard 1 also which can be accessed here as <a href="https://indianaccounting.blogspot.in/2012/01/as-1.html" target="_blank">Notes on AS 1</a> and if you like to read <a href="https://indianaccounting.blogspot.in/2012/01/as-1.html" target="_blank">A.S-1 Disclosure of Accounting Policies</a> as issue by ICAI, you can read from <a href="https://resource.cdn.icai.org/46911asb36718-as1.pdf" target="_blank">Here.</a></span></span></b></h2>
<h2>
<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;"> </span></span></b></h2>
<h2>
<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;"> <u>Accounting Standard -1 DISCLOSURE OF ACCOUNTING POLICIES </u></span></span></b></h2>
<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;">Purpose</span><o:p></o:p></span></b></div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Promote
better understanding of financial statements.</span></li>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Disclosure
of significant accounting policies.</span></li>
<li><span style="font-family: "wingdings"; font-size: 12pt; line-height: 110%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; line-height: 110%; text-indent: -0.25in;">Facilitate comparison between financial statement of different enterprises
for same period and financial statements of same enterprises for different
periods.</span></li>
</ul>
</div>
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<h3>
<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;">Accounting Policies</span></span></b></h3>
</div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 113%;">Accounting Policies refer to specific accounting principles and the
method of applying those principles adopted by the enterprises in the preparation
and presentation of financial statements. Certain areas which have more than
one method of accounting treatment enforces accountant to make decision from
various options for recording and disclosing.<o:p></o:p></span><br />
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 113%;"><br /></span></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 110%;">Areas in which differing accounting policies may be adopted by different
enterprises (Not an exhaustive list)<o:p></o:p></span></div>
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<br />
<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Methods
of depreciation, depletion and amortization</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Conversion
or translation of foreign currency items</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Valuation
of inventories</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Treatment
of goodwill</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Valuation
of investments</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Treatment
of retirement benefits</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Recognition
of profit on long-term contracts</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Valuation
of fixed assets</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Treatment
of contingent liabilities</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Treatment
of expenditure during construction.</span></li>
</ul>
</div>
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<br />
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;"><br /></span></span></div>
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<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;">Fundamental Accounting Assumption</span><o:p></o:p></span></b></div>
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<br /></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 113%;">Fundamental accounting assumptions are the underling principles in the
preparation and presentation of financial statements. Unless otherwise
disclosed it is assumed to be complied with. Disclosure is necessary if they
are not followed.<o:p></o:p></span><br />
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 113%;"><br /></span></div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; line-height: 112%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><i style="text-indent: -0.25in;"><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 112%;"><b>Going Concern</b></span></i><span style="font-family: "times new roman" , "serif"; font-size: 12pt; line-height: 112%; text-indent: -0.25in;"><b>- </b>The enterprise is normally viewed as a going concern, that is, as<i> </i>continuing in operation for the
foreseeable future. It is assumed that the enterprise has neither the intention
nor the necessity of liquidation. </span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; line-height: 110%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><i style="text-indent: -0.25in;"><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 110%;"><b>Consistency</b></span></i><span style="font-family: "times new roman" , "serif"; font-size: 12pt; line-height: 110%; text-indent: -0.25in;"><b>-</b> It is assumed that accounting policies are consistent from one period
to<i> </i>another.</span></li>
</ul>
</div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 11.5pt; line-height: 120%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><i style="text-indent: -0.25in;"><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 120%;"><b>Accrual</b></span></i><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 120%; text-indent: -0.25in;"><b>- </b>Revenues and costs are accrued, that is, recognized as they are earned
or<i> </i>incurred (and not as money is
received or paid) and recorded in the financial statements of the periods to
which they relate. (The considerations affecting the process of matching costs
with revenues under the accrual assumption are not dealt with in this Standard)</span></li>
</ul>
<br />
<b><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 120%;"><br /></span>
</b><br />
<div style="text-align: center;">
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: large; line-height: 120%;"><a href="http://indianaccounting.blogspot.com/2012/01/as-1.html" target="_blank"><b>Read Short Note on AS-1</b></a></span></div>
</div>
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<br />
Consideration in the selection of accounting policies is that the statements
prepared and presented should represent a true and fair view of the state of
affairs as at the balance sheet date and of the profit. Major considerations
governing the selection and application of accounting policies are—<br />
<br /></div>
<div style="text-align: left;">
<div class="MsoNormal" style="line-height: 120%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 5.0pt; margin-top: 0in; mso-list: l0 level1 lfo1; tab-stops: .5in; text-indent: -.25in;">
<br />
<ul>
<li><span style="font-family: "wingdings"; font-size: 11.5pt; line-height: 120%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><b style="text-indent: -0.25in;"><i><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 120%;">Prudence</span></i></b><b style="text-indent: -0.25in;"><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 120%;">:<i> </i></span></b><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 120%; text-indent: -0.25in;">In view of the uncertainty attached to future events, profits are not
anticipated<b><i> </i></b>but recognised only when realised though not necessarily in
cash. Provision is made for all known liabilities and losses even though the
amount cannot be determined with certainty and represents only a best estimate
in the light of available information.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: 1.0in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Prudence
ensures that,<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 1.5in; mso-line-height-alt: 0pt; mso-list: l0 level2 lfo1; tab-stops: 1.5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 12.0pt;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Profits and
Assets are not overstated</span><span style="font-family: "symbol"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 2.05pt; mso-line-height-rule: exactly;">
<br /></div>
<div class="MsoNormal" style="margin-left: 1.5in; mso-line-height-alt: 0pt; mso-list: l0 level2 lfo1; tab-stops: 1.5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 12.0pt;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Losses and Liabilities are not understated</span><span style="font-family: "symbol"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 1.5in; mso-line-height-alt: 0pt; mso-list: l0 level2 lfo1; tab-stops: 1.5in; text-indent: -.25in;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br /></span></div>
<div class="MsoNormal" style="line-height: 2.05pt; mso-line-height-rule: exactly;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><b>Example:
</b>Valuing inventory at lower of cost and net realizable value.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 2.55pt; mso-line-height-rule: exactly;">
<br /></div>
<div class="MsoNormal" style="margin-left: 1.0in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Purchase –
100 units at Rs.15/unit<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 1.0in; mso-line-height-alt: 0pt; tab-stops: 123.0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Sales</span><span style="font-family: "times new roman" , "serif"; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"> </span><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">-60 units at Rs.20/unit<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 2.15pt; mso-line-height-rule: exactly;">
<br /></div>
<div class="MsoNormal" style="margin-left: 1.0in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Net
realizable value is Rs.12/unit<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 1.0in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Then, the
value of the unsold stock at the year end is recorded at Rs.12/unit .<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 2.05pt; mso-line-height-rule: exactly;">
<br /></div>
<div class="MsoNormal" style="margin-left: 1.0in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">i.e, 40
units at Rs.12/unit = 40*12 = 480 ; </span><span style="font-family: "times new roman" , serif; font-size: 12pt;">thus recognizing loss of Rs.120</span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: .5in; mso-line-height-alt: 0pt;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">[40*(15-12)]<o:p></o:p></span></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br /></span></div>
<div class="MsoNormal" style="line-height: 2.35pt; mso-line-height-rule: exactly;">
<br /></div>
<div class="MsoNormal" style="line-height: 113%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 9.0pt; margin-top: 0in; mso-list: l1 level1 lfo2; tab-stops: .5in; text-indent: -.25in;">
<br />
<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; line-height: 113%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><b style="text-indent: -0.25in;"><i><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 113%;">Substance over form</span></i></b><span style="font-family: "times new roman" , "serif"; font-size: 12pt; line-height: 113%; text-indent: -0.25in;">: The
accounting treatment and presentation in financial statements<b><i> </i></b>of
transactions and events should be governed by their substance and not merely by
the legal form.</span></li>
</ul>
</div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 111%;">Example: With respect to Asset purchased under hire purchase scheme. The
asset is shown in the books of hire purchaser irrespective of the fact that the
hire purchaser is not the legal owner of the assets purchased.<o:p></o:p></span></div>
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<li><span style="font-family: "wingdings"; font-size: 11.5pt; line-height: 124%; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><b style="text-indent: -0.25in;"><i><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 124%;">Materiality</span></i></b><span style="font-family: "times new roman" , "serif"; font-size: 11.5pt; line-height: 124%; text-indent: -0.25in;">: Financial statements should
disclose all “material” items, i.e. items the<b><i> </i></b>knowledge of which might
influence the decisions of the user of the financial statements.</span></li>
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<span style="font-family: "times new roman" , "serif"; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;">Change in Accounting Policies</span></span></b></div>
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<b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><span style="color: blue;"><br /></span></span></b></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 110%;">Accounting policies should be consistent from one period to another.
However, change in accounting policy is allowed on following conditions-<o:p></o:p></span></div>
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<ul>
<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Requirement
of statute</span></li>
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<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Compliance
of Accounting Standard</span></li>
</ul>
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<li><span style="font-family: "wingdings"; font-size: 12pt; text-indent: -0.25in;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "times new roman" , "serif"; font-size: 12pt; text-indent: -0.25in;">Better
presentation of financial statement.</span></li>
</ul>
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<span style="color: blue;"><b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Disclosure</span></b><!--EndFragment--> :</span></div>
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<img alt="Accounting Standard 1 AS" border="0" data-original-height="353" data-original-width="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiUmQNVvlwKJcrR_zBw4iAGC5Emc_9Mng_D4vCc0vIp4fEBqTcC4ChtOll7MgNF-Xdwnyo9tlkckOT1IBMj-yTBZeWi45CCoH5Nt6ZZ77oOWnFbU1qsflgEBAwBKEjF7knUec1OiVstspR/s1600/Accounting+Standard+1+Indian.jpg" title="Disclosure of accounting policies" /></div>
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<div dir="ltr" id="docs-internal-guid-5e9d86c8-7739-4212-2ba7-ecd6e9c784cc" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-indent: 0px;">
<span style="color: red; font-family: "arial"; font-size: 18pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Also Read Notes on :</span></div>
<ol style="margin-bottom: 0pt; margin-top: 0pt; text-indent: 0px;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2017/11/as-14-accounting-for-amalgamations.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 14 :Accounting for Amalgamation</span></a></div>
</li>
</ol>
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<br /></div>
<ol start="2" style="margin-bottom: 0pt; margin-top: 0pt; text-indent: 0px;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;"><a href="http://www.indianaccounting.in/2017/12/as-10-property-plant-and-equipment.html" style="text-decoration-line: none;">Accounting Standard 10 : Property , Plant and Equipment</a> (Revised)</span></div>
</li>
</ol>
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<br /></div>
<ol start="3" style="margin-bottom: 0pt; margin-top: 0pt; text-indent: 0px;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 2 : Valuation of Inventory</span></a></div>
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<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;"><a href="http://www.indianaccounting.in/2017/12/as-13-accounting-for-investment.html" style="text-decoration-line: none;">Accounting Standard 13 : Accounting for Investment</a></span></div>
</li>
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-29991703936452313422098-11-12T18:06:00.000+00:002019-08-11T08:20:14.220+00:00Accounting Standard – 1 DISCLOSURE OF ACOUNTING POLICY<b><i><u><span style="font-family: "arial narrow" , sans-serif; font-size: 15pt;">Accounting Standard 1 - DISCLOSURE OF ACOUNTING POLICY</span></u></i></b><br />
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<h3>
<span style="font-size: small; font-weight: normal;"><i><span style="font-family: "arial narrow" , sans-serif;">Accounting policies </span></i><i><span style="font-family: "arial narrow" , sans-serif;">are the specific accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements.</span></i></span></h3>
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-<span style="font-family: "times new roman"; font-style: normal; font-variant: normal; line-height: normal;"> </span><i><span style="font-family: "arial narrow" , sans-serif;">All significant accounting policies should be disclosed.</span></i></div>
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-<span style="font-family: "times new roman"; font-style: normal; font-variant: normal; line-height: normal;"> </span><i><span style="font-family: "arial narrow" , sans-serif;">Such disclosure form part of financial statements.</span></i></div>
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-<span style="font-family: "times new roman"; font-style: normal; font-variant: normal; line-height: normal;"> </span><i><span style="font-family: "arial narrow" , sans-serif;">All disclosures should be made at one place.</span></i></div>
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-<span style="font-family: "times new roman"; font-style: normal; font-variant: normal; line-height: normal;"> </span><i><span style="font-family: "arial narrow" , sans-serif;">Specific disclosure for the adoption of fundamental accounting assumptions is not required.</span></i></div>
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-<span style="font-family: "times new roman"; font-style: normal; font-variant: normal; line-height: normal;"> </span><i><span style="font-family: "arial narrow" , sans-serif;">Disclosure of accounting policies cannot remedy a wrong or inappropriate treatment of the item in the accounts.</span></i></div>
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<br /></div>
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<i><span style="font-family: "arial narrow" , sans-serif;">Any change in accounting policies which has a material effect in the current period or which is reasonably expected to have material effect in later periods should be disclosed.</span></i></div>
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<i><span style="font-family: "arial narrow" , sans-serif;">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, the fact should be indicated.</span></i></div>
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<a href="http://www.blogger.com/goog_217932315"><br />
</a></div>
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<a href="http://linkshares.net/114027504" target="_blank"><b><i><u><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;">Fundamental Accounting Assumption: (GCA</span></u></i></b><b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;">) :</span></i></b></a></div>
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<br /></div>
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<span style="font-family: "arial narrow" , sans-serif;">1] Going Concern</span></div>
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<br /></div>
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<span style="font-family: "arial narrow" , sans-serif;">2] Consistency</span></div>
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<br /></div>
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<span style="font-family: "arial narrow" , sans-serif;">3] Accrual</span></div>
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<br /></div>
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<span style="font-family: "arial narrow" , sans-serif;"><b>Major considerations governing the selection of accounting policies:</b></span></div>
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<br /></div>
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<span style="font-family: "arial narrow" , sans-serif;">1] Prudence</span></div>
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<span style="font-family: "arial narrow" , sans-serif;">2] Substance over form (Logic over Law)</span></div>
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<br /></div>
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<span style="font-family: "arial narrow" , sans-serif;">3] Materiality</span></div>
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<br />
<blockquote class="tr_bq">
<b><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">Read Best <a href="http://www.indianaccounting.in/2017/12/as1-disclosure-of-accounting-policies.html" target="_blank">Summary Note on AS 1</a></span></b></blockquote>
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<a href="http://www.blogger.com/goog_217932319"><br />
</a></div>
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<b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;">The following are examples of the areas in which different accounting policies may be adopted by different enterprises:</span></i></b></div>
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<span style="font-size: 10pt;">-<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-variant: normal; font-weight: 400; line-height: normal;"> </span></span><b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;">Methods of <a href="http://indianaccounting.blogspot.in/2012/03/as-6-depreciation-accounting.html">depreciation</a></span></i></b></div>
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<span style="font-size: 10pt;">-<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-variant: normal; font-weight: 400; line-height: normal;"> </span></span><b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;"><a href="https://indianaccounting.blogspot.in/2012/12/accounting-standard-11-effects-of.html" target="_blank">Methods of translation of foreign currency</a></span></i></b></div>
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<span style="font-size: 10pt;">-<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-variant: normal; font-weight: 400; line-height: normal;"> </span></span><span style="font-size: 10pt; text-indent: -0.75in;"><span style="font-family: "times new roman"; font-size: 7pt;"> </span></span><b style="text-indent: -0.75in;"><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;"><a href="https://indianaccounting.blogspot.in/2015/07/as-2-valuation-of-inventory.html" target="_blank">Valuation of inventory</a></span></i></b></div>
<div class="MsoBodyTextIndent2" style="margin-left: 9pt; text-align: justify; text-indent: -0.75in;">
<span style="font-size: 10pt;">-<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-variant: normal; font-weight: 400; line-height: normal;"> </span></span><b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;"><a href="https://indianaccounting.blogspot.in/2017/12/as-13-accounting-for-investment.html" target="_blank">Valuation of investments</a></span></i></b></div>
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<span style="font-size: 10pt;">-<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-variant: normal; font-weight: 400; line-height: normal;"> </span></span><b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;">Treatment of retirement benefits</span></i></b></div>
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<span style="font-size: 10pt;">-<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-variant: normal; font-weight: 400; line-height: normal;"> </span></span><b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;"><a href="https://indianaccounting.blogspot.in/2012/03/as-29-provisions-contigent-liabilities.html" target="_blank">Treatment of contingent liabilities</a> etc.</span></i></b><br />
<b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;"><br /></span></i></b>
<b><i><span style="font-family: "arial narrow" , sans-serif; font-size: 10pt;"><br /></span></i></b>
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<div dir="ltr" id="docs-internal-guid-5e9d86c8-7739-4212-2ba7-ecd6e9c784cc" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: start; text-indent: 0px;">
<span style="color: red; font-family: "arial"; font-size: 18pt; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Also Read Notes on :</span></div>
<ol style="margin-bottom: 0pt; margin-top: 0pt; text-align: start; text-indent: 0px;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://www.indianaccounting.in/2017/11/as-14-accounting-for-amalgamations.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 14 :Accounting for Amalgamation</span></a></div>
</li>
</ol>
<div style="text-align: start; text-indent: 0px;">
<br /></div>
<ol start="2" style="margin-bottom: 0pt; margin-top: 0pt; text-align: start; text-indent: 0px;">
<li dir="ltr" style="font-family: Arial; font-size: 14pt; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;"><a href="http://www.indianaccounting.in/2017/12/as-10-property-plant-and-equipment.html" style="text-decoration-line: none;">Accounting Standard 10 : Property , Plant and Equipment</a> (Revised)</span></div>
</li>
</ol>
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<br /></div>
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<a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;">Accounting Standard 2 : Valuation of Inventory</span></a></div>
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</ol>
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<span style="color: #1155cc; font-size: 14pt; vertical-align: baseline; white-space: pre-wrap;"><a href="http://www.indianaccounting.in/2017/12/as-13-accounting-for-investment.html" style="text-decoration-line: none;">Accounting Standard 13 : Accounting for Investment</a></span></div>
</li>
</ol>
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-32616222631740396622097-05-15T05:27:00.000+00:002019-08-11T08:22:17.237+00:00AS 2 Valuation of InventoryThe accounting treatment for inventories is prescribed in AS 2 valuation of inventory, which provides guidance for determining the value at which inventories are carried out in the financial statement until related revenues are recognized.<br />
<img alt="AS2 title image" class="alignnone size-full wp-image-36" src="https://indianaccounts.files.wordpress.com/2018/06/as2-valuation-of-inventory1065025984.jpg" title="AS-2 valuation of inventory" /><br />
<b><u>Objective</u></b><br />
Determination of value at which inventories are carried in the financial statements.<br />
<br />
<b><u>Applicability</u></b><br />
This AS 2 Valuation of Inventory is not applicable in the following cases<br />
<ul>
<li>Work in progress under construction contracts, including directly related service contracts (It is specifically covered by AS-7 <a href="http://www.indianaccounting.in/2016/06/as-7-construction-contract.html">construction Contracts</a>)</li>
<li> Work in progress in the ordinary course of business of service providers;</li>
<li> Shares, debentures and other financial instruments held as stock-in- trade</li>
<li> Producers’ inventories of livestock, agricultural and forest products, and mineral oils,ores and gases to the extent that they are measured at net realizable value in accordance with well established practices in those industries.</li>
</ul>
<h3>
<b><u>Key Terms used in AS 2 Valuation of Inventory:</u></b></h3>
<b><u> </u></b> <b>Inventories : </b>It is an asset:<br />
<ul>
<li>Held for sale in ordinary course of business(Finished Goods)</li>
<li>In the process of production for such sale (WIP and Raw material)</li>
<li>In the form of materials or supplies to be consumed in the production</li>
<li>process or in the rendering of services (Stores, spares and consumables)</li>
</ul>
<b>Net realizable value</b><br />
It 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.<br />
<br />
<b>Measurement of Inventories</b><br />
Inventories should be valued at the lower of cost and net realizable value.<br />
<br />
<b>Composition of cost</b><br />
<b>Cost consists of :</b><br />
<ul>
<li>Purchase Cost</li>
<li>Conversion Cost</li>
<li>Other cost incurred in bringing the inventories to the present location and condition.</li>
</ul>
<b>Purchase Cost</b><br />
It comprises of<br />
<ul>
<li>Purchase price</li>
<li>Duties and taxes (other than those subsequently recoverable)</li>
<li>Freight inwards</li>
<li>Any other expenditure directly attributable to the acquisition</li>
<li>Trade discounts, rebates, duty drawbacks and other similar items are deducted.</li>
</ul>
<b>Cost of conversion</b><br />
The costs of conversion of inventories include costs directly related to the units of production, such as direct labour, direct material and direct expenses. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods.<br />
<br />
<b>Fixed production overheads:</b><br />
They are those indirect costs of production that remain relatively constant regardless of the volume of production, such as depreciation and maintenance of factory buildings.<br />
<br />
<b>Variable production overheads:</b><br />
They are those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and indirect labor.<br />
<br />
<b>Allocation of fixed production overheads:</b><br />
<ul>
<li>Allocation is based on the normal capacity.</li>
</ul>
<ul>
<li>Normal capacity is the production expected after taking into account the loss of capacity resulting from planned maintenance.</li>
</ul>
<ul>
<li>The actual level of production may be used if it approximates normal capacity.</li>
</ul>
Amount of fixed production overheads allocated to each unit of production in case of<br />
<ul>
<li> <b>Low Production</b>: It is not increased as a consequence of low production or idle plant. Un-allocated overheads are recognized as an expense in the period in which they are incurred.</li>
<li><b>High Production:</b> In case of abnormally high production, the amount of fixed production overheads allocated to each unit of production is decreased so that inventories are not measured above cost.</li>
</ul>
<b><br />
</b> <b>Allocation of variable production overheads:</b><br />
Variable production overheads are assigned to each unit of production on the basis of the actual use of the production facilities.<br />
<ul>
<li> <b>If it results in Joint Products:</b> When the costs of conversion of each product are not separately identifiable, they are allocated between the products on a rational and consistent basis. The allocation may be based, on the relative sales value when the products become separately identifiable.</li>
<li><b>If it results in By-Products:</b> By-products as well as scrap or waste materials, by their nature, are immaterial. When this is the case, they are often measured at net realizable value and this value is deducted from the cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost.</li>
<li>Cost incurred to bring the inventory to present location and condition</li>
<li>Interest and borrowing cost, it is usually not considered to be incurred in the process to bring it to present location and condition. It is included in the cost only when the inventory takes substantial period of time to get ready for intended sale. Example – Grape Wine.</li>
<li>Though standard is silent, treatment of amortization of intangibles should be taken as a part of inventory costs.</li>
<li> Exchange differences will not form part of inventory costs as per Indian GAAP.</li>
</ul>
<b>Cost Formula</b><br />
When the goods lying in the stock can be specifically identified the cost is determined specifically as segregated for producing or purchasing such goods. Where specific identification method cannot be applied, the costs of inventories are determined using:<br />
<ul>
<li><b>First In First Out Method (FIFO Method)</b></li>
<li><b>Weighted Average Cost Method (WAC Method)</b></li>
</ul>
<b>Other Techniques of cost measurement</b><br />
<ul>
<li><b>Standard Cost-</b> Standard Cost can used instead of actual cost. It takes into account normal level of consumption of material , labour , efficiency & capacity utilization. It must be reviewed on timely basis.</li>
<li> <b>Retail Method-</b> In retail business, it is difficult to ascertain cost of individual item and the inventories are rapidly changing with similar margins marking it impracticable to use other methods. In such a case retail method is used.</li>
</ul>
<b>Net Realizable Value</b><br />
It is the estimated selling price in ordinary course of business, less estimated cost of completion and estimated cost necessary to make the sale.<br />
<b><br />
</b> <b>Estimation of Net Realizable Value</b><br />
NRV is estimated as under:<br />
<ul>
<li> <b>If finished product is sold at or above cost-</b> Estimated realizable value of raw material and supplies is considered more than its cost. Therefore inventory of raw materials will be valued at cost.</li>
<li><b>If finished product is sold below cost-</b> Estimated realizable value of raw material and supplies is equal to the replacement price of raw material. The inventory of raw materials will be valued at replacement price.</li>
</ul>
<b><u>Disclosure</u></b><br />
<b>Following disclosures as per AS 2 are to be made in Financial statements of the enterprise:</b><br />
<ul>
<li> Accounting policy adopted to measure value of the inventories</li>
<li> Cost formulae used</li>
<li> Total carrying amount of inventories</li>
<li> Classification adopted by enterprise.</li>
</ul>
<div>
In this post we learn that AS 2 deals with valuation of inventory and how we need to do valuation of inventory in the financial statement on the closing date. what are the inventories,how valuation is done for raw material ,work in progress(WIP) and finished goods in case of manufacturers and in case of traders finished goods as inventory.</div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-1452305336681088121.post-59175627979840048052096-11-30T09:25:00.000+00:002019-08-11T08:24:17.894+00:00AS-3 Cash Flow Statement<img alt="Cash-flow" class="alignnone wp-image-63 size-full" height="300" src="https://fmfunda.files.wordpress.com/2018/05/cash-flow374935792.jpg" title="AS 3 cash flow statement" width="800" /><b></b><br />
<br />
As per AS-3 cash flow statement important <b>Definitions</b>:<br />
<b>Cash</b> comprises cash on hand and cash at bank (Demand Deposits with bank).<br />
<br />
<b>Cash Equivalents</b> are<br />
<ul>
<li>Short Term</li>
<li>Highly Liquid Investments (Maturity around 3 months)</li>
<li>Subject to insignificant risk of changes in value.</li>
</ul>
<div class="separator" style="clear: both;">
</div>
<b>Cash Flows</b> are inflows and outflows of cash and cash equivalents.<br />
<br />
<b>Cash Flow Statement</b> represents the cash flows during the specified period by operating, investing and financing activities.<br />
<br />
<b>Operating Activities</b> are the principal revenue-producing activities of the enterprise and other activities that are not investing activities and financing activities.<br />
<b><i>Example</i></b>:<br />
<ul>
<li>Cash receipts from sales of goods/services</li>
<li>Cash receipts from royalties, fees and other revenue items</li>
<li>Cash payments for salaries, wages and rent</li>
<li>Cash payment to suppliers for goods</li>
<li>Cash payments or refunds of Income Tax unless they can be specifically identified with financing or investing activities</li>
<li>Cash receipts and payments to future contracts, forward contracts when the contracts are held for trading purposes.</li>
</ul>
Cash from operating activities can be disclosed either by;<br />
<ul>
<li>DIRECT METHOD, Or</li>
<li>INDIRECT METHOD</li>
</ul>
<b>Investing Activities</b> are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.<br />
<b><i>Example</i></b>:<br />
<ul>
<li>Cash payments/receipts to acquire/sale of fixed assets including intangible assets</li>
<li>Cash payments to acquire shares or interest in joint ventures (other than the cases where instruments are considered as cash equivalents)</li>
<li>Cash advances and loans made to third parties (Loan sanctioned by a financial enterprise is operating activity)</li>
<li>Dividends and Interest received</li>
<li>Cash flows from acquisitions and disposal of subsidiaries</li>
</ul>
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<b>Financing Activities</b> 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 borrowing of the enterprise.<br />
<b><i>Example</i></b>:<br />
<ul>
<li>Cash proceeds from issue of shares and debentures</li>
<li>Buy back of shares</li>
<li>Redemption of Preference shares or debentures</li>
<li>Cash repayments of amount borrowed.</li>
<li>Dividend and Interest paid</li>
</ul>
An enterprise should report separately major classes of gross cash receipts and gross cash payments arising from investing and financing activities.<br />
<br />
However, cash flows from following activities may be reported on a net basis.<br />
<ul>
<li>Cash receipts and payments on behalf of customers</li>
</ul>
For <b>example</b>: Cash collected on behalf of, and paid over to, the owners of properties.<br />
<ul>
<li>Cash flows from items in which turnover is quick, the amounts are large and the maturities are short.</li>
</ul>
For <b><i>example</i></b>: Purchase and sale of investments.<br />
<ul>
<li>For financial enterprise: Cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date.</li>
<li>For financial enterprise: Deposits placed/withdrawn from other financial enterprises</li>
<li>For financial enterprise: Cash advances and loans made to customers and the repayment of those advances and loans.</li>
</ul>
<b><u>Foreign Currency Cash Flows</u></b>:<br />
<br />
Cash flows arising in foreign currency should be recorded in enterprise’ reporting currency applying the exchange conversion rate existing on the date of cash flow.<br />
<br />
The effect of changes in exchange rates of cash and cash equivalents held in foreign currency should be reported as separate part of the reconciliation of the changes in cash and cash equivalents during the period.<br />
<br />
<b><u>Extraordinary Items</u></b><br />
<br />
These items should be separately shown under respective heads of cash from operating, investing and financing activities.<br />
<br />
Investing and financing transactions that do not require the use of cash and cash equivalents should be excluded from a cash flow statement.<br />
<br />
For <i><b>Example;</b></i><br />
<b>A</b>] The conversion of debt to equity<br />
<b>B</b>] Acquisition of an enterprise by means of issue of shares<br />
<br />
<b><u>Other Disclosure:</u></b><br />
<ul>
<li>Components of cash and cash equivalents.</li>
<li>Reconciliation of closing cash and cash equivalents with items of balance sheet.</li>
<li>The amount of significant cash and cash equivalent balances held by the enterprise, which are not available for use by it.</li>
</ul>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-1296735695242835392049-12-30T14:46:00.000+00:002018-02-19T05:38:25.364+00:00Basic Accounting Principles and Rules<br />
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<h1>
<b><span style="font-size: large;">Accounting Principles and Rules</span></b></h1>
<br />
As we know that <b>accounting is the language of business</b>, which communicates the position of a business houses to the outside world. In order to make this language easy and commonly understandable by all, it is necessary that it should be based on certain uniform doctrine and standards are known as accounting principles.
