INCOME COMPUTATION AND

DISCLOSURE STANDARD (ICDS)

CA. Ritesh
Mittal

CA. Ritesh Mittal

Sanjay Kumar Kothari and Co.,
Chartered Accountants,
MOBILE: 09885377421
mrriteshmittal@gmail.com
 INTRODUCTION

The Converged IFRS (Ind AS), will be having significant

impact on financial statements for many entities.
Ind ASs are meant to primarily serve the needs of investors
and hence are not suitable for the purposes of tax
computation.
Eg: Fair Value over Historical Cost.
Balance Sheet Approach
Discounting Techniques
A clear need was felt for tax accounting standards that
would guide the computation of taxable income.
Also to Harmonization of Different Accounting Treatments
for different assesses.
 INTRODUCTION

Section 145(1):
Profits & gains of business or profession or Income from
other sources shall subject to sub -section (2), be computed in
accordance with either cash or mercantile system of
accounting regularly employed by the assessee
Section 145(2):
Empowers the Central Government to notify ICDS for any class
of assessees or for any class of income

Accordingly, two tax accounting standards were notified

1.Disclosure of accounting policies
2.Disclosure of prior period and extraordinary items and
changes in accounting policies
 INTRODUCTION

Noncompliance of ICDS gives power to the Tax Authority

to assess income on best judgment basis and also levy
penalty on additions to returned income.

The CBDT issued draft 14 Tax Accounting Standards in

2012.
On the basis of the suggestions and comments received
from the stakeholders, CBDT had revised and issued 12
draft ICDS for public comments
 INTRODUCTION

Vide notification No. S.O. 892(E) dated 31 March 2015 , the

Central Government notified ten ICDS w.e.f. 1 April 2015 i.e.
AY 2016-17
Clarifications sought by stakeholders were examined by an
Expert Committee and vide notification no. 87/2016 dated
29 September 2016, the ICDS notified in March 2015 were
replaced with revised ICDS w.e.f. 1 April 2016 i.e. AY 2017 -18
Vide notification no. 88/2016 dated 29 September 2016 ,
Form 3CD was amended to capture the disclosures and
compliance mandated under the revised ICDS
The CBDT has recently issued Circular No. 10/2017 dated 23
March 2017 providing clarifications on specific issues (FAQ)
 APPLICABILITY OF ICDS

ICDS shall apply to all taxpayers other than an individual

or a Hindu undivided family who is not required to get
his accounts of the previous year audited in accordance
with the provisions of section 44AB of the said Act

Following Mercantile system of Accounting.

For the Purpose of Computation of Total income
under the Head Profit and gains of business or
profession or Income from other sources

Applicable from assessment year 2017 -18 and

subsequent assessment years
Not Applicable for M aintenance of Books of Accounts
 APPLICABILITY OF ICDS
PREAMBLE

This Income Computation and Disclosure Standard is

applicable for computation of income chargeable under
the head
- Profits and gains of business or profession or
- Income from other sources
and not for the purpose of maintenance of books of
accounts.

In the case of conflict between the provisions of the

Incometax Act, 1961 and this Income Computation and
Disclosure Standard, the provisions of the Act shall
prevail to that extent.
 APPLICABILITY OF ICDS (FAQ)
CLARIFICATIONS PROVIDED BY CBDT
ICDS will override prior court judgments.
If there is a conflict between ICDS and Rules, the specific rule
shall prevail.
ICDS shall apply to assesses irrespective of whether they
follow Accounting standards or Ind-AS.
ICDS shall not apply for the computation of MAT. However,
ICDS will apply for the computation of Alternate Minimum Tax
(AMT).
ICDS shall apply to Banks, Non-Banking Financial Institutions,
Insurance companies, power sector, etc... unless any sector -
specific provisions are made under the Income Tax Act, 1961
(Act) or under the ICDS.
 APPLICABILITY OF ICDS (FAQ)
CLARIFICATIONS PROVIDED BY CBDT
Applicability of ICDS to non -corporate taxpayers who are not
required to maintain books of account and/or those who are
covered by presumptive scheme of taxation like sections 44AD,
44AE, 44ADA, 44B, 44BB, 44BBA, etc. of the Act

The relevant provisions of ICDS shall also apply to the persons

computing income under the relevant presumptive taxation
scheme.
For example, for computing presumptive income of a partnership
firm under section 44AD of the Act, the provisions of ICDS on
Construction Contract or Revenue recognition shall apply for
determining the receipts or turnover, as the case may be.
Individual /HUF not falling under audit are outside the purview.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 KEYPOINTS

An entity need not maintain separate books of accounts

to compute income under ICDS.
The differences between ICDS and Ind AS/current AS as
the case needs to track them and make adjustments in
computation.
Current tax audit requirements has been enhanced to
require auditors to report on the correctness of tax
computation under ICDS.
ITR Forms & Tax Audit Report has been revised.
SCHEDULE ICDS

New
Schedule is
added in
ITR 3,5 & 6

Effect of ICDS
on profit
Need to be
disclosed
DISCLOSURES IN ITR FORMS
OTHER INFORMATION
 DISCLOSURES IN FORM 3CD

(Notification no. 88/2016 dated 29 September 2016)

Clause 13(d) under Part-B:

(d) Whether any adjustment is required to be made to

the profits or loss for complying with the provisions of
income computation and disclosure standards notified
under section 145(2)
(e) If answer to (d) above is in the affirmative, give
details of such adjustments:
 DISCLOSURES IN FORM 3CD

Increase in Decrease in Net effect

profit (Rs.) profit (Rs.) (Rs.)
ICDS I Accounting Policies
ICDS II Valuation of Inventories
ICDS III Construction Contracts
ICDS IV Revenue Recognition
ICDS V Tangible Fixed Assets
ICDS VI Changes in Foreign Exchange rates
ICDS VII Government Grants
ICDS VIII Securities
ICDS IX Borrowing Costs
ICDS X Provisions, Contingent Liabilities and
Contingent Assets
Total
DISCLOSURES IN FORM 3CD
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 ICDS 1

