ACCOUNTING STANDARDS

Accounting standards are the policy documents or written statements issued from time to time by an expert accounting body in relation to various aspects of measurement, treatment and disclosure of accounting transactions or events for ensuring uniformity in accounting practices. Objectives of accounting standards: 1. Uniformity of practice 2. Comparative Analysis 3. Provide adequate information to users 4. To guide professionals (accountants, auditors, tax authorities) in dealing with those items. ACCOUNTING STANDARD 1- DISCLOSURE OF ACCOUNTING POLICIES Definition: Accounting policies refer to: 1. Specific principles 2. Method of applying these principles in the preparation and presentation of financial statements. Objective: 1. To promote better understanding of financial statements. 2. To facilitate comparative analysis with different firms and different time periods. Scope: Disclosure is required if the concepts of a) Going Concern b) Consistency c) Accrual are not followed Disclosure: This standard states that: 1. All accounting policies should be disclosed in a clear, concise manner. 2. All principles, conventions, rules and procedures adopted by the management must be disclosed. The enterprise may choose the accounting policies that suit its needs. 3. A change in the accounting policy must be disclosed. The effect of such a change should also be disclosed 4. Going concern, accrual and consistency are the fundamental accounting assumptions, if they are not followed, the fact must be disclosed, along with reasons. 5. Wrong or inappropriate treatment of an item ACCOUNTING STANDARD 2- VALUATION OF INVENTORIES Definition: Inventories are assets 1. Held for sale in the ordinary course of business 2. In the process of production for such sale

3. In the form of materials consumed in the production process or for rendering services. Objective: To determine the value of inventories that are held in stock till they are sold and revenues are realized, so that they can be recorded in the financial statements. Scope: Applicable to all inventories, other than: 1. Work in progress and directly related services under construction contracts. 2. Work in progress relating to service providers. Eg: Airtel, Vodafone, etc. 3. Shares, debentures and other financial instruments held as stock in trade. 4. Producers inventories of live stock, agricultural and forest products, mineral oils, ores and gases. These items have separate well established standards of measurement in their respective industries. Disclosure: The financial statement should disclose: 1. The accounting policies used to measure inventories. 2. The cost formula used. 3. The total carrying amount of inventories and their classification into a. Raw materials b. Work in progress c. Finished goods d. Stores and spares e. Loose tools and so on. ACCOUNTING STANDARD 3- CASH FLOW STATEMENTS Definition: 1. Cash is comprised of both cash in hand and cash at bank. 2. Cash equivalents are short term, highly liquid investments that can readily be converted to known amounts of cash. 3. Cash flows are inflows and outflows of cash and cash equivalents. Objectives: To provide users of financial statements with a basis to: 1. Assess the ability of an enterprise to generate cash flows. 2. Know how the enterprise utilizes these cash flows. Scope: An enterprise should prepare a cash flow statement and should present it along with the financial statements of each period. Disclosure of cash and cash equivalents: 1. An enterprise must disclose all cash components and should present values in the cash flow statement that correspond with values in the balance sheet.

2. An enterprise must disclose that amount of significant cash and cash components that are available but cannot be used by it, along with explanations by the management. ACCOUNTING STANDARD 4- CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE Definition: 1. A contingency is a condition that may or may not occur, and the occurrence of which may result on gain or loss to the enterprise. 2. The balance sheet of an enterprise is prepared on a particular date. This balance sheet has to be approved by the Board of Directors or any other approving authority. There maybe a significant time gap between the date on which the balance sheet is prepared and the date on which it is approved. Events occurring after the balance sheet date are significant events that take place during this time gap. They can be favorable or unfavorable. Objective: To help in the estimation of amounts relating to conditions existing on the balance sheet date. Scope: It deals with the treatment in the financial statement of: 1. Liabilities 2. Events occurring after the balance sheet date However, the following contingencies are EXCLUDED from this standard: 1. Liability of life assurance and general insurance enterprises due to policies issued. 2. Obligations under retirement benefit plans 3. Commitments arising from long-term lease contracts. Disclosure: 1. Nature of the event occurring after the balance sheet date. 2. An estimate of the financial effect of such an event or a statement that such an estimate cannot be made. ACCOUNTING STANDARD 5- NET PROFIT OR LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGES IN ACCOUNTING POLICIES Definition: 1. Ordinary activities are those activities that are undertaken by an enterprise as a part of its regular business routine. Any activity related to such ordinary activities may also be called ordinary. 2. Extra ordinary items are incomes or expenses that arise from events or transactions that are not ordinary in nature and do not occur frequently or regularly.

