ACCOUNTING STANDARDS

Applicability of Accounting Standards:

For the purpose of applicability of Accounting Standards, enterprises are classified into three categories, viz;
Level I, Level II and Level III.

Criteria for classification of enterprises:

Level I Enterprises:
Enterprises which fall in anyone or more of the following categories, at anytime during the accounting
period, are classified as Level I enterprises:
(i) Enterprises whose equity or debt securities are listed whether in India or outside India.
(ii) Enterprises, which are in the process of listing their equity or debt securities as evidenced by the
board of directors’ resolution in this regard.
(iii) Banks including co-operative banks.
(iv) Financial institutions.
(v) Enterprises carrying on insurance business.
(vi) All commercial, industrial and business reporting enterprises, whose turnover for the immediately
preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crores.
Turnover does not include ‘other income’.
(vii) All commercial, industrial and business reporting enterprises having borrowings, including public
deposits, in excess of Rs. 10 crores at any time during the accounting period.
(viii) Holding and subsidiary enterprises of any one of the above at any time during the accounting period.

Level II Enterprises:
Enterprises which are not Level I enterprises but fall in anyone or more of the following categories are
classified as Level II enterprises:
(i) All commercial, industrial and business reporting enterprises, whose turnover for the immediately
preceding accounting period on the basis of audited financial statements exceeds Rs. 40 lakhs but
does not exceed Rs. 50 crores. Turnover does not include ‘other income’.
(ii) All commercial, industrial and business reporting enterprises having borrowings, including public
deposits, in excess of Rs. 10 crores at any time during the accounting period.
(iii) Holding and subsidiary enterprises of the above at any time during the accounting period.

Level III Enterprises:

Enterprises, which are not covered under Level I and Level II, are considered as Level III enterprises.

Applicability
Level II and level III enterprises are considered as SMEs
Level I enterprises are required to comply fully with all accounting standards.
No relaxation is given to Level II Level III enterprises in respect of recognition and measurement principles.
Relaxations are provided with regard to disclosure requirements. According, Level II and Level III
enterprises are fully exempted from certain accounting standards which mainly lay down disclosure
requirements. In respect of certain other accounting standards, which lay down recognition, measurement
and disclosure requirements, relaxations from certain disclosure requirements are given.

AS No. Descriptions Level 1 Level 2 Level 3

1 Disclosure of Accounting Policies Applicable Applicable Applicable
2 Valuation of Inventories Applicable Applicable Applicable
3 Cash Flow Statements Applicable Not Not
Applicable Applicable
4 Contingencies and Events Occurring After the
Balance Sheet Date Applicable Applicable Applicable
5 Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies Applicable Applicable Applicable
6 Depreciation Accounting Applicable Applicable Applicable
7 Construction Contracts Applicable Applicable Applicable
(Old + New) Ref Note 1 Ref note 1
Ref Note 1
8 Accounting for Research and Development
(This standard has been withdrawn
w.e.f. 1-4-2004 for all levels of enterprises
and AS 26 is applicable) Applicable Applicable Applicable
9 Revenue Recognition Applicable Applicable Applicable
10 Accounting for Fixed Assets Applicable Applicable Applicable
11 The Effects of Changes in Foreign Exchange
Rates Applicable Applicable Applicable
(applicability of old and new standards should
be mentioned) Ref note 2 Ref note 2 Ref note 2
12 Accounting for Government Grants Applicable Applicable Applicable
13 Accounting for Investments Applicable Applicable Applicable
14 Accounting for Amalgamations Applicable Applicable Applicable
15 Accounting for Retirement Benefits in the
Financial Statements of Employers Applicable Applicable Applicable
16 Borrowing Costs Applicable Applicable Applicable
17 Segment Reporting Applicable Applicable Applicable
18 Related Party Disclosures Applicable Applicable Applicable
with modi with modi
fications fications
19 Leases Applicable Applicable Applicable
with some with some
modificati modificati
ons and ons and
Exemption Exemption
from from
Disclosure Disclosure
Require Require
ments ments
(Ref (Ref
Note 3) Note 3)
20 Earnings Per Share Applicable Applicable Applicable
with some with some
modificat modificat
ions and ions and
exemption exemption
from from
Disclosure Disclosure
Require Require
Ments ments
(Ref (Ref
Note 4) Note 4)
AS No. Descriptions Level 1 Level 2 Level 3

21 Consolidated Financial Statements Applicable Not Not

(Ref Applicable Applicable
Note 5)
22 Accounting for Taxes on Income Applicable Applicable Applicable
except for except for except for
non non non
corporate corporate corporate
enterprises enterprises enterprises
w.e.f. w.e.f. w.e.f.
1-4-2006 1-4-2006 1-4-2006
as per as per as per
announce announce announce
ment ment ment
for AS 22 for AS 22 for AS 22
by ICAI by ICAI by ICAI
23 Accounting for Investments in Associates in
Consolidated Financial Statements Applicable Not Not
Applicable Applicable
24 Discounting Operations Applicable Not Not
Applicable Applicable
25 Interim Financial Reporting Applicable Not
(Ref note 6) Applicable
26 Intangible Assets Applicable Applicable Applicable
27 Financial Reporting of Interests in Applicable Not Not
Joint Ventures (Ref note 5) Applicable Applicable
to the to the
extent of extent of
requirements requirements
relating to relating to
consolidated consolidated
financial financial
statements statements
28 Impairment of Assets Applicability Applicability Applicability
from 1-4-2004 from 1-4-2006 from1-4-2008
onwards onwards onwards
29 Provisions, Contingent Liabilities and Applicable Disclosure Disclosure
Contingent Assets requirements requirements
are not are not
applicable applicable

Notes
1) The revised Standard (2002) comes into effect in respect of all contracts entered into during accounting
periods commencing on or after 1-4-2003 and is mandatory in nature from date. Accordingly, the pre-
revised AS 7 (issued 1983) is not applicable in respect of such contracts.
2) The revised AS 11 (2003) would come into effect in respect of accounting periods commencing on or
after 1-4-2004 and would be mandatory in nature from that date. The revised standard (2003) would
 supersede AS 11 (1994), except that in respect of accounting for transactions in foreign currencies
entered into by the reporting enterprise itself or through its branches before the date the revised AS 11
(2003) comes into effect, AS 11(1994) will continue to be applicable.
3) AS 19: Para 22 (c), (e) & (f); Para 25(a), (b) & (c); Para 37(a), (f) & (g) and Para 46 (b), (d) & (e) of AS
19.
4) AS 20: No need to disclose Diluted Earning Per Share and information required by para 48 of AS 20.
5) Relevant regulators require compliance with AS-21, AS-23 & AS-27 only by certain Level I
enterprises.
6) AS 25, Interim Financial Reporting, does not require any enterprise to present interim financial
report. It is applicable only if an enterprise is required or elects to prepare and present an interim
financial report. However, the recognition and measurement requirements contained in this Standard
are applicable to