Thus, Basic accounting principles may be defined as those rules doctrine and standard which are followed by all the accountants universally at the time of recording business transactions and events.<br />
<br />
<br />
<b>1. </b><b>Separate Entity Concept or Business Entity Concept: </b><br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3QJopZYyffkaHQMzpO81W2IUj4JMOcG-WtiRY1BOizZUGLlQHdAuc8jv2NjG1u4hSfPYu0Yh1txAYzpc5Zl7pgM2uQIGZqHzcXYmKacLJBMuQGS51pdVNofvdNR33q6Xba33s1ZQnRiyt/s1600/photo+doc.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="Accounting Principles" border="0" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3QJopZYyffkaHQMzpO81W2IUj4JMOcG-WtiRY1BOizZUGLlQHdAuc8jv2NjG1u4hSfPYu0Yh1txAYzpc5Zl7pgM2uQIGZqHzcXYmKacLJBMuQGS51pdVNofvdNR33q6Xba33s1ZQnRiyt/s640/photo+doc.png" title="" width="492" /></a></div>
<br />
<ol>
<li>According to this concept, business and businessman, both should be treated as separate entities at the time of recording transactions in the books of business. This concept makes it possible-
Account Books in Name of Business Entity
Records only Transactions of Business Entity
Not to record the private transactions of business in the books of business,
Recorded from View-Point of Business
To record the transactions between businessman and business
To present the true fair view of the business affairs.
</li>
<li> Why this concept?
Thus, if this concept is not followed, then the private transactions of the proprietor will be mixed up with the transactions of business and then, the true and fair position of the business could not be known. That is why, when one person invests Rs. 1,00,000 into business, it is deemed that the proprietor has given that amount to the business and therefore, this amount is shown as a liability in the books of the business. In case, the proprietor withdraws Rs. 20,000 from the business, it will be charged to him and therefore, the net amount payable by the businessman will be shown as Rs. 80,000.
</li>
<li>Confliction with law:
The concept of separate entity is applicable to all forms of business organizations. The relationship, created by law between business and businessman, should not be taken into consideration at the time of recording transaction. For example, in case of a partnership business or in case of a sole proprietorship business, the partners or sole proprietor are not considered as separate entities in the eyes of law, but for accounting purposes they will considered as separate entities.<b>
<b> </b></b><b></b></li>
</ol>
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b>
<br />
<ul>
<li>Accountants treat a business as distinct from the persons who own it. But according to law business and the proprietor are one and the same.</li>
<li>According to this concept, all the business transactions are recorded in the books of accounts from the view point of the business only. Business transactions are recorded in the business books of accounts and owner’s transactions in his personal books of accounts.</li>
<li>Since distinction is made between business and owner, it becomes possible to record transactions of the business with the proprietor also. Without such a distinction, the affairs of the firm will be all mixed up with the private affairs of the proprietor and the true picture of the firm will not be available.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li><b>2. </b><b>Going Concern or Continuity Assumption: </b></li>
</ol>
<b>The Going Concern Concept is the basic idea the business will continue for a long time, followed by all accountants, while recording and reporting the business transactions. </b>As per this concept, unless otherwise known it is assumed that the firm is a going concern and its business will continue for an indefinite time. A firm is said to be a going concern, if there is neither intention nor necessary to wind up the affairs of business or substantially curtail the scale of its operation. It is due to this concept that:
<b> </b>
Proper distinction is made between capital and revenue expenditure
Assets are classified into current assets and fixed assets,
Liabilities are classified into short-term liabilities and long term liabilities,
Use its fixed Assets till the end of their useful life,
Carry forward (Defer) expenses or income to future years. (Expenses useful for 2 or 3 years are taken as deferred revenue expenditure),
Repay its long-term loans,
Expenses useful for many years are treated as fixed assets, to be written off, not in the year of purchase, by way of depreciation over its useful life.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b><span style="text-decoration: underline;">Going Concern Concept is one of the Fundamental Accounting Assumptions.</span></b><b></b>
<br />
<ul>
<li>The financial statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future.</li>
<li>It is assumed that the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations.</li>
<li>If such an intention or need exists, the financial statements may have to be prepared on a different basis and, if so, the basis used is disclosed.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li> <script async="" src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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</script> <b>3. </b><b>Accounting Period Concept or Periodicity Concept: </b></li>
</ol>
This concept is the based on Going Concern, concept. As per the going concern concept, the life of the business is considered to be indefinite. However, the measurement of income and study of the financial position of a business house after a very long period would not be helpful in taking the corrective action within the right time.
In order to tackle the above problem, accounting period concept is developed. As per this concept, the life of the business is divided into appropriate segments or into time interval and after every time interval, the businessman must ‘stop’ and ‘see back’, how things are going. A segment or time interval is called ‘Accounting Period’, which is usually one year. The relationship between Going Concern and Periodicity can be depicted by the following diagram:
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="66"><div align="center">
Year<sub>1</sub></div>
</td>
<td valign="top" width="66"><div align="center">
Year<sub>2</sub></div>
</td>
<td valign="top" width="66"><div align="center">
Year<sub>3</sub></div>
</td>
<td valign="top" width="60"><div align="center">
Year<sub>4</sub></div>
</td>
<td valign="top" width="60"><div align="center">
Year<sub>5</sub></div>
</td>
<td valign="top" width="54"><div align="center">
Year<sub>6</sub></div>
</td>
<td valign="top" width="60"><div align="center">
Year<sub>7</sub></div>
</td>
</tr>
</tbody>
</table>
<div align="center">
Life of Organization</div>
Thus, at the end of each accounting period, an income Statement and a Balance Sheet are prepared. The Income Statement discloses the profit or loss, made by the business during the accounting period, while the Balance Sheet depicts the financial position of the business at the end of Accounting Period.
Further, it is to be noted that this concept is also necessary for the allocation of expenses between capital and revenue. That portion of capital expenditure, which is consumed during the current period, is charged as expenses to income statement and unconsumed portion is shown in the balance sheet as an asset for the future consumption.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b></b>
<br />
<ul>
<li>However the businessman/users of financial information desire to know the results of the operation and financial position at appropriate time intervals.</li>
<li>Therefore, the life of the business is divided into appropriate segments/time interval. Each segment/time interval is called as Accounting period.</li>
<li>Normally the Accounting period is “one year” [12 months].<b></b></li>
<li>Any period can be selected as Accounting Period depending upon the convenience of the business or as per the business practices in country.<b></b></li>
<li>Accounting attempts to present the gains or losses earned or suffered by the business during the period under review.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li><b>4. </b><b>Accrual Concept: </b></li>
</ol>
According to this principle –
All the revenues should be recognized when they are earned, not when they are received in cash, and
Similarly, the expense should be recognized when they are incurred, not when they are paid this concept is <b>based on the matching concept</b> of accounting.
For example, suppose a building is taken on rent for the purpose of business on 1<sup>st</sup> February. The financial year ends on 31<sup>st</sup> December. In such a situation, as per accrual, the total rent for eleven months should be shown in the profit and loss account, irrespective of the actual amount paid for rent during the year.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b><span style="text-decoration: underline;">Accrual Concept is one of the Fundamental Accounting Assumptions.</span></b><b></b>
<br />
<ul>
<li>All income and charges relating to the financial period to which the financial statements relate should be taken into account, regardless of the date of receipt or payment.</li>
<li>Income should be accounted on earned basis and not on receipt basis.</li>
<li>Expenses should be accounted on incurred basis and not on paid basis.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li><b>5. </b><b>Realization Concept or <a href="https://indianaccounting.blogspot.in/2012/03/as-9-revenue-recognition.html">Revenue Recognition</a> Concept: </b></li>
</ol>
This concept deals with the problem, when the revenue should be recognized?” According to this concept, the sale should be recognised at the point, when the property in goods passes to the buyer and he becomes legally liable to pay and other income is recognised, when they accrue.
<b> </b>
Mr. A place an order with Mr. B for supply of certain goods, which are yet to be manufactured. On receipt of order, Mr. B purchases raw materials employs workers, produces the goods and delivers finished goods to A Mr. A makes payment on receipt of goods. In this case, the sale will be presumed to have been made not at the time of receipt of the order for the goods, but at the time, when goods are delivered to Mr. A.
When cash is received <b>(Cash Sale).</b>
When the customer has become legally liable to pay the price <b>(Credit Sale).</b>
When specific service is performed <b>(Service contract).</b><b></b>
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b></b>
<br />
<ul>
<li>This concept emphasizes that profit should be considered only when realized.</li>
<li>When profit should be deemed to have accrued? Whether at the time of receiving the order or at the time of execution of the order or at the time of receiving the cash?</li>
<li><b>Answer:</b> As per law (Sales of Goods Act), the revenue is earned only when the goods are transferred. It means that profit is deemed to have accrued when 'property (ownership) in goods passes to the buyer' viz. when sales are affected.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li><b>6. </b><b>Money Measurement Concept:</b></li>
</ol>
As per this concept, only monetary transactions are recorded in the books of accounts. The transactions, which cannot be expressed in monetary terms, do not find place in the books of accounts, although they may be very useful for the business.<b></b>
Measurement of business transactions in money helps in understanding the state of affairs of the business in a better way. For example, if a business owns cash of Rs. 10,000, 600 kg. of raw materials, two truck, 1000 square feet of building space etc. these items cannot be added together to produce a meaningful total, what the business owns. However, if these items are expressed in monetary items such as Rs. 10,000 of cash, Rs. 12,000 of raw materials (600 kg.), Rs. 2,00,000 of two trucks and Rs. 5,00,000 of 1000 square feet of building, all such items can be added and a better estimate about the assets of the business will be available.
Some people think that the Accounting gives a full picture of business. It is never true, because in Accounting, only monetary items are recorded; no record is made for non-monetary items. Thus accounting does not give the picture of non- monetary items.
It is due to this concept that:
Recording in Terms of Money,
Recording only Monetary Items.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b></b>
<br />
<ul>
<li>In accounting, only those business transactions and events which are of financial nature are recorded.</li>
<li>To be precise, the transactions should be measurable in terms of money. Otherwise it should not be recorded.</li>
</ul>
<b>Example:</b>
Car – 2 No.s
Stock – 5 kgs
Furniture – 5 Chairs and two tables
Computer – 3
Land – 10 acres
Building – Rs.10,000
From the above information, a person cannot prepare a statement informing that the total of assets is 10,025 [i.e.10000+10+3+5+5+2]
<br />
<ul>
<li>This concept has the following limitation.<b></b></li>
</ul>
<b>a) </b>It does not give a complete account of the happenings in business unit.
<b> Example:</b>
Ü Strike in the factory
Ü Sales manager is not speaking with production manager
<b>b) </b>It is not capable of recording transactions which cannot be expressed in terms of money.
Ü Employees are the assets of the organization
<b> </b>
<b>Note: </b>Though this concept has its own limitations, still it is used for accounting purposes, because there is not better measurement scale other than this concept.<b></b></td>
</tr>
</tbody>
</table>
<ol>
<li><b>7. </b><b>Cost Concept: </b></li>
</ol>
Accounting to this concept:
<b> </b>
As asset is recorded in the books at the price, which is paid to acquire it, and
This cost is the basis for all subsequent accounting for that asset.
For example, if a plot of land is purchased for Rs. 1,50,000 then as per this concept, the asset will be recorded in the books at Rs. 1,50,000, even if its market value at that time is Rs. 2,00,000. In case a year later, the market value of this asset comes down to Rs. 1,00,000 it will continue to be shown at Rs. 1,50,000 and not at
Rs. 1,00,000.
The cost concept does not mean that the asset will always be shown at cost. It has also been started above that cost becomes the basis for all future accounting for the asset. It means that asset is recorded at cost at the time of its purchase, but it may systematically be reduced in its value by charging depreciation.
<b> </b>
<b>Advantage: </b>Cost concept has the advantage of bringing objectivity in the preparation and presentation of financial statements. In the absence of this concept, the figures shown in the accounting records would have depended on the subjective views of a person.
<b> </b>
<b>Drawbacks: </b>However if cost concept is followed in the following situations, then the financial statements will not depict the true and fair position of the business:-
In case of inflationary trend in the price of the assets (such as land), the historical cost does not have relevance. For example, suppose during the financial year, an asset is purchased for Rs. 50,000 and at the end of financial year, its market value is Rs. 2,00,000. In the financial statements, the assets will be shown at Rs. 50,000, which will not depict the true and fair view of the land.
In case, asset does not have any acquisition value, (for example, assets acquired by the firm by way of gift), such asset will not be shown in the financial statement, if cost concept is followed, because nothing is paid for it. This will adversely affect the concept of true and fair view.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b></b>
<br />
<ul>
<li>According to this concept, an asset is ordinarily recorded in the books at the price at which it was acquired i.e. at its cost price.</li>
<li>It must be remembered that the real worth of the assets changes from time to time. So, it does not mean that the value of such assets is wrongly recorded in the books.</li>
<li>The book value of the assets as recorded does not reflect their real value. They do not signify that the values noted therein are the values for which they can be sold.<b></b></li>
<li>Though the assets are recorded in the books at cost, in course of time, they become reduced in value on account of depreciation charges.<b></b></li>
<li>The idea that the transactions should be recorded at cost rather than at a subjective or arbitrary value is known as Cost Concept.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li><b>8. </b><b>Matching Concept: </b></li>
</ol>
This is based on the Accounting Period Concept. The main object of running a business is to each profit. In order to ascertain the profits, made by the business during a period, it is necessary that’ ‘Revenues’ of the period should be matched with the ‘Cost or Expenses’ of that period. The effect of this principle can be summarized as follows:
(a) When an item of revenue is entered in the profit and loss account, then all the expenses, incurred to earn that income (whether paid or not) should be entered on the expenses side.
(b) When some amount is spent in the current year, and the income against it will be earned in the subsequent years, then the expenditure should be shown in the subsequent years, when the income is earned.
It is due to the concept that necessary entries are made for outstanding expense, prepaid expenses, accrued income and unaccrued income in the books of accounts.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b></b>
<br />
<ul>
<li>As per this concept, all expenses matched with the revenue of that period should only be taken into consideration.</li>
<li>If any revenue is recognized, then expenses related to earn that revenue should also be recognized.</li>
<li>This concept is based on accrual concept as it considers the occurrence of expenses and income and do not concentrate on actual inflow or outflow of cash.<b></b></li>
<li>This leads to adjustment of certain items like prepaid and outstanding expenses, unearned or accrued incomes.<b></b></li>
<li>It is not necessary that every expense identify every income. Some expenses are directly related to the revenue and some are time bound.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<ol>
<li><b>9. </b><b>Objective Concept OR Objective Evidence Concept: </b></li>
</ol>
According to this concept, the accounting data and accounting information should be verifiable and free from personal bias. For example, in the case of Fixed Assets, the amount can be verified by purchase bill etc. They should be objective (out of one’s mind), not subjective (of one’s mind).<b></b>
However, there are some areas in Accounting, where evidence cannot be available to verify information and where estimations are made. For example, the estimation of depreciation, estimation of Bad and Doubtful debts, etc. These estimates should be free any bias and should be based on reasonable analysis.
<br />
<ol>
<li><b>10. </b><b> Dual Aspects Concept: </b></li>
</ol>
This is a basic accounting. Accounting to this concept, every business transactions has dual effect-<br />
<b><span style="color: blue;">1<sup>st </sup>Aspects</span> </b><br />
<b> </b>
(i) It increases on Asset and decreases other Asset,
<b><i>[Purchase of Machinery] </i></b><b><i><b><i>[Payment of </i></b></i></b><b><i><b><i><b><i><b><i><b><i><b><i><b><i> </i></b></i></b></i></b></i></b></i></b></i></b></i></b><br />
<b><i><b><i><b><i><b><i><b><i><b><i><b><i> Cash]</i></b></i></b></i></b></i></b> </i></b></i></b> </i></b> <br />
(ii) It increases an Asset and simultaneously increase liability,
<b><i>[Purchase of Machinery] </i></b><br />
<b><i> [Payment at future date </i></b><i>(on credit basis)<b>]</b></i><br />
(iii) It decreases one Asset, and decreases one Liability
<b><i>[Payment of Cash] </i></b><b><i><b><i>[Settlement of </i></b></i></b><br />
<b><i><b><i> Liability]</i></b> </i></b><br />
(iv) It increase liability, and decreases simultaneously liability <b><i>[Bank Loan Obtained] </i></b><br />
<b><i> [Payment to Creditors </i></b><i>(Using Loan Amount)<b>]</b></i>
Alternatively-
<b>1<sup>st </sup>Aspects </b><br />
<br />
<span style="color: blue;"><b>2<sup>nd</sup> Aspects</b></span><br />
(i) It decreases on Asset and increases other Asset,<br />
(ii) It increase liability and simultaneously, increases an Asset<br />
(iii) It decreases Liability, and decreases one Asset<br />
(iv) It decreases liability, and simultaneously increase liability
<b><i> </i></b>
<b>For example,</b> suppose Mr. A purchases some goods worth Rs. 1000 in cash. In this business transaction, Mr. A gets the goods of worth Rs. 1000, but on the other hand, he lost the cash of Rs. 1000. So, Goods Account and Cash Account shall be affected by this transaction.
Thus in every business transaction, one aspect represents the assets or expenses other represents the claim or income and these two expects are always equal. This approach generates the concept of accounting equation, which can be summarized as below:
<br />
<div align="center">
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top">Liabilities = Assets
External Liabilities + Capital = Assets</td>
</tr>
</tbody>
</table>
</div>
For example, if A starts a business with a capital of Rs. 1,00,000. There are no aspects of this transaction. On the one hand, the business has asset (in the form of cash) of Rs. 1,00,000, while on the other hand the business has to pay to the proprietor a sum of Rs. 1,00,000, which is known as proprietor’s capital. This expression can be shown in the form of accounting equation as follows:
<br />
<div align="center">
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top">Capital (Liability) = Cash (Assets)
1,00,000 = 1,00,000</td>
</tr>
</tbody>
</table>
</div>
In the example given above, if the furniture worth Rs. 50,000 is purchased, the situation will be as follows:
Capital (Rs. 1,00,000) = Cash (Rs. 50,000) + Furniture (Rs. 50,000)
Thus, this concept develops a relationship between liabilities and assets. The Accounting Equation can be technically started as “for every debit, there is an equivalent credit”. As a matter of fact, the entire Double Entry System of Book-Keeping is based on this concept.
