tag:blogger.com,1999:blog-20946488418624774162024-03-08T02:12:42.601-08:00INDIAN ACCOUNTING STANDARDSLearn indian accounting standards known as IndAS and accounting standards useful for cma,ca students and accountants in india.Unknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-2094648841862477416.post-52703526698834259452023-05-03T18:26:00.004-07:002023-05-03T18:29:33.928-07:00Ind AS 16 Notes with Examples<p>In this note, we will provide an overview of Ind AS 16 with examples, which deals with the accounting treatment of property, plant, and equipment, and is similar to AS 10 in its scope and requirements.</p><p><br /></p><p>There have been recent developments in the field of accounting standards in India, particularly with the implementation of <b><a href="https://indianaccounting.in" target="_blank">Indian Accounting</a></b> Standards (Ind AS) for certain companies.</p><p><br /></p><p>Ind AS is a set of accounting standards that is converged with the International Financial Reporting Standards (IFRS) and is mandatory for certain companies in India. Companies that meet certain criteria, such as listed companies and certain types of banks, insurance companies, and non-banking financial companies, are required to prepare their financial statements in accordance with Ind AS.</p><p><br /></p><h3 style="text-align: left;">Scope of Ind AS 16</h3><p>Ind AS 16 applies to all types of property, plant, and equipment, except for assets held for sale in the ordinary course of business or for disposal. The standard applies to all companies that are required to prepare their financial statements in accordance with Ind AS, as mentioned above.</p><p><br /></p><p>The standard applies to the measurement, recognition, and disclosure of property, plant, and equipment in the financial statements of a company.</p><p><br /></p><h3 style="text-align: left;">Measurement of Property, Plant, and Equipment</h3><p>Ind AS 16 provides guidance on the measurement of property, plant, and equipment, which includes the cost and revaluation models. Under the cost model, property, plant, and equipment are recorded at their cost of acquisition or construction, including all incidental expenses such as installation charges and duties. The cost model also includes the cost of replacing parts or repairing the assets to maintain their operational efficiency.</p><p><br /></p><p>The revaluation model involves the periodic revaluation of property, plant, and equipment to reflect their current market value. The revaluation model is applicable only if the fair value of the property, plant, and equipment can be determined with sufficient reliability.</p><p><br /></p><h3 style="text-align: left;">Recognition of Property, Plant, and Equipment</h3><p>Property, plant, and equipment are recognized in the financial statements of a company when they meet the following criteria:</p><p></p><ul style="text-align: left;"><li>It is probable that the economic benefits associated with the asset will flow to the company, and</li><li>The cost of the asset can be reliably measured.</li></ul><p></p><p><br /></p><p>The standard requires that property, plant, and equipment be recognized at cost or fair value, depending on the measurement model used. If an asset is acquired in exchange for another asset or through a non-monetary transaction, the cost of the asset is measured based on the fair value of the consideration given or received.</p><p><br /></p><h3 style="text-align: left;">Depreciation of Property, Plant, and Equipment</h3><p>Depreciation is the systematic allocation of the cost of property, plant, and equipment over its useful life. Ind AS 16 provides guidance on the calculation of depreciation for property, plant, and equipment, including the method of depreciation, useful life, and residual value.</p><p><br /></p><p>The standard requires that the method of depreciation used must reflect the pattern in which the economic benefits of the asset are expected to be consumed by the company. The most common methods of depreciation include the straight-line method, the reducing balance method, and the sum-of-the-years-digits method.</p><p><br /></p><p>The useful life of property, plant, and equipment is determined based on factors such as the expected usage of the asset, the physical wear and tear of the asset, and the technological obsolescence of the asset. The residual value of the asset is the estimated amount that the company would receive after deducting the expected costs of disposal.</p><p><br /></p><h3 style="text-align: left;">Disclosure Requirements</h3><p>Ind AS 16 requires companies to disclose certain information related to property, plant, and equipment in their financial statements. The disclosure requirements include:</p><p></p><ul style="text-align: left;"><li>The measurement basis used for the property, plant, and equipment</li><li>The depreciation method used and the useful life of the asset</li></ul><p></p><p><br /></p><p><br /></p><h3 style="text-align: left;">Few IndAS 16 Examples for better understanding of this accounting standard.</h3><p><br /></p><p>Examples of how Ind AS 16 may be applied in different scenarios:</p><p><br /></p><p>1. ABC Ltd, a manufacturing company, acquires a new plant and machinery for INR 1 crore. The company estimates that the useful life of the plant and machinery is 10 years and the residual value is INR 5 lakhs.</p><p><br /></p><p>Under Ind AS 16, ABC Ltd should recognize the plant and machinery as an asset at its cost of INR 1 crore, which includes all incidental expenses related to the acquisition. The company should then calculate the annual depreciation expense based on the useful life and residual value of the asset. If ABC Ltd uses the straight-line method of depreciation, the annual depreciation expense would be INR 9.5 lakhs (INR 1 crore - INR 5 lakhs divided by 10 years).</p><p><br /></p><p>2. XYZ Bank, a banking company, has a lease agreement for a property with a lease term of 5 years. The lease agreement requires the bank to make monthly lease payments of INR 2 lakhs to the lessor.