3. Prior period items are incomes or expenses which arise in the current period as a result of errors or omission in the preparation of financial statements of one or more prior (earlier) periods. Objective: To prescribe standards for the preparation of certain items in the statement of profit and loss so that all firms can follow these standards and prepare accounts in a uniform manner and comparative analysis would become easier. Scope: This standard deals with: 1. Presentation of ordinary activities, extra ordinary items and prior period items in the statement of profit and loss. 2. The disclosure of changes in accounting policies and the financial effect of such changes. This standard does NOT deal with tax implications arising from the above mentioned items. Taxes will be treated separately depending on the circumstances. Disclosure of prior period items: 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 current profit and loss can be perceived. Examples of prior period items are: 1. Error in calculation in providing expenditure or income. 2. Omission to account for income or expenditure. 3. Non-provision of traveling expenses for travel already undertaken. 4. Non-provision for salary already due in the earlier year. 5. Applying incorrect rate of depreciation. 6. Treating operating lease as finance lease. ACCOUNTING STANDARD 6- DEPRECIATION ACCOUNTING Definitions: 1. Depreciation is a measure of the wearing out, consumption or other loss in the value of an asset resulting from use, passage of time or obsolescence through technology and market changes. 2. Depreciable assets are assets which: a. Have a limited useful life b. That are held by the enterprise for use in production or supple, rentals, or administration, but NOT for purpose of sale. Objectives: To ensure that a depreciable asset is depreciated each accounting year throughout its useful life in an appropriate manner. Scope: This standard applies to all depreciable assets EXCEPT: 1. Forests, plantations and similar regenerative natural resources. 2. Wasting assets: for example, expenditure on exploration and extraction of mineral oils, natural gas, and other non-regenerative resources.

3. 4. 5. 6.

Expenditure on research and development. Goodwill Live stock Land (unless it has limited useful life for the enterprise)

Disclosure: 1. Total cost of the asset: Historical cost or written down value 2. Total depreciation for the period for each asset 3. Accumulated depreciation for each asset. 4. Method of depreciation. 5. Rate of depreciation for each asset. 6. If additions or sale of asset occurs, then the effect of these events on the depreciation of the asset. (Note: A change in the method of depreciation is treated as a change in accounting policy and is disclosed separately, NOT under this standard.) ACCOUNTING STANDARD 7- ACCOUNTING FOR CONSTRUCTION CONTRACTS Definition: A construction contract is a contract for the construction of a single asset (eg: building) or a combination of assets which together constitute a single project (eg: an apartment complex) Objective: To provide for the preparation and presentation of financial statements of construction undertakings on a uniform basis. Scope: This standard deals with the preparation of financial statements for construction companies and for companies which undertake construction contracts, not as contractors but on their own account (eg: joint ventures) Disclosure: A contractor (or enterprise) must make the following disclosures: 1. The method used to recognize the revenue earned by the contract within the period. 2. The method used to determine the stage of completion of the contract in progress. 3. Any change in accounting policy within the period. ACCOUNTING STANDARD-8 ACCOUNTING FOR RESEARCH AND DEVLOPMENT Definition: 1) Research is original and planned investigation undertaken with the hope of gaining new scientific or technical knowledge and undertaking. 2) Development is the transition of research findings or other knowledge into a plan or design for the production of new or substantially improved

materials, devices, products, processes, systems or services, prior to the commencement of commercial production. Objective: The Standard deals with the treatment of costs of research and development in financial statements. Scope: The standard deals with the treatment of cost of research and development in financial statements, but does not deal with the accounting implications of: 1) Research and development activities conducted for others under a contract. 2) Exploration for oil, gas and mineral deposits. 3) Research and development activities of enterprises at the construction stage. Disclosure: 1) Total amount of R&D costs should be charged as an expense in the profit and loss account. This also includes the amortized portion of deferred costs. 2) Deferred R&D costs to the extent not written off or adjusted should be shown in the balance sheet under the head miscellaneous expenditure 3) The accounting policy adopted, including amortization practice, if any.