<b> </b>
<br />
<table border="1" cellpadding="0" cellspacing="0">
<tbody>
<tr>
<td valign="top" width="669">ë <b>REMEMBER</b> <b></b>
<br />
<ul>
<li>Dual aspect principle is the basis for Double Entry System of book-Keeping.</li>
<li>All business transactions recorded in accounts have two aspects.</li>
<li>One is debit aspect and another one is credit aspect.<b></b></li>
<li>For every debit, there must be an equal and corresponding credit.<b></b></li>
<li>Now look at the following for Dual Aspect Concept.<b></b></li>
</ul>
</td>
</tr>
</tbody>
</table>
<div align="center">
<br /></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-87055713805325776402035-07-02T06:43:00.000+00:002017-12-09T07:28:42.067+00:00All Accounting Standards at a Glance (Part-I)<br />
<br />
<br />
| <span style="color: blue;"><a href="http://indianaccounting.blogspot.in/2012/11/all-accounting-standard-at-glance-ii.html"><span style="color: blue;"><b>Read All Accounting Standards at a glance (II)</b></span></a> </span> || <span style="color: blue;"><a href="http://indianaccounting.blogspot.in/2012/12/all-accounting-standard-at-glance-iii.html"><span style="color: blue;"><b>Read All Accounting Standards at a glance (III)</b></span></a> </span> |
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<b style="line-height: 99%;"><span style="font-family: "times new roman" , serif;"><span style="color: blue;"> Accounting Standard-1 — DISCLOSURE OF ACCOUNTING
POLICIES</span></span></b></div>
<div class="Section5">
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Significant
Accounting Policies followed in preparation of accounts be disclosed at one
place along with the financial statements. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Any
change and financial impact of such change should be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">If
fundamental assumptions (going concern, consistency and accrual) are not
followed, the fact to be disclosed. Going concern assumption is assessed for a
foreseeable period of one year </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Accounting
Policies adopted by the enterprise should represent true and fair view of the
state of affairs of the financial statements </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Major
considerations governing selection and application of accounting policies are:
i) Prudence, ii) Substance over form and iii) Materiality. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Note
— In relation to derivative contracts (e.g. foreign exchange forward contracts)
the Institute interpreted on the principles of prudence that the loss (net), if
any on each reporting date shall be provided through the statement of profit
and loss account.</span></b><br />
<b><span style="color: blue; font-family: "times new roman" , "serif";"><a href="http://indianaccounting.blogspot.in/2012/01/as-1.html" target="_blank">READ MORE</a></span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
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</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -166;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1066" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1067"
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</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -165;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1067" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1068"
style='position:absolute;z-index:-164;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.25pt,24.7pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -164;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1068" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-2 — VALUATION OF INVENTORIES (REVISED) </span></span></b></div>
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<b><span style="font-family: "times new roman" , "serif";">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.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 96%;"><o:p></o:p></span></div>
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<div class="MsoNormal" style="line-height: 111%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l6 level1 lfo6; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 111%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Inventories
are valued at lower of cost or net realisable value. Specific identification
method is required when goods are not ordinarily interchangeable. In other
circumstances, the enterprise may adopt either weighted average cost method or
FIFO methods whichever approximates the fairest possible approximisation of
cost incurred. Standard Costing Method or Retail Inventory Method can be
adopted only as a techniques of measurement provided where the results of these
measurements approximates the results that would be arrived at after adopting
specific identification method or weighted average method or FIFO method as may
be applicable to the circumstances. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 111%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The
financial statements should disclose: (a) the accounting policies adopted in
measuring inventories, including the cost formula used; and (b) the total
carrying amount of inventories and its classification appropriate to the
enterprise.<a href="http://indianaccounting.blogspot.in/2012/11/as-2-valuation-of-inventory.html" target="_blank"><span style="color: blue;">READ MORE</span></a><br /> </span></b></div>
</div>
<span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span>
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<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-3 — CASH FLOW
STATEMENTS</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 111%;">The
standard sets out the requirement that where the cash flow statement is
presented, it shall disclose a movement in "cash and cash
equivalents" segregating various transactions into operating, investing
and financing activity. It requires certain specific items to be addressed in
the cash flows and certain supplemental disclosures for non-cash transactions.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 111%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">Cash comprises cash on hand and
demand deposits with banks.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">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.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 97%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">Cash flows are inflows and
outflows of cash and cash equivalents.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">Operating activities are the
principal revenue-generating activities of the enterprise and other activities
that are not investing or financing activities. Examples, cash receipts from
the sale of goods and the rendering of services; cash receipts from royalties,
fees, commissions and other revenue; cash payments to suppliers for goods and
services; cash payments to and on behalf of employees.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 107%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">Investing activities are the
acquisition and disposal of long-term assets and other investments not included
in cash equivalents. Examples, cash payments to acquire fixed assets (including
intangibles). These payments include those relating to capitalised research and
development costs and self-constructed fixed assets; cash receipts from
disposal of fixed assets (including intangibles); cash payments to acquire
shares, warrants or debt instruments of other enterprises and interests in
joint ventures (other than payments for those instruments considered to be cash
equivalents and those held for dealing or trading purposes).</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 110%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">Financing activities are
activities that result in changes in the size and composition of the owners’
capital (including preference share capital in the case of a company) and
borrowings of the enterprise. Example, cash proceeds from issuing shares or
other similar instruments; cash proceeds from issuing debentures, loans, notes,
bonds, and other short- or long-term borrowings; and cash repayments of amounts
borrowed.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 107%;"><o:p></o:p></span></div>
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<br /></div>
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<b><span style="font-family: "times new roman" , "serif";">Additionally certain items are
required to be disclosed separately, like Income Tax, Dividends, etc.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">The enterprise can choose either
direct method or indirect method for presentation of its cash flows.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 119%;">Cash
flows arising from transactions in a foreign currency should be recorded in an
enterprise’s reporting currency by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency at the
date of the cash flow. A rate that approximates the actual rate may be used if
the result is substantially the same as would</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 119%;"><o:p></o:p></span></div>
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style='position:absolute;left:0;text-align:left;z-index:-158;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.25pt,24.7pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
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<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -158;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1074" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">arise
if the rates at the dates of the cash flows were used. The effect of changes in
exchange rates on cash and cash equivalents held in a foreign currency should
be reported as a separate part of the reconciliation of the changes in cash and
cash equivalents during the period.</span></b><br />
<b><span style="color: blue; font-family: "times new roman" , "serif";"><a href="http://indianaccounting.blogspot.in/2012/02/as-3-cash-flow-statement.html" target="_blank">READ MORE</a></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 104%;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-4 —
CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
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<b><span style="font-family: "times new roman" , "serif";">Contingencies</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The
amount of a contingent loss should be provided for by a charge in the statement
of profit and loss if it is probable that future events will confirm that,
after taking into account any related probable recovery, an asset has been
impaired or a liability has been incurred as at the balance sheet date, and a
reasonable estimate of the amount of the resulting loss can be made. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l13 level1 lfo7; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The
existence of a contingent loss should be disclosed in the financial statements
if either of the conditions in above paragraph is not met, unless the
possibility of a loss is remote. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Contingent
gains should not be recognised in the financial statements. </span></b><span style="font-family: "symbol"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , "serif";">Events occurring after the
Balance Sheet Date</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.35pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l9 level1 lfo8; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Assets
and liabilities should be adjusted for events occurring after the balance sheet
date that provide additional evidence to assist the estimation of amounts
relating to conditions existing at the balance sheet date or that indicate that
the fundamental accounting assumption of going concern (i.e., the continuance
of existence or substratum of the enterprise) is not appropriate. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 113%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l9 level1 lfo8; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 113%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 113%;">Dividends stated to be in respect
of the period covered by the financial statements, which are proposed or
declared by the enterprise after the balance sheet date but before approval of
the financial statements, should be adjusted. </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 113%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 102%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l9 level1 lfo8; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 102%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 102%;">Disclosure should be made in the
report of the approving authority of those events occurring after the balance
sheet date that represent material changes and commitments affecting the
financial position of the enterprise. </span></b><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 102%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.9pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , "serif";">Disclosure</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.45pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l30 level1 lfo9; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">If
disclosure of contingencies is required by paragraph 11 of the Statement, the
following information should be provided: the nature of the contingency, the
uncertainties which may affect the future outcome, an estimate of the financial
effect, or a statement that such an estimate cannot be made. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l30 level1 lfo9; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">If
disclosure of events occurring after the balance sheet date in the report of
the approving authority is required by the Standard then it shall disclose; the
nature of the event, an estimate of the financial effect, or a statement that
such an estimate cannot be made. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.4pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; punctuation-wrap: simple; text-autospace: none;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-5 — NET PROFIT/LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND
CHANGES IN ACCOUNTING POLICIES</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.35pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 111%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; punctuation-wrap: simple; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<span style="font-family: "symbol"; font-size: 9.5pt; line-height: 111%;"></span><b><span style="font-family: "times new roman" , "serif";"> Prominent definitions includes;
Ordinary activities are any activities which are undertaken by an enterprise as
part of its business and such related activities in which the enterprise
engages in furtherance of, incidental to, or arising from, these activities.
Extraordinary items are income or expenses that arise from events or
transactions that are clearly distinct from the ordinary activities of the
enterprise and, therefore, are not expected to recur frequently or regularly.
Prior period items are income or expenses which arise in the current period as a
result of errors or omissions in the preparation of the financial statements of
one or more prior periods. Accounting policies are the specific accounting
principles and the methods of applying those principles adopted by an
enterprise in the preparation and presentation of financial statements.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 111%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 1.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<!--[if gte vml 1]><v:line id="_x0000_s1075" style='position:absolute;
z-index:-157' from="-11pt,40.1pt" to="551.75pt,40.1pt" o:allowincell="f"
strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 52px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -157;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image007.gif" v:shapes="_x0000_s1075" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section8">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<!--[if gte vml 1]><v:line
id="_x0000_s1076" style='position:absolute;z-index:-156;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="587.5pt,24.7pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -156;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1076" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1077"
style='position:absolute;z-index:-155;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="24.7pt,24.7pt" to="24.7pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -155;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1077" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1078"
style='position:absolute;z-index:-154;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="24.7pt,767.25pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -154;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1078" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1079"
style='position:absolute;z-index:-153;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.75pt,24.95pt" to="587.75pt,767.75pt"
o:allowincell="f" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -153;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1079" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1080"
style='position:absolute;z-index:-152;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.25pt,24.7pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -152;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1080" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Accounting
treatment and disclosures</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.4pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Ordinary
Activities : When items of income and expense within profit or loss from
ordinary activities are of such size, nature or incidence that their disclosure
is relevant to explain the performance of the enterprise for the period, the
nature and amount of such items should be disclosed separately. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.1pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Extraordinary
Items should be disclosed in the statement of profit and loss as a part of net
profit or loss for the period. The nature and the amount of each extraordinary
item should be separately disclosed in the statement of profit and loss in a
manner that its impact on current profit or loss can be perceived. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.1pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Prior
Period : The nature and amount of prior period items should be separately
disclosed in the statement of profit and loss in a manner that their impact on
the current profit or loss can be perceived. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Accounting
Estimate : The effect of a change in an accounting estimate should be included
in the determination of net profit or loss in; (a) the period of the change, if
the change affects the period only; or (b) the period of the change and future
periods, if the change affects both. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 111%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 111%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Accounting
Policy : Any change in an accounting policy which has a material effect should
be disclosed. The impact of, and the adjustments resulting from, such change,
if material, should be shown in the financial statements of the period in which
such change is made, to reflect the effect of such change. Where the effect of
such change is not ascertainable, wholly or in part, the fact should be
indicated. If a change is made in the accounting policies which has no material
effect on the financial statements for the current period but which is
reasonably expected to have a material effect in later periods, the fact of
such change should be appropriately disclosed in the period in which the change
is adopted. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 111%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.3pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">A
change in accounting policy consequent upon the adoption of an Accounting
Standard should be accounted for in accordance with the specific transitional
provisions, if any, contained in that Accounting Standard. However, disclosures
required by paragraph 32 of the Statement should be made unless the
transitional provisions of any other Accounting Standard require alternative
disclosures in this regard. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 109%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l50 level1 lfo10; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 109%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Where
any policy was applied to immaterial items in any earlier period but the item
is material in the current period, the change in accounting policy, if any,
shall not be treated as a change in accounting policy and accordingly no
disclosure is required e.g., gravity booked on cash basis in earlier period for
relatively insignificant number of employees which in current period has become
material and thus provided on basis of report of Actuary. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 109%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.05pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-6 — DEPRECIATION
ACCOUNTING</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.35pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l51 level1 lfo11; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Allocate
depreciable amount of a depreciable assets on systematic basis to each
accounting year over useful life of asset, useful life may be reviewed
periodically. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l51 level1 lfo11; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Basis
must be consistently followed and disclosed. Any change to be quantified and
disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l51 level1 lfo11; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Rates
of depreciation should be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l51 level1 lfo11; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">A
change in method followed be made only if required by the statute, compliance
to Accounting Standard, appropriate preparation or presentation of the
financial statement. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l51 level1 lfo11; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">In
cases of extension, revaluation or exchange fluctuation, depreciation to be
provided on adjusted figure prospectively over the residual useful life of the
asset. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l51 level1 lfo11; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Deficiency
or surplus in case of transfer/change in method be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Historical
cost, depreciation for the year and accumulated depreciation be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 1.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<!--[if gte vml 1]><v:line id="_x0000_s1081" style='position:absolute;
z-index:-151' from="-11pt,16.75pt" to="551.75pt,16.75pt" o:allowincell="f"
strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 21px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -151;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image007.gif" v:shapes="_x0000_s1081" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section9">
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l4 level1 lfo12; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1082"
style='position:absolute;left:0;text-align:left;z-index:-150;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="587.5pt,24.7pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -150;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1082" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1083"
style='position:absolute;left:0;text-align:left;z-index:-149;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="24.7pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -149;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1083" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1084"
style='position:absolute;left:0;text-align:left;z-index:-148;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,767.25pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -148;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1084" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1085"
style='position:absolute;left:0;text-align:left;z-index:-147;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.75pt,24.95pt" to="587.75pt,767.75pt" o:allowincell="f"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; left: 0px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -147;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1085" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1086"
style='position:absolute;left:0;text-align:left;z-index:-146;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.25pt,24.7pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -146;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1086" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Revision
in method of depreciation be made from date of use. Change in method of
charging depreciation is change in accounting policy be disclosed. <a href="http://indianaccounting.blogspot.in/2012/03/as-6-depreciation-accounting.html" target="_blank"><span style="color: blue;">READ MORE</span></a></span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-7 — ACCOUNTING
FOR CONSTRUCTION CONTRACTS</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.3pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l62 level1 lfo13; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">It
may be mentioned that the standard is applicable in accounting of contracts in
the books of the contractor. It is not applicable for construction project
undertaken by the entity on behalf of its own, for example, a builder
constructing flats to be sold. It is also not applicable to Service Contracts
which are not related to the construction of asset. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 10.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">According
to AS-7 (Revised) the enterprise should follow only percentage completion
method. </span></b><span style="font-family: "symbol"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 102%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l62 level1 lfo13; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 102%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 102%;">Where in case the contract revenue
or the stage of completion cannot be determined reliably, the cost incurred on
the contract may be carried forward as work-in-progress. All foreseen losses
must be fully provided for. </span></b><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 102%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Under
percentage of completion method, appropriate allowance for future contingencies
shall be made. </span></b><span style="font-family: "symbol"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l62 level1 lfo13; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">WIP,
receipt of progressive payments, advances, retentions, receivables and certain
other items are required to be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.1pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-9 — REVENUE
RECOGNITION</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.35pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l71 level1 lfo15; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Revenue
from sales or service transactions should be recognised when the requirements
as to performance as set out are satisfied, provided that at the time of
performance it is not unreasonable to expect ultimate collection. If at the
time of raising of any claim it is unreasonable to expect ultimate collection,
revenue recognition should be postponed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 110%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l71 level1 lfo15; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 110%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">In
a transaction involving the sale of goods, performance should be regarded as
being achieved when the following conditions have been fulfilled: (i) the
seller of goods has transferred to the buyer the property in the goods for a
price or all significant risks and rewards of ownership have been transferred
to the buyer and the seller retains no effective control of the goods
transferred to a degree usually associated with ownership; and (ii) no
significant uncertainty exists regarding the amount of the consideration that
will be derived from the sale of the goods. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 110%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l71 level1 lfo15; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">In
a transaction involving the rendering of services, performance should be
measured either under the completed service contract method or under the
proportionate completion method, whichever relates the revenue to the work
accomplished. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.1pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l71 level1 lfo15; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Such
performance should be regarded as being achieved when no significant
uncertainty exists regarding the amount of the consideration that will be
derived from rendering the service. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 1.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<!--[if gte vml 1]><v:line id="_x0000_s1087" style='position:absolute;
z-index:-145' from="-11pt,31.3pt" to="551.75pt,31.3pt" o:allowincell="f"
strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 41px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -145;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image006.gif" v:shapes="_x0000_s1087" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section10">
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l34 level2 lfo16; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1088"
style='position:absolute;left:0;text-align:left;z-index:-144;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="587.5pt,24.7pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -144;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1088" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1089"
style='position:absolute;left:0;text-align:left;z-index:-143;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="24.7pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -143;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1089" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1090"
style='position:absolute;left:0;text-align:left;z-index:-142;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,767.25pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -142;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1090" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1091"
style='position:absolute;left:0;text-align:left;z-index:-141;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.75pt,24.95pt" to="587.75pt,767.75pt" o:allowincell="f"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; left: 0px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -141;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1091" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1092"
style='position:absolute;left:0;text-align:left;z-index:-140;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.25pt,24.7pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -140;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1092" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Revenue
arising from the use of other enterprise resources yielding interest, royalties
and dividends should only be recognised when no significant uncertainty as to
measurability or collectability exists. These revenues are recognised on the
following bases: </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.4pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 13pt; text-align: justify; text-indent: -13pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(ii)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Interest:
on a time proportion basis taking into account the amount outstanding and the
rate applicable. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 11.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 16pt; text-align: justify; text-indent: -16pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(iii)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;">
</span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Royalties:
on an accrual basis in accordance with the terms of the relevant agreement. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 11.8pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 19pt; text-align: justify; text-indent: -19pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(iv)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;"> </span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Dividends from investments in
shares: when the owner’s right to receive payment is established. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "times new roman" , "serif";">Disclosure</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.3pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l61 level1 lfo17; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">In
addition to the disclosures required by Accounting Standard 1 on ‘Disclosure of
Accounting Policies’ (AS-1), an enterprise should also disclose the
circumstances in which revenue recognition has been postponed pending the
resolution of significant uncertainties. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l61 level1 lfo17; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">In
cases where revenue cycle of the entity involves collection of excise duty the
enterprise is required to disclose revenue at gross as reduced by excise amount
thereby finally arriving net sales on the face of the profit and loss account. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l61 level1 lfo17; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The
standard is followed by an appendix that though is not part of the Standard,
illustrate the application of the Standard to a number of commercial situation
deals with various situations in an endeavour to assist in clarifying
application of the Standard. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-10 — ACCOUNTING
FOR FIXED ASSETS</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.45pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The
cost of a fixed asset should comprise its purchase price and any attributable
cost of bringing the asset to its working condition for its intended use. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Self-constructed
asset shall be accounted at cost. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">In
case of exchange of asset, fair value of asset acquired or the net book value
of asset given up whichever is more clearly evident shall be considered. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Revaluation
is permitted provided it is done for the entire class of assets. The basis of
revaluation should be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Increase
in value on revaluation shall be credited to Revaluation Reserve while the
decrease should be charged to Profit and Loss Account. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Goodwill
to be accounted only when paid for. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Assets
acquired on hire purchase shall be recorded at its fair value. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Gross
and net book values at beginning and end of year showing additions, deletions
and other movements is required to be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Assets
should be eliminated from books on disposal or when of no utility value. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Profit/loss
on disposal be recognised on disposal to Profit and Loss Account. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l74 level1 lfo18; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Machinery
spares that can be used only in conjunction of specific asset shall be capitalised.
</span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<!--[if gte vml 1]><v:line
id="_x0000_s1093" style='position:absolute;z-index:-139' from="-11pt,64.1pt"
to="551.75pt,64.1pt" o:allowincell="f" strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 84px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -139;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image007.gif" v:shapes="_x0000_s1093" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section11">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<!--[if gte vml 1]><v:line
id="_x0000_s1094" style='position:absolute;z-index:-138;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="587.5pt,24.7pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -138;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1094" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1095"
style='position:absolute;z-index:-137;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="24.7pt,24.7pt" to="24.7pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -137;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1095" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1096"
style='position:absolute;z-index:-136;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="24.7pt,767.25pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -136;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1096" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1097"
style='position:absolute;z-index:-135;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.75pt,24.95pt" to="587.75pt,767.75pt"
o:allowincell="f" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -135;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1097" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1098"
style='position:absolute;z-index:-134;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.25pt,24.7pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -134;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1098" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-11 (REVISED) — ACCOUNTING FOR EFFECTS OF CHANGES IN FOREIGN
EXCHANGE RATES</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.4pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Applicable
to all enterprises for which accounting period commences on or after 1-4-2004.
It is applicable to transactions in foreign currency and translating financial
statements of foreign subsidiary/branches. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Monetary
items denominated in Foreign Currency shall be reported using closing rates. </span></b><span style="font-family: "symbol"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Non
monetary items carried in terms of historical cost in foreign currency shall be
reported at the exchange rate on the date of the transaction. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Exchange
differences shall be recognised as income/expenses in the period in which they
arise except in case of fixed assets and differences on account of forward
contracts. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 115%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 115%;">Translation of foreign exchange
transaction of revenue items except opening/closing inventories and
depreciation shall be made by applying rate at the date of the transactions.
For convenience purposes an average rate or weighted average rate may be used,
provided it approximates the rate of exchange. Opening and closing inventories
shall be translated at rates prevalent on opening and closing dates,
respectively and depreciation amount shall be converted by applying the rate
used for translation of the asset. </span></b><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 115%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 117%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 117%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 117%;">Translation gains and losses for
branches/subsidiaries forming integral part of operations of the entity shall
be accounted as stated in above. However translation gains and losses for
non-integral operations shall be directly credited to reserves. It may be
mentioned that that the method of arriving translation gains or losses shall be
different from that stated above; i.e., all assets and liabilities are
converted at closing rates and revenue items are converted at average rates,
where it approximates the rates at the date of transactions. Integral foreign
operation is a foreign operation, the activities of which are an integral
foreign operation is a foreign operation, the activities of which are an
integral part of those of the reporting enterprise. </span></b><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 117%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 111%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 111%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Exchange
differences arising on repayment of liabilities incurred for purchase of fixed
assets shall be expensed through profit and loss account. {Note, in case of a
Company (read as required by Schedule VI), where the fixed asset is purchased
from outside India, the related exchange gains and loss, if any, are required
to be capitalized}. Also in case of a company, other exchange differences arising
out of long-term monetary items can be initially deferred and later amortized
over the period up to March 31, 2012 or the life of the related long-term
monetary asset whichever is lower with corresponding adjustments in balance
sheet through "Foreign Currency Monetary Item Translation Difference
Account". </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 111%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.75pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l22 level1 lfo19; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">Gains or losses on accounting of
forward contracts is recognised through profit and loss account (unless it
relates </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 2.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; tab-stops: 76.0pt 131.0pt 189.0pt 231.0pt 305.0pt 346.0pt 405.0pt 6.25in 487.0pt; text-autospace: none;">
<b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 99%;">to</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 99%;">fixed</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 99%;">assets</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">as</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">described</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 99%;">in</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">above</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">for</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">a</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"> </span><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 99%;">Company).</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 19.15pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
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<b><span style="font-family: "times new roman" , "serif";">However,
measurement of gains or losses on forward contract depends upon the intention
for which it is taken. Where it is not for trading or speculative purposes the
premium/discount is amortised over the term of the contracts. Where these are
held for either speculative or trading purposes, the gain or loss is arrived at
each reporting date after comparing the FAIR VALUE of contract for its
remaining term of maturity with the carrying amount at the reporting date.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 109%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l2 level1 lfo20; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Profit/Loss
on cancellation or renewal of forward exchange contract shall be recognised as
income/expenses of the respective period (unless it relates to fixed assets as
described in above for a Company). </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l2 level1 lfo20; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Amount
of exchange difference included in Profit & Loss Account adjusted in
carrying forward or amount of fixed assets or due to forward contracts
recognised in Profit & Loss Account for one or more accounting period must
be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 1.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
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strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 68px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -133;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image006.gif" v:shapes="_x0000_s1099" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section12">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<!--[if gte vml 1]><v:line
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<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -132;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1100" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1101"
style='position:absolute;z-index:-131;mso-position-horizontal-relative:page;
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o:allowincell="f" strokecolor="#0070c0" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -131;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1101" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1102"
style='position:absolute;z-index:-130;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="24.7pt,767.25pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -130;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1102" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1103"
style='position:absolute;z-index:-129;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.75pt,24.95pt" to="587.75pt,767.75pt"
o:allowincell="f" strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -129;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1103" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1104"
style='position:absolute;z-index:-128;mso-position-horizontal-relative:page;
mso-position-vertical-relative:page' from="587.25pt,24.7pt" to="587.25pt,767.25pt"
o:allowincell="f" strokecolor="#0070c0" strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -128;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1104" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-12 — ACCOUNTING FOR GOVERNMENT GRANTS</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.4pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 121%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 121%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 121%;">Grants should not be recognised
unless reasonably assured to be realised. Grants towards specific assets be
presented as deduction from its gross value. Alternatively, be treated as deferred
income in Profit & Loss Account on rational basis over the useful life of
the asset when depreciable. For non-depreciable asset requiring fulfilment of
any obligations, it be credited to Profit & Loss Account during the
concerned period to fulfil obligations. </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 121%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.15pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Balance
of deferred income be disclosed appropriately as to promoter’s contribution, be
credited to capital reserves and considered as shareholders’ funds </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Grants
in the form of non monetary assets given at concessional rate be accounted at
their acquisition cost. Asset given free of cost be recorded at nominal value. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Grants
receivable as compensation of losses/expenses incurred be recognised and
disclosed in Profit & Loss Account in the year it is receivable and shown
as extraordinary item if appropriately read with AS-5. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Contingency
related to grant be treated in accordance with AS-4. Grants when become
refundable, be shown as extraordinary item read with AS-5. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Grants
related to revenue on becoming refundable be adjusted first against unamortised
deferred credit balance of the grant and then be charged to Profit & Loss
Account. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Grants
against specific assets on becoming refundable be recorded by increasing the
value of the respective assets or by reducing Capital Reserve/Deferred Income
balance of the grant. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Grant
to promoter’s contribution when refundable be reduced from the Capital Reserve.