Accounting

Policies
 ACCOUNTING POLICIES IN ICDS IS
APPLICABLE FOR COMPUTING INCOME
CBDT has clarified in FAQ no 1
ICDS is not meant for maintenance of books of account or
preparing financial statements.
Persons are required to maintain books of account and
prepare financial statements as per accounting policies
applicable to them. For example, companies are required to
maintain books of account and prepare financial statements
as per requirements of Companies Act, 2013.
The accounting policies mentioned in ICDS-I being
fundamental in nature shall be applicable for computing
income under the heads "Profits and gains of business or
profession" or "Income from other sources".
 ICDS - 1 ACCOUNTING POLICIES

Scope: This ICDS deals with significant accounting

policies

Definition Accounting Policies

The accounting policies refer to the specific accounting
principles and the methods of applying those principles
adopted by a person.
 ICDS - 1 ACCOUNTING POLICIES

Fundamental Accounting Assumptions are

a) Going Concern No intention/ Necessity of
liquidation
b) Consistency Policies followed are consistent
c) Accrual As and when earned/ Incurred & Recorded
in the year to which relates.
 CONSIDERATIONS IN THE SELECTION

Accounting policies adopted by a person shall be such so

as to
represent a true and fair view of
the state of affairs and
income of the business, profession or vocation.
For this purpose,
i substance and not merely by the legal form; and
ii marked to market loss or an expected loss shall not be
recognised unless required by other ICDS.
 CHANGE IN ACCOUNTING POLICY

Change in Accounting Policy

An accounting policy shall not be changed without
reasonable cause.

The CBDT has clarified in FAQ no 9 that under the Act,

reasonable cause is an existing concept and has
evolved well over a period of time conferring desired
flexibility to the tax payer in deserving cases
DISCLOSURE OF ACCOUNTING POLICIES

All significant accounting policies adopted by a person

shall be disclosed.
If fundamental assumptions are not followed, same shall
be disclosed.
Disclosure of accounting policies or of changes therein
cannot remedy a wrong or inappropriate treatment of
the item.
DISCLOSURE OF ACCOUNTING POLICIES

Change in Accounting Policy:

Any change in an accounting policy which has a material
effect shall be disclosed.
The amount by which any item is affected by such change
shall also be disclosed to the extent ascertainable.
If Amount can not be quantified, same shall be indicated.
Change bearing No material effect in previous year but which
is reasonably expected to have a material effect in later
previous years,
the fact of such change shall be appropriately disclosed
in the previous year in which the change is adopted and
also in the previous year in which such change has material
effect for the first time.
 TRANSITIONAL PROVISIONS

All contract or transaction existing on the 1st day of

April, 2016 or entered into on or after the 1st day of
April, 2016
shall be dealt with in accordance with the provisions of
this standard
after taking into account the income, expense or loss, if
any, recognised in respect of the said contract or
transaction for the previous year ending on or before
the 31st March,2016.
 ICDS 1 & AS 1
KEY DIFFERENCES
Concept of Materiality is taken away in ICDS:
Concept of Materiality for selection of accounting
policies is omitted.
Change in Accounting Policy:
Accounting policies shall not be changed without a
reasonable cause
What is reasonable?
 ICDS 1 & AS 1
KEY DIFFERENCES
Concept of Prudence is taken away in ICDS :
Expected losses or mark-to-market losses shall not be
recognized unless permitted by any other ICDS

In the absence of prudence as a Consideration for

Selecting an Accounting Policy, there could be
situations which could result in earlier recognition of
income or gains or later recognition of expenses.

Concept of Prudence : Profits are recognised only when realised

& Provision is made for all known liabilities and losses even
though the amount cannot be determined with certainty
 IMPACT OF PRUDENCE - EXAMPLE

Year Loss Anticipated Computation

Income Income Books of Remarks
Tax Accounts
Expected Anticipated Foreseeable loss is not
1 loss = Income = 1,000 (5,000) allowed as deduction but
(5000) 1,000 anticipated profit is taxed

Actual Actual As per ICDS, the actual

2 loss = Income = (5,000) 1,000 loss will now be allowed
(5,000) 1,000 in year 2 and actual gain
will be regarded as
income in accounts.
 MARKET TO MARKET ( MTM) GAIN

CBDT has clarified in FAQ no 8 that Same principle as

contained in ICDS-I relating to MTM losses or an
expected loss shall apply mutatis mutandis to MTM
gains or an expected profit.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 ICDS II

Valuation

Of

Inventories
 ICDS 2 -VALUATION OF INVENTORIES

Scope
Applies to valuation of Inventories except;
a) Works in progress under construction contract (ICDS III)
b) Works in progress dealt by other ICDS
c) Shares/ Debentures/other Financial instruments held as
stock in trade (ICDS VIII Securities)
d) Producers inventories of Livestock/ agriculture/ Forest
produce /mineral oils/ores/gases to the extent measured
at net realizable value.
e) Machinery/ Spares used only in connection with Tangible
fixed asset and their use in expected to be irregular
(ICDS V- Tangiable assets).
 KEY DEFINITIONS AND
VALUATION OF INVENTORIES
a) Inventories
i. Stocks held for sale in ordinary course of business.
ii. Stocks in the process of production for such sale
iii.Stocks to be consumed in production of in rendering
of services
b) Net Realizable value :
Estimated selling price in the ordinary course of
business less estimated costs of completion and costs
necessary for making sale
Valuation of Inventories - Measurement
Inventories shall be valued at cost, or net realisable
value, whichever is lower.
 COST OF INVENTORIES

Cost of Inventories include expenses incurred on purchases

/ services / conversion and other costs incurred for
bringing the inventory in present location / condition.

Purchase price include duties / taxes / freight and other

directly related expenses but excludes Discounts / rebates
etc.

Cost of services for service provider consists of Labour/

Supervisionary and other directly related expenses.