ACCOUNTING STANDARD-9 REVENUE RECOGNITION. Definition: Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends. Objective: This standard deals explains as to when the revenue should be recognized in profit and loss account and also states the circumstances in which revenue recognition can be postponed. Scope: This Standard does not deal with the following aspects of revenue recognition to which special considerations apply: (i) Revenue arising from construction contracts. (ii) Revenue arising from hire-purchase, lease agreements; (iii) Revenue arising from government grants and other similar subsidies; (iv) Revenue of insurance companies arising from insurance contracts.

Disclosure: When revenue recognition is postponed, the disclosure of the circumstances necessitating the postponement should be made. ACCOUNTING STANDARD -10 ACCOUNTING FOR FIXED ASSETS Definition: Fixed asset is an asset which is 1) Held with the intention of being used for the purpose of producing or providing goods and services. 2) Not held for sale in the normal course of business 3) Expected to be used for more than one accounting period. Objective: The objective of this standard is to show the treatment of fixed assets in the financial statements. Scope: This standard applies to all fixed assets except 1) Forest, plantations and similar regenerative natural resource. 2) Wasting assets like minerals, oil and natural gas. 3) Expenditure on real estate development. 4) Live stock. Disclosure: The following information should be disclosed in the financial statements: (i) Gross and net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements; (ii) Expenditure incurred on account of fixed assets in the course of construction or acquisition; and (iii) Revalued amounts substituted for historical costs of fixed assets, the method adopted to compute the revalued amounts, the nature of indices used, the year of any appraisal made, and whether an external valuer was involved, in case where fixed assets are stated at revalued amounts ACCOUNTING STANDARD -11 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES. Definitions: The following terms are used in this statement:

1) Reporting currency: is the currency used in presenting the financial statements. 2) Foreign currency: is a currency other than the reporting currency of an enterprise. 3) Exchange rate: is the ratio for exchange of two currencies as applicable to the realization of a specific asset or the payment of a specific liability or the recording of a specific transaction or a group of inter-related transactions. 4) Average rate: is the mean of the exchange rates in force during a period. 5) Forward rate: is the exchange rate established by the terms of an agreement for exchange of two currencies at a specified future date. 6) Closing rate: is the exchange rate at the balance sheet date. 7) Monetary items: are money held and assets and liabilities to be received or paid in fixed or determinable amounts of money, e.g., cash, receivables, payables. 8) Non-monetary items: are assets and liabilities other than monetary items e.g. fixed assets, inventories, investments in equity shares. Objective: An enterprise may have transactions in foreign currencies or it may have foreign branches. Foreign currency transactions should be expressed in the enterprise's reporting currency and the financial statements of foreign branches should be translated into the enterprise's reporting currency in order to include them in the financial statements of the enterprise. The principal issues in accounting for foreign currency transactions and foreign branches are to decide which exchange rate to use and how to recognize in the financial statements the financial effect of changes in exchange rates.
Scope: This

Statement should be applied by an enterprise:

(a) In accounting for transactions in foreign currencies; and (b) In translating the financial statements of foreign branches for inclusion in the financial statements of the enterprise. Disclosure: An enterprise should disclose (i) The amount of exchange differences included in the net profit or loss for the period; (ii) The amount of exchange differences adjusted in the carrying amount of fixed assets during the accounting period; and

(iii) The amount of exchange differences in respect of forward exchange contracts to be recognized in the profit or loss for one or more subsequent accounting periods. ACCOUNTING STANDARD 12- ACCOUNTING FOR GOVERNMENT GRANTS Definition: 1. Government refers to the government, government agencies and similar bodies whether local, national or international. 2. Government grants are assistances by the government in cash or kind to an enterprise for previous or future compliance with certain conditions. Objective: To provide for preparation and presentation of government grants in the final accounts on a uniform basis. Scope: This standard deals with accounting for government grants (such as: subsidiaries, cash incentives, duty drawbacks, etc.) it does NOT deal with: 1. The problems arising in accounting for government grants in financial statement with regard to changing prices. 2. Government assistance other than in the form of government grants. 3. Government participation in the ownership of the enterprise. Disclosure: The following disclosures should be made: 1. The accounting policy adopted for government grants including the methods of presentation in the financial statement. 2. Classification of government grants into monetary grants and non monetary grants (i.e. in the form of assets given at a low rate or free of cost.) ACCOUNTING STANDARD 13- ACCOUNTING FOR INVESTMENTS Definition: Investments are assets held by an enterprise for: 1. Earning income by way of dividends, interest and rentals 2. Capital appreciation 3. Other benefits of the investing enterprise (Note: Assets held as stock-in-trade are NOT investments) Objective: To provide for preparation and presentation of accounts of the investing enterprise on a uniform basis. Scope: This standard deals with accounting for investments in the financial statements of the enterprise, but does NOT deal with: 1. The basis for recognition of interest, dividends and rentals earned on the investments. 2. Operating and financial leases.