</span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l52 level1 lfo21; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Accounting
policy adopted for grants including method of presentation, extent of
recognition in financial statements, at concession/free of cost be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-13 — ACCOUNTING
FOR INVESTMENTS</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l69 level1 lfo22; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Current
investments and long-term investments shall be disclosed distinctly with
further sub-classification. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l69 level1 lfo22; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Cost
of investment to include acquisition charges, e.g., brokerage, fees and duties.
</span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l69 level1 lfo22; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Current
investments shall be disclosed at lower of costs and fair value. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Long-term
investments shall be disclosed at cost. </span></b><span style="font-family: "symbol"; font-size: 10.0pt;"><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l69 level1 lfo22; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Provision
for decline (other than temporary) to be made. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 111%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l69 level1 lfo22; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 111%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 111%;">Adequate disclosure is required
for: the accounting policy adopted — classification of investments — income
from investments, profit/loss on disposal and changes in carrying amount of
such investment — aggregate amount of quoted and unquoted investments giving
aggregate market value of quoted investments. </span></b><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 111%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.3pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l69 level1 lfo22; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Significant
restrictions on right of ownership, realisation of investment and remittance of
income and proceeds of disposal thereof be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
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<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;"></span></span></b><br />
<div id="14AS">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">AS-14 — ACCOUNTING
FOR AMALGAMATION</span></span></b></div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt;">•<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt;">The Accounting Standard is applicable only where it
is made in pursuant to a scheme sanctioned by statute. </span></b><span style="font-family: "symbol"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 102%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l47 level1 lfo23; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 102%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.5pt; line-height: 102%;">The accounting method to be adopted
depends whether the amalgamation is in the nature of merger or not as defined
in para 3(e) of the Standard. The definitions list out five criteria, all of
which must be satisfied for an </span></b><span style="font-family: "symbol"; font-size: 9.5pt; line-height: 102%;"><o:p></o:p></span></div>
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<!--[if gte vml 1]><v:line id="_x0000_s1105" style='position:absolute;
z-index:-127' from="-11pt,24.65pt" to="551.75pt,24.65pt" o:allowincell="f"
strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -127;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image006.gif" v:shapes="_x0000_s1105" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section13">
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<!--[if gte vml 1]><v:line id="_x0000_s1106"
style='position:absolute;left:0;text-align:left;z-index:-126;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="587.5pt,24.7pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -126;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1106" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1107"
style='position:absolute;left:0;text-align:left;z-index:-125;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="24.7pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -125;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1107" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1108"
style='position:absolute;left:0;text-align:left;z-index:-124;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,767.25pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -124;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1108" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1109"
style='position:absolute;left:0;text-align:left;z-index:-123;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.75pt,24.95pt" to="587.75pt,767.75pt" o:allowincell="f"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; left: 0px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -123;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1109" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1110"
style='position:absolute;left:0;text-align:left;z-index:-122;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.25pt,24.7pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -122;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1110" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">amalgamation
to be accounted on the basis of "Pooling of Interest Method". If any
criterion is not met then the amalgamation is accounted on by using
"Purchase Method". It may be mentioned that these criteria relates to
mode of payment of consideration of merger, shareholding pattern pre and Post
Merger, intention to carry-on business after the merger, pooling of all assets
and liabilities after the merger and an intention to continue to carry the
carrying amounts of assets and liability after the merger.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 109%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.35pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l53 level1 lfo24; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Under
Purchase Method, all assets and liabilities of the transferor company is
recorded either at existing carrying amount or consideration is allocated to
individual identifiable assets and liabilities on basis of its fair values at
date of amalgamation. The excess or shortfall of consideration over value of
net assets is recognised as goodwill or capital reserve. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 119%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l53 level1 lfo24; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 119%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 119%;">Under the Pooling of Interest
Method, assets, liabilities and reserves of the transferor company be recorded
at existing carrying amount and in the same form as on date of amalgamation. In
case of conflicting accounting policies existing in transferor and transferee
company a uniform policy be adopted on amalgamation, as per Accounting Standard-5. </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 119%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.35pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l53 level1 lfo24; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Certain
specific disclosures as discussed in the questionnaire below are required to be
made in financial statements after amalgamation. In case of amalgamation
effected after Balance Sheet date but before issue of financial statements of
either party, the event be only specifically disclosed and not given effect in
such statements. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 95%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; punctuation-wrap: simple; text-autospace: none;">
<b><span style="font-family: "times new roman" , serif;"><span style="color: blue;">Accounting Standard-15 — ACCOUNTING FOR RETIREMENT BENEFITS IN THE FINANCIAL
STATEMENT OF EMPLOYERS</span></span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 95%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.45pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l57 level1 lfo25; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The
method of accounting of retirement benefits depends on the nature of retirement
benefits and in practice it may not be incorrect to say that it also depends on
the mode of funding. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l57 level1 lfo25; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">On
the basis of nature, a retirement benefit scheme can be classified either as
defined benefit plan or defined contribution plan. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.55pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 107%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; punctuation-wrap: simple; text-align: justify; text-autospace: none; text-justify: inter-ideograph;">
<b><span style="font-family: "times new roman" , "serif";">Defined contribution schemes are
schemes where the amounts to be paid as retirement benefits are determined by
contributions to a fund together with earnings thereon; e.g., provident fund
schemes. Defined benefit schemes are retirement benefit schemes under which
amounts to be paid as retirement benefits are determinable usually by reference
to employee’s earnings and/or years of service; e.g., gratuity schemes.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 10.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<b><span style="font-family: "times new roman" , "serif";">For defined contribution schemes,
contribution payable by employer is charged to Profit & Loss Account.</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.7pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l72 level1 lfo26; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">For
defined benefit schemes, accounting treatment will depend on the type of
arrangements which the employer has made. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.65pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l72 level1 lfo26; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">If
payment for retirement benefits is made out of employers funds, appropriate
charge to Profit & Loss Account to be made through a provision for accruing
liability, calculated according to actuarial valuation. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 14.5pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l72 level1 lfo26; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">If
liability for retirement benefit is funded through creation of trust, the
excess/shortfall of contribution paid against amount required to meet accrued
liability as certified by actuary is treated as pre-payment or charged to
Profit & Loss Account. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 104%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 120%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l72 level1 lfo26; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 120%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 120%;">If liability for retirement benefit
is funded through a scheme administered by an insurer, an actuarial certificate
or confirmation from insurer is obtained. The excess/shortfall of the
contribution paid against the amount required to meet accrued liability as
confirmed by insurer is treated as pre-payment or charged to Profit & Loss
Account. </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 120%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 97%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l72 level1 lfo26; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Any
alteration in the retirement benefit cost should is charged or credited to
Profit & Loss Account and change in actuarial method is to be disclosed. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 97%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 99%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l72 level1 lfo26; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Financial
statements to disclose method by which retirement benefit cost have been
determined. </span></b><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 99%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 1.0pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<!--[if gte vml 1]><v:line id="_x0000_s1111" style='position:absolute;
z-index:-121' from="-11pt,12.25pt" to="551.75pt,12.25pt" o:allowincell="f"
strokeweight=".16931mm"/><![endif]--><!--[if !vml]--><span style="height: 2px; margin-left: -16px; margin-top: 15px; mso-ignore: vglayout; position: absolute; width: 753px; z-index: -121;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image007.gif" v:shapes="_x0000_s1111" width="753" /></span><!--[endif]--><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
<div class="Section14">
<div class="MsoNormal" style="line-height: 112%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l48 level2 lfo27; mso-pagination: none; punctuation-wrap: simple; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 112%;">•<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1112"
style='position:absolute;left:0;text-align:left;z-index:-120;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,24.7pt" to="587.5pt,24.7pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -120;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1112" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1113"
style='position:absolute;left:0;text-align:left;z-index:-119;
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from="24.7pt,24.7pt" to="24.7pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 32px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -119;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1113" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1114"
style='position:absolute;left:0;text-align:left;z-index:-118;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="24.7pt,767.25pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 32px; margin-top: 1022px; mso-ignore: vglayout; position: absolute; width: 752px; z-index: -118;"><img height="2" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1114" width="752" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1115"
style='position:absolute;left:0;text-align:left;z-index:-117;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.75pt,24.95pt" to="587.75pt,767.75pt" o:allowincell="f"
strokeweight=".16931mm">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 993px; left: 0px; margin-left: 783px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -117;"><img height="993" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image005.gif" v:shapes="_x0000_s1115" width="2" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1116"
style='position:absolute;left:0;text-align:left;z-index:-116;
mso-position-horizontal-relative:page;mso-position-vertical-relative:page'
from="587.25pt,24.7pt" to="587.25pt,767.25pt" o:allowincell="f" strokecolor="#0070c0"
strokeweight=".48pt">
<w:wrap anchorx="page" anchory="page"/>
</v:line><![endif]--><!--[if !vml]--><span style="height: 992px; left: 0px; margin-left: 782px; margin-top: 32px; mso-ignore: vglayout; position: absolute; width: 2px; z-index: -116;"><img height="992" src="file:///C:/DOCUME~1/rao/LOCALS~1/Temp/msohtmlclip1/01/clip_image004.gif" v:shapes="_x0000_s1116" width="2" /></span><!--[endif]--><b><span style="font-family: "times new roman" , "serif"; font-size: 10.0pt; line-height: 112%;">The institute has
issued AS-15 which is broadly on lines of IFRS-19. It is applicable for
accounting periods commencing after December 7, 2007. The Standard improves the
existing practices mainly in the following areas. </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 112%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 96%; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; punctuation-wrap: simple; text-align: justify; text-autospace: none; text-justify: inter-ideograph;">
<b><span style="font-family: "times new roman" , "serif";">— It is broad in its
applicability as it covers all short-term and long term employee benefits. For
example, annual paid leave (though not encashable), long-term service rewards,
subsidised goods or services, etc. are also covered </span></b><span style="font-family: "symbol"; font-size: 9.0pt; line-height: 96%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: "times new roman" , "serif";">— Additional disclosures are
required in relation to any defined benefits plans including: </span></b><span style="font-family: "symbol"; font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 11.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 13pt; text-align: justify; text-indent: -13pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(i)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;"> </span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The reconciliation of (opening to
closing) of Projected Benefit Obligation. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 11.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 16pt; text-align: justify; text-indent: -16pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(ii)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;"> </span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The reconciliation of (opening to
closing) of Fair Value of Plan Assets. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 11.8pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 19pt; text-align: justify; text-indent: -19pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(iii)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;"> </span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">The reconciliation of (opening to
closing) of Net Liability/Prepaid Asset. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 11.95pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 19pt; text-align: justify; text-indent: -19pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(iv)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;"> </span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Components of charge during the
year. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 11.8pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 16pt; text-align: justify; text-indent: -16pt;">
<!--[if !supportLists]--><b><span style="font-family: "times new roman" , "serif"; mso-fareast-font-family: "Times New Roman";">(v)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;"> </span></span></b><!--[endif]--><b><span style="font-family: "times new roman" , "serif";">Principal actuarial assumptions. <o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 12.2pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-46690377622309620022034-07-10T04:09:00.000+00:002018-04-22T06:45:14.465+00:00Important Question and Answers on Accounting Standards (Part-I)<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.4pt;">
<h2>
<i style="line-height: 17px; text-align: justify; text-indent: -21.2pt;"><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 16px;"><span style="color: blue;"><b>Valuation of fixed assets in special cases.</b></span></span></i></h2>
</div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.4pt;">
<h3>
<i style="line-height: 17px; text-align: justify; text-indent: -21.2pt;"><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 16px;"><span style="color: blue;"><b><br /></b></span></span></i><i style="line-height: 17px; text-align: justify; text-indent: -21.2pt;"><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 16px;"><span style="color: blue;"><b> </b></span></span></i><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 119%;">Para 15 of
<a href="http://indianaccounting.blogspot.in/2012_03_12_archive.html">Accounting Standard 10 on “Accounting for Fixed Assets”</a> states the following
provisions regarding valuation of fixed assets in special cases :</span></h3>
</div>
<div class="MsoNormal" style="line-height: .3pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 110%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.0pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.0pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 110%;">1.<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 110%;">In
the case of fixed assets acquired on hire purchase terms, although legal
ownership does not vest in the enterprise, such assets are recorded at their
cash value, which if not readily available, is calculated by assuming an
appropriate rate of interest. They are shown in the balance sheet with an
appropriate narration to indicate that the enterprise does not have full
ownership thereof. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: .6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 42pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 107%;">2.<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , sans-serif;"><span style="font-size: 10.5pt; line-height: 107%;">Where
an enterprise owns fixed assets jointly with others (otherwise than as a
partner in a firm), the extent of its share in such assets, and the proportion
in the original cost, accumulated </span><span style="font-size: 14px; line-height: 14px;">depreciation</span><span style="font-size: 10.5pt; line-height: 107%;"> and written down value are
stated in the balance sheet. Alternatively, the pro-rata cost of such jointly
owned assets is grouped together with similar fully owned assets. Details of
such jointly owned assets are indicated separately in the fixed assets
register. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 1.1pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="line-height: 120%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.0pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.05pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;">3.<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;">Where
several assets are purchased for a consolidated price, the consideration is
apportioned to the various assets on a fair basis as determined by competent
valuers.
</span><br />
<div class="MsoNormal" style="line-height: 120%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.0pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.05pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;"><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;"><br /></span></span></div>
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;">
</span>
<br />
<div class="MsoNormal" style="line-height: 120%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.0pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.05pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;"><br /></span></div>
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;">
</span>
<br />
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.4pt;">
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;"><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;"><b><span style="color: blue;">Events
Occurring after the Balance Sheet Date and their disclosure requirements.</span></b></span></i><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></span></div>
<span style="font-family: "arial narrow" , "sans-serif"; line-height: 120%;">
</span>
<br />
<div class="MsoNormal" style="font-size: 10.5pt; margin: 0in 0in 0.0001pt 0.4pt;">
<span style="font-family: "arial narrow" , "sans-serif"; line-height: 120%;"><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;"> </span></i><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 107%; text-align: justify;">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 in the case of any other entity by the
corresponding approving authority.</span></span></div>
<span style="font-family: "arial narrow" , "sans-serif"; line-height: 120%;">
</span>
<br />
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<span style="font-family: "arial narrow" , "sans-serif"; line-height: 120%;"><br /></span></div>
<span style="font-family: "arial narrow" , "sans-serif"; line-height: 120%;">
</span>
<div class="MsoNormal" style="font-size: 10.5pt; margin: 0in 0in 0.0001pt 0.4pt; text-align: justify; text-indent: 21.2pt;">
<span style="font-family: "arial narrow" , "sans-serif"; line-height: 120%;"><span style="font-family: "arial narrow" , sans-serif;"><span style="font-size: 10.5pt; line-height: 104%;">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
(</span><span style="font-size: 14px; line-height: 14px;">i.e.</span><span style="font-size: 10.5pt; line-height: 104%;"> the continuance of existence or substratum of the enterprise) is not
appropriate. However, assets and liabilities should not be adjusted for but
disclosure should be made in the report of the approving authority of events
occurring after the balance sheet date that represent material changes and
commitments affecting the financial position of the enterprise.</span></span><span style="font-family: "times new roman" , serif; font-size: 12pt; line-height: 104%;"><o:p></o:p></span></span></div>
<span style="line-height: 120%;">
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<br /></div>
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<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">(ii)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">Disclosure regarding events occurring
after the balance sheet date : <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">The nature of the event; <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">An estimate of the financial effect, or a
statement that such an estimate cannot be made.</span></div>
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<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;"><br /></span></div>
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<br /></div>
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<i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"><span style="color: blue;"><b>Prior-Period
items.</b></span></span></i></div>
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<i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"><span style="color: blue;"><b> </b></span></span></i><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 107%; text-align: justify;">When
income or expenses 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, the said incomes or expenses have to be classified as prior period
items. The errors may occur as a result of mathematical mistakes, mistakes in
applying accounting policies, misinterpretation of facts or oversight.</span></div>
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<span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 107%; text-align: justify;"><br /></span></div>
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<span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 107%; text-align: justify;"><br /></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; font-size: 10.5pt; line-height: 107%; margin: 0in 0in 0in 0.4pt; text-align: justify;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 107%;"><o:p></o:p></span></div>
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<br /></div>
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<span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;">Pre–incorporation expenses.</span></i><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"> </span></i></b></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; font-size: 10.5pt; margin: 0in 0in 0.0001pt 0.4pt;">
<span style="color: blue;"><b><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"><i> </i> </span></b></span><span style="line-height: 116%;"><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 116%;">Pre–incorporation expenses denote expenses
incurred by the promoters for the purposes of the company before its
incorporation.</span></span></div>
<div class="WordSection1" style="font-family: "arial narrow", sans-serif; font-size: 10.5pt;">
<div class="MsoNormal" style="line-height: 17.7pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
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<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">Broadly,
these include expenses in connection with:</span><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 4.85pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-line-height-rule: exactly; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 42.4pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">preliminary analysis of the conceived
idea, <o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 121%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.4pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.45pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 121%;">(b)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 121%;">detailed
investigation in terms of technical feasibility and commercial viability to
establish the soundness of the proposition, <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 120%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.4pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.4pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;">(c)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 120%;">preparation
of ‘project report’ or ‘feasibility report’ and its verification through
independent appraisal authority (before giving final approval to the
proposition) and <o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 113%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 42.4pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 42.45pt; text-align: justify; text-autospace: none; text-indent: -21.2pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 113%;">(d)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 113%;">organisation
of funds, property and managerial ability and assembling of other business
elements. <o:p></o:p></span></div>
</div>
<span style="font-family: "times new roman" , "serif"; font-size: 12pt;"><br clear="all" style="mso-break-type: section-break; page-break-before: always;" />
</span>
<br />
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<br /></div>
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<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 119%;">These expenses should be properly capitalised and shown in the
balance sheet under the heading “Miscellaneous Expenditure”. There is no legal
requirement to write–off these expenses to profit and loss </span><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt; line-height: 119%;"><o:p></o:p></span><span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 115%;">account
within any specified period of time nor is there any rigid accounting
convention in regard to this matter. However, good corporate practice
recognises the need to write off these expenses to profit and loss account
whtin a period of 3 to 5 years.</span></div>
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<span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 115%;"><br /></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; font-size: 10.5pt; line-height: 119%; margin-bottom: 0in; text-indent: 21.2pt;">
<span style="font-family: "arial narrow" , sans-serif; font-size: 10.5pt; line-height: 115%;"><br /></span></div>
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</div>
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<div style="font-family: "arial narrow", sans-serif; font-size: 10.5pt;">
<span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">Provisions
contained in the Accounting Standard in respect of Revaluation of fixed assets.<br /><script async="" src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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</script><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"><o:p></o:p></span>
<br />
</span></i></b></span></div>
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<span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;"><span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;"> </span></i></b></span><b style="text-align: justify; text-indent: -21.4pt;"><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">(i)<span style="font-family: "times new roman"; font-size: 7pt; font-weight: normal;">
</span></span></b><b style="text-align: justify; text-indent: -21.4pt;"><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">Revaluation of
fixed Assts</span></b></span></i></b></span></div>
<div style="font-family: "arial narrow", sans-serif; font-size: 10.5pt;">
<span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">
</span></i></b></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; font-size: 10.5pt; line-height: 5.15pt; margin-bottom: 0in;">
<span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;"><br /></span></i></b></span></div>
<div style="font-family: "arial narrow", sans-serif;">
<b><span style="font-family: "arial narrow" , "sans-serif";">
</span></b>
</div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; margin: 0in 0in 0.0001pt 21.4pt; text-align: justify;">