Cost of conversion include directly related expenses and

systematic allocation of fixed/ Variable overheads usually
based on capacity of production
 COST OF INVENTORIES

Where more than one product is produced

simultaneously the allocation of costs shall be rational
& consistent.
Values of immaterial by products/Scraps/ Wastages
shall be based on deducted from cost of main product.
Other cost to the extent present location/condition
Interest and other borrowing costs shall not be part of
costs of inventories unless they are recognized as part
of cost as per ICDS on Borrowing costs.
Exclude Abnormal cost, Storage Cost, Administrative
& Selling cost.
 NET REALISABLE VALUE

Inventories shall be written down to net realisable

value on an itembyitem basis.
Net realisable value shall be based on the most reliable
evidence available at the time of valuation.
Materials and other supplies held for use in the
production of inventories shall not be written down
below the cost, where the finished products in which
they shall be incorporated are expected to be sold at or
above the cost.
 COST FORMULATES

Specific Identification Method

For not ordinarily interchangeable inventories and
Produced for Specific Projects
FIFO or Weighted Average Method
For Interchangeable / Large number of inventories
specific identification of costs shall not be made.
The formula used shall reflect the fairest possible
approximation
Retail Method
Where it is impracticable to use the above methods
retail method can be used in the retail trade
for measuring inventories of large number of rapidly changing
items that have similar margins.
 ICDS 2 -VALUATION OF INVENTORIES
(AS-2)
Standard Cost of Measurement of Inventory is
allowed in the revised ICDS (Revised ICDS)

Change in Method of valuation of inventory :

once adopted by a taxpayer in any tax year shall not be
changed without a reasonable cause.
 ICDS 2 -VALUATION OF INVENTORIES
OPENING INVENTORIES
ICDS specifically incorporates that
The value of the inventory as on the beginning of the
previous year shall be
(i) the cost of inventory available, if any, on the day of
the commencement of the business when the business
has commenced during the previous year; and
(ii) the value of the inventory as on the close of the
immediately preceding previous year, in any other case.

Hence by Change in Method of valuation of inventory

the opening inventory will remain same
 VALUATION OF INVENTORIES IN CASE
OF FIRM/AOP/BOI DISSOLUTION
In case of dissolution of a partnership firm or
association of person or body of individuals,
notwithstanding whether business is discontinued or
not, the inventory on the date of dissolution shall be
valued at the net realizable value.
 DISCLOSURE

Accounting policies adopted in measuring the

inventories including cost formulae (FIFO/Weighted
Average Method) used.

Where Standard Costing has been used as a

measurement of cost, details of such inventories and a
confirmation of the fact that standard cost
approximates the actual cost; and

Total Carrying amount of inventories and its

classification.
 TRANSITIONAL PROVISIONS

Interest and other borrowing costs,

which do not meet the criteria for recognition of interest as a
component of the cost,
but included in the cost of the opening inventory as on the 1st
day of April, 2016,
shall be taken into account for determining cost of such
inventory for valuation as on the close of the previous year
beginning on or after 1st day of April, 2016
if such inventory continue to remain part of inventory as on
the close of the previous year beginning on or after 1st day of
April, 2016.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
ICDS III - Construction Contracts
As 7
 REAL ESTATE DEVELOPERS,
BOT PROJECTS AND LEASES

CBDT Clarification in FAQ 12 that at present there is

no specific ICDS notified for real estate developers,
BOT projects and leases.

Therefore, relevant provisions of the Act and ICDS shall

apply to these transactions as may be applicable.
 ICDS III - CONSTRUCTION CONTRACTS

Scope: This ICDS Should be applied in determination of income

for a construction contract of a contractor

Definitions:
Construction contract is a contract specifically negotiated for
the construction of an asset or a combination of assets that are
closely interrelated or interdependent in terms of their design,
technology and function or their ultimate purpose or use and
includes :
contract for the rendering of services which are directly related to
the construction of the asset, for example, those for the services of
project managers and architects;
contract for destruction or restoration of assets, and the
restoration of the environment following the demolition of assets.
 DEFINITIONS

Fixed price contract is a construction contract in

which the contractor agrees to a fixed contract price,
or a fixed rate per unit of output, which may be subject
to cost escalation clauses.
Cost plus contract is a construction contract in
which the contractor is reimbursed for allowable or
otherwise defined costs, plus a mark up on these costs
or a fixed fee.
Retentions are amounts of progress billings which
are not paid until the satisfaction of conditions
specified in the contract for the payment of such
amounts or until defects have been rectified.
 THE RECOGNITION OF CONTRACT
REVENUE AND EXPENSES
Contract revenue and contract costs
associated with the construction contract
should be recognised as revenue and expenses respectively
by reference to the stage of completion of the contract activity
at the reporting date.

The recognition of revenue and expenses

by reference to the stage of completion of a contract
is referred to as the percentage of completion method.
Under this method, contract revenue is matched with the
contract costs incurred in reaching the stage of completion,
resulting in the reporting of revenue, expenses and profit which
can be attributed to the proportion of work completed.
 ICDS III - CONSTRUCTION CONTRACTS

Percentage Completion Method in ICDS:

During the early stages of a contract, where the outcome of
the contract cannot be estimated reliably contract revenue is
recognised only to the extent of costs incurred.
The early stage of a contract shall not extend beyond 25 % of
the stage of completion.
 ICDS III - CONSTRUCTION CONTRACTS
FORESEEABLE LOSSES
Foreseeable Losses are not allowed as deduction :
As per ICDS Future or anticipated losses shall not be
allowed, unless such losses are actually incurred.
Losses incurred on a contract shall be allowed only in
proportion to the stage of completion.

AS-7 provides for Recognition of foreseeable losses

It permits to recognise immediately the foreseeable losses on a
contract regardless of commencement or stage of completion of
contract.
 ICDS III - CONSTRUCTION CONTRACTS

Reversal of revenue
AS-7 provides for reversal of revenue on account of
uncertainty arising on realisability of contract revenue
which was already recognized as income.

ICDS - Where contract revenue already recognized as

income is subsequently written-off in books, it shall be
recognized as an expense and not as an adjustment of
contract revenue.
 STAGE OF COMPLETION

The stage of completion of a contract shall be

determined with reference to:
a) the proportion that contract costs incurred for work
performed upto the reporting date bear to the
estimated total contract costs; or
b) surveys of work performed; or
c) completion of a physical proportion of the contract
work.