3. Investments of retirement benefit plans and life insurance enterprises. 4. Mutual funds and related companies, banks, and public financial institutions. Disclosure: 1. Accounting policies followed for valuation of investment. 2. Classification of investments into Current Investments and Long-Term Investments. 3. Aggregate amount of quoted and unquoted securities. 4. Any specific information regarding investments. For example: a. Minimum holding period for sale/disposal. b. Utilization of sale proceeds. c. Non-remittance of sale proceeds of investments held outside India.

ACCOUNTING STANDARD 14- ACCOUNTING FOR AMALGAMATION Definition: 1. Amalgamation basically means the process of combining multiple enterprises into one according to the provisions of the Companies Act, 1956. 2. Transferor Company means the company which is amalgamated into another company. 3. Transferee Company means the company which absorbs the transferor company or the company into which the transferor company is being amalgamated into. Objectives: to provide for uniformity in accounting in case of an amalgamation. Scope: This standard deals with accounting for amalgamations and the treatment of any goodwill or reserves. It does NOT deal with: 1. Acquisitions which arise when one company purchases the whole or part of the shares of another company. 2. Acquisitions which arise when one company purchases the whole or part of the assets of another company. 3. Acquisitions which arise when one company purchases another company by means of purchase consideration like money, shares or any other method of payment. Disclosure: The financial statement of the transferee company should disclose the following: 1. Names and general nature of business of the amalgamating companies. 2. Effective date of amalgamation. 3. Method of accounting used. 4. Particulars of schemes sanctioned under statues like the Companies Act, 1956. ACCOUNTING STANDARD 15- ACCOUNTING FOR RETIREMENT BENEFITS IN THE FINANCIAL STATEMENTS OF EMPLOYERS

Definition: Retirement benefit schemes are arrangements to provide benefits to employees who: 1. Are leaving service 2. Retiring Or to the dependants of the employee upon his/her death. Objective: To provide for preparation of accounts in a uniform manner regarding retirement benefit schemes. Scope: This standard deals with accounting for retirement benefits in financial statements. Retirement benefits are in the form of: 1. Provident fund 2. Superannuation 3. Pension 4. Gratuity 5. Leave encashment benefit n retirement 6. Post retirement health and welfare schemes 7. Other benefits Disclosure: 1. When there is uncertainty about the number of employees who will accept an offer of termination benefits, a contingent liability arises. It should be disclosed under the head Contingent Liabilities and Contingent Assets. 2. If an expense is of significant nature to an enterprise such that the performance of the enterprise is affected, then the nature of and amount of such an expense should be disclosed (Under AS-5) 3. An enterprise should disclose information on termination benefits of key employees (Under AS- 18) ACCOUNTING STANDARD 16- BORROWING COSTS Definition: Borrowing costs are interests and other costs incurred by an enterprise in connection with the borrowing of funds. Objective: To prescribe accounting treatments for borrowing costs. Scope: This standard should be applied in accounting for borrowing costs. However this standard does NOT deal with owners equity like preference shares and equity shares. Disclosure: The financial statement should disclose: 1. The accounting policy adopted for borrowing costs. 2. The amount of borrowing cost capitalized during the period. ACCOUNTING STANDARD 17- SEGMENT REPORTING