<span style="font-family: "arial narrow" , "sans-serif";"><span style="font-family: "arial narrow" , "sans-serif";">According to <a href="http://indianaccounting.blogspot.in/2012_03_12_archive.html">Accounting Standard 10 on“Accounting for Fixed Assets” </a><o:p></o:p></span></span></div>
<div style="font-family: "arial narrow", sans-serif;">
<span style="font-family: "arial narrow" , "sans-serif";">
</span>
</div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 4.85pt; margin-bottom: 0in;">
<span style="font-family: "arial narrow" , "sans-serif";"><br /></span></div>
<div style="font-family: "arial narrow", sans-serif;">
<span style="font-family: "arial narrow" , "sans-serif";">
</span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 114%; margin: 0in 0in 0in 42.4pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif";"><span style="font-family: "arial narrow" , "sans-serif"; line-height: 114%;">(a)<span style="font-family: "times new roman"; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 114%;">When fixed assets are revalued in
financial statements, the basis of selection should be an entire class of
assets or the selection should be done on a systematic basis. The basis of
selection should be disclosed. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 0.1pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 121%; margin: 0in 0in 0in 42.4pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 121%;">(b)<span style="font-family: "times new roman"; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 121%;">The revaluation of any class of assets
should not result in the net book value of that class being greater than the
recoverable amount of that class of assets. <o:p></o:p></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; margin: 0in 0in 0.0001pt 42.4pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif";">(c)<span style="font-family: "times new roman";">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif";">The accumulated depreciation should not be
credited to profit and loss account. <o:p></o:p></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 4.85pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; margin: 0in 0in 0.0001pt 42.4pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif";">(d)<span style="font-family: "times new roman";">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif";">The net increase in book value should be
credited to a revaluation reserve account. <o:p></o:p></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 4.8pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 110%; margin: 0in 0in 0in 42.4pt; text-align: justify; text-indent: -21.2pt;">
<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 110%;">(e)<span style="font-family: "times new roman"; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 110%;">On
disposal of a previously revalued item of fixed asset, the difference between
net disposal proceeds and the net book value should be charged or credited to
the profit and loss account except that to the extent to which such a loss is
related to an increase and which has not been subsequently reversed or utilised
may be charged directly to that account.</span></div>
<div class="MsoNormal" style="color: blue; font-family: "arial narrow", sans-serif; font-size: 10.5pt; font-style: italic; line-height: 110%; margin: 0in 0in 0in 42.4pt; text-align: justify; text-indent: -21.2pt;">
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 110%;"><br /></span></div>
<div class="MsoNormal" style="color: blue; font-family: "arial narrow", sans-serif; font-size: 10.5pt; font-style: italic; font-weight: bold; line-height: 110%; margin: 0in 0in 0in 42.4pt; text-align: justify; text-indent: -21.2pt;">
<br /></div>
<div class="MsoNormal" style="color: blue; font-family: "arial narrow", sans-serif; font-size: 10.5pt; font-style: italic; font-weight: bold; margin: 0in 0in 0.0001pt 0.4pt;">
<i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"><span style="color: blue;"><b>The
difference between actual expense or income and the estimated expense or income
as accounted for in earlier years’ accounts, does not necessarily constitue the
item to be a prior period item comment.</b></span></span></i></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; margin: 0in 0in 0.0001pt 0.4pt;">
<i style="color: blue; font-size: 10.5pt; font-style: italic; font-weight: bold;"><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"><span style="color: blue;"><b> </b></span></span></i><span style="font-family: "arial narrow" , sans-serif; line-height: 119%;">The statement given in the question is
correct and is in accordance with the <a href="http://indianaccounting.blogspot.in/2012/03/as-5-net-profit-or-loss-for-period.html">Accounting Standard (AS) 5 (Revised) “NetProfit or Loss for the Period. Prior Period Items and Changes in AccountingPolicies’’.</a></span></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 0.35pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal" style="font-family: "arial narrow", sans-serif; line-height: 105%; margin: 0in 0in 0in 0.4pt; text-align: justify;">
<span style="font-family: "arial narrow" , "sans-serif"; line-height: 105%;">The
use of reasonable estimates is an essential part of the preparation of
financial statements and does not undermine their reliability. An estimate may
have to be revised if changes occur regarding the circumstances on which the
estimate was based, or as a result of new information or subsequent
developments. The revision of the estimate, by its nature, does not bring the
adjustments within the definition of an extraordinary item or a prior period
item.</span><span style="color: blue; font-family: "times new roman" , "serif"; font-size: 12pt; font-style: italic; font-weight: bold; line-height: 105%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="color: blue; font-family: "arial narrow", sans-serif; font-size: 10.5pt; font-style: italic; font-weight: bold; line-height: 105%; margin: 0in 0in 0in 0.4pt; text-align: justify;">
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 105%;"><br /></span></div>
<div class="MsoNormal" style="color: blue; font-family: "arial narrow", sans-serif; font-size: 10.5pt; font-style: italic; font-weight: bold; line-height: 105%; margin: 0in 0in 0in 0.4pt; text-align: justify;">
<span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 105%;"><br /></span></div>
<div class="MsoNormal" style="color: blue; font-family: "arial narrow", sans-serif; font-size: 10.5pt; font-style: italic; font-weight: bold; margin: 0in 0in 0.0001pt 0.4pt;">
<span style="color: blue;"><b><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt;">When
can revenue be recognised in the case of transaction of sale of goods?</span></i><i><span style="font-family: "arial narrow" , "sans-serif"; font-size: 10.5pt; line-height: 115%;"> </span></i></b></span></div>
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per <a href="http://indianaccounting.blogspot.in/2012/03/as-9-revenue-recognition.html">AS 9 Revenue Recognition</a>, revenue from sales transactions should be
recognised when the following requirements as to performance are satisfied,
provided that at the time of performance it is not unreasonable to expect
ultimate collection :</span></div>
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<!--[if !supportLists]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 111%;">(i)<span style="font-family: "times new roman"; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "arial narrow" , "sans-serif"; line-height: 111%;">The
seller of goods has transferred to the buyer the property in the goods for a
price or all significant risks and rewards of ownership have been transferred
to the buyer and the seller retains no effective control of the goods
transferred to a degree usually associated with ownership; and</span></div>
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<span style="font-family: "arial narrow" , sans-serif; line-height: 120%; text-indent: -21.2pt;">(ii)<span style="font-family: "times new roman"; line-height: normal;">
</span></span><span style="font-family: "arial narrow" , sans-serif; line-height: 120%; text-indent: -21.2pt;">No
significant uncertainty exists regarding the amount of the consideration that
will be derived from the sale of goods.</span></div>
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<span style="font-family: "arial narrow" , sans-serif; line-height: 120%; text-indent: -21.2pt;"><br /></span></div>
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<b style="font-family: "arial narrow", sans-serif; text-align: center; text-indent: -21.2pt;"><span style="background-color: #fefdfa; color: red; font-family: arial, tahoma, helvetica, freesans, sans-serif; font-size: large; line-height: 111%; text-indent: 0px;">Read Also : <a href="http://indianaccounting.blogspot.in/2012/11/important-question-and-answers-on_12.html" style="line-height: 111%;">Important Question and Answers on Accounting Standards (Part-II)</a></span></b></div>
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-25275610560106731492033-06-28T05:41:00.000+00:002018-05-08T14:05:24.336+00:00Accounting Standard – 7 Construction Contract<span style="font-family: "arial" , "helvetica" , sans-serif;"> Today we have brought you good quick summary of accounting standard 7 or AS 7 in short, This indian Accounting Standard 7 is mandatory as of July 1 2017.</span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"> Construction Contract :-</span> <span style="font-family: "arial" , "helvetica" , sans-serif;">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.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2-rD6dfUJkJO6FdzDStrcKc9sJobfVuO72AixrDvRTYoXKuWEpcWdp_NheN2O40py55XPSglqx38ru7Sm-pfV9-SwiMNWmU0QPdz3PwyxUsggfb9PnnIbrLNZrIhog0dlaO64t2fO6e7F/s1600/Accounting+Standard+7.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><img alt="Accounting Standard 7 AS Construction" border="0" data-original-height="213" data-original-width="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2-rD6dfUJkJO6FdzDStrcKc9sJobfVuO72AixrDvRTYoXKuWEpcWdp_NheN2O40py55XPSglqx38ru7Sm-pfV9-SwiMNWmU0QPdz3PwyxUsggfb9PnnIbrLNZrIhog0dlaO64t2fO6e7F/s1600/Accounting+Standard+7.jpg" title="Construction Contract" /></span></a></div>
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</h2>
<b><span style="font-family: "arial" , "helvetica" , sans-serif;">Recognition of contract revenue and contract cost</span></b><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">When the outcome of a construction contract can be estimated reliably, contract revenue and contract cost should be recognized as revenue and expenses by reference to the stage of construction.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br />
</span> <span style="font-family: "arial" , "helvetica" , sans-serif;">(<i>This accounting standard recommends the use of percentage of completion method</i>)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br />
</span> <span style="font-family: "arial" , "helvetica" , sans-serif;">When the outcome of a construction contract cannot be estimated reliably,</span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Revenue should be recognized only to the extent of contract costs incurred of which recovery is probable. (i.e. Revenue recognized = Costs Incurred )</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Contract costs should be recognized as an expense in the period in which they are incurred.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: </span><br />
<ol>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Total contract revenue can be measured reliably;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The receipt of revenue is probable;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The contract costs to complete the contract can be measured reliably;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The stage of completion at the reporting date can be measured reliably;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The contract costs attributable to the contract can be clearly identified.</span></li>
</ol>
<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Contract revenue should comprise</b>: </span><br />
<ol>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The initial amount of revenue agreed in the contract; and</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Variations in amount to be received</span></li>
</ol>
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">To the extent that it is probable that they will result in revenue; and</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">They are capable of being reliably measured.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">(<i>Contract can of two kinds: Fixed Price contract and Cost Plus contract</i>)</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><b><br />
</b> <b>Contract costs should comprise:</b> </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Costs that relate directly to the specific contract;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Costs that are attributable to contract activity in general and can be allocated to the contract.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">At any stage of contract, when it is probable that total contract costs will exceed total contract revenue, the expected loss should be recognized as an expense immediately. The amount of such loss is determined irrespective of: </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Whether or not work has commenced on the contract;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The stage of completion of contract activity; or</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Whether outcome of contract is estimated or not</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">When an uncertainty arises about the collectability of an amount already included in contract revenue, and already recognized in the statement of profit and loss, the uncollectable amount or the amount in respect of which recovery has ceased to be probable is recognized as an expense rather than an adjustment of the amount of contract revenue. Contract costs that relate to future activity, are recognized as an asset provided it is probable that they will be recovered. Such asset is classified as Contract WIP. The stage of completion of a contract may be determined by following ways; </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Surveys of work done</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Completion of physical proportion of the contract work</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The proportion that contract costs incurred for work performed upto the reporting date bear to the estimated total contract costs.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">When a contract covers a number of assets, the construction of each asset should be treated as a separate construction of each asset should be treated as separate construction contract when : </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Separate proposals have been submitted for each asset;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Each asset has been subject to separate negotiation</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The costs and revenues of each asset can be identified.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">A group of contracts, whether with a single customer or with several customers, should be treated as a single construction contract when : </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The group of contracts is negotiated as a single package;</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The contracts are very closely interrelated</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The contracts are performed concurrently or in a continuous sequence.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The recognition of revenue and expenses in construction contract is based on reliable estimate. This estimate may vary from one accounting year to another accounting year. The effect of change in estimate should be treated as per <a href="https://indianaccounting.blogspot.in/2012/03/as-5-net-profit-or-loss-for-period.html">AS-5</a>. i.e. It should not be treated as prior period item or extraordinary item.<script async="" src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script> <!-- Rads --> </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br />
</span> <br />
<ins class="adsbygoogle" data-ad-client="ca-pub-0901716907594283" data-ad-format="auto" data-ad-slot="4314801301" style="display: block;"></ins><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Disclosure</b>: </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Contract Revenue recognized as revenue</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Method used to determine the contract revenue</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Method used to determine the stage of completion</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Contract costs incurred + Recognised Profit – Recognised Loss</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Amount of advances received</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Amount due from customers</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Amount due to customers</span></li>
</ul>
<div>
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif;"><b>Read Notes on :</b></span></div>
<div>
<ol>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><a href="http://www.indianaccounting.in/2015/07/as-2-valuation-of-inventory.html" target="_blank">Accounting Standard 2 : Valuation of Inventory</a></span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><a href="http://www.indianaccounting.in/2017/12/as-10-property-plant-and-equipment.html" target="_blank">Accounting Standard 10 PPE (Revised)</a></span></li>
<li><a href="http://www.indianaccounting.in/2012/05/as-19-leases.html" target="_blank"><span style="font-family: "arial" , "helvetica" , sans-serif;">Accounting Standard 19 Leases</span></a></li>
</ol>
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-1452305336681088121.post-33801167819764529762023-06-07T10:37:00.001+00:002023-06-07T10:37:12.417+00:00IndAS 104 - Insurance Contracts<p><b>Indian Accounting Standard 104</b> (<b>IndAS 104</b>), also known as "Insurance Contracts," is a crucial accounting standard issued by the Institute of Chartered Accountants of India (ICAI). IndAS 104 provides comprehensive guidance on the recognition, measurement, presentation, and disclosure of insurance contracts in the financial statements of insurance companies operating in India. The standard aims to enhance the transparency, comparability, and reliability of financial reporting in the insurance industry, ensuring that users of financial statements have access to relevant and reliable information.</p><p><br /></p><h3 style="text-align: left;">Key Provisions of IndAS 104:</h3><p><b>1. Definition and Scope:</b></p><p>IndAS 104 defines an insurance contract as a contract that transfers significant insurance risk from the policyholder to the insurer. The standard applies to all types of insurance contracts, including life, health, property, casualty, and liability insurance, regardless of the form in which they are written.</p><p><br /></p><p><b>2. Measurement of Insurance Contracts:</b></p><p>IndAS 104 provides guidance on the measurement of insurance contracts, distinguishing between two main measurement models: the premium allocation approach (PAA) and the building block approach (BBA). The PAA allocates premiums over the coverage period, while the BBA considers the contractual cash flows, risk adjustments, and time value of money to determine the carrying amount of insurance liabilities and related assets.</p><p><br /></p><p><b>3. Contract Modifications and Derecognition:</b></p><p>IndAS 104 outlines the accounting treatment for contract modifications and derecognition of insurance contracts. Changes in the contractual terms or coverage are accounted for as modifications, while derecognition occurs when the contractual rights and obligations under an insurance contract cease to exist.</p><p><br /></p><p><b>4. Presentation and Disclosure:</b></p><p>IndAS 104 mandates specific presentation and disclosure requirements for insurance contracts in the financial statements. Insurance companies must provide information about the nature and extent of insurance contracts, significant assumptions, uncertainties, and risk management practices. Additionally, disclosures related to insurance risk, policyholder participation features, and sensitivity analysis are required to enhance transparency and assist users in understanding the financial impact of insurance contracts.</p><p><br /></p><p><b>5. Transition and Implementation:</b></p><p>IndAS 104 provides guidance on the transition from previous accounting practices to the requirements of the standard. Insurance companies are required to apply the standard retrospectively, adjusting the opening balance of retained earnings or other appropriate equity components. The standard also offers practical expedients and transitional reliefs to ease the implementation process.</p><p><br /></p><h3 style="text-align: left;">Significance and Application of IndAS 104:</h3><p><b>1. Improved Financial Reporting in the Insurance Industry:</b></p><p>IndAS 104 enhances the quality and transparency of financial reporting in the insurance sector. By providing comprehensive guidelines for the recognition, measurement, and disclosure of insurance contracts, the standard ensures that insurance companies accurately represent the financial impact of their insurance activities, enabling users of financial statements to make informed decisions.</p><p><br /></p><p><b>2. Consistency and Comparability:</b></p><p>IndAS 104 promotes consistency and comparability in the accounting treatment of insurance contracts across insurance companies. By establishing a common framework for measuring and disclosing insurance liabilities, the standard facilitates meaningful analysis and benchmarking of insurance companies' financial performance and risk profiles.</p><p><br /></p><p><b>3. Enhanced Risk Assessment and Pricing:</b></p><p>IndAS 104 enables insurance companies to better assess and price insurance risks. The standard requires a thorough evaluation of contractual cash flows, risk adjustments, and time value of money, providing a more accurate estimation of insurance liabilities. This supports effective risk management practices and ensures adequate pricing of insurance products.</p><p><br /></p><p><b>4. Investor and Stakeholder Confidence:</b></p><p>Compliance with IndAS 104 enhances investor and stakeholder confidence in the financial statements of insurance companies. The standard's rigorous requirements for recognition, measurement, and disclosure of insurance contracts instill trust and transparency, enabling investors, policyholders, regulators, and other stakeholders to evaluate the financial health of insurance companies. This, in turn, fosters a stable and robust insurance industry, attracting investment and promoting financial stability.</p><p><br /></p><p><b>5. Regulatory Compliance:</b></p><p>IndAS 104 aligns Indian accounting practices with international standards, particularly International Financial Reporting Standard 17 (IFRS 17). By adopting IndAS 104, insurance companies ensure compliance with the global standards, facilitating cross-border transactions, regulatory compliance, and international comparability.</p><p><br /></p><h3 style="text-align: left;">Practical Examples of IndAS 104 in India:</h3><p><b>1. Measurement of Life Insurance Contracts:</b></p><p>An insurance company assesses the cash flows and risks associated with a life insurance contract. It applies the building block approach (BBA) to determine the carrying amount of insurance liabilities, considering mortality risk, policyholder behavior, and discount rates. The company also recognizes any policyholder participation features, such as bonuses or dividends, in accordance with IndAS 104.</p><p><br /></p><p><b>2. Accounting for Property and Casualty Insurance Contracts:</b></p><p>An insurance company issues property and casualty insurance policies covering various risks, such as fire, theft, and liability. It applies the premium allocation approach (PAA) to allocate premiums over the coverage period, recognizing the related insurance revenue. The company also accounts for claims incurred, reserves for outstanding claims, and any potential adjustments based on changing estimates or contract modifications.</p><p><br /></p><p><b>3. Disclosure of Insurance Risk and Sensitivity Analysis:</b></p><p>An insurance company discloses information about its exposure to insurance risks, such as underwriting risk, credit risk, and market risk. It provides details on the methods used to assess and manage these risks, including the use of risk models, reinsurance arrangements, and risk management policies. The company also performs sensitivity analysis to disclose the potential impact of changes in key assumptions on the carrying amounts of insurance liabilities.</p><p><br /></p><p><b>4. Presentation of Insurance Contracts in Financial Statements:</b></p><p>An insurance company presents its insurance contracts separately in the financial statements, distinguishing between the carrying amounts of insurance liabilities and the related assets, such as reinsurance recoverables and deferred acquisition costs. The company discloses the nature and extent of its insurance contracts, including the duration, coverage, and policyholder participation features.</p><p><br /></p><p><b>5. Transition to IndAS 104:</b></p><p>An insurance company adopts IndAS 104 and undergoes a retrospective transition from its previous accounting practices. It adjusts the opening balance of retained earnings to reflect the impact of adopting the new standard. The company applies practical expedients and transitional reliefs as permitted by IndAS 104 to facilitate a smooth transition and minimize the disruption to its financial reporting.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-49253009786817852052023-05-31T06:55:00.003+00:002023-05-31T06:55:46.538+00:00International Accounting Standard (IAS) : Achieving Financial Transparency and Global Consistency<p>International accounting standards play a pivotal role in ensuring consistency, comparability, and reliability in financial reporting across different countries and jurisdictions. In an increasingly interconnected world, harmonizing accounting standards has become crucial for facilitating transparent financial reporting and fostering global economic growth. This article explores the importance of international accounting standards, their evolution, key principles, and their impact on businesses and stakeholders worldwide.</p><p><br /></p><h3 style="text-align: left;">Evolution of International Accounting Standards:</h3><p>The development of international accounting standards can be traced back to the 1970s when multinational companies faced challenges in consolidating financial statements due to varying national accounting practices. To address this issue, the International Accounting Standards Committee (IASC) was established in 1973. Later, in 2001, the International Accounting Standards Board (IASB) succeeded the IASC and became the global authority responsible for setting International Financial Reporting Standards (IFRS).</p><p><br /></p><h3 style="text-align: left;">Importance of International Accounting Standards:</h3><p><b>1. Global Consistency:</b> International accounting standards ensure that financial statements are prepared and presented in a consistent manner across different jurisdictions. This consistency enhances the comparability of financial information, facilitating investment decision-making, and promoting international capital flows.</p><p><br /></p><p><b>2. Transparent Financial Reporting:</b> International accounting standards prioritize transparency by requiring comprehensive and accurate disclosures in financial statements. By enhancing the quality and reliability of financial information, they foster investor confidence and contribute to market stability.</p><p><br /></p><p><b>3. Facilitating Cross-border Transactions:</b> Standardized accounting practices minimize complexities and uncertainties associated with cross-border transactions. They enable companies to present their financial performance in a standardized format, simplifying the process of evaluating business opportunities and conducting due diligence.</p><p><br /></p><p><b>4. Improved Accountability:</b> International accounting standards set clear guidelines for preparing financial statements, thereby enhancing accountability and reducing the potential for fraudulent practices. These standards establish robust frameworks for auditing, ensuring the integrity of financial reporting.</p><p><br /></p><h3 style="text-align: left;">Key Principles of International Accounting Standards:</h3><p><b>1. Fair Presentation:</b> Financial statements must provide a true and fair view of a company's financial position, performance, and cash flows. This principle ensures the faithful representation of economic events and transactions.</p><p><br /></p><p><b>2. Substance over Form:</b> International accounting standards emphasize the economic substance of transactions over their legal form. This principle prevents companies from manipulating financial statements by exploiting legal loopholes.</p><p><br /></p><p><b>3. Prudence:</b> Prudence requires cautious reporting, ensuring that potential losses and liabilities are recognized promptly. This principle prevents over-optimistic reporting and promotes conservative estimates.</p><p><br /></p><p><b>4. Consistency:</b> International accounting standards promote consistency in applying accounting policies over time. This principle ensures comparability and reliability in financial reporting, allowing stakeholders to make informed decisions.</p><p><br /></p><h3 style="text-align: left;">Impact of International Accounting Standards:</h3><p><b>1. Enhanced Investor Confidence:</b> By providing transparent and comparable financial information, international accounting standards instill confidence among investors, attracting more capital to the global markets.</p><p><br /></p><p><b>2. Facilitating Global Trade:</b> Standardized accounting practices simplify cross-border transactions, reducing barriers to trade and facilitating international business operations. This harmonization fosters economic growth and promotes global commerce.</p><p><br /></p><p><b>3. Streamlined Financial Reporting:</b> Adhering to international accounting standards streamlines the financial reporting process for multinational companies. This reduces costs associated with adapting to various national accounting frameworks and improves operational efficiency.</p><p><br /></p><p><b>4. International Convergence:</b> International accounting standards have sparked a global movement toward convergence, aligning national accounting frameworks with IFRS. This convergence enhances the comparability of financial information and reduces inconsistencies across jurisdictions.</p><p><br /></p><h3 style="text-align: left;">Challenges and opportunities for international accounting standards:</h3><p><b>1. Adoption and Implementation:</b> One of the key challenges is the adoption and implementation of international accounting standards by individual countries. While many jurisdictions have already adopted IFRS or converged their national standards, some countries still face barriers due to legal, cultural, or regulatory factors. Encouraging wider adoption and ensuring consistent implementation remains a priority.</p><p><br /></p><p><b>2. Complexity and Interpretation:</b> As business transactions become increasingly complex and diverse, accounting standards must adapt to address emerging issues. The IASB continuously updates and revises its standards to keep pace with evolving business practices. However, the interpretation and application of these standards can be subjective, leading to varying practices across jurisdictions. Continued efforts are needed to improve clarity, guidance, and consistency in interpreting and applying the standards.</p><p><br /></p><p><b>3. Sector-Specific Challenges:</b> Different industries and sectors often have unique accounting requirements. For instance, sectors such as banking, insurance, and extractive industries have specific accounting standards to address their distinct characteristics. Balancing the need for sector-specific guidance while maintaining overall consistency is a constant challenge for international accounting standards.</p><p><br /></p><p><b>4. Technological Advancements:</b> The rise of technology, including artificial intelligence, blockchain, and cloud computing, is transforming the business landscape. These advancements have implications for financial reporting and the accounting profession. International accounting standards need to adapt to address the accounting and reporting challenges associated with new technologies and digital transformations.