Contract Revenue shall be recognised when there is

reasonable certainty of its ultimate collection
 DISCLOSURE

A person shall disclose:

the amount of contract revenue recognised as revenue in
the period; and
the methods used to determine the stage of completion of
contracts in progress.

A person shall disclose the following for contracts in

progress at the reporting date, namely:
amount of costs incurred and recognised profits less
recognised losses upto the reporting date;
the amount of advances received; and
the amount of retentions.
 TRANSITIONAL PROVISIONS

Contract revenue and contract costs associated with

the construction contract, which commenced on or
after 1st day of April, 2016 shall be recognised in
accordance with the provisions of this standard.

Contract revenue and contract costs associated with

the construction contract, which commenced on or
before the 31st day of March, 2016 but not completed
by the said date,
shall be recognised based on the method regularly
followed by the person prior to the previous year
beginning on the 1st day of April, 2016
 RETENTION MONEY

CBDT clarification in FAQ 11

Whether the recognition of retention money,
receipt of which is contingent on the satisfaction of
certain performance criterion is to be recognized as
revenue on billing?

Retention money, being part of overall contract

revenue, shall be recognised as revenue subject to
reasonable certainty of its ultimate collection
condition.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 ICDS - IV

Revenue

Recognition

(As 9)
 ICDS IV
REVENUE RECOGNITION
Scope:
This ICDS deals with the bases for recognition of
revenue arising in the course of the ordinary activities
of a person from
the sale of goods;
the rendering of services;
the use by others of the persons resources yielding
interest, royalties or dividends.

Does not deal with aspects of revenue recognition which

are dealt with by other ICDS
 REVENUE - DEFINITION

Revenue is
the gross inflow of
cash,
receivables or
other consideration arising
in the course of the ordinary activities of a person from
the sale of goods,
From the rendering of services,
or from the use by others of the persons resources
yielding interest, royalties or dividends.
In an agency relationship, the revenue is the amount of
commission and not the gross inflow
 ICDS IV REVENUE RECOGNITION
SALE OF GOODS
Sale of Goods:
Goods are transferred to the buyer for a price.
All Transfer of Risk and Rewards.
No effective control.
Certainty in Collection.
 ICDS IV REVENUE RECOGNITION
RENDERING OF SERVICES
Rendering of Services
Revenue Shall be recognized by "percentage
completion method".
ICDS requires application of ICDS on construction
contracts for recognition of revenue on mutatis
mutandis basis.
Stage of completion including threshold of 25%
No recognition of the foreseeable losses on a contract.

AS-9 recognizes both the "proportionate completion

method" and "completed service contract method" for
recognition of revenue from service transactions.
 EXCEPTIONS TO PERCENTAGE
COMPLETION METHOD - REVISED ICDS
When services are provided by an indeterminate
number of acts over a specific period of time, revenue
may be recognised on a straight line basis over the
specific period, and

Revenue from service contracts with duration of not

more than 90 days may be recognised when the
rendering of services under that contract is completed
or substantially completed.
 ON USE OF RESOURCES YIELDING

Interest shall accrue on the time basis determined by the

amount outstanding and the rate applicable.
Interest on refund of any tax, duty or cess shall be deemed to
be the income of the year in which received (Revised ICDS).
Discount or premium on debt securities held is treated as
though it were accruing over the period to maturity.
Royalties shall accrue in accordance with the terms of the
relevant agreement and shall be recognised on that basis
unless, having regard to the substance of the transaction, it is
more appropriate to recognise revenue on some other
systematic and rational basis.
Dividends are recognised in accordance with the provisions
of the Act.
 TRANSITIONAL PROVISIONS

Rendering of Services: The transitional provisions of

ICDS on construction contract shall mutatis mutandis
apply to the recognition of revenue and the associated
costs for a service transaction undertaken on or before
the 31st day of March, 2016 but not completed by the
said date.
 TRANSITIONAL PROVISIONS
Revenue for a transaction, other than a service
transaction undertaken on or before the 31st day of
March, 2016 but not completed by the said date shall
be recognised in accordance with the provisions of this
standard for the previous year commencing on the 1st
day of April, 2016 and subsequent previous year.
The amount of revenue, if any, recognised for the said
transaction for any previous year commencing on or
before the 1st day of April, 2015 shall be taken into
account for recognising revenue for the said
transaction for the previous year commencing on the
1st day of April, 2016 and subsequent previous years.
 DISCLOSURES

In case of sale of goods total amount not recognized as

revenue due to lack o reasonable certainty of ultimate
collection and nature of uncertainty.
Amount of revenue recognised in service transactions.
Method used to determine the stage of completion of
service transactions in progress.
For service transactions in progress at the end of year:
a) Costs incurred and profits recognised upto end of
previous year.
b) Amount of advances received.
c) Amount of retentions.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 ICDS V
Tangible
Fixed
Assets

As 10
 ICDS V- TANGIBLE FIXED ASSETS

Scope: This ICDS deals with treatment of tangible fixed

assets

Tangible assets may be acquired, self constructed or self

produced

Fair Value:
Means amount for which that asset could be exchanged
between knowledgeable, willing parties in an arms
length transaction.
 IDENTIFICATION OF TANGIBLE FIXED
ASSET (TFA)
Tangible fixed asset is an asset
being land, building, machinery, plant or furniture
held with the intention of being used
for the purpose of producing or providing goods or
services
and is not held for sale in the normal course of
business.
 IDENTIFICATION OF TANGIBLE FIXED
ASSET (TFA)
Stand by equipments and servicing equipments are
part of TFA.
Machinery spares shall be charged to the revenue as
and when consumed.
Machinery spares which can be used only in
connection with TFA and their use in expected to be
irregular are part of TFA.
 COMPONENTS OF ACTUAL COST

Purchase price
Taxes/Duties excluding subsequently recoverable
Directly attributable expenditure or making/usage of
asset.
Trade discounts / rebates shall be deducted
Cost may change subsequent to acquisition /
construction on account of price adjustment / duties /
exchange fluctuation.
Administration / General overheads not related to TFA
are to be excluded.
Expenditure on test runs / experimental production are
to be capitalized.
 COMPONENTS OF ACTUAL COST
NON-MONETORY CONSIDERATION

Acquisition of Fixed Assets in exchange for

another asset or shares or securities
ICDS
The fair value of tangible fixed assets so acquired shall
be its actual cost.