</p><p><br /></p><p>Under Ind AS 16, XYZ Bank should recognize the lease payments as an expense in its income statement over the lease term. The bank should also recognize a right-of-use asset in its balance sheet, which represents its right to use the property for the lease term. The initial measurement of the right-of-use asset should be the present value of the lease payments, discounted at the incremental borrowing rate of the bank.</p><p><br /></p><p>3. PQR Ltd, a construction company, has a fleet of vehicles that it uses for its business operations. The company decides to revalue its fleet of vehicles at the end of the financial year to reflect their current market value.</p><p><br /></p><p>Under Ind AS 16, PQR Ltd can choose to measure its fleet of vehicles using either the cost model or the revaluation model. If the company chooses to use the revaluation model, it should revalue the fleet of vehicles to its fair value at the end of the financial year. The fair value can be determined based on an independent appraisal or a market analysis. The company should then recognize any increase or decrease in the fair value of the fleet of vehicles as a revaluation gain or loss in its income statement. If the company decides to use the cost model, the vehicles would continue to be measured at their original cost, and no revaluation would be necessary.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2094648841862477416.post-48635515005100899052012-12-28T04:06:00.000-08:002017-12-28T02:55:16.626-08:00Ind AS 20 on Accounting for Government Grants and Disclosure of Government Assistance and AS 12 on Accounting for Government Grants<div class="Section1">
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 110%;">(i)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 110%;">Ind AS 20 deals with the other forms of
government assistance which do not fall within the definition of government
grants. It requires that an indication of other forms of government assistance
from which the entity has directly benefited should be disclosed in the
financial statements. However, AS 12 does not deal with such government assistance.
<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; mso-fareast-font-family: Arial;">(ii)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial";">AS
12 requires that in case the grant is in respect of non-depreciable assets, the
amount of the grant should be shown as capital reserve which is a part of
shareholders’ funds. It further requires that if a grant related to a
non-depreciable asset requires the fulfilment of certain obligations, the grant
should be credited to income over the same period over which the cost of
meeting such obligations is charged to income. AS 12 also gives an alternative
to treat such grants as a deduction from the cost of such asset. <o:p></o:p></span></div>
</div>
<div class="Section3">
<br />
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<span style="font-size: 12pt;"> </span><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 110%; text-align: justify; text-indent: 2.45pt;">As compared to the above, Ind AS 20, is based
on the principle that all government grants would normally have certain
obligations attached to them and these grants should be recognised as income
over the periods which bear the cost of meeting the obligation. It, therefore,
specifically prohibits recognition of grants directly in the shareholders’
funds.</span></div><script async="" src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 109%;">(iii)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 109%;">AS 12 recognises that some government grants
have the characteristics similar to those of promoters’ contribution. It
requires that such grants should be credited directly to capital reserve and
treated as a part of shareholders’ funds. Ind AS 20 does not recognise
government grants of the nature of promoters’ contribution. As stated at (ii)
above, Ind AS 20 is based on the principle that all government grants would
normally have certain obligations attached to them and it, accordingly,
requires all grants to be recognised as income over the periods which bear the
cost of meeting the obligation. <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 109%;">(iv)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 109%;">AS 12 requires that government grants in the
form of non-monetary assets, given at a concessional rate, should be accounted
for on the basis of their acquisition cost. In case a non-monetary asset is
given free of cost, it should be recorded at a nominal value. Ind AS 20
requires to to value non-monetary grants at their fair value, since it results
into presentation of more relevant information and is conceptually superior as
compared to valuation at a nominal amount. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; mso-fareast-font-family: Arial;">(v)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial";">Existing
AS 12 gives an option to present the grants related to assets, including
non-monetary grants at fair value in the balance sheet either by setting up the
grant as deferred income or by deducting the grant from the gross value of
asset concerned in arriving at at its book value. Ind AS 20 requires
presentation of such grants in balance sheet only by setting up the grant as
deferred income. Thus, the option to present such grants by deduction of the
grant in arriving at at at its book value is not available under Ind AS 20 <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 113%;">(v)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 113%;">Ind AS 20 includes Appendix A which deals with
<i>Government</i> <i>Assistance—No Specific Relation to Operating Activities </i><o:p></o:p></span></div>
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<span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 113%;"><i><br /></i></span></div>
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<span style="background-color: white; color: #231f20; font-family: "helvetica" , sans-serif; font-size: 15px; line-height: normal; text-indent: 0px;">(vi) Ind AS 20 requires that loans received from a government that have a below-market rate of interest should be recognised and measured in accordance with Ind AS 39 (which requires all loans to be recognised at fair value, thus requiring interest to be imputed to loans with a below-market rate of interest) whereas AS 12 does not require so.</span></div>