</p><p><br /></p><p><b>5. Convergence and Global Consistency:</b> Achieving full convergence among national accounting standards and IFRS is an ongoing objective. Convergence allows for global consistency, comparability, and ease of doing business across borders. Collaborative efforts are required to address remaining differences and promote convergence among national standards.</p><p><br /></p><p><b>6. Stakeholder Education and Capacity Building:</b> Effective implementation of international accounting standards requires sufficient knowledge and understanding among professionals, regulators, and other stakeholders. Investing in education and capacity building programs is essential to ensure a strong foundation for the adoption and implementation of these standards globally.</p><p><br /></p><p>The International Financial Reporting Standards (IFRS) are a set of accounting standards issued by the International Accounting Standards Board (IASB). The IFRS encompasses a comprehensive framework that consists of various individual standards. </p><p><br /></p><h3 style="text-align: left;">List of the main International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS):</h3><p>1. IAS 1: Presentation of Financial Statements</p><p>2. IAS 2: Inventories</p><p>3. IAS 7: Statement of Cash Flows</p><p>4. IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors</p><p>5. IAS 10: Events after the Reporting Period</p><p>6. IAS 11: Construction Contracts</p><p>7. IAS 12: Income Taxes</p><p>8. IAS 16: Property, Plant, and Equipment</p><p>9. IAS 17: Leases</p><p>10. IAS 18: Revenue</p><p>11. IAS 19: Employee Benefits</p><p>12. IAS 20: Accounting for Government Grants and Disclosure of Government Assistance</p><p>13. IAS 21: The Effects of Changes in Foreign Exchange Rates</p><p>14. IAS 23: Borrowing Costs</p><p>15. IAS 24: Related Party Disclosures</p><p>16. IAS 26: Accounting and Reporting by Retirement Benefit Plans</p><p>17. IAS 27: Separate Financial Statements</p><p>18. IAS 28: Investments in Associates and Joint Ventures</p><p>19. IAS 29: Financial Reporting in Hyperinflationary Economies</p><p>20. IAS 32: Financial Instruments: Presentation</p><p>21. IAS 33: Earnings per Share</p><p>22. IAS 34: Interim Financial Reporting</p><p>23. IAS 36: Impairment of Assets</p><p>24. IAS 37: Provisions, Contingent Liabilities, and Contingent Assets</p><p>25. IAS 38: Intangible Assets</p><p>26. IAS 39: Financial Instruments: Recognition and Measurement</p><p>27. IAS 40: Investment Property</p><p>28. IAS 41: Agriculture</p><p><br /></p><p>In addition to these International Accounting Standards (IAS), the IFRS includes International Financial Reporting Standards (IFRS) that were developed after the transition from IASB to IFRS. Some of the significant IFRS include:</p><p>1. IFRS 1: First-time Adoption of International Financial Reporting Standards</p><p>2. IFRS 2: Share-based Payment</p><p>3. IFRS 3: Business Combinations</p><p>4. IFRS 4: Insurance Contracts</p><p>5. IFRS 5: Non-current Assets Held for Sale and Discontinued Operations</p><p>6. IFRS 6: Exploration for and Evaluation of Mineral Resources</p><p>7. IFRS 7: Financial Instruments: Disclosures</p><p>8. IFRS 8: Operating Segments</p><p>9. IFRS 9: Financial Instruments</p><p>10. IFRS 10: Consolidated Financial Statements</p><p>11. IFRS 11: Joint Arrangements</p><p>12. IFRS 12: Disclosure of Interests in Other Entities</p><p>13. IFRS 13: Fair Value Measurement</p><p>14. IFRS 15: Revenue from Contracts with Customers</p><p>15. IFRS 16: Leases</p><p>16. IFRS 17: Insurance Contracts</p><p>17. IFRS 18: Revenue</p><p><br /></p><p>International accounting standards have come a long way in fostering financial transparency, global consistency, and comparability in financial reporting. Through their adoption and implementation, these standards have enhanced investor confidence, facilitated cross-border transactions, and streamlined financial reporting processes for multinational companies. However, challenges such as adoption, complexity, sector-specific issues, technological advancements, convergence, and stakeholder education persist.</p><p><br /></p><p>As the global business environment continues to evolve, the International Accounting Standards Board and other stakeholders must remain vigilant in addressing these challenges and advancing the harmonization of accounting standards. By embracing innovation, promoting collaboration, and ensuring effective implementation, international accounting standards can continue to drive financial transparency, improve decision-making, and support sustainable economic growth in an interconnected world.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-26768028521169894222023-05-30T04:41:00.000+00:002023-05-30T04:41:15.445+00:00IndAS 37 - Provisions, Contingent Liabilities, and Contingent Assets Notes<p><b>Indian Accounting Standard</b> 37 (<b>IndAS 37</b>) is a crucial accounting standard issued by the Institute of Chartered Accountants of India (ICAI). Also known as "Provisions, Contingent Liabilities, and Contingent Assets," <b>IndAS 37</b> provides guidance on the recognition, measurement, presentation, and disclosure of provisions, contingent liabilities, and contingent assets in the financial statements of entities operating in India. The standard aims to ensure transparency, reliability, and comparability in reporting these items, thereby enhancing the usefulness and reliability of financial statements.</p><p><br /></p><h3 style="text-align: left;">Key Provisions of IndAS 37:</h3><p><b>1. Definition and Recognition of Provisions:</b></p><p>IndAS 37 defines provisions as liabilities of uncertain timing or amount that arise from past events. The standard outlines criteria for recognizing provisions, including the existence of a present obligation, the probability of an outflow of resources, and the ability to estimate the amount reliably. Examples of provisions include legal settlements, warranties, and restructuring costs.</p><p><br /></p><p><b>2. Measurement of Provisions:</b></p><p>IndAS 37 requires entities to measure provisions at the best estimate of the expenditure required to settle the obligation. This estimate incorporates considerations such as risk and uncertainty, discounting when the effect is material, and the time value of money. If there is a range of possible outcomes, the provision is measured at the most likely amount within the range.</p><p><br /></p><p><b>3. Contingent Liabilities:</b></p><p>IndAS 37 provides guidance on the recognition and disclosure of contingent liabilities, which are possible obligations arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events. The standard requires entities to disclose contingent liabilities unless the possibility of an outflow of resources is remote.</p><p><br /></p><p><b>4. Contingent Assets:</b></p><p>IndAS 37 outlines the criteria for recognizing and disclosing contingent assets, which are possible assets arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events. The standard prohibits the recognition of contingent assets but requires disclosure when the inflow of economic benefits is probable.</p><p><br /></p><p><b>5. Disclosure Requirements:</b></p><p>IndAS 37 mandates extensive disclosure requirements for provisions, contingent liabilities, and contingent assets. Entities are required to provide information about the nature, timing, and uncertainties surrounding these items, including the key assumptions and significant risks. The objective is to provide users of financial statements with a clear understanding of the nature, extent, and impact of these items on the entity's financial position and performance.</p><p><br /></p><h3 style="text-align: left;">Significance and Application of IndAS 37:</h3><p><b>1. Accurate Financial Reporting:</b></p><p>IndAS 37 ensures accurate and transparent reporting of provisions, contingent liabilities, and contingent assets. By providing specific criteria for recognition, measurement, and disclosure, the standard promotes consistent and reliable financial reporting practices, enabling users of financial statements to assess the true financial position and performance of entities.</p><p><br /></p><p><b>2. Enhanced Decision-making and Risk Assessment:</b></p><p>Compliance with IndAS 37 enhances decision-making by providing stakeholders with relevant and reliable information about provisions, contingent liabilities, and contingent assets. Investors, creditors, and other users of financial statements can assess the potential impact of these items on the entity's financial health, risk profile, and future cash flows.</p><p><br /></p><p><b>3. Compliance with International Reporting Standards:</b></p><p>IndAS 37 aligns Indian accounting practices with international financial reporting standards, promoting convergence and facilitating the comparability of financial statements globally. This harmonization enhances the credibility of Indian financial reporting and supports international business transactions and investment decisions.</p><p><br /></p><p><b>4. Mitigation of Legal and Compliance Risks:</b></p><p>By providing comprehensive guidelines for the recognition and measurement of provisions, IndAS 37 assists entities in mitigating legal and compliance risks. It ensures that obligations arising from past events are appropriately recognized and accounted for, reducing the potential for legal disputes or non-compliance with regulatory requirements. This helps entities maintain their credibility and integrity in the business environment.</p><p><br /></p><p><b>5. Transparent Disclosure and Stakeholder Communication:</b></p><p>IndAS 37's disclosure requirements promote transparency and effective communication with stakeholders. By providing detailed information about provisions, contingent liabilities, and contingent assets, entities enable stakeholders to make informed decisions, assess the entity's risk exposure, and understand the potential impact on future financial performance.</p><p><br /></p><h3 style="text-align: left;">Practical Examples of IndAS 37 in India:</h3><p><b>1. Legal Settlement Provision:</b></p><p>Company A is involved in a legal dispute with a customer regarding a breach of contract. As per IndAS 37, the company recognizes a provision for the estimated settlement amount if it is probable that an outflow of resources will be required and a reliable estimate can be made. The provision is measured at the best estimate of the expected settlement amount, considering the likelihood of various outcomes and any potential legal costs involved.</p><p><br /></p><p><b>2. Restructuring Provision:</b></p><p>Company B decides to restructure its operations, involving employee layoffs and the closure of certain facilities. IndAS 37 requires the company to recognize a provision for the costs associated with the restructuring. This provision includes severance payments, termination benefits, and any other directly attributable costs. The provision is measured at the best estimate of the expected expenditure necessary to carry out the restructuring.</p><p><br /></p><p><b>3. Warranty Provision:</b></p><p>Company C manufactures and sells electronic products that come with a warranty. IndAS 37 requires the company to recognize a provision for the expected costs of honoring warranty claims. The provision is measured based on historical warranty claim rates, repair or replacement costs, and any other relevant factors that may impact the warranty obligations.</p><p><br /></p><p><b>4. Contingent Liability Disclosure:</b></p><p>Company D is facing a potential legal dispute, but the outcome is uncertain. IndAS 37 requires the company to disclose the contingent liability in its financial statements if the possibility of an outflow of resources is not remote. The disclosure should provide relevant details about the nature of the contingency, the uncertainties surrounding it, and any potential financial impact on the entity.</p><p><br /></p><p><b>5. Contingent Asset Disclosure:</b></p><p>Company E is awaiting the outcome of a pending patent application. If the patent is granted, it could generate significant economic benefits for the company. IndAS 37 requires the company to disclose the contingent asset in its financial statements if the inflow of economic benefits is probable. The disclosure should include relevant details about the nature of the contingent asset and any potential impact on the entity's financial position.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-28559819248324823872023-05-19T10:15:00.000+00:002023-05-19T10:15:47.716+00:00Accounting Standard (AS) 21 : Consolidated Financial Statements<p><b>Accounting Standard 21</b> (AS 21) is a financial reporting standard issued by the Institute of Chartered Accountants of India (ICAI). <b>AS 21</b> provides guidelines for the determination of <b>consolidated financial statements</b>, which are prepared by a parent company that controls one or more subsidiary companies. This article aims to provide a detailed overview of AS 21, covering its key points and significance in India.</p><p><br /></p><h3 style="text-align: left;">Key Points of Accounting Standard (AS) 21 :</h3>1. Objective of AS 21:<p>The primary objective of AS 21 is to ensure that <b>consolidated financial statements</b> provide reliable and relevant information about the financial position, performance, and cash flows of a group of entities as a single economic entity.</p><p><br /></p>2. Scope of AS 21:<p>AS 21 applies to the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent company. It covers the procedures for consolidation, accounting treatment of investments, elimination of intercompany transactions, and reporting of non-controlling interests.</p><p><br /></p>3. Control and Consolidation:<p>AS 21 defines control as the power to govern the financial and operating policies of an entity. A parent company is required to prepare consolidated financial statements when it controls one or more subsidiary companies. Control is typically evidenced by ownership of more than 50% of the voting power or the ability to appoint the majority of the board of directors.</p><p><br /></p><p>4. Accounting Treatment of Investments:</p><p>AS 21 provides guidelines for accounting treatment of investments in subsidiaries, associates, and joint ventures. Investments in subsidiaries are consolidated, meaning they are included in the consolidated financial statements. Investments in associates and joint ventures are accounted for using the equity method or proportionate consolidation method, respectively.</p><p><br /></p><p>5. Preparation of Consolidated Financial Statements:</p><p>AS 21 outlines the process for preparing consolidated financial statements. It requires the parent company to combine the financial statements of the parent and its subsidiaries, making necessary adjustments to eliminate intercompany transactions, balances, and unrealized profits. The consolidated financial statements must be prepared using uniform accounting policies.</p><p><br /></p><p>6. Reporting of Non-controlling Interests:</p><p>AS 21 mandates the reporting of non-controlling interests (NCIs) in the consolidated financial statements. NCIs represent the portion of equity in a subsidiary not attributable to the parent company. NCIs are presented separately in the <b>consolidated statement</b> of financial position and consolidated statement of profit and loss.</p><p><br /></p><p>7. Disclosures:</p><p>AS 21 emphasizes the importance of adequate disclosures in the consolidated financial statements. Disclosures should include the nature of the relationship between the parent company and its subsidiaries, details of significant restrictions on the ability of subsidiaries to transfer funds to the parent, and the nature and extent of any changes in ownership interests.</p><p><br /></p><h3 style="text-align: left;">Significance of AS 21 in India:</h3><p>1. Compliance with Accounting Standards:</p><p>AS 21 is a mandatory accounting standard in India. Companies are required to comply with AS 21 while preparing their consolidated financial statements to ensure consistency and comparability of financial information across different entities.</p><p><br /></p><p>2. Transparency and Accountability:</p><p>AS 21 promotes transparency and accountability by providing guidelines for the preparation of consolidated financial statements. It ensures that investors, creditors, and other stakeholders have access to reliable and relevant information about the financial performance of the entire group of entities.</p><p><br /></p><p>3. Improved Decision Making:</p><p>The use of AS 21 enables users of financial statements to make more informed decisions by providing a comprehensive view of the financial position, performance, and cash flows of the group. <b>Consolidated financial statements</b> eliminate the duplication of intercompany transactions and provide a clearer understanding of the group's overall financial health.</p><p><br /></p><p>4. International Comparability:</p><p>AS 21 aligns with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) on consolidation principles. This alignment allows Indian companies that follow AS 21 to enhance the comparability of their consolidated financial statements with those prepared by international entities following similar standards. This facilitates cross-border investments, acquisitions, and collaborations.</p><p><br /></p><p>5. Investor Confidence and Trust:</p><p>By adhering to AS 21, companies demonstrate their commitment to transparent and standardized financial reporting practices. This enhances investor confidence and trust, as stakeholders can rely on the consolidated financial statements to make informed decisions regarding investments, lending, and other financial transactions.</p><p><br /></p><p>6. Regulatory Compliance:</p><p>AS 21 ensures that Indian companies comply with the regulatory requirements set forth by the ICAI and other regulatory bodies. Compliance with AS 21 is essential for companies listed on stock exchanges, as they need to provide accurate and reliable consolidated financial statements to meet regulatory obligations.</p><p><br /></p><p>7. Facilitating Merger and Acquisition Activities:</p><p>AS 21 plays a vital role in merger and acquisition activities by providing a framework for the preparation of consolidated financial statements. It enables companies to assess the financial impact of acquiring or merging with other entities, facilitating a more accurate valuation and assessment of risks and benefits.</p><p><br /></p><p><b>Conclusion:</b></p><p><b>Accounting Standard 21</b> (AS 21) is a crucial financial reporting standard in India, governing the preparation and presentation of consolidated financial statements. By following AS 21, companies ensure transparency, comparability, and compliance with international standards. </p><p>The standard promotes investor confidence, facilitates informed decision making, and supports regulatory compliance. <b>AS 21</b> plays a significant role in enhancing the overall financial reporting framework in India, promoting accountability and trust among stakeholders.</p><p><br /></p><h3 style="text-align: left;">Practical examples that can help you better understand the application of Accounting Standard 21 (AS 21) :</h3><p>1. Example 1: Acquisition of Subsidiary</p><p>Company A acquires 80% of the voting rights in Company B, making it the parent company. According to AS 21, Company A is required to prepare <b>consolidated financial statements</b>. The financial statements of Company B are combined with those of Company A, adjusting for intercompany transactions, unrealized profits, and any non-controlling interests.</p><p><br /></p><p>2. Example 2: Non-controlling Interests (NCIs)</p><p>Company X owns 70% of the voting rights in Company Y, while the remaining 30% is held by external shareholders. According to AS 21, the consolidated financial statements prepared by Company X must reflect the non-controlling interests (NCIs) of the external shareholders separately. This ensures transparency in reporting the portion of equity attributable to the non-controlling shareholders.</p><p><br /></p><p>3. Example 3: Joint Ventures</p><p>Company P enters into a joint venture with Company Q, forming a separate entity, Company R. AS 21 provides guidance on the accounting treatment of joint ventures. The equity method is used to account for the investment in the joint venture, and the proportionate share of assets, liabilities, revenues, and expenses of the joint venture are included in the consolidated financial statements of Company P.</p><p><br /></p><p>4. Example 4: Elimination of Intercompany Transactions</p><p>Company M, the parent company, sells goods worth INR 1,000 to its subsidiary, Company N. To avoid double counting, <b>AS 21</b> requires the elimination of intercompany transactions during the consolidation process. In this case, the sale of INR 1,000 is eliminated, and only the transactions with external parties are reflected in the consolidated financial statements.</p><p><br /></p><p>5. Example 5: Uniform Accounting Policies</p><p>Company X and its subsidiary, Company Y, follow different accounting policies for the valuation of inventory. According to <b>AS 21</b>, when preparing consolidated financial statements, Company X needs to ensure uniform accounting policies across the group. This may involve adjusting the subsidiary's financial statements to align with the parent company's policies.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-33996926189754657582023-05-18T09:01:00.000+00:002023-05-18T09:01:52.658+00:00IndAS Compliance Checklist for Small Businesses: Ensuring Financial Reporting Accuracy<p><b>Introduction</b>:</p><p>Small businesses in India face various accounting and reporting challenges, particularly when it comes to adhering to the Indian Accounting Standards (IndAS). </p><p>IndAS, which aligns Indian accounting practices with International Financial Reporting Standards (IFRS), promotes transparency and consistency in financial reporting. Complying with IndAS may seem daunting, but with a comprehensive compliance checklist, small businesses can navigate the complexities and ensure accurate financial reporting. </p><p>This article provides a detailed IndAS compliance checklist tailored specifically for small businesses.</p><p><b>1. Familiarize Yourself with IndAS:</b></p><p>Start by gaining a clear understanding of the key principles, concepts, and requirements of IndAS. Familiarize yourself with the standard's scope, recognition, measurement, and disclosure criteria.</p><p><br /></p><p><b>2. Identify Applicable IndAS:</b></p><p>Determine which IndAS are relevant to your small business based on factors such as company size, industry, and ownership structure. Common IndAS applicable to small businesses include IndAS 101 (Presentation of Financial Statements), IndAS 107 (Financial Instruments Disclosures), and IndAS 116 (Leases).</p><p><br /></p><p><b>3. Assess Accounting Policies:</b></p><p>Review your existing accounting policies and ensure they align with the requirements of IndAS. Identify any deviations and make the necessary adjustments to ensure compliance. Pay close attention to areas such as revenue recognition, lease accounting, and financial instrument measurement.</p><p><br /></p><p><b>4. Transitioning to IndAS:</b></p><p>If your small business is transitioning from previous accounting standards to IndAS, develop a detailed plan outlining the steps and timeline for the transition. Consider factors such as the opening IndAS balance sheet, restatement of comparative figures, and communication with stakeholders regarding the changes.</p><p><br /></p><p><b>5. Implement Robust Internal Controls:</b></p><p>Establish strong internal controls to ensure accuracy, reliability, and integrity of financial reporting. Implement segregation of duties, review procedures, and monitoring mechanisms to prevent errors and fraud. This helps maintain compliance with IndAS and enhances overall financial governance.</p><p><br /></p><p><b>6. Develop IndAS Compliant Financial Statements:</b></p><p>Prepare comprehensive financial statements in accordance with IndAS requirements. Ensure proper classification, measurement, and disclosure of assets, liabilities, equity, revenues, and expenses. Pay attention to presentation formats and disclosure notes as prescribed by IndAS.</p><p><br /></p><p><b>7. Consider Industry-Specific IndAS:</b></p><p>Certain industries have specific IndAS requirements. For example, real estate developers need to comply with IndAS 115 (Revenue from Contracts with Customers) and IndAS 116 (Leases). Identify industry-specific IndAS and ensure compliance in line with your business operations.</p><p><br /></p><p><b>8. Stay Updated with IndAS Amendments:</b></p><p>IndAS is subject to amendments and updates over time. Stay abreast of changes by regularly reviewing updates from the Ministry of Corporate Affairs (MCA), Institute of Chartered Accountants of India (ICAI), and other authoritative sources. Incorporate any changes into your compliance practices.</p><p><br /></p><p><b>9. Disclosure Requirements:</b></p><p>Adhere to IndAS disclosure requirements to provide relevant, reliable, and timely information to stakeholders. Pay attention to details such as related-party transactions, contingencies, and significant accounting policies. Ensure the disclosures are clear, understandable, and complete.</p><p><br /></p><p><b>10. Engage Professional Expertise:</b></p><p>Consider engaging the services of qualified accounting professionals or consultants with expertise in IndAS. They can assist with the interpretation of complex standards, provide guidance, and help ensure accurate compliance.</p><p><br /></p><h3 style="text-align: left;">Common Challenges in Adopting IndAS for SMEs</h3><p>The adoption of Indian Accounting Standards (IndAS) presents both opportunities and challenges for small and medium-sized enterprises (SMEs) in India. While IndAS aims to enhance transparency and comparability in financial reporting, SMEs often face unique hurdles during the transition process.</p><p>Common challenges faced by SMEs in transitioning to IndAS and provides insights into overcoming them effectively.</p><p><br /></p><p><b>1. Lack of Awareness and Understanding:</b></p><p>One of the primary challenges for SMEs is the lack of awareness and understanding of IndAS. Many SMEs are accustomed to following the earlier accounting standards and may not have the necessary knowledge or resources to grasp the complexities of IndAS. To address this challenge, SMEs should invest in comprehensive IndAS training programs and seek professional guidance to ensure a clear understanding of the standards and their implications.</p><p><br /></p><p><b>2. Limited Resources and Expertise:</b></p><p>SMEs typically have limited financial and human resources, making it challenging to allocate sufficient time and personnel for IndAS implementation. The scarcity of experienced accounting professionals with IndAS expertise further compounds this challenge. SMEs can consider outsourcing certain accounting functions or engaging external consultants to bridge the resource and expertise gaps during the transition phase.</p><p><br /></p><p><b>3. Complex Accounting Policies:</b></p><p>IndAS introduces more intricate accounting policies compared to the previous standards. SMEs may struggle with the application and interpretation of these policies, especially in areas such as revenue recognition, financial instruments, and leases. To mitigate this challenge, SMEs should proactively educate themselves about the specific IndAS requirements relevant to their business and seek professional advice when needed.</p><p><br /></p><p><b>4. Systems and Processes Alignment:</b></p><p>Transitioning to IndAS often necessitates changes in existing systems, processes, and reporting mechanisms. SMEs may face difficulties in aligning their accounting software, internal controls, and IT infrastructure with the new requirements. Investing in appropriate technology and seeking guidance from IT professionals can help SMEs streamline their systems and ensure seamless IndAS implementation.</p><p><br /></p><p><b>5. Impact on Financial Ratios and Metrics:</b></p><p>The adoption of IndAS can significantly impact financial ratios and key performance metrics used by SMEs for decision-making and external reporting. This shift may create challenges in comparing financial data over time or with industry benchmarks. SMEs should assess the impact of IndAS on their financial ratios and metrics, communicate any changes to stakeholders, and develop alternative benchmarks to ensure effective financial analysis and decision-making.</p><p><br /></p><p><b>6. Cost Implications:</b></p><p>Transitioning to IndAS may involve additional costs for SMEs. These costs can arise from hiring external experts, upgrading systems, and training staff. SMEs need to carefully evaluate the cost implications of IndAS adoption and ensure adequate financial planning and budgeting to accommodate these expenses.</p><p><br /></p><p><b>7. Communication with Stakeholders:</b></p><p>Effective communication with stakeholders is essential during the transition to IndAS. SMEs may encounter challenges in explaining the impact of IndAS changes to investors, lenders, and other external parties. Clear and transparent communication, backed by proper documentation, can help alleviate concerns and build trust in the reliability of the financial statements prepared under IndAS.</p><p><br /></p><p><b>8. Time Constraints:</b></p><p>Transitioning to IndAS requires sufficient time for planning, training, and implementation. SMEs often face time constraints due to their day-to-day operational demands. It is crucial to allocate dedicated resources and establish a realistic timeline for the transition process. Proper project management and regular progress tracking can help SMEs stay on track and meet the IndAS implementation deadlines.</p><p><br /></p><p><b>Conclusion:</b></p><p>Complying with IndAS is essential for small businesses in India to maintain financial reporting accuracy and transparency. By following the IndAS compliance checklist outlined in this article, small businesses can navigate the complexities of IndAS implementation, ensure accurate financial reporting, and gain stakeholders' trust. Remember, IndAS compliance is an ongoing process, and staying informed about changes and updates is crucial for maintaining compliance in the dynamic accounting landscape.</p><p><br /></p><p>While transitioning to IndAS poses challenges for SMEs, they can overcome these hurdles with careful planning, knowledge enhancement, and strategic decision-making. By investing in training, seeking professional guidance, and leveraging available resources, SMEs can navigate the complexities of IndAS implementation successfully. </p><p><br /></p><p>Embracing the IndAS framework enables SMEs to enhance financial reporting credibility, improve transparency, and align themselves with global accounting standards. Overcoming challenges such as lack of awareness, limited resources, complex accounting policies, systems alignment, financial ratio adjustments, cost implications, stakeholder communication, and time constraints requires a proactive and focused approach.</p><p><br /></p><p>SMEs should prioritize creating a comprehensive IndAS implementation plan that outlines specific actions, timelines, and resource allocation. This plan should address key challenges and allocate sufficient time for training and understanding IndAS requirements. SMEs should consider engaging external experts, such as consultants or accounting professionals, to provide guidance and expertise during the transition period.</p><p><br /></p><p>To mitigate resource limitations, SMEs can explore cost-effective options such as outsourcing certain accounting functions or leveraging technology solutions that streamline IndAS compliance. Cloud-based accounting software, for example, can facilitate efficient reporting and integration with IndAS requirements.</p><p><br /></p><p>Collaboration and knowledge-sharing among SMEs can also be beneficial. Participating in industry associations or forums dedicated to IndAS implementation allows SMEs to exchange experiences, best practices, and challenges faced during the transition. This collective learning approach can help SMEs navigate the IndAS landscape more effectively.</p><p><br /></p><p>Additionally, SMEs should consider conducting a thorough impact assessment of IndAS on their financial statements, key metrics, and ratios. By understanding these changes, SMEs can proactively communicate with stakeholders, including investors, lenders, and regulatory bodies. Clear and transparent communication helps manage expectations and fosters trust in the company's financial reporting.</p><p><br /></p><p>SMEs should leverage available resources, such as publications, guidance notes, and updates provided by the Ministry of Corporate Affairs and professional accounting bodies like the Institute of Chartered Accountants of India (ICAI). Staying up-to-date with amendments and interpretations of IndAS ensures compliance and mitigates the risk of non-compliance penalties.