Definition: A business segment is a distinguishable component of an enterprise that is engaged in providing an individual or a group of related products or services and is subject to returns and risks that are different from the other segments of the enterprise. Objective: To establish principles for reporting financial information about the different types of products and services an enterprise produces and the different geographical areas in which it operates. Scope: The standard should be applied in presenting general-purpose financial statements and can also be applied in case of consolidated financial statements. Disclosure: The primary segments should disclose the following: 1. Revenue from external customers. 2. Revenue from transactions with other segments. 3. Segment result. 4. Cost of acquiring tangible and intangible fixed assets. 5. Depreciation and amortization expenses. 6. Carrying amount of segment assets. 7. Segment liabilities. 8. Non-cash expenses other than depreciation and amortization. 9. Reconciliation of revenue, result, assets and liabilities. ACCOUNTING STANDARD 18- RELATED PARTY DISCLOSURES Definition: 1. Related party- Parties are considered to be related if at any time during the reporting period if: a. one has the ability to CONTROL the other party or b. It exercises significant INFLUENCE over the other partys financial/operating decisions. 2. Related party transactions- a transfer of resources or obligations between the related parties whether or not a price is paid for the transfer. Objective: To establish requirements for disclosure of: 1. Related party relationships. 2. Transactions between a reporting enterprise and its related parties. Scope: This standard should be applies in reporting related party relationships and transaction between a reporting enterprise and its related parties. The requirements of this standard apply to all the financial statements of each reporting enterprise as also to the consolidated financial statements of a holding company. Disclosure: For the purpose of disclosure, related parties can be categorized as under: When the existence of a relationship is due to the concept of control, even though there is no actual transaction between the parties, the following disclosure is needed:

1. Name of the related party. 2. Nature of the related party relationship. 3. When the relationship is only due to influence, NOT control, then no disclosure is needed When transactions take place between related parties, then the following should be disclosed, in case of both, control and influence: 1. Name of the related party. 2. Description of the relationship. 3. Description of the nature of the transaction. 4. Volume of transactions. 5. Any other element of transactions which are required to understand financial statements. 6. Amount of outstanding items and provision for bad or doubtful debts. 7. Amounts written off or written back in respect of debts due to or due from related parties. The disclosure is not applicable when it conflicts with the reporters duties of confidentiality. Disclosure is a must on the part of related parties even if the transactions are arms length transactions or transactions not influenced by the relationship. ACCOUNTING STANDARD 19- LEASES Definition: 1. A lease is an agreement in which the lessor conveys to the lessee the right to use an asset for a period of time in return for payment. 2. A financial lease is a lease that substantially transfers all the risks and rewards that are attached to the ownership of an asset. 3. An operating lease is any lease other than a financial lease. Objective: To prescribe for lessee and lessor the appropriate accounting policies and disclosures in relation to finance and operating leases. Scope: This standard applies to all leases, EXCEPT: 1. Lease agreements to explore or use natural gas, oil, gas, timber, metals and other mineral rights. 2. Licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents and copyrights. 3. Lease agreements to use land. Disclosure: The following disclosures in the books of the lessor and the lessee should be made: Disclosure of OPERATING lease in the books of the LESSOR: 1. General description of significant leasing agreements.

2. Accounting policy for initial down payment. 3. Future lease payments classified into: a. Not later than 1 year b. 1 year 5 years c. Later than 5 years Disclosure of OPERATING lease in the books of the LESSEE: 1. General description of significant leasing agreements. 2. Future lease payments classified into: a. Not later than 1 year b. 1 year 5 years c. Later than 5 years 3. Lease payments recognized in the profit and loss account for the period. Disclosure of FINANCE lease in the books of the LESSOR: 1. General description of significant leasing agreements. 2. Accounting policy for initial direct cost. 3. Reconciliation of total gross investment in lease with present value of Minimum Lease Payment (MLP) receivable on balance sheet date. 4. MLP receivable in the following categories: a. Not later than 1 year b. 1 year 5 years c. Later than 5 years Disclosure of FINANCE lease in the books of the LESSEE: 1. Asset under finance lease should be separated from assets owned. 2. Reconciliation of total Minimum Lease Payment (MLP) receivable with its present value on balance sheet date. 3. MLP in the following categories: a. Not later than 1 year b. 1 year 5 years c. Later than 5 years ACCOUNTING STANDARD-20 EARNING PER SHARE. Definition: 1) An equity share is a share other than a preference share. 2) A preference share is a share carrying preferential rights to dividends and repayment of capital. 3) A potential equity share is a financial instrument or other contract than entitles. Or may entitle its holder to equity shares.