AS
The fair value of the asset/securities given up or fair
value of the asset acquired, whichever is more clearly
evident, should be recorded as actual cost.
 COMPONENTS OF ACTUAL COST
IMPROVEMENTS AND REPAIRS
Expenditure that increases the future benefits from the
existing asset beyond its previously assessed standard
of performance is added to the actual cost.

Additions/extensions to existing TFA is to be

capitalized if it becomes integral part of TFA
 COMPONENTS OF ACTUAL COST
SPECIAL CASES
If TFA is owned jointly, then proportionate share of
actual cost / depreciation / WDV shall be considered
and grouped with fully owned TFAs and shall be
indicated separately in TFA register

. Where several assets are purchased for a consolidated

price, then the consideration shall be apportioned to
various assets on fair basis.
 TRANSITIONAL PROVISIONS

The actual cost of TFA of which commenced on or

before the 31st day of March, 2016 but not completed
by the said date,
shall be recognised in accordance with the provisions
of this standard.
The amount of actual cost, if any, recognised for the
said assets for any previous year commencing on or
before the 1st day of April, 2015 shall be taken into
account for recognising actual cost of the said assets
for the previous year commencing on the 1st day of
April, 2016 and subsequent previous years.
 MISC

Revaluation of assets is not incorporated in ICDS

Depreciation on a tangible fixed asset and income

arising on transfer of a tangible fixed asset shall be
computed in accordance with the provisions of the Act.
 DISCLOSURES

Description of assets
Rate of depreciation
Actual cost/WDV
Additions/Deductions with dates
Adjustments on account of CENVAT credit/ change in
exchange rate of currency/subsidy, Grant,
reimbursement etc.
Depreciation allowable.
WDV at the end of the year
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10
The effects of Changes in Foreign Exchange
VI Rates 11
VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 ICDS VI
The effects of
Changes in
Foreign
Exchange
Rates

AS 11
ICDS -VI THE EFFECTS OF CHANGES IN
FOREIGN EXCHANGE RATES
This ICDS deals with:
Treatment of transactions in foreign currencies;
Translating the financial statements of foreign operations;
Treatment of foreign currency transactions in the nature of
forward exchange contracts.
FOREIGN CURRENCY TRANSACTIONS (FCT)
INITIAL RECOGNITION
FCT shall be recorded on initial recognition in the
reporting currency at prevailing exchange rate at the
date of transaction .

Average rate may be used for transactions over a

period of one week/month.

If exchange rate fluctuations significantly, then actual

rate at the date of transaction shall be used
 CONVERSION AT LAST DATE OF
PREVIOUS YEAR
Foreign currency monetary items (like trade receivables,
payables, bank balance, etc.) shall be converted into
reporting currency by applying closing rate.

Foreign currency non monetary items shall be converted

into reporting currency by using exchange rate prevailing at
the date of transaction

Non-monetary item being inventory which is carried at NRV

value denominated in a foreign currency shall be reported
using the exchange rate that existed when such value was
determined.
 RECOGNITION OF EXCHANGE
DIFFERENCES
In respect of monetary items,
exchange differences arising on the settlement thereof
or on conversion thereof at last day of the previous year
shall be recognised as income or as expense in that
previous year.

In respect of nonmonetary items,

exchange differences arising on conversion thereof at
the last day of the previous year
shall not be recognised as income or as expense in that
previous year.
 ICDS VI - EFFECTS OF CHANGES IN
FOREIGN EXCHANGE RATES
AS-11 provides guidance on initial and subsequent
recognition of foreign currency transactions and the
resultant exchange differences

ICDS expressly provides that these provisions will be

subject to Section 43A of the Act and Rule 115 of the
Income-tax Rules, 1962.

Sec 43A- Special provisions consequential to changes

in rate of exchange of currency.
 SECTION 43A

where an assessee has acquired any asset from a country

outside India
for the purposes of his business or profession and,
in consequence of a change in the rate of exchange at
any time after the acquisition of such asset,
there is an increase or reduction in the liability
the amount by which the liability aforesaid is so
increased or reduced shall be adjusted to the actual
cost of the asset
 TRANSLATING THE FINANCIAL
STATEMENTS OF FOREIGN OPERATIONS
Financial Statements of Foreign Operations

The financial statements of a foreign operation shall be

translated using the principles and procedures in
paragraphs 3 to 6 as if the transactions of the foreign
operation had been those of the person himself.

Same treatment as of transactions in foreign currencies

 FORWARD EXCHANGE CONTRACTS

Any premium or discount

arising at the inception of a forward exchange contract
shall be amortised as expense or income
over the life of the contract.
Exchange differences on such a contract shall be recognised as
income or as expense
in the previous year in which the exchange rates change.
Any profit or loss arising on cancellation or renewal shall be
recognised as income or as expense for the previous year.
Not Applicable for Trading / Speculative Purpose & Hedge
items
 FORWARD EXCHANGE CONTRACTS

Premium, discount or exchange difference on contracts

that are intended for
trading or speculation purposes, or
that are entered into to hedge the foreign currency risk of a
firm commitment or a highly probable forecast
transaction
shall be recognised at the time of settlement.
 ICDS VII

Government
Grants

AS 12
 ICDS VII- GOVERNMENT GRANTS

Scope
The ICDS deals with the treatment of Government grants.
(sometimes called by other names such as subsidies, cash
incentives, duty drawbacks, waiver, concessions,
reimbursements, etc.)

This ICDS does not deal with:

Government assistance other than in the form of
Government grants; &
Government participation in the ownership of the
enterprise.
 DEFINITIONS

Government refers to the Central Government, State

Governments, agencies and similar bodies, whether local,
national or international.
Government grants are
assistance by Government
in cash or kind
to a person
for past or future compliance
with certain conditions.
They exclude those forms of Government assistance which
cannot have a value placed upon them and the transactions
with Government which cannot be distinguished from the
normal trading transactions of the person.
 RECOGNITION OF GOVERNMENT GRANTS

Government grants should not be recognised until

there is reasonable assurance that
the person shall comply with the conditions attached to
them, and
The grants shall be received.

Recognition of Government grant shall not be

postponed beyond the date of actual receipt.
 RECOGNITION OF GOVERNMENT GRANTS
DIFFERENCE WITH AS

Accounting Standard
Mere receipt of a grant is not necessarily conclusive
evidence that the conditions attached to the grant have
been or will be fulfilled.

ICDS
provides that recognition of Government grant shall not
be postponed beyond the date of actual receipt.
TREATMENT OF GOVERNMENT GRANTS

Where grants relate to depreciable fixed assets/other

assets, same shall be deducted from actual cost/WDV of
concerned asset (Block of asset).
Where grants relate to non depreciable assets, same shall
be recognized as income over the periods the period for
which cost of compliance are incurred and charged to P&L
A/c.
Grants receivable as compensation for expenses/losses shall
be recognized as income in the year in which it is receivable
Grants in the form of non-monetary assets given at
concessional rate, shall be accounted for on basis of their
acquisition cost.
Any other Government Grant shall be recognised as income
in the year and Match the cost
 REFUND OF GOVT GRANTS

Refundable grants on non-depreciable assets shall

first be applied against un amortized deferred credit
and balance if any shall be charged to P&L A/c.

Refundable grants on depreciable assets shall be

added to cost or WDV of such assets and depreciation
shall be provided on increased value(s) prospectively
 DISCLOSURES

Nature and extent of grant recognised and deducted

from cost or WDV of depreciable asset in that year.
Nature and extent of grant recognised as income
during the previous year.
Nature and extent of grant not recognised and not
deducted from cost or WDV with reasons there for.
Nature and extent of grant not recognised as income
during that previous year with reasons there for.
 TRANSITIONAL PROVISIONS

All the Government grants which meet the recognition

criteria on or after 1st day of April, 2016 shall be
recognised for the previous year commencing on or
after 1st day of April, 2016 in accordance with the
provisions of this standard
after taking into account the amount, if any, of the said
Government grant recognised for any previous year
ending on or before 31st day of March,2016.
 TRANSITIONAL PROVISIONS

All government grants actually received prior to 1st day of

April 2016 shall be deemed to have been recognised on its
receipt in accordance ICDS -VII and accordingly will be outside
the transitional provision and therefore the government
grants received on or after 1st day of April, 2016 and for
which recognition criteria provided in Para 5 to Para 9 of
ICDS-VII is also satisfied thereafter, the same shall be
recognised as per the provisions of ICDS -VII. The grants
received prior to 1st day of April, 2016 shall continue to be
recognised as per the law prevailing prior to that date.
 TRANSITIONAL PROVISIONS
EXAMPLE
For example, if out of total subsidy entitlement of 10 Crore an
amount of 6 Crore is recognised in the books of account till 31st
day of March, 2016 and recognition of balance 4 Crore is deferred
pending satisfaction of related conditions and/or achieving
reasonable certainty of receipt. The balance amount of 4 Crore
will be taxed in the year in which related conditions are met and
reasonable certainty is received. If these conditions are met over
two years, the amount of 4 Crore shall be taxed over the period of
two years. The amount of 6 Crore for which recognition criteria
were met prior to 1st day of April, 2016 shall not be taxable post
1st day of April, 2016.
But if the subsidy is already received prior to 1st day of April,
2016, Para 13 of ICDS-VII shall not apply even if some of the
related conditions are met on or after 1 April, 2016. This is in
view of Para 4(2) of ICDS-VII which provides that Government
grant shall not be postponed beyond the date of actual receipt.
Such grants shall continue to be governed by the provisions of
law applicable prior to 1st day of April, 2016.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
ICDS VIII - Securities
AS 13
 ICDS VIII - SECURITIES

The revised ICDS introduce two parts in this standard.

Part A deals with the securities held as stock -in trade

Part B deals with the securities held by

a scheduled bank or
public financial institutions
formed under a Central or a State Act or
so declared under the Companies Act.
 ICDS VIII - SECURITIES
PART A
Scope: This ICDS deals with securities held as stock
intrade.
Accounting Standard - 13
deals with accounting for current investments, long term
investments and investment property but excludes shares,
debentures or other securities held as stock-in- trade.

Since ICDS deals with computation of income under

Business head or Other Sources head
Securities does not include derivates
 QUESTION 10

Question 10 : Which ICDS would govern derivative

instruments?
Answer : ICDS -VI (subject to para 3 of ICDS-VIII)
provides guidance on accounting for derivative
contracts such as forward contracts and other similar
contracts.
For derivatives, not within the scope of ICDS -VI,
provisions of ICDS-I would apply.
INITIAL RECOGNITION & MEASUREMENT
ACTUAL COST
A security on acquisition shall be recognised at actual cost.
Actual cost = purchase price + acquisition charges such as
brokerage, fees, tax, duty or cess.
Where a security is acquired in exchange for other securities,
the fair value of the security so acquired shall be its actual cost.
Where a security is acquired in exchange for another asset, the
fair value of the security so acquired shall be its actual cost.
Where unpaid interest has accrued before the acquisition of an
interest-bearing security and is included in the price paid for the
security, the subsequent receipt of interest is allocated between pre -
acquisition and post-acquisition periods; the pre -acquisition
portion of the interest is deducted from the actual cost.
 SUBSEQUENT MASUREMENT

Valuation of securities held as stock -in trade at the

end of previous year
Securities should be valued at lower of cost or net
realizable value (NRV).
Comparison of cost and NRV shall be done category-wise
(and not for each individual security),
for which securities shall be classified into the
following categories:
(a) Shares
(b) Debt securities
(c) Convertible securities
(d) Any other securities not covered above.
 OPENING STOCK AND NON QUOTED
SECURITIES
Opening stock of securities held as stock in trade shall
be valued as under:
First year of business cost as available at the
commencement.
Existing business value of closing stock in the
immediately preceding year.
Closing stock of securities not listed at the end of the
year or not quoted regularly, shall be valued at actual
cost.
FIFO method shall be followed where specific
identification is not possible.
 QUESTION 19

Question 19 : Para 9 of ICDS-VIII on securities

requires securities held as stock-in-trade shall be
valued at actual cost initially recognised or net
realisable value (NRV) at the end of that previous
year, whichever is lower. Para 10 of Part -A of ICDS-VIII
requires the said exercise to be carried out category
wise. How the same shall be computed?
Answer : For subsequent measurement of securities held
as stock-in-trade, the securities are first aggregated
category wise. The aggregate cost and NRV of each
category of security are compared and the lower of the
two is to be taken as carrying value as per ICDS -VIII. This
is illustrated below
Security Category Cost NRV Lower of ICDS
cost or NRV Value

A Share 100 75 75
B Share 120 150 120
C Share 140 120 120
D Share 200 190 190
Total 560 535 505 535

E Debt Security 150 160 150

F Debt Security 105 90 90
G Debt Security 125 135 125
H Debt Security 220 230 220
Total 600 615 585 600
Securities Total 1160 1150 1090 1135
 PART B

Part B deals with the securities held by

a scheduled bank or
public financial institutions
formed under a Central or a State Act or
so declared under the Companies Act.
Definitions
(a) "Scheduled Bank" shall have the meaning assigned to it in
clause (ii) of the Explanation to clause (viia) of sub-section
(1) of section 36 of the Act.
(b) "Securities" shall have the meaning assigned to it in clause
(h) of section 2 of the Securities Contract (Regulation) Act,
1956 (42 of 1956) and shall include share of a company in
which public are not substantially interested;
 CLASSIFICATION, RECOGNITION AND
MEASUREMENT OF SECURITIES
Securities shall be
classified,
recognised and
measured
in accordance with the extant guidelines issued by the
Reserve Bank of India in this regard
and any claim for deduction in excess of the said guidelines
shall not be taken into account.
To this extent, the provisions of Income Computation and
Disclosure Standard VI on the effect of changes in foreign
exchange rates relating to forward exchange contracts shall
not apply."
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and Contingent
X Assets 29
 ICDS IX

Borrowing
Costs

AS - 16
 DEFINITIONS

Borrowing costs are interest and other costs

incurred by a person in connection with the borrowing
of funds and include:
commitment charges on borrowings;
amortised amount of discounts or premiums relating to
borrowings;
amortised amount of ancillary costs incurred in
connection with the arrangement of borrowings;
finance charges in respect of assets acquired under
finance leases or under other similar arrangements.
 Question 21 : Whether bill discounting charges and
other similar charges would fall under the
definition of borrowing cost?
Answer : The definition of borrowing cost is an
inclusive definition. Bill discounting charges and other
similar charges are covered as borrowing cost.
 DEFINITIONS

Qualifying asset means:

land, building, machinery, plant or furniture, being
tangible assets;
knowhow, patents, copyrights, trade marks, licences,
franchises or any other business or commercial rights
of similar nature, being intangible assets;
inventories that require a period of twelve months or
more to bring them to a saleable condition

As against the criterion of substantial period of time

for classifying an asset as qualifying asset under ICAI
AS-16,
CAPITALISATION OF BORROWING COST

Borrowing costs that

are directly attributable
to the acquisition, construction or production
of a qualifying asset
shall be capitalised
as part of the cost of that asset.
The amount of borrowing costs eligible for capitalisation
shall be determined in accordance with this ICDS.
Other borrowing costs shall be recognised in accordance
with the provisions of the Act.
For the purposes of this ICDS, capitalisation in the context of
inventory referred to means addition of borrowing cost to the
cost of inventory.
CAPITALISATION OF BORROWING COST

Specific Borrowings Actual Amount of Borrowing cost

to be capitalised
General Borrowings- Proportionate Amount

Commencement of Capitalisation:
The capitalisation of borrowing costs shall commence:
in a case of Specific borrowings, from the date on
which funds were borrowed;
in a case of general borrowings, from the date on which
funds were utilised.
SUSPENSION OF CAPITALISATION OF
BORROWING COST
ICDS does not discusses about Suspension of
Capitalisation of Borrowing Cost.
 CESSATION OF CAPITALISATION

Capitalisation of borrowing costs shall cease:

in case of inventory , when substantially all the
activities necessary to prepare such inventory for its
intended sale are complete.
In other cases when such asset is first put to use;
 DISCLOSURE

The following disclosure shall be made in respect of

borrowing costs, namely:
the accounting policy adopted for borrowing costs; and
the amount of borrowing costs capitalised during the
previous year.
 Question 20 : There arc specific provisions in the Act
read with Rules under which a portion of borrowing cost
may get disallowed under sections like 14A, 43B,
40(a)(1), 40(a)(ia), 40A(2)(b), etc of the Act. Whether
borrowing costs to be capitalized under ICDS -IX should
exclude portion of borrowing costs which gets
disallowed under such specific provisions?
Answer : Since specific provisions of the Act override the
provisions of ICDS, it is clarified that borrowing costs to be
considered for capitalization under ICDS -IX shall exclude
those borrowing costs which are disallowed under specific
provisions of the Act. Capitalization of borrowing cost shall
apply for that portion of the borrowing cost which is
otherwise allowable as deduction under the Act.
 ICDS STANDARDS NOTIFIED

ICDS Accounting
No Particulars Standard
I Accounting Policies 1
II Valuation of Inventories 2
III Construction Contracts 7
IV Revenue Recognition 9
V Tangible Fixed Assets 10

VI The effects of Changes in Foreign Exchange Rates 11

VII Government Grants 12
VIII Securities 13
IX Borrowing Costs 16
Provisions, Contingent Liabilities and
X Contingent Assets 29
 ICDS - X
Provisions,
Contingent
Liabilities
and
Contingent
Assets
AS 29
 ICDS -10 PROVISIONS, CONTINGENT
LIABILITIES AND CONTINGENT ASSETS
Scope:
This ICDS deals with
provisions,
contingent liabilities and
contingent assets,
except those:
resulting from financial instruments;
resulting from executory contracts;
arising in insurance business from contracts with
policyholders; and
covered by another ICDS.
 DEFINITIONS

Provision is a liability which can be measured only by

using a substantial degree of estimation.
Liability is a
present obligation of the person
arising from past events,
The settlement of which
is expected to result in an outflow from the person
of resources embodying economic benefits.
Present obligation is an obligation if, based on the
evidence available, its existence at the end of the
previous year is considered reasonably certain..
 RECOGNITION OF PROVISIONS

A provision shall be recognised when:

a person has a present obligation as a result of a past
event;
it is reasonably certain that an outflow of resources
embodying economic benefits will be required to settle
the obligation; and
a reliable estimate can be made of the amount of the
obligation.

If these conditions are not met, no provision shall be

recognised.
 CONTINGENT LIABILITIES

Contingent liability is:

a possible obligation that arises from past events and the existence
of which will be confirmed only by the occurrence or nonoccurrence
of one or more uncertain future events not wholly within the control
of the person; or
a present obligation that arises from past events but is not
recognised because:
it is not reasonably certain that an outflow of resources embodying
economic benefits will be required to settle the obligation; or
a reliable estimate of the amount of the obligation cannot be made.

B) Contingent Liabilities: Shall not be recognised.

Present obligation VS Possible Obligation
 CONTINGENT ASSETS

Contingent asset is a
possible asset
that arises from past events
The existence of which will be confirmed only by the
occurrence or nonoccurrence of one or more uncertain
future events not wholly within the control of the person.

Contingent assets are not recognised .

Contingent assets are assessed continually and when it
becomes reasonably certain that inflow of economic benefit
will arise, the asset and related income are recognised in
the previous year in which the change occurs.
 EXAMPLE - WARRANTIES

A manufacturer gives warranties at the time of sale to

purchasers of its product.
Under the terms of the contract for sale the
manufacturer undertakes to make good, by repair or
replacement, manufacturing defects that become
apparent within three years from the date of sale.
On past experience, it is probable ( ie more likely than
not) that there will be some claims under the
warranties.
 EXAMPLE - REFURBISHMENT COSTS

A furnace has a lining that needs to be replaced every

five years for lining has been in use for three years.
 EXAMPLE- CHANGES IN THE INCOME
TAX SYSTEM
The government introduces a number of changes to the
income tax system. As a result of these changes, an
entity in the financial services sector will need to
retrain a large proportion of its administrative and
sales workforce in order to ensure continued
compliance with financial services regulation. At the
end of the reporting period, no retraining of staff has
taken place.
Present obligation as a result of a past obligating event
There is no obligation because no obligating event
(retraining) has taken place.
Conclusion No provision is recognised
 MEASUREMENT

a) Best estimate :
i. Provision recognized shall be best estimate
required to settle present obligation at the end of
year. Amount of Provision shall not be discounted
to its present value.

ii. Amount recognized as asset and related income

shall be the best estimate and shall not be
discounted to its present value.
 MEASUREMENT - BEST ESTIMATE

An entity sells goods with a warranty under which customers are

covered for the cost of repairs of any manufacturing defects that
become apparent within the first six months after purchase. If
minor defects were detected in all products sold, repair costs of 1
million would result. If major defects were detected in all
products sold, repair costs of 4 million would result. The entitys
past experience and future expectations indicate that, for the
coming year, 75 per cent of the goods sold will have no defects, 20
per cent of the goods sold will have minor defects and 5 per cent
of the goods sold will have major defects. In accordance with
paragraph 24, an entity assesses the probability of an outflow for
the warranty obligations as a whole.
The expected value of the cost of repairs is:
(75% of nil) + (20% of 1m) + (5% of 4m) = 400,000
 MEASUREMENT

b) Reimbursements:
Where a provision is expected to be reimbursed
by another party then such reimbursement shall
be recognized if it is reasonably certain that
reimbursement will be received.
 REVIEW

i. Provisions shall be reviewed at the end of each

previous year and adjusted to current best
estimate.
ii. If not required, provision shall be reversed.
iii. Contingent asset(s) and related income shall be
reviewed at the end of previous tear and
adjusted to current best estimate and if not
required, shall be reversed.
 DISCLOSURE

a) Brief description of the nature of liability.

b) Carrying amount opening and closing.
c) Additional provisions made during the year
(new+ increase in existing).
a) Amounts incurred and changed against the provision
during the year.
b) provisions amounts reversed during the year.
 DISCLOSURE

f) Amount of expected reimbursement and

corresponding asset recognised there of , if any.
g)For contingent assets and related incomes following
shall be disclosed:
i. Brief description of nature of assets and related
income.
ii. Opening and closing carrying amounts of the year.
iii. Additional amount of assets and related income
recognized during the previous year.
iv. Amount of asset and related income reversed during
the previous year.
 TRANSITIONAL PROVISIONS

ICDS X provides that all the provisions or assets and related

income shall be recognised for the previous year
commencing on or after 1st day of April, 2016 in
accordance with the provisions of this standard after taking
into account the amount recognised, if any, for the same for
any previous year ending on or before 31st day of March,
2016.

Basis of Transition provision in Query 23

The intent of transitional provision is that there is neither
'double taxation' of income due to application of ICDS nor
there should be escape of any income due to application of
ICDS from a particular date. This is explained as under
 QUESTION 23

Provision required as per ICDS on 31 March 2017 for items INR 3 Crores
brought forward from 31st day of March 2016 ... (A)

Provisions as per ICDS for FY 2016-17 ... (B) INR 5 Crores

Total gross provision .. .(C) = (A) + (B) INR 8 Crores

Less: Provision already recognised for computation INR 2 Crores

of taxable income in F Y 2016-17or earlier... (D)

Net provisions as per ICDS in FY 2016-17 to be recognised INR 6 Crores

as per transition provision... (E) = (C) -(D)
 CA . Ritesh Mittal
Sanjay Kumar Kothari and Co.,
Chartered Accountants,
MOBILE: 09885377421
mrriteshmittal@gmail.com