</p><p><br /></p><p>Lastly, SMEs should view the transition to IndAS as an opportunity for growth and improvement. Implementing IndAS can enhance the financial management processes, provide valuable insights into the business's financial health, and attract potential investors who value transparency and compliance.</p><p><br /></p><p>In conclusion, while SMEs may face challenges during the transition to IndAS, a proactive and strategic approach can help overcome these hurdles. By investing in knowledge, resources, and effective communication, SMEs can successfully implement IndAS, resulting in improved financial reporting quality and increased stakeholder confidence. Embracing IndAS standards positions SMEs for long-term success in an increasingly globalized and transparent business environment.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-72460145324939326262023-05-12T10:08:00.004+00:002023-05-12T10:08:31.914+00:00Accounting Standard (AS) 20 - Earnings Per Share (EPS)<p><b>Accounting Standard (AS) 20</b> is an accounting standard issued by the Institute of Chartered Accountants of India (ICAI) that pertains to <b>accounting for earnings per share (EPS)</b>. EPS is a financial ratio that represents the amount of net income earned by a company for each share of its outstanding common stock. AS 20 sets out the principles for calculating and presenting EPS in the financial statements.</p><p><br /></p><p>One of the main objectives of <b>Accounting Standard 20</b> is to provide users of financial statements with information about a company's profitability and its ability to generate earnings for shareholders. EPS is an important measure of a company's profitability because it reflects the amount of net income that is available to be distributed to shareholders.</p><p><br /></p><p><b>AS 20</b> requires that EPS be calculated for each class of equity shares that a company has issued. This includes common shares, preference shares, and other classes of shares that have different rights and obligations. The formula for calculating EPS is as follows:</p><p><br /></p><p>EPS = (Net Profit - Preferred Dividends) / Weighted Average Number of Common Shares Outstanding</p><p><br /></p><p>To calculate EPS, a company needs to determine its net profit for the period and subtract any dividends paid on preferred shares. The number of common shares outstanding must be adjusted for any share issuances or repurchases that occurred during the period. The resulting EPS figure can then be presented in the income statement or in a separate statement of earnings per share.</p><p><br /></p><p><b>AS 20</b> also requires that companies disclose certain information related to EPS in the notes to the financial statements. This includes the number of shares outstanding for each class of equity shares, the amount of any dividends paid or declared on each class of shares, and the method used to calculate the weighted average number of shares outstanding.</p><p><br /></p><h3 style="text-align: left;">Practical examples of Accounting Standard 20 in India:</h3><p><b>1</b>. <b>Calculation of EPS:</b> A company has issued 100,000 common shares and earned a net profit of Rs. 10 lakhs during the year. It did not pay any dividends on preferred shares during the year. The company also issued 20,000 additional common shares in the middle of the year. The weighted average number of common shares outstanding during the year is 105,000 (100,000 shares for the first half and 120,000 shares for the second half). The EPS for the year is (10 lakhs - 0) / 105,000 = Rs. 9.52 per share.</p><p><br /></p><p><b>2</b>. <b>Presentation of EPS:</b> A company presents its EPS figure in a separate statement of earnings per share, which includes the EPS for each class of equity shares. The statement also includes a reconciliation of the weighted average number of shares outstanding for each class of shares.</p><p><br /></p><p><b>3</b>. <b>Disclosures:</b> A company discloses in the notes to the financial statements the number of shares outstanding for each class of equity shares, the amount of any dividends paid or declared on each class of shares, and the method used to calculate the weighted average number of shares outstanding. The company also provides an explanation of any changes in the number of shares outstanding during the year, such as share issuances or repurchases.</p><p><br /></p><h3 style="text-align: left;">Question and Answer related to AS 20:</h3><p><b>1. What is the objective of AS 20?</b></p><p>The main objective of AS 20 is to prescribe the principles for the calculation and presentation of earnings per share (EPS) in the financial statements of a company. The standard aims to provide investors and other users of financial statements with a measure of the profitability of a company on a per-share basis.</p><p><br /></p><p><b>2. What are the different types of EPS under AS 20?</b></p><p>AS 20 requires a company to present both basic EPS and diluted EPS in its financial statements. Basic EPS is calculated by dividing the net profit or loss attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted EPS takes into account the potential dilutive effect of convertible securities and stock options on the number of equity shares outstanding.</p><p><br /></p><p><b>3. How does AS 20 treat the impact of changes in the number of shares outstanding during the period?</b></p><p>AS 20 requires a company to adjust the weighted average number of shares outstanding for any changes in the number of shares during the period, such as new issuances or buybacks. The impact of such changes on the calculation of EPS is reflected in the numerator of the EPS formula, i.e., the net profit or loss attributable to equity shareholders.</p><p><br /></p><p><b>4. Can a company exclude any items from the calculation of EPS under AS 20?</b></p><p>AS 20 requires a company to calculate EPS based on the net profit or loss attributable to equity shareholders after adjusting for any potential dilutive effect of convertible securities and stock options. However, a company may exclude certain items from the calculation of EPS if they are considered to be extraordinary or non-recurring in nature. Such items should be separately disclosed in the financial statements.</p><p><br /></p><p><b>5. How does AS 20 apply to consolidated financial statements?</b></p><p>AS 20 applies to the calculation and presentation of EPS in both standalone and consolidated financial statements. In the case of consolidated financial statements, the net profit or loss attributable to equity shareholders and the weighted average number of shares outstanding are calculated based on the consolidated financial statements of the group. The impact of any changes in the number of shares of subsidiary companies is also reflected in the calculation of EPS.</p><p><br /></p><p>In conclusion, <b>AS 20</b> plays an important role in ensuring that companies in India accurately calculate and present earnings per share in their financial statements. This standard provides a uniform methodology for calculating EPS and requires companies to disclose important information related to EPS in the notes to the financial statements. Examples of practical applications of <b>Accounting Standard 20</b> include the calculation and presentation of EPS figures for different classes of equity shares and the disclosure of information related to dividends and share issuances.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-43937875305785965462023-05-10T09:50:00.003+00:002023-05-10T09:53:52.777+00:00AS 18 - Related Party Disclosure (Notes with examples)<p>AS 18 or Accounting Standard 18 on "Related Party Disclosures" is a standard issued by the Institute of Chartered Accountants of India (ICAI) that requires companies to disclose the nature and extent of their related party transactions in their financial statements.</p><p><br /></p><p>Related parties are defined as individuals or entities that are closely connected to the company, such as its owners, directors, key management personnel, subsidiaries, associates, and joint ventures. The purpose of related party disclosures is to ensure transparency and prevent any potential conflicts of interest that may arise from such transactions.</p><p><br /></p><p>Under AS 18, companies are required to disclose the following in their financial statements:</p><p></p><ol style="text-align: left;"><li>The name of the related party and its relationship with the company.</li><li>The nature of the related party transaction, including the amount involved and any terms and conditions of the transaction.</li><li>The amounts of outstanding balances, including any advances, loans, or guarantees provided by the company to the related party.</li><li>The amounts of income, expenses, gains, or losses arising from related party transactions.</li></ol><p></p><p><br /></p><p>It is important to note that related party transactions must be disclosed even if they are conducted on normal commercial terms and conditions. Companies are also required to disclose any changes in the nature and extent of their related party transactions from the previous year.</p><p><br /></p><p>AS 18 applies to all companies in India that prepare financial statements in accordance with <b><a href="https://newindianaccountingstandards.blogspot.com" target="_blank">Indian Accounting Standards</a></b> (Ind AS). It is important for companies to comply with AS 18 to ensure transparency and avoid any potential legal or regulatory issues related to related party transactions.</p><p><br /></p><h3 style="text-align: left;">10 examples of related party transactions that would require disclosure under AS 18 in India:</h3><p>1. The company sells goods or services to a subsidiary or associate company at a price that is lower or higher than the prevailing market rate.</p><p>2. The company provides a loan or advance to a director or key management personnel at a lower rate of interest than the market rate.</p><p>3. The company enters into a lease agreement with a related party for a property or asset.</p><p>4. The company provides a guarantee or security for a loan taken by a related party.</p><p>5. The company purchases goods or services from a related party at a price that is higher than the prevailing market rate.</p><p>6. The company enters into a joint venture or partnership agreement with a related party.</p><p>7. The company provides a loan or advance to a subsidiary or associate company at a lower rate of interest than the market rate.</p><p>8. The company provides services to a related party at a price that is lower than the prevailing market rate.</p><p>9. The company sells an asset to a related party at a price that is lower or higher than the prevailing market rate.</p><p>10. The company enters into a licensing or royalty agreement with a related party for the use of intellectual property.</p><p><br /></p><p>In each of these cases, the company must disclose the nature and extent of the related party transaction, including the name of the related party, the amount involved, any terms and conditions, and any outstanding balances or income/expenses arising from the transaction, in their financial statements.</p><p><br /></p><h3 style="text-align: left;">10 questions and answers related to AS 18 and related party disclosures in India:</h3><p>1. Q: What is the definition of a related party under AS 18?</p><p>A: Related parties are individuals or entities that are closely connected to the company, such as its owners, directors, key management personnel, subsidiaries, associates, and joint ventures.</p><p><br /></p><p>2. Q: Do related party transactions need to be disclosed in the financial statements even if they are conducted on normal commercial terms and conditions?</p><p>A: Yes, related party transactions must be disclosed even if they are conducted on normal commercial terms and conditions.</p><p><br /></p><p>3. Q: What are some examples of related party transactions that would require disclosure under AS 18?</p><p>A: Examples include sales of goods or services to a subsidiary or associate company, loans to directors or key management personnel, leasing agreements, joint ventures, and royalty agreements.</p><p><br /></p><p>4. Q: What information needs to be disclosed in the financial statements regarding related party transactions?</p><p>A: The name of the related party, the nature of the transaction, the amount involved, any outstanding balances, and any income/expenses arising from the transaction must be disclosed.</p><p><br /></p><p>5. Q: What is the purpose of related party disclosures under AS 18?</p><p>A: The purpose of related party disclosures is to ensure transparency and prevent any potential conflicts of interest that may arise from related party transactions.</p><p><br /></p><p>6. Q: Are there any exemptions to the related party disclosure requirements under AS 18?</p><p>A: No, there are no exemptions to the related party disclosure requirements under AS 18.</p><p><br /></p><p>7. Q: Do the related party disclosure requirements under AS 18 apply to all companies in India?</p><p>A: Yes, the related party disclosure requirements under AS 18 apply to all companies in India that prepare financial statements in accordance with Indian Accounting Standards (Ind AS).</p><p><br /></p><p>8. Q: What are some potential legal or regulatory issues that companies may face if they fail to comply with AS 18?</p><p>A: Companies may face legal or regulatory issues such as penalties or fines for failing to comply with AS 18, as well as reputational damage.</p><p><br /></p><p>9. Q: Is there any guidance provided by the ICAI on how to prepare related party disclosures?</p><p>A: Yes, the ICAI has issued guidance in the form of the Accounting Standard and related implementation guidance documents.</p><p><br /></p><p>10. Q: How often do companies need to update their related party disclosures in the financial statements?</p><p>A: Companies need to update their related party disclosures in the financial statements annually to reflect any changes in the nature and extent of their related party transactions from the previous year.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-87442874715298262772023-04-27T04:57:00.001+00:002023-04-27T04:57:26.861+00:00Accounting Standard (AS) 30 - Financial Instruments Recognition and Measurement<p>Accounting Standard 30 (AS 30) deals with financial instruments recognition and measurement. It provides guidance on the recognition and measurement of financial instruments, including derivatives, and the disclosure of information about financial instruments in the financial statements.</p><p><br /></p><p><b>Financial Instruments:</b></p><p>Financial instruments are contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Examples of financial instruments are:</p><p></p><ul style="text-align: left;"><li>Shares, bonds, and debentures</li><li>Loans and receivables</li><li>Derivatives such as futures and options</li><li>Trade payables and receivables</li><li>Bank overdrafts and cash balances</li></ul><p></p><p><br /></p><p><b>Recognition of Financial Instruments:</b></p><p>Financial instruments should be recognized in the financial statements when the entity becomes a party to the contractual provisions of the instrument.</p><p><br /></p><p><b>Measurement of Financial Instruments:</b></p><p>The measurement of financial instruments depends on the category to which they belong. AS 30 classifies financial instruments into four categories:</p><p><b>1.</b> Financial assets and liabilities at fair value through profit or loss:</p><p>Financial instruments that are held for trading purposes, or designated by the entity as fair value through profit or loss, are measured at fair value. Changes in fair value are recognized in profit or loss.</p><p>Example: An investment company holds shares in listed companies that are held for trading purposes. The company measures these shares at fair value, and any changes in fair value are recognized in profit or loss.</p><p><br /></p><p><b>2.</b> Held-to-maturity investments:</p><p>Financial instruments that are held with the intention to hold them to maturity are measured at amortized cost. The effective interest method is used to allocate the interest income and expense over the period of the investment.</p><p>Example: A bank holds a portfolio of bonds that it intends to hold until maturity. The bank measures these bonds at amortized cost, and interest income is recognized over the period of the investment using the effective interest method.</p><p><br /></p><p><b>3.</b> Loans and receivables:</p><p>Financial instruments that are not held for trading or designated as fair value through profit or loss are measured at amortized cost using the effective interest method.</p><p>Example: A company provides loans to customers and measures these loans at amortized cost using the effective interest method.</p><p><br /></p><p><b>4.</b> Available-for-sale financial assets:</p><p>Financial instruments that are not held for trading, not designated as fair value through profit or loss, and not held-to-maturity investments are measured at fair value. Changes in fair value are recognized in other comprehensive income until the financial asset is sold or impaired, at which point the cumulative gain or loss is reclassified to profit or loss.</p><p>Example: An insurance company holds a portfolio of equity investments that are not held for trading or held-to-maturity. The company measures these investments at fair value, and any changes in fair value are recognized in other comprehensive income until the investments are sold or impaired.</p><p><br /></p><p><b>Disclosure of Financial Instruments:</b></p><p>AS 30 requires entities to disclose information about financial instruments in their financial statements, including:</p><p></p><ul style="text-align: left;"><li>The fair value of financial instruments, the methods used to determine fair value, and the level of the fair value hierarchy</li><li>The classification of financial instruments and the basis of their measurement</li><li>The nature and extent of risks arising from financial instruments and how the entity manages those risks</li><li>The amount of any impairment losses recognized on financial instruments</li></ul><p></p><p><br /></p><p><b>Conclusion:</b></p><p>AS 30 provides guidance on the recognition, measurement, and disclosure of financial instruments in the financial statements of an entity. It is important for entities to comply with AS 30 to ensure that their financial statements provide relevant and reliable information to users.</p><p><br /></p><h3 style="text-align: left;">Here are some practical examples of how Accounting Standard 30 (AS 30) may be applied in India:</h3><p><b>1. Recognition of Financial Instruments:</b></p><p>A company enters into a contract to purchase raw materials from a supplier on credit. As per the contract, the company is obligated to make the payment within 30 days of the delivery of the goods. The company becomes a party to the contractual provisions of the financial instrument (the credit contract) when it takes delivery of the goods. The company should recognize the financial instrument (the trade payable) in its financial statements.</p><p><br /></p><p><b>2. Measurement of Financial Instruments:</b></p><p>A bank provides a loan of Rs. 1 crore to a borrower at an interest rate of 10% per annum. The loan has a maturity of five years, and the borrower is required to make monthly payments of interest and principal. The bank measures the loan at amortized cost using the effective interest method. The interest income is allocated over the period of the loan using the effective interest rate, which takes into account the cash flows and the time value of money.</p><p><br /></p><p><b>3. Classification of Financial Instruments:</b></p><p>A mutual fund invests in shares of a listed company. The mutual fund intends to hold the shares for the long term but may sell them if market conditions change. The shares are not held for trading purposes, nor are they designated as fair value through profit or loss. The mutual fund classifies the shares as available-for-sale financial assets and measures them at fair value. Any changes in fair value are recognized in other comprehensive income until the shares are sold or impaired.</p><p><br /></p><p><b>4. Disclosure of Financial Instruments:</b></p><p>A company has issued debentures worth Rs. 50 crore to raise funds for its expansion plans. The company discloses the following information about the debentures in its financial statements:</p><p></p><ul style="text-align: left;"><li>The fair value of the debentures as per the latest valuation report</li><li>The basis of measurement (amortized cost using the effective interest method)</li><li>The maturity date of the debentures and the interest rate payable</li><li>The risks associated with the debentures, such as interest rate risk and credit risk, and the measures taken by the company to manage those risks</li><li>Any impairment losses recognized on the debentures</li></ul><p></p><p><br /></p><p>In all of these examples, the entity must carefully consider whether the recognition, measurement, or disclosure of financial instruments is appropriate under AS 30.</p><div><br /></div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-1452305336681088121.post-63994039163965068072023-04-25T05:25:00.004+00:002023-04-25T05:25:22.730+00:00Accounting Standard 28 (AS 28) : Impairment of Assets<p><b>Accounting Standard 28</b> (<b>AS 28</b>) in India is titled "<b>Impairment of Assets</b>" It lays down the guidelines for the impairment of assets and the recognition of related losses in the financial statements of a company. The standard applies to all types of assets except those covered by other accounting standards.</p><h3 style="text-align: left;">Key provisions of AS 28 :</h3><p><b>1. Impairment of Assets:</b></p><p>An asset is considered impaired if the carrying amount of the asset exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. The fair value less costs to sell is the amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Value in use is the present value of estimated future cash flows expected to be derived from an asset or cash-generating unit.</p><p><b>2. Recognition of Impairment Loss:</b></p><p>If an asset is impaired, the company should recognize an impairment loss in its financial statements. The impairment loss is the excess of the carrying amount of the asset over its recoverable amount. The impairment loss should be recognized immediately in the profit and loss statement, unless the asset is carried at a revalued amount, in which case the impairment loss should be recognized as a decrease in the revaluation surplus.</p><p><b>3. Reversal of Impairment Loss:</b></p><p>If the recoverable amount of an impaired asset increases in a subsequent period, the company may reverse the impairment loss. The reversal of impairment loss should be recognized in the profit and loss statement, to the extent that the carrying amount of the asset does not exceed its carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.</p><p><b>4. Disclosure Requirements:</b></p><p><b>The company should disclose the following information in its financial statements:</b></p><p></p><ul style="text-align: left;"><li>The amount of impairment losses recognized during the period, including the line item(s) of the statement of profit and loss in which they are included.</li><li>The amount of impairment losses reversed during the period, including the line item(s) of the statement of profit and loss in which they are included.</li><li>The recoverable amount of impaired assets.</li><li>The methods and assumptions used to determine the recoverable amount of impaired assets.</li></ul><p></p><p>Overall, AS 28 provides a framework for the recognition and measurement of impairment losses in the financial statements of a company. It is important for companies to comply with this standard to ensure transparency and accuracy in their financial reporting.</p><p><br /></p><h4 style="text-align: left;">Examples of how Accounting Standard 28 (AS 28) might be applied in India:</h4><p><b>1. Example of Impairment Loss Recognition:</b></p><p>Suppose a company purchased a machine for Rs. 10 lakh five years ago. The company has been depreciating the machine at a rate of 10% per year, and the accumulated depreciation is now Rs. 5 lakh. However, the market conditions have changed, and the demand for the products produced by the machine has decreased significantly. As a result, the company estimates that the recoverable amount of the machine is now only Rs. 3 lakh. In this case, the carrying amount of the machine (Rs. 10 lakh - Rs. 5 lakh) exceeds its recoverable amount (Rs. 3 lakh), indicating that the machine is impaired. The company should recognize an impairment loss of Rs. 4 lakh (Rs. 10 lakh - Rs. 3 lakh) in its financial statements.</p><p><b>2. Example of Impairment Loss Reversal:</b></p><p>Suppose the company in the above example conducts a review of its assets in the following year and determines that the recoverable amount of the machine has increased to Rs. 5 lakh due to increased demand for its products. In this case, the carrying amount of the machine (Rs. 10 lakh - Rs. 5 lakh) is less than its recoverable amount (Rs. 5 lakh), indicating that the impairment loss recognized in the previous year can be reversed. The company should recognize a reversal of impairment loss of Rs. 2 lakh (Rs. 5 lakh - Rs. 3 lakh) in its financial statements.</p><p><b>3. Example of Disclosures:</b></p><p>Suppose a company has recognized impairment losses on its assets during the year. In its financial statements, the company should disclose the amount of impairment losses recognized during the year, including the line item(s) of the statement of profit and loss in which they are included. The company should also disclose the recoverable amount of impaired assets and the methods and assumptions used to determine the recoverable amount of impaired assets. Additionally, if the company has reversed any impairment losses during the year, it should disclose the amount of impairment losses reversed during the period, including the line item(s) of the statement of profit and loss in which they are included.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-53330524454603860302019-08-11T08:24:00.000+00:002019-08-11T08:24:44.017+00:00AS-3 Cash Flow Statement (As issued by ICAI)<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Objective</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span><br />
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">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.<o:p></o:p></span><br />
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">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.<o:p></o:p></span><br />
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Scope</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span><br />
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">1. An enterprise should prepare a cash flow
statement and should present it for each period for which financial statements
are presented.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">2. Users of an enterprise's financial
statements are interested in how the enterprise generates and uses cash and
cash equivalents. This is the case regardless of the nature of the enterprise's
activities and irrespective of whether cash can be viewed as the product of the
enterprise, as may be the case with a financial enterprise. Enterprises need
cash for essentially the same reasons, however different their principal
revenue-producing activities might be. They need cash to conduct their
operations, to pay their obligations, and to provide returns to their
investors. <o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Benefits of Cash Flow Information</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">3. A cash flow statement, when used in
conjunction with the other financial statements, provides information that
enables users to evaluate the changes in net assets of an enterprise, its
financial structure (including its liquidity and solvency) and its ability to
affect the amounts and timing of cash flows in order to adapt to changing
circumstances and opportunities. Cash flow information is useful in assessing
the ability of the enterprise to generate cash and cash equivalents and enables
users to develop models to assess and compare the present value of the future
cash flows of different enterprises. It also enhances the comparability of the
reporting of operating performance by different enterprises because it
eliminates the effects of using different accounting treatments for the same
transactions and events.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">4. Historical cash flow information is often
used as an indicator of the amount, timing and certainty of future cash flows.
It is also useful in checking the accuracy of past assessments of future cash
flows and in examining the relationship between profitability and net cash flow
and the impact of changing prices.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
</div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Definitions</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">5. The following terms are used in this Statement
with the meanings specified:<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<b><i><u><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Cash comprises</span></u></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">
cash on hand and demand deposits with banks.<o:p></o:p></span></i></b></div>
<b><i><u><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Cash
equivalents</span></u></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> 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.<o:p></o:p></span></i></b><br />
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><i><u><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Cash flows</span></u></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">
are inflows and outflows of cash and cash equivalents.<o:p></o:p></span></i></b></div>
<b><i><u><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Operating
activities</span></u></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> are the principal revenue-producing
activities of the enterprise and other activities that are not investing or
financing activities.<o:p></o:p></span></i></b><br />
<b><i><u><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Investing
activities</span></u></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> are the acquisition and disposal of
long-term assets and other investments not included in cash equivalents.<o:p></o:p></span></i></b><br />
<b><i><u><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Financing
activities</span></u></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> 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.<o:p></o:p></span></i></b><br />
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Cash and Cash Equivalents</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">6. Cash equivalents are held for the purpose of
meeting short-term cash commitments rather than for investment or other
purposes. For an investment to qualify as a cash equivalent, it must be readily
convertible to a known amount of cash and be subject to an insignificant risk
of changes in value. Therefore, an investment normally qualifies as a cash
equivalent only when it has a short maturity of, say, three months or less from
the date of acquisition. Investments in shares are excluded from cash
equivalents unless they are, in substance, cash equivalents; for example,
preference shares of a company acquired shortly before their specified
redemption date (provided there is only an insignificant risk of failure of the
company to repay the amount at maturity).<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">7. Cash flows exclude movements between items
that constitute cash or cash equivalents because these components are part of
the cash management of an enterprise rather than part of its operating,
investing and financing activities. Cash management includes the investment of
excess cash in cash equivalents.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Presentation of a Cash Flow Statement</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">8. The cash flow statement should report cash
flows during the period classified by operating, investing and financing
activities.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">9. An enterprise presents its cash flows from
operating, investing and financing activities in a manner which is most
appropriate to its business. Classification by activity provides information
that allows users to assess the impact of those activities on the financial
position of the enterprise and the amount of its cash and cash equivalents.