Objective: To prescribe principles for determination and presentation of earning per share which will improve comparison of performance among different enterprises for the same period and among different periods for the same enterprise. Scope: The standard should be applied by enterprises whose equity shares or potential equity shares are listed on a recognized stock exchange in India. An enterprise which has neither equity nor potential equity shares which are listed but which discloses earnings per share should calculate and disclose earning per share in accordance with this standard. Disclosure: Disclosure of numerator and reconciliation the amount used as numerator for calculating basic and diluted EPS and its reconciliation with net profit or loss for that period. Disclosure of denominator and reconciliation weighted average number of shares used as denominator for calculating basic and diluted EPS and reconciliation of their denominators to each other. Basic and diluted EPS: limited revision of AS-20 prescribes that if profit or loss includes extraordinary items as per AS-5 the enterprise may also present, with appropriate description on the face of the statement of profit/loss: 1) basic earnings per share computed on the basis of earnings excluding extraordinary items (net of tax expenses) 2) Diluted earning per share computed on the basis of earnings excluding extraordinary items (net of tax expense).

ACCOUNTING STANDARD -21 CONSOLIDATED FINANCIAL STATEMENTS Definition: 1) A subsidiary is an enterprise that is controlled by another enterprise (known as the parent). 2) A parent is an enterprise that has one or more subsidiaries. 3) A group is a parent and all its subsidiaries. Objectives: The objective of this standard is to lay down principles and procedures for preparation and presentation of consolidated financial statements that are presented by a parent to provide financial information about the economic activity of its group.

These statements are intended to present financial information about a parent and its subsidiary (ies) as a single economic entity to show the economic resources controlled by the group, the obligations of the group and the results the group achieves with its resources. Scope: The standard should be applied in the preparation of consolidated financial statements for a group of enterprises under the control of a parent. The standard should also be applied in accounting for investments in subsidiaries in the separate financial statements of a parent. The standard does not deal with: 1) Method of accounting for amalgamations and their effects on consolidation, including goodwill arising on amalgamation. 2) Accounting for investments in associates. 3) Accounting for investment in joint ventures. Disclosure: Following disclosure should be made in consolidated financial statements 1) List of all subsidiaries. 2) Proportion of ownership interest. 3) Nature of relationship between parent and subsidiary, whether direct control or control through subsidiaries. 4) Name of the subsidiary in which reporting dates are different. 5) The fact of different accounting policies applied for preparation of consolidated financial statements. 6) If consolidation of particular subsidiary has not been made as per the grounds allowed in accounting standards, the reason for not consolidating should be disclosed. ACCOUNTING STANDARD -22 ACCOUNTING FOR TAXES ON INCOME. Definition: 1) Accounting income (loss) is the net profit or loss for a period as reported in the statement of profit/loss, before deducting income tax expense or adding income tax saving. 2) Taxable income (tax loss) is the amount of the income (loss) for a period, determined in accordance with the tax laws, based upon which income tax payable (recoverable) is determined. 3) Tax expense (tax saving) is the aggregate of current tax and deferred tax charged or credited to the statement of profit or loss for the period. 4) Current tax is the amount of income tax determined to be payable (recoverable) in respect of the taxable income (loss) for a period. 5) Deferred tax is the tax effect of timing differences. Objective: To prescribe accounting treatment for taxes on income.

Scope: The standard should be applied in accounting for taxes on income. This includes the determination of the amount of the expense or saving related to taxes on income in respect for an accounting period and the disclosure of such an amount in the financial statements. For the purpose of this standard, taxes on income include all domestic and foreign taxes which are based on taxable income. Disclosure: 1) The break up of deferred tax asset/liability should be disclosed. 2) In case of deferred tax asset arising out of unabsorbed depreciation or loss, evidence supporting recognition should be disclosed. 3) Deferred tax/liability should be disclosed separately from current assets/liabilities. They should also be distinguished from advance tax/tax provisions/tax refund due. 4) Deferred tax liability should be set off, if permissible under the tax laws but to be shown separately if not permissible. ACCOUNTING STANDARD -23 ACCOUNTING FOR INVESTMENTS IN ASSOCIATES IN CONSOLIDATED FINANCIAL STATEMENTS. Definition: 1) An associate is an enterprise in which the investor has significant influence and which is neither subsidiary nor a joint venture of the investor. 2) Significant influence is the power to participate in the financial and/or operating policy decisions of the investee but not control over those policies. Objective: To see out principles and procedures for recognizing, in the consolidated financial statements, the effects of the investments in associates on the financial position and operating results of a group. Scope: The standard should be applied in accounting for investments, in associates in the preparation and presentation of consolidated financial statements by an investor. The standard does not deal with accounting for investments in associates in the preparation and presentation of separate financial statements by an investor. Disclosure: 1) Description of associate including the proportion ownership interest should be disclosed.

2) Investment in associates accounted for using the equity method should be classified as long-term investments. 3) Difference in reporting dates of financial statement of associates and of the investor should be disclosed.

ACCOUNTING STANDARD -24 DISCONTINUING OPERATIONS Definition: A discounting operation is a component of an enterprise: (a) That the enterprise, pursuant to a single plan is: 1) Disposing of substantially in its entirely, such as by seeing the component in a single transaction or by de-merger or by spin-off of ownership of the component to the enterprises shareholders; or 2) Disposing of piecemeal, such as by selling off the components assets and settling its liabilities individually; or 3) Terminating through abandonment; and (b) That represents a separate major line of business or geographical area of operation; and (c) That can be distinguished operationally and for financial reporting purposes. Objective: To establish principles for reporting information about discontinuing operations, there by enhancing the ability of uses of financial statements to make projections of an enterprises cash flows, earnings- generating capacity, and financial position by segregating information about discontinuing operations from information about continuing operations. Scope: The standard applied all discontinuing operations of an enterprise. The requirements related to cash flow statement contained in this standard are applicable where an enterprise prepares and presents a cash flow statement. Disclosure: 1) Initial disclosure-first disclosure after initial disclosure event occurs about the discontinuing operations. (a) Description of the discontinuing operation. (b) Business or geographical segments in which it is reported. (c) Date and nature of initial disclosure event. (d) Timing of expected completion of discontinuance. (e) Carrying amount of total assets and liabilities to be disposed of. (f) Amount of revenue and expense attributable to discontinuing operations.

(g) Amount of pre-tax profit or loss and tax expense attributable to discontinuing operation. (h) Net cash flows attributable to the operating, investing and financial activities of the discontinuing operations. 2) Other disclosure-when an enterprise disposes of assets or settles liabilities attributable to a discontinuing operation the following other informations are also disclosed: (b) Amount of gain or loss recognized on the disposal of assets or settlement of liabilities and related income tax. (c) Net selling prices from the sale of those net assets for which the enterprise has entered into binding sale agreements and the expected timing thereof and carrying amount of those assets. 3) Manner of disclosure: The disclosure of amount of pre-tax profit or loss and tax expense and amount of gain or loss recognized on the disposal of assets and settlement of liabilities should be disclosed on the face of statement of profit/loss accounts, other information should be disclosed in the notes to accounts. 4) Updating the disclosure: The disclosure required for discontinuing operation should continue in financial statements for the period upto and including the period in which the discontinuance is completed. The disclosure required should be updated. ACCOUNTING STANDARD -25 INTERIM FINANCIAL REPORTING Definition: 1) Interim financial report means a financial report containing either a complete set of financial statements or a set of consolidated financial statements for an interim period. 2) Interim period is a financial reporting period shorter than a full financial year. Objective: To prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in a complete or condensed financial statements for an interim period, thereby enabling the improvement of investors, creditors, and others ability to understand an enterprises capacity to generate earnings and cash flows, its financial condition and liquidity. Scope: The standard is applicable to enterprises which are required to or elects to prepare and present interim financial report. Minimum components of an interim financial report:

(a) (b) (c) (d)

Condensed balance sheet. Condensed statement of profit and loss. Condensed cash flow statement. Selected explanatory notes.

Minimum disclosure of notes: Following minimum disclosure of notes and explanatory statements should be made: 1) A statement that the same accounting policies are followed in the interim financial statements as these followed in the most recent annual financial statements or, if these policies have been changed, a description of the nature and effect of the change. 2) Description about the seasonal or cyclical effect on interim financial year. 3) Unusual factors that affected assets, liabilities, equity, net income, and cash flow. 4) Effect of change in estimates. 5) Change in debt and equity through issuance, repurchase and repayments. 6) Details of dividend payment. 7) Segment revenue, segment result for business segment or geographical segment, whichever is the primary basis of the reporting entity. 8) Material event that occurred after the end of interim period. 9) Effect of changes in composition of the enterprise during interim period -change in composition include business combination, acquisition restructuring, disposal of subsidiaries. Etc 10) Material changes in contingent liabilities since the last balance sheet date. ACCOUNTING STANDARD -26 INTANGIBLE ASSETS Definition: 1) An intangible asset is an identifiable non monetary asset, without physical substance held for use in the use of production or supply or guide or services, for rental to others, or for administrative purposes. 2) An asset is a resource: (a) controlled by an enterprise as result of past events and (b) From which future economic benefits are expected to flow to the enterprise. Objective: To prescribe the accounting treatment for intangible assets that are not dealt with specifically in other accounting standard. Scope: The standard should be applied by all enterprises in accounting for intangible assets, except: (b) Intangible assets that are covered by other accounting standard. (c) Financial asset. (d) Mineral rights and expenditure on the exploration for or development and extraction of minerals, oil, natural gas and similar non-regenerative resources: and

(e) Intangible asset arising in insurance enterprises from contacts with policy holders. Disclosure: 1) the financial statement should disclose the following in respect of intangible asset: (a) Useful life or amortization rate. (b) Amortization method. (c) Gross carrying amount, accumulated amortization and impairment laws at the beginning and at the end of the period (d) Reconciliation of carrying amount at the beginning and at the end of the period. Further disclosure: 1) If amortization period is more than 10 years, the reason why the useful life is estimated for more than 10 years. 2) Carrying amount of intangibles, whose life is restricted, pledged on security. 3) Research and development expenses recognized as expenses during the period. ACCOUNTING STANDARD -27 FINANCIAL REPORTING OF INTERESTS IN JOINT VENTURES Definition: 1) A joint venture is a contractual agreement whereby two or more parties, undertake an economic activity which is subject to joint control. 2) A venture is a party to a joint venture and has joint control over that joint venture. 3) An investor to a joint venture is a party to a joint venture and does have not control over that joint venture. Objective: To set out principles and procedures for accounting for interests in joint ventures and reporting of joint venture assets, liabilities, income and expenses in the financial statement of ventures and investors. Scope: The standard should be applied in accounting for interests in joint ventures and the reporting of joint venture assets, liabilities, income and expenses in the financial statements of ventures and investors, regardless of the structures or forms under which the joint venture activities take place. Disclosure: A venture should make the following disclosures in its separate as well as in consolidated financial statement: 1) A list of all joint ventures describing their interest in significant joint venture. 2) Proportion of interest in case of jointly controlled entity.

3) The aggregate amount of each of the assets, liabilities, income and expenses relating to its interest in the jointly controlled entities. 4) Amount of capital commitments in the joint venture that has been incurred jointly with other venturer and its share in share in such capital commitments. 5) Any contingency that has been incurred in relation to its interest in joint venture. 6) Its share of contingencies that has been incurred jointly with other venturer. 7) Contingencies for which the venturer is liable to other venturer of joint venture.

ACCOUNTING STANDARD -28 IMPAIRMENT OF ASSETS Definition: Impairment of asset is weakening in value of an asset. As per AS-28 asset is said to be impaired when carrying amount of asset is more than its recoverable amount. Carrying amount: Carrying amount is the amount at which asset is shown in the balance sheet. The asset is shown in balance sheet at its cost less accumulated depreciation or amortization and accumulated impairment losses. Objective: The objective of this Statement is to prescribe the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount. Scope: The accounting standard is applicable to all assets like fixed assets and intangible assets but it does not apply to the following assets. 1) inventories 2) asset arising from construction contracts 3) financial asset 4) Deferred tax asset. Disclosure: The disclosure for this accounting standard has to be done in four major categories. 1) basic requirements for each class of assets 2) Requirement for segment reporting. 3) Requirement for cash generating unit. 4) Requirement for reversal of impairment loss.

ACCOUNTING STANDARD -29 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS Definitions: 1) Provision: provision is a liability, which can be measured only by using a substantial degree of estimation. 2) Contingent liability: as per AS-29, a contingent liability is a possible obligation that arises from past events and existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the enterprises. 3) Contingent assets: as per AS-29, a contingent liability is a possible asset that arises from past events and existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the enterprises. Objectives: The objective of AS-29 is to prescribe the accounting for1) provisions 2) Contingent liabilities. 3) Contingent assets. 4) Provision for restructuring cost. Scope: This Standard should be applied in accounting for provisions and contingent liabilities and in dealing with contingent assets, except: (a) Those resulting from financial instruments that are carried at fair value; (b) Those resulting from executory contracts, except where the contract is onerous. Disclosure: The following should be disclosed according to AS-29. 1) Opening balance. 2) Addition to and use of the provision. 3) Unused amount of the provision 4) Closing balance of the provision. 5) A brief description of provision. 6) Major assumption about future events made while measuring the provision and indication of uncertain items. 7) The expected reimbursement recognized as an asset.