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<br />Unknownnoreply@blogger.comtag:blogger.com,1999:blog-2094648841862477416.post-76607733006853773152012-12-28T03:58:00.000-08:002017-12-08T18:35:52.614-08:00Ind AS 10, Events after the Reporting Period and existing AS 4, Contingencies and Events occurring after the Balance Sheet Date
<br />
<div class="Section1">
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; mso-fareast-font-family: Arial;">(i)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial";">In
Ind AS 10, material non-adjusting events are required to be disclosed in the
financial statements, whereas the existing AS 4 requires the same to be
disclosed in the report of approving authority. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; font-size: 10.0pt; line-height: 114%;">(ii)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; font-size: 10.0pt; line-height: 114%;">As per Ind AS 10 dividend proposed or declared
after the reporting period, can not be recognised as a liability in the
financial statements because it dose not meet the criteria of a present
obligation as per Ind AS 37. Such dividend is required to be <o:p></o:p></span></div>
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<span style="color: #231f20; font-family: "arial"; font-size: 10.0pt;">disclosed in the notes in the financial
statements as per Ind AS 1,</span><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 111%; text-align: justify;">whereas as per the existing AS 4 the same is required to
be adjusted in financial statements because of the requirements prescribed in
the Schedule VI to the Companies Act, 1956.</span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 110%;">(iii)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 110%;">If after the reporting date, it is determined
that the fundamental accounting assumption of going concern is no longer
appropriate, Ind AS 10 requires a fundamental change in the basis of
accounting. Whereas existing AS 4 requires assets and liabilities to be
adjusted for events occurring after the balance sheet date that indicate that
the fundamental accounting assumption of going concern is not appropriate. <o:p></o:p></span></div>
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<span style="color: #231f20; font-family: "arial";">In this
regard, Ind AS 10 refers to Ind AS 1, which requires an entity to make the
following disclosures: </span><span style="color: #231f20; font-family: "arial"; font-size: 10.5pt; line-height: 103%;"><o:p></o:p></span></div>
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<span style="color: #231f20;"><span style="font-family: "arial";"><span style="line-height: 14.44444465637207px;">></span></span><span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; line-height: 97%;">disclose
the fact that the financial statements are not prepared on a going concern
basis together with the basis on which the financial statements are prepared <o:p></o:p></span></div>
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<span style="color: #231f20;"><span style="font-family: "arial";"><span style="line-height: 14.44444465637207px;">></span></span><span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "arial"; line-height: 94%;">state
the reason why the entity is not regarded as a going concern. <o:p></o:p></span></div>
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<span style="color: #231f20; font-family: "arial";">Existing AS
4 does not require any such disclosure, However, existing AS 1 requires the
disclosure of the fact in case going concern assumption is not followed.</span><span style="font-size: 12pt; line-height: 103%;"><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "arial"; mso-fareast-font-family: Arial;">(iv)<span style="font-family: "times new roman"; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "arial";">Ind
AS 10 includes an Appendix <i>Distribution of Non-cash Assets</i> <i>to Owners </i>which
deals , inter alia, with when to recognise<i> </i>dividends payable to its
owners. <o:p></o:p></span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-2094648841862477416.post-26461830638336380772012-12-08T04:27:00.001-08:002023-05-12T03:26:30.663-07:00Ind AS 16 Property, Plant and Equipment, and existing AS 10, Accounting for Fixed Assets and AS 6, Depreciation Accounting<p><span style="font-size: medium;"><b>Ind AS 16</b> deals with accounting for property, plant and equipment which are covered by existing AS 10, Accounting for Fixed Assets. Ind AS 16 also deals with depreciation of property, plant and equipment which is presently covered by AS 6, Depreciation Accounting. Therefore, the major differences mentioned below are between the Ind AS 16 and existing AS 10 and existing AS 6.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(i)</b> Existing AS 10 specifically excludes accounting for real estate developers from its scope, whereas Ind AS 16 does not exclude such developers from its scope.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(ii)</b> Ind AS 16, apart from defining the term property, plant and equipment, also lays down the following criteria which should be satisfied for recognition of items of property, plant and equipment:</span></p><p><span style="font-size: medium;">(a) it is probable that future economic benefits associated with the item will flow to the entity, and</span></p><p><span style="font-size: medium;">(b) the cost of the item can be measured reliably.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;">Existing AS 10 does not lay down any specific recognition criteria for recognition of a fixed asset. As per the standard, any item which meets the definition of a fixed asset should be recognised as a fixed asset.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(iii)</b> As per Ind AS 16, initial costs as well as the subsequent costs are evaluated on the same recognition principles to determine whether the same should be recognised as an item of property, plant and equipment. Existing AS 10 on the other hand, prescribes separate recognition principles for subsequent expenditure. As per existing AS 10, subsequent expenditures related to an item of fixed asset are capitalised only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance. (Paragraph 7 of Ind AS 16 and Paragraph 12 of existing AS 10)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(iv)</b> Ind AS 16 requires that major spare parts qualify as property, plant and equipment when an entity expects to use them during more than one period and when they can be used only in connection with an item of property, plant and equipment.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;">As per existing AS 10, only those spares are required to be capitalised which can be used only in connection with a fixed asset and whose use is expected to be irregular. (Paragraph 8 of Ind AS 16 and Paragraph 8.2 of existing AS 10)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(v)</b> Ind AS 16 is based on the component approach. Under this approach, each major part of an item of property plant and </span><span style="font-size: large;">equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. As a corollary, cost of replacing such parts is capitalised, if recognition criteria are met with consequent derecognition of carrying amount of the replaced part. </span></p><p><span style="font-size: large;">The cost of replacing those parts which have not been depreciated separately is also capitalised with the consequent derecognition of the replaced parts. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;">Existing AS 10, however, does not mandatorily require full adoption of the component approach. It recognises the said approach in only one paragraph by stating that accounting for a tangible fixed asset may be improved if total cost thereof is allocated to its various parts. Apart from this, neither existing AS 10 nor existing AS 6 deals with the aspects such as separate depreciation of components, capitalising the cost of replacement, etc. (Paragraphs 43, 70 of Ind AS 16 and paragraph 8.3 of Existing AS 10)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(vi)</b> Ind AS 16 requires that the cost of major inspections should be capitalised with consequent derecognition of any remaining carrying amount of the cost of the previous inspection. Existing </span><span style="font-size: large;">AS 10 does not deal with this aspect. (Paragraph 14 of Ind AS </span><span style="font-size: large;">16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(vii)</b> In line with the requirement of Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets, for creating a provision towards the costs of dismantling and removing the item of property plant and equipment and restoring the site on which it is located at the time the item is acquired or constructed, Ind AS 16 requires that the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located should be included in the cost of the respective item of property plant and equipment. Existing AS 10 does not contain any such requirement. (Paragraphs16 (c) and 18 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(viii)</b> Ind AS 16 requires an entity to choose either the cost model or the revaluation model as its accounting policy and to apply that policy to an entire class of property plant and equipment. It requires that under revaluation model, revaluation be made with reference to the fair value of items of property plant and equipment. It also requires that 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></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;">Existing AS 10 recognises revaluation of fixed assets. However, the revaluation approach adopted therein is ad hoc in nature, as it does not require the adoption of fair value basis as its accounting policy or revaluation of assets with regularity. It also provides an option for selection of assets within a class for revaluation on systematic basis. (Paragraphs 29 and 31 of Ind AS 16 and paragraph 27 of existing AS 10)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(ix)</b> Ind AS 16 provides that the revaluation surplus included in equity in respect of an item of property plant and equipment may be transferred to the retained earnings when the asset is derecognised. 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 entity. In such a case, the amount of the surplus transferred would be the difference between the depreciation based on the revalued carrying amount of the asset and depreciation based on its original cost. Transfers from revaluation surplus to the retained earnings are not made through profit or loss. (Paragraph 41 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;">As compared to the above, neither existing AS 10 nor existing AS 6 deals with the transfers from revaluation surplus. To deal with this aspect, the Institute issued a Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets. </span></p><p><span style="font-size: medium;">The Guidance Note provides that if a company has transferred the difference between the revalued figure and the book value of fixed assets to the ‘Revaluation Reserve’ and has charged the additional depreciation related thereto to its profit and loss account, it is possible to transfer an amount equivalent to accumulated additional depreciation from the revaluation reserve to the profit and loss account or to the general reserve as the circumstances may permit, provided suitable disclosure is made in the accounts. </span></p><p><span style="font-size: medium;">However, the said Guidance Note also recognises that it would be prudent not to charge the additional depreciation arising due to revaluation against the revaluation reserve.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(x)</b> With regard to self-constructed assets, Ind AS 16, specifically states that the cost of abnormal amounts of wasted material, labour, or other resources incurred in the construction of an asset is not included in the cost of the assets. Existing AS 10 while dealing with self-constructed fixed assets does not mention the same. (Paragraph 22 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xi)</b> Ind AS 16 provides that 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 recognised as interest over the period of credit unless such interest is capitalised in accordance with Ind AS 16. Similarly, the concept of cash price equivalent has been followed in case of disposal of fixed assets also. Existing AS 10 does not contain this requirement. (Paragraphs 23 and 72 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xii)</b> Existing AS 10 specifically deals with the fixed assets owned by the entity jointly with others. Ind AS 16 does not specifically deal with this aspect as these would basically be covered by Ind AS 31 as jointly controlled assets. (Paragraph 15.2 of existing AS 10)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xiii)</b> Existing AS 10 specifically deals with the situation where several assets are purchased for a consolidated price. It provides that the consideration should be apportioned to the various assets on the basis of their respective fair values. However, Ind AS 16 does not specifically deal with this situation. (Paragraph 15.3 of existing AS 10)</span></p><p><span style="font-size: medium;"><br /></span></p><p><b style="font-size: large;">(xiv) </b><span style="font-size: medium;">Ind AS 16 requires that the residual value and useful life of an asset 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 AS 5. Under existing AS 6, such a review is not obligatory as it simply provides that useful life of an asset may be reviewed periodically. (Paragraph 51 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xv)</b> Ind AS 16 requires that 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. In existing AS 6, change in depreciation method can be made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements. (Paragraph 61 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xvi)</b> Ind AS 16 requires that change in depreciation method should be considered as a change in accounting estimate and treated accordingly. In existing AS 6, it is considered as a change in accounting policy and treated accordingly. (Paragraph 61 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xvii)</b> Ind AS 16 requires that compensation from third parties for items of property, plant and equipment that were impaired, lost or given up should be included in the statement of profit and loss when the compensation becomes receivable. Existing AS 10 does not specifically deal with this aspect. (Paragraph 65 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xviii)</b> Ind AS 16 specifically provides that gains arising on derecognition of an item of property, plant and equipment should not be treated as revenue as defined in AS 9. Existing AS 10 is silent on this aspect. (Paragraph 68 of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xix)</b> Ind AS 16 deals with the situation where entities hold the items of property, plant and equipment for rental to others and subsequently sell the same. No such provision is there in existing AS 10. (Paragraph 68A of Ind AS 16)</span></p><p><span style="font-size: medium;"><br /></span></p><p><b style="font-size: large;">(xx) </b><span style="font-size: medium;">Ind AS 16 does not deal with the assets ‘held for sale’ because the treatment of such assets is covered in Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations. Existing AS 10 deals with accounting for items of fixed assets retired from active use and held for sale.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xxi)</b> Ind AS 16 requires that if property, plant and equipment is acquired in exchange for a non-monetary asset, it should be recognised at its fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. </span></p><p><span style="font-size: medium;">The existing standard requires that when a fixed asset is acquired in exchange for another asset, its cost is usually determined by reference to the fair market value of the consideration given. It may be appropriate to consider also the fair market value of the asset acquired if this is more clearly evident. </span></p><p><span style="font-size: medium;">Existing AS 10 also prescribes an alternative accounting treatment that is sometimes used for an exchange of assets, particularly when the assets exchanged are similar, is to record the asset acquired at the net book value of the asset given up; in each case an adjustment is made for any balancing receipt or payment of cash or other consideration.</span></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><b>(xxii)</b> Ind AS 16 includes Appendix A which addresses how the changes in the measurement of an existing decommissioning, restoration and similar liability that result from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, or a change in the discount rate, shall be accounted for.</span></p><p><span style="font-size: medium;">The disclosure requirements of Ind AS 16 are significantly elaborate as compared to AS 10/AS 6 </span></p><p><span style="font-size: medium;"><b><a href="https://newindianaccountingstandards.blogspot.com/2023/05/ind-as-16-notes-examples.html" target="_blank">Notes on IND AS 16 with Examples</a></b></span></p>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-2094648841862477416.post-48009219625677259252012-12-08T04:26:00.002-08:002017-12-03T02:24:06.300-08:00Ind AS 7, Statement of Cash Flows and the existing AS 3, Cash Flow Statements<script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 124%; mso-fareast-font-family: Arial;">(i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 124%;">Ind AS 7 specifically includes
bank overdrafts which are repayable on demand as a part of cash and cash
equivalents, whereas the </span><span style="color: #231f20; font-family: Arial, sans-serif; font-size: 10pt;">existing AS 3 is silent
on this aspect (refer paragraph 8 of Ind AS</span></div>
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<span style="color: #231f20; font-family: "Arial","sans-serif";">7).
</span><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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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 116%; mso-fareast-font-family: Arial;">(ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 116%;">Ind AS 7 provides the treatment
of cash payments to manufacture or acquire assets held for rental to others and
subsequently held for sale in the ordinary course of business as cash flows
from operating activities. Further, treatment of cash receipts from rent and
subsequent sale of such assets as cash flow from operating activity is also
provided (refer paragraph 14 of Ind AS 7). The existing AS 3 does not contain
such requirements. <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 124%; mso-fareast-font-family: Arial;">(iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 124%;">Ind AS 7 includes the following
new examples of cash flows arising from financing activities (refer paragraph
17 of Ind AS 7): <o:p></o:p></span></div>
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<span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 9.5pt;">(a) cash payments
to owners to
acquire or redeem
the entity’s </span><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
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<br /></div>
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<span style="color: #231f20; font-family: "Arial","sans-serif";">shares</span><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="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(b)<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">cash proceeds from
mortgages <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(c)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">cash payments by a lessee for the reduction of the outstanding
liability relating to a finance lease<b>.</b> <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 117%; mso-fareast-font-family: Arial;">(iv)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 117%;">As compared to the existing AS 3, Ind AS 7 specifically requires
adjustment of the profit or loss for the effects of ‘undistributed profits of
associates and non-controlling interests’ while determining the net cash flow
from operating activities using the indirect method (refer paragraph 20(b) of
the Ind AS 7). <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(v)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">The existing AS 3 requires cash flows associated with
extraordinary activities to be separately classified as arising from operating,
investing and financing activities, whereas Ind AS 7 does not contain this
requirement. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: Arial, sans-serif; line-height: 114%;"><span style="font-size: x-small;">(vi)</span><span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span><span style="font-family: 'Times New Roman'; line-height: normal;"><span style="font-size: x-small;"> </span></span></span><!--[endif]--><span style="color: #231f20; font-family: Arial, sans-serif; line-height: 114%;"><span style="font-size: x-small;">As compared to the existing AS 3, Ind AS 7 requires to disclose
the amount of cash and cash equivalents and other assets and liabilities in the
subsidiaries or other businesses over which control is obtained or lost (refer
paragraph 40(c) and (d) of Ind AS 7). Ind AS 7 also requires to report the
aggregate amount of the cash paid or received as consideration for obtaining or
losing <o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><span style="color: #231f20; font-family: Arial, sans-serif;"> control</span><span style="color: #231f20; font-family: Arial, sans-serif;"> </span><span style="color: #231f20; font-family: Arial, sans-serif;">of</span><span style="color: #231f20; font-family: Arial, sans-serif;">
</span><span style="color: #231f20; font-family: Arial, sans-serif;">subsidiaries</span><span style="color: #231f20; font-family: Arial, sans-serif;"> </span><span style="color: #231f20; font-family: Arial, sans-serif;">or</span><span style="color: #231f20; font-family: Arial, sans-serif;"> </span><span style="color: #231f20; font-family: Arial, sans-serif;">other</span><span style="color: #231f20; font-family: Arial, sans-serif;">
</span><span style="color: #231f20; font-family: Arial, sans-serif;">businesses</span><span style="color: #231f20; font-family: Arial, sans-serif;"> </span><span style="color: #231f20; font-family: Arial, sans-serif;">in</span><span style="color: #231f20; font-family: Arial, sans-serif;"> </span><span style="color: #231f20; font-family: Arial, sans-serif;">the</span><span style="color: #231f20; font-family: Arial, sans-serif;">
</span><span style="color: #231f20; font-family: Arial, sans-serif;">statement</span><span style="color: #231f20; font-family: Arial, sans-serif;"> </span></span><span style="color: #231f20; font-family: Arial, sans-serif; font-size: 9.5pt;"> </span><span style="color: #231f20; font-family: Arial, sans-serif; font-size: 9.5pt;">of </span><span style="color: #231f20; font-family: Arial, sans-serif; line-height: 104%;">cash
flows, net of cash and cash equivalents acquired or disposed of as a part of
such transactions, events or changes in circumstances (refer paragraph 42 of
Ind AS 7). The existing AS 3 does not contain such requirements.</span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(vii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 7 requires to classify cash flows arising from changes in
ownership interests in a subsidiary that do not result in a loss of control as
cash flows from financing activities (refer paragraphs 42A and 42B of Ind AS
7). The existing AS 3 does not contain such a requirement. <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(viii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 7 mentions the use of Equity or Cost method while
accounting for an investment in an associate or a subsidiary (refer paragraph
37 of Ind AS 7). It also specifically deals with the reporting of interest in a
jointly controlled entity using proportionate consolidation and using equity
method (refer paragraph 38 of Ind AS 7). The existing AS 3 does not contain
such requirements. <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(ix)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 7 uses the term ‘functional currency’ instead of
‘reporting currency’ (as used in the existing AS 3) <i>.</i> Ind AS 7 also
deals with translation of cash flows of a foreign subsidiary (refer paragraphs
25 to 27 of Ind AS 7) whereas in the existing AS 3, it is not dealt with. <o:p></o:p></span></div>
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<br /></div>
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<span style="color: #231f20; font-family: Arial, sans-serif; font-size: 11pt; line-height: 115%;">Ind AS 7 requires more
disclosures as compared to the existing AS 3 (refer paragraph 50 of the Ind AS
7).</span><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 124%;"> <o:p></o:p></span></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-2094648841862477416.post-89390234460184301682012-12-07T22:41:00.000-08:002017-12-08T18:38:31.057-08:00Ind AS 1, Presentation of Financial Statements and existing AS 1 (issued 1979), Disclosure of Accounting Policies<script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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<div class="Section1">
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<span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 1 generally deals
with presentation of financial statements, whereas existing AS 1 (issued1979)
deals only with the disclosure of accounting policies. The scope of Ind AS 1 is
thus much wider and line by line comparison of the difference with the present
standard is not possible. However, the major requirements as laid down in Ind
AS 1 are as follows:</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 108%;"><o:p></o:p></span></div>
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<span style="color: #231f20; font-family: "Arial","sans-serif";">(i) An enterprise shall make an explicit
statement in the financial statements of compliance with all the Indian
Accounting Standards. Further, Ind AS 1 allows deviation from a requirement of
an accounting standard in case the management concludes that compliance with
Ind ASs will be misleading and if the regulatory framework requires or does not
prohibit such a departure.</span><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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<span style="color: #231f20; font-family: "Arial","sans-serif";">(ii)
Ind AS 1 requires presentation and provides criteria for classification of
Current / Non- Current assets / liabilities.</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 103%;"><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 103%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 29.0pt; 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 29.0pt; text-align: justify; text-autospace: none; text-indent: -29.0pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 1 prohibits
presentation of any item as extraordinary Item in the statement of profit and
loss or in the notes. <o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 110%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 29.0pt; 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 28.85pt; text-align: justify; text-autospace: none; text-indent: -29.0pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.5pt; line-height: 110%; mso-fareast-font-family: Arial;">(iv)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.5pt; line-height: 110%;">Ind AS 1 requires disclosure of
judgments made by management while framing of accounting polices. Also, it
requires disclosure of key assumptions about the future and other sources of
measurement uncertainty that have significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within next
financial year. <o:p></o:p></span></div>
</div>
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<br /></div>
<div class="MsoNormal" style="line-height: 103%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 29.0pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l1 level1 lfo2; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 29.0pt; text-align: justify; text-autospace: none; text-indent: -29.0pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(v)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 1 requires
classification of expenses to be presented based on nature of expenses. <o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 29.0pt; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l1 level1 lfo2; mso-pagination: none; punctuation-wrap: simple; tab-stops: list 29.0pt; text-align: justify; text-autospace: none; text-indent: -29.0pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(vi)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 1 requires
presentation of balance sheet <i>as at the</i> <i>beginning of the earliest
period when an entity applies an accounting policy retrospectively or makes a
retrospective restatement of items in the financial statements, or when it
reclassifies items in its financial statements. </i><o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(vii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">In respect of
reclassification of items, Ind AS 1 requires disclosure of nature, amount and
reason for reclassification in the notes to financial statements. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.4pt; 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 29pt; text-align: justify; text-indent: -29pt;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: Arial;">(viii)<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Ind AS 1 requires the financial statements to include a
Statement <o:p></o:p></span></div>
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<br /></div>
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<span style="color: #231f20; font-family: "Arial","sans-serif";">of Changes in Equity to be shown as a part of the balance sheet
which, inter alia, includes reconciliation between opening and closing balance
for each component of equity</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 103%;"><o:p></o:p></span></div>
<br />Unknownnoreply@blogger.comtag:blogger.com,1999:blog-2094648841862477416.post-76888206057134567402012-12-07T22:36:00.000-08:002017-12-03T02:18:36.953-08:00Ind AS 2- Inventories and existing AS 2- Valuation of Inventories <script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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<div class="Section1">
<div class="MsoNormal" style="line-height: 104%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 29.0pt; 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 29.0pt; text-align: justify; text-autospace: none; text-indent: -29.0pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 2 deals with the subsequent recognition of cost/carrying
amount of inventories as an expense, whereas the existing AS 2 does not provide
the same (refer paragraphs 1 and 34 of Ind AS 2). <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 119%; mso-fareast-font-family: Arial;">(ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 119%;">Ind AS 2 provides explanation
with regard to inventories of service providers whereas the existing AS 2 does
not contain such an explanation (refer paragraphs 8, 19 and 29 of Ind AS 2). <o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 116%; mso-fareast-font-family: Arial;">(iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 116%;">The existing AS 2 explains that
inventories do not include machinery spares which can be used only in
connection with an item of fixed asset and whose use is expected to be
irregular; such machinery spares are accounted for in accordance with
Accounting Standard (AS) 10, <i>Accounting for Fixed Assets</i>. Ind AS 2 does
not contain specific explanation in respect of such spares as this aspect is
covered under Ind AS 16. <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: 29.0pt; 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 28.85pt; text-align: justify; text-autospace: none; text-indent: -29.0pt; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.5pt; line-height: 113%; mso-fareast-font-family: Arial;">(iv)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif"; font-size: 10.5pt; line-height: 113%;">Ind AS 2 does not apply to
measurement of inventories held by commodity broker-traders, who measure their
inventories at fair </span><span style="color: #231f20; font-family: Arial, sans-serif; font-size: 10.5pt; line-height: 110%;">value less costs to sell.
However, this aspect is not there in the existing AS 2. Accordingly, Ind AS
2defines fair value and provides an explanation in respect of distinction
between ‘net realisable value’ and ‘fair value’. The existing AS 2 does not contain
the definition of fair value and such explanation.</span></div>
</div>
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<span style="color: #231f20; font-family: "Arial","sans-serif";">(v) Ind AS 2 provides detailed guidance in
case of subsequent assessment of net realisable value (refer paragraph 33 of
Ind AS 2). It also deals with the reversal of the write-down of inventories to
net realisable value to the extent of the amount of original write-down, and
the recognition and disclosure thereof in the financial statements. The
existing AS 2 does not deal with such reversal.</span><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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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(vi)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS 2 excludes from
its scope only the measurement of inventories held by producers of agricultural
and forest products, agricultural produce after harvest, and minerals and
mineral products though it provides guidance on measurement of such inventories
(refer paragraphs 4 and 20 of Ind AS 2). However, the existing AS 2 excludes
from its scope such types of inventories. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(vii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">The existing AS 2
specifically provides that the formula used in determining the cost of an item
of inventory should reflect the fairest possible approximation to the cost
incurred in bringing the items of inventory to their present location and
condition whereas Ind AS 2 does not specifically state so and requires the use
of consistent cost formulas for all inventories having a similar nature and use
to the entity. Ind AS 2also explains this aspect (refer paragraphs 25 and 26)<b><i>.</i></b>
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<!--[if !supportLists]--><span style="color: #231f20; font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">(viii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #231f20; font-family: "Arial","sans-serif";">Ind AS <i>2</i> requires
more disclosures as compared to the existing AS 2 (refer paragraph 36 of the
Ind AS <i>2</i>). <o:p></o:p></span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-2094648841862477416.post-39489823023842492132010-12-04T03:01:00.000-08:002012-12-06T21:13:59.746-08:00Indian Accounting: Classification of Costs:<a href="http://indianaccounting.blogspot.in/2012/11/classification-of-costs.html">Indian Accounting: Classification of Costs:</a>Unknownnoreply@blogger.com0