This information may also be used to evaluate the relationships among those
activities.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">10. A single transaction may include cash flows
that are classified differently. For example, when the instalment paid in
respect of a fixed asset acquired on deferred payment basis includes both
interest and loan, the interest element is classified under financing activities
and the loan element is classified under investing activities.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Operating Activities</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">11.<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">The amount of cash flows arising from
operating activities is a key indicator of the extent to which the operations
of the enterprise have generated sufficient cash flows to maintain the
operating capability of the enterprise, pay dividends, repay loans and make new
investments without recourse to external sources of financing. Information
about the specific components of historical operating cash flows is useful, in
conjunction with other information, in forecasting future operating cash flows.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
</div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">12. Cash flows from operating activities are
primarily derived from the principal revenue-producing activities of the
enterprise. Therefore, they generally result from the transactions and other
events that enter into the determination of net profit or loss. Examples of
cash flows from operating activities are:<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> cash
receipts from the sale of goods and the rendering of services;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> cash
receipts from royalties, fees, commissions and other revenue;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;"> </span></span><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> cash
payments to suppliers for goods and services;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(d)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash payments to and on behalf of
employees;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(e)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash receipts and cash payments of an
insurance enterprise for premiums and claims, annuities and other policy
benefits;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(f)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash payments or refunds of income
taxes unless they can be specifically identified with financing and investing
activities; and<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(g)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash receipts and payments relating to
futures contracts, forward contracts, option contracts and swap contracts when
the contracts are held for dealing or trading purposes.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: list 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">13. Some transactions, such as the sale of an item
of plant, may give rise to a gain or loss which is included in the
determination of net profit or loss. However, the cash flows relating to such
transactions are cash flows from investing activities.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">14. An enterprise may hold securities and loans
for dealing or trading purposes, in which case they are similar to inventory
acquired specifically for resale. Therefore, cash flows arising from the
purchase and sale of dealing or trading securities are classified as operating
activities. Similarly, cash advances and loans made by financial enterprises
are usually classified as operating activities since they relate to the main
revenue-producing activity of that enterprise.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Investing Activities</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">15. The separate disclosure of cash flows arising
from investing activities is important because the cash flows represent the
extent to which expenditures have been made for resources intended to generate
future income and cash flows. Examples of cash flows arising from investing
activities are:<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo2; tab-stops: 19.5pt list 53.1pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash payments to acquire fixed assets
(including intangibles). These payments include those relating to capitalised
research and development costs and self-constructed fixed assets;<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo2; tab-stops: 19.5pt list 53.1pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash receipts from disposal of fixed
assets (including intangibles);<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo2; tab-stops: 19.5pt list 53.1pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash payments to acquire shares,
warrants or debt instruments of other enterprises and interests in joint
ventures (other than payments for those instruments considered to be cash
equivalents and those held for dealing or trading purposes);<o:p></o:p></span></div>
<div style="margin-left: .25in; mso-list: l0 level1 lfo2; tab-stops: list .25in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(d)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash receipts from disposal of shares,
warrants or debt instruments of other enterprises and interests in joint
ventures (other than receipts from those instruments considered to be cash
equivalents and those held for dealing or trading purposes);<o:p></o:p></span></div>
<div style="margin-left: .25in; mso-list: l0 level1 lfo2; tab-stops: list .25in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(e)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash advances and loans made to third
parties (other than advances and loans made by a financial enterprise);<o:p></o:p></span></div>
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash receipts from the repayment of advances and
loans made to third parties (other than advances and loans of a financial enterprise);</span><br />
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
</div>
<div style="margin-left: .25in; mso-list: l4 level1 lfo1; tab-stops: list .25in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash payments for futures contracts,
forward contracts, option contracts and swap contracts except when the
contracts are held for dealing or trading purposes, or the payments are
classified as financing activities; and<o:p></o:p></span></div>
<div style="margin-left: .25in; mso-list: l4 level1 lfo1; tab-stops: list .25in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash receipts from futures contracts,
forward contracts, option contracts and swap contracts except when the
contracts are held for dealing or trading purposes, or the receipts are
classified as financing activities.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">16. When a contract is accounted for as a hedge of
an identifiable position, the cash flows of the contract are classified in the
same manner as the cash flows of the position being hedged.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Financing Activities</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">17. The separate disclosure of cash flows arising
from financing activities is important because it is useful in predicting
claims on future cash flows by providers of funds (both capital and borrowings)
to the enterprise. Examples of cash flows arising from financing activities
are:<o:p></o:p></span></div>
<div style="margin-left: .5in; mso-list: l3 level1 lfo2; tab-stops: list .5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash proceeds from issuing shares or
other similar instruments;<o:p></o:p></span></div>
<div style="margin-left: .5in; mso-list: l3 level1 lfo2; tab-stops: list .5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash proceeds from issuing debentures,
loans, notes, bonds, and other short or long-term borrowings; and<o:p></o:p></span></div>
<div style="margin-left: .5in; mso-list: l3 level1 lfo2; tab-stops: list .5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">cash repayments of amounts borrowed.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Reporting Cash Flows from Operating Activities</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">18. An enterprise should report cash flows from
operating activities using either:<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo3; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo3; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
indirect method, whereby net profit or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of income or expense associated
with investing or financing cash flows.<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">19. The direct method provides information which
may be useful in estimating future cash flows and which is not available under the
indirect method and is, therefore, considered more appropriate than the
indirect method. Under the direct method, information about major classes of
gross cash receipts and gross cash payments may be obtained either:<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l0 level1 lfo4; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> from
the accounting records of the enterprise; or<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l0 level1 lfo4; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> by
adjusting sales, cost of sales (interest and similar income and interest
expense and similar charges for a financial enterprise) and other items in the
statement of profit and loss for:<o:p></o:p></span></div>
<div style="margin-left: 50.7pt; mso-list: l1 level1 lfo5; tab-stops: 19.5pt; text-indent: -15.6pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">i)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">changes during the period in
inventories and operating receivables and payables;<o:p></o:p></span></div>
<div style="margin-left: 50.7pt; mso-list: l1 level1 lfo5; tab-stops: list 50.7pt; text-indent: -15.6pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">ii)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">other non-cash items; and<o:p></o:p></span></div>
<div style="margin-left: 50.7pt; mso-list: l1 level1 lfo5; tab-stops: list 50.7pt; text-indent: -15.6pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">iii)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">other items for which the cash effects
are investing or financing cash flows.<o:p></o:p></span></div>
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Under the indirect method, the net cash flow
from operating activities is determined by adjusting net profit or loss for the
effects of:</span><br />
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
</div>
<div style="margin-left: 39.0pt; mso-list: l0 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">changes during the period in
inventories and operating receivables and payables;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l0 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">non-cash items such as depreciation,
provisions, deferred taxes, and unrealised foreign exchange gains and losses;
and<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l0 level1 lfo1; tab-stops: list 39.0pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">all other items for which the cash
effects are investing or financing cash flows.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Alternatively, the net cash flow from
operating activities may be presented under the indirect method by showing the
operating revenues and expenses excluding non-cash items disclosed in the
statement of profit and loss and the changes during the period in inventories
and operating receivables and payables.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Reporting Cash Flows from Investing and Financing
Activities</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">21. An enterprise should report separately major
classes of gross cash receipts and gross cash payments arising from investing
and financing activities, except to the extent that cash flows described in
paragraphs 22 and 24 are reported on a net basis.<o:p></o:p></span></i></b></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Reporting Cash Flows on a Net Basis</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">22. Cash flows arising from the following
operating, investing or financing activities may be reported on a net basis:<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo2; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;"> </span></span></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> cash
receipts and payments on behalf of customers when the cash flows reflect the
activities of the customer rather than those of the enterprise; and<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b) cash receipts and payments for items in which
the turnover is quick, the amounts are large, and the maturities are short.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">23. Examples of cash receipts and payments
referred to in paragraph 22(a) are:<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo3; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">the acceptance and repayment of demand
deposits by a bank;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo3; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">funds held for customers by an
investment enterprise; and<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo3; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">rents collected on behalf of, and paid
over to, the owners of properties.<o:p></o:p></span></div>
<div style="margin-left: .25in;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Examples of cash receipts and payments
referred to in paragraph 22(b) are advances made for, and the repayments of:<o:p></o:p></span></div>
<div style="margin-left: .5in; mso-list: l4 level1 lfo4; tab-stops: list .5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">principal amounts relating to credit
card customers;<o:p></o:p></span></div>
<div style="margin-left: .5in; mso-list: l4 level1 lfo4; tab-stops: list .5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">the purchase and sale of investments;
and<o:p></o:p></span></div>
<div style="margin-left: .5in; mso-list: l4 level1 lfo4; tab-stops: list .5in; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">other short-term borrowings, for
example, those which have a maturity period of three months or less.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">24. Cash flows arising from each of the following
activities of a financial enterprise may be reported on a net basis:<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l3 level1 lfo5; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> cash
receipts and payments for the acceptance and repayment of deposits with a fixed
maturity date;<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l3 level1 lfo5; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;"> </span></span></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
placement of deposits with and withdrawal of deposits from other financial
enterprises; and<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l3 level1 lfo5; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> cash
advances and loans made to customers and the repayment of those advances and
loans.<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l3 level1 lfo5; tab-stops: 19.5pt; text-indent: -19.5pt;">
</div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Foreign Currency Cash Flows</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">25. Cash flows arising from transactions in a
foreign currency should be recorded in an enterprise's reporting currency by
applying to the foreign currency amount the exchange rate between the reporting
currency and the foreign currency at the date of the cash flow. A rate that
approximates the actual rate may be used if the result is substantially the
same as would arise if the rates at the dates of the cash flows were used. The
effect of changes in exchange rates on cash and cash equivalents held in a
foreign currency should be reported as a separate part of the reconciliation of
the changes in cash and cash equivalents during the period.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">26. Cash flows denominated in foreign currency are
reported in a manner consistent with Accounting Standard (AS) 11, Accounting
for the Effects of Changes in Foreign Exchange Rates. This permits the use of
an exchange rate that approximates the actual rate. For example, a weighted
average exchange rate for a period may be used for recording foreign currency
transactions.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">27. Unrealised gains and losses arising from
changes in foreign exchange rates are not cash flows. However, the effect of
exchange rate changes on cash and cash equivalents held or due in a foreign
currency is reported in the cash flow statement in order to reconcile cash and
cash equivalents at the beginning and the end of the period. This amount is
presented separately from cash flows from operating, investing and financing
activities and includes the differences, if any, had those cash flows been
reported at the end-of-period exchange rates. <o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Extraordinary Items</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">28. The cash flows associated with extraordinary
items should be classified as arising from operating, investing or financing activities
as appropriate and separately disclosed.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">29. The cash flows associated with extraordinary
items are disclosed separately as arising from operating, investing or
financing activities in the cash flow statement, to enable users to understand
their nature and effect on the present and future cash flows of the enterprise.
These disclosures are in addition to the separate disclosures of the nature and
amount of extraordinary items required by Accounting Standard (AS) 5, Net
Profit or Loss for the Period, Prior Period Items and Changes in Accounting
Policies.<o:p></o:p></span></div>
<div style="margin-left: 35.1pt; text-indent: -35.1pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Interest and Dividends</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">30.<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Cash flows from interest and dividends
received and paid should each be disclosed separately. Cash flows arising from
interest paid and interest and dividends received in the case of a financial
enterprise should be classified as cash flows arising from operating
activities. In the case of other enterprises, cash flows arising from interest
paid should be classified as cash flows from financing activities while
interest and dividends received should be classified as cash flows from
investing activities. Dividends paid should be classified as cash flows from
financing activities.<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">31.<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">The total amount of interest paid
during the period is disclosed in the cash flow statement whether it has been
recognised as an expense in the statement of profit and loss or capitalised in
accordance with Accounting Standard (AS) 10, Accounting for Fixed Assets.<o:p></o:p></span></div>
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Interest paid and interest and dividends
received are usually classified as operating cash flows for a financial
enterprise. However, there is no consensus on the classification of these cash
flows for other enterprises. Some argue that interest paid and interest and
dividends received may be classified as operating cash flows because they enter
into the determination of net profit or loss. However, it is more appropriate
that interest paid and interest and dividends received are classified as
financing cash flows and investing cash flows respectively, because they are
cost of obtaining financial resources or returns on investments.</span><br />
<div style="margin-left: 39.0pt; mso-list: l3 level1 lfo5; tab-stops: 19.5pt; text-indent: -19.5pt;">
</div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">30.<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Some argue that dividends paid may be
classified as a component of cash flows from operating activities in order to
assist users to determine the ability of an enterprise to pay dividends out of
operating cash flows. However, it is considered more appropriate that dividends
paid should be classified as cash flows from financing activities because they
are cost of obtaining financial resources.<o:p></o:p></span></div>
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Taxes on Income</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span><br />
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">31.<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Cash flows arising from taxes on
income should be separately disclosed and should be classified as cash flows
from operating activities unless they can be specifically identified with
financing and investing activities.<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; mso-list: l0 level1 lfo1; tab-stops: list 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">32.<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Taxes on income arise on transactions
that give rise to cash flows that are classified as operating, investing or
financing activities in a cash flow statement. While tax expense may be readily
identifiable with investing or financing activities, the related tax cash flows
are often impracticable to identify and may arise in a different period from the
cash flows of the underlying transactions. Therefore, taxes paid are usually
classified as cash flows from operating activities. However, when it is
practicable to identify the tax cash flow with an individual transaction that
gives rise to cash flows that are classified as investing or financing
activities, the tax cash flow is classified as an investing or financing
activity as appropriate. When tax cash flow are allocated over more than one
class of activity, the total amount of taxes paid is disclosed.<o:p></o:p></span></div>
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Investments in
Subsidiaries, Associates and Joint Ventures</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span><br />
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">36. When accounting for an investment in an
associate or a subsidiary or a joint venture, an investor restricts its
reporting in the cash flow statement to the cash flows between itself and the investee/joint
venture, for example, cash flows relating to dividends and advances.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Acquisitions and Disposals of
Subsidiaries and Other Business Units</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">37. The aggregate cash flows arising from
acquisitions and from disposals of subsidiaries or other business units should
be presented separately and classified as investing activities.<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">38. An enterprise should disclose, in aggregate,
in respect of both acquisition and disposal of subsidiaries or other business
units during the period each of the following:<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo2; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
total purchase or disposal consideration; and<o:p></o:p></span></i></b></div>
<div style="margin-left: 39.0pt; mso-list: l2 level1 lfo2; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
portion of the purchase or disposal consideration discharged by means of cash
and cash equivalents.<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">39. The separate presentation of the cash flow
effects of acquisitions and disposals of subsidiaries and other business units
as single line items helps to distinguish those cash flows from other cash
flows. The cash flow effects of disposals are not deducted from those of
acquisitions.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Non-cash Transactions</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l1 level1 lfo3; tab-stops: 19.5pt list .5in; text-indent: -19.5pt;">
<!--[if !supportLists]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">40.<span style="font-family: "times new roman"; font-size: 7pt; font-style: normal; font-weight: normal;">
</span></span></i></b><!--[endif]--><b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Investing and financing transactions
that do not require the use of cash or cash equivalents should be excluded from
a cash flow statement. Such transactions should be disclosed elsewhere in the
financial statements in a way that provides all the relevant information about
these investing and financing activities.<o:p></o:p></span></i></b></div>
<div style="margin-left: 19.5pt; mso-list: l1 level1 lfo3; tab-stops: 19.5pt list .5in; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">41.<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Many investing and financing
activities do not have a direct impact on current cash flows although they do
affect the capital and asset structure of an enterprise. The exclusion of
non-cash transactions from the cash flow statement is consistent with the
objective of a cash flow statement as these items do not involve cash flows in
the current period. Examples of non-cash transactions are:<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; mso-list: l1 level1 lfo3; tab-stops: 19.5pt list .5in; text-indent: -19.5pt;">
</div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">the acquisition of assets by assuming
directly related liabilities;<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">the acquisition of an enterprise by means
of issue of shares; and<o:p></o:p></span></div>
<div style="margin-left: 39.0pt; mso-list: l1 level1 lfo1; tab-stops: 19.5pt; text-indent: -19.5pt;">
<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">the conversion of debt to equity.<o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Components of Cash and Cash
Equivalents</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-left: 19.5pt; tab-stops: 19.5pt; text-indent: -19.5pt;">
<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">42. An enterprise should disclose the components
of cash and cash equivalents and should present a reconciliation of the amounts
in its cash flow statement with the equivalent items reported in the balance
sheet.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">43. In view of the variety of cash management
practices, an enterprise discloses the policy which it adopts in determining
the composition of cash and cash equivalents.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">44.
The effect of any change in the policy
for determining components of cash and cash equivalents is reported in
accordance with Accounting Standard (AS) 5, Net Profit or Loss for the Period,
Prior Period Items and Changes in Accounting Policies.<o:p></o:p></span></div>
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<b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">Other Disclosures</span></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
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<b><i><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">45.
An enterprise should disclose, together
with a commentary by management, the amount of significant cash and cash
equivalent balances held by the enterprise that are not available for use by
it.</span></i></b><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">46.
There are various circumstances in which
cash and cash equivalent balances held by an enterprise are not available for
use by it. Examples include cash and cash equivalent balances held by a branch
of the enterprise that operates in a country where exchange controls or other
legal restrictions apply as a result of which the balances are not available
for use by the enterprise.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">47.
Additional information may be relevant to
users in understanding the financial position and liquidity of an enterprise.
Disclosure of this information, together with a commentary by management, is
encouraged and may include:<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
amount of undrawn borrowing facilities that may be available for future
operating activities and to settle capital commitments, indicating any
restrictions on the use of these facilities; and<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt;">
</span></span><!--[endif]--><span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;"> the
aggregate amount of cash flows that represent increases in operating capacity
separately from those cash flows that are required to maintain operating
capacity.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; font-size: 10.0pt;">48. The separate disclosure of cash flows that
represent increases in operating capacity and cash flows that are required to
maintain operating capacity is useful in enabling the user to determine whether
the enterprise is investing adequately in the maintenance of its operating
capacity. An enterprise that does not invest adequately in the maintenance of
its operating capacity may be prejudicing future profitability for the sake of
current liquidity and distributions to owners.<o:p></o:p></span></div>
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<br />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1452305336681088121.post-80311487551355382522018-05-19T09:46:00.010+00:002023-05-19T09:56:41.164+00:00Cost Accounting Techniques: A Comprehensive Guide<p><b>Cost accounting</b> plays a vital role in helping businesses analyze, control, and optimize their costs. It provides valuable insights into the various components of production, operation, and service delivery. Within cost accounting, several techniques and methods have been developed to aid in cost measurement, analysis, and decision-making. </p><p>In this article, we will explore some of the key <b>cost accounting techniques</b> that businesses employ to enhance their financial management and operational efficiency.</p><p><b>1. Activity-Based Costing (ABC):</b></p><p>Activity-Based Costing is a technique that allocates costs based on the activities required to produce goods or services. It identifies cost drivers, which are the factors that consume resources and drive costs. </p><p>By assigning costs to specific activities, ABC provides a more accurate understanding of the true cost of each product or service. This allows businesses to make informed decisions regarding pricing, resource allocation, and process improvements.</p><p><b>Example</b>: Let's consider a manufacturing company that produces multiple products. With traditional costing methods, costs are allocated based on direct labor or machine hours. However, the company realizes that some products require more setup time, machine maintenance, or special handling, which are not accurately captured by the traditional costing system.</p><p>By implementing ABC, the company identifies cost drivers such as setup hours, machine hours, or material handling activities. It assigns costs based on the activities required for each product. As a result, products that have more complex and resource-intensive production processes will have higher costs allocated to them, reflecting their actual resource consumption. This helps the company make better pricing decisions and identify areas for process improvements.</p><p><br /></p><p><b>2. Standard Costing:</b></p><p>Standard costing involves setting predetermined costs for various components of production or operations. It establishes standard costs for materials, labor, and overhead, which serve as benchmarks for performance evaluation. </p><p>By comparing actual costs against the standards, businesses can identify cost variances and take corrective actions. Standard costing facilitates cost control, budgeting, and variance analysis, enabling businesses to manage costs effectively.</p><p><b>Example: </b>A company manufactures a product and establishes standard costs for materials, labor, and overhead. The standard cost for producing one unit of the product is calculated based on historical data and engineering estimates. However, during the production process, actual costs may deviate from the standards due to factors like material price fluctuations or variations in labor efficiency.</p><p>By comparing actual costs to the standard costs, the company can calculate cost variances. For instance, if the actual cost of materials is higher than the standard cost, it indicates a material price variance. By analyzing these variances, the company can identify areas of inefficiency or cost-saving opportunities. This information allows management to take corrective actions, such as negotiating better material prices or improving production processes to reduce costs.</p><p><br /></p><p><b>3. Marginal Costing:</b></p><p>Marginal costing focuses on analyzing the variable costs associated with producing an additional unit of a product or service. It distinguishes between fixed costs and variable costs and calculates the contribution margin, which is the difference between sales revenue and variable costs. </p><p>Marginal costing helps businesses assess the profitability of different products, make pricing decisions, and determine the impact of changes in production levels or sales volumes.</p><p><br /></p><p><b>4. Activity-Based Budgeting (ABB):</b></p><p>Activity-Based Budgeting aligns budgeting with activity-based costing principles. It involves identifying and budgeting for specific activities that consume resources and incur costs. ABB emphasizes the relationship between activities and costs, providing a more accurate basis for budget allocation. </p><p>By focusing on the underlying activities, businesses can prioritize resource allocation, optimize cost-efficiency, and align budgets with strategic objectives.</p><p><br /></p><p><b>5. Life Cycle Costing:</b></p><p>Life Cycle Costing considers the costs associated with a product or project throughout its entire life cycle, from design and development to disposal. It involves analyzing costs at each stage, including acquisition, production, maintenance, and disposal. Life Cycle Costing helps businesses make informed decisions by considering the long-term cost implications of different options, such as product design choices, equipment selection, or investment decisions.</p><p><br /></p><p><b>6. Target Costing:</b></p><p>Target Costing is a proactive approach to cost management that focuses on designing products or services to meet specific cost targets. It involves analyzing customer needs and preferences, estimating the desired profit margin, and determining the allowable cost. </p><p>By aligning product design, production processes, and cost structures with the target cost, businesses can achieve profitability while meeting customer expectations.</p><p><b>Example:</b> Suppose a company wants to introduce a new product to the market while maintaining a competitive price point. The company conducts market research to determine the target selling price based on customer preferences and competitor pricing.</p><p>Using target costing, the company then calculates the target cost by subtracting the desired profit margin from the target selling price. This target cost becomes the maximum allowable cost for the product. The cross-functional team, including engineers, designers, and production specialists, works together to design the product and develop production processes that meet the target cost.</p><p>By applying target costing, the company ensures that the product is designed and manufactured with cost considerations from the early stages. This helps eliminate unnecessary costs, streamline processes, and achieve profitability while meeting customer expectations.</p><p><br /></p><p><b>7. Just-in-Time (JIT) Costing:</b></p><p>Just-in-Time costing is closely associated with lean manufacturing principles. It emphasizes minimizing inventory and production waste by reducing setup times, improving production flow, and eliminating non-value-added activities. JIT costing aims to optimize costs by aligning production with customer demand, reducing carrying costs, and enhancing operational efficiency.</p><p><b>Example:</b> A company adopts a Just-in-Time (JIT) production approach to minimize inventory and reduce waste. With JIT costing, the company focuses on eliminating non-value-added costs and improving operational efficiency.</p><p>The company implements JIT principles such as reducing setup times, optimizing production flow, and maintaining a tight production schedule based on customer demand. By minimizing the time and costs associated with holding excess inventory, the company can achieve cost savings.</p><p>JIT costing allows the company to optimize costs by aligning production with actual customer demand, reducing carrying costs, and improving overall efficiency in the production process.</p><p><br /></p><p><b>Conclusion:</b></p><p><b>Cost accounting techniques</b> provide powerful tools for businesses to measure, analyze, and manage costs effectively. By employing these techniques, companies can gain valuable insights into their cost structures, make informed decisions, and improve overall financial performance. </p><p>Whether it's allocating costs based on activities, setting standard costs, or analyzing life cycle costs, each technique has its unique strengths and applications. </p><p>By leveraging these cost accounting techniques, businesses can enhance their competitiveness, optimize resource allocation, and drive sustainable growth in today's dynamic and cost-conscious business environment.</p>Unknownnoreply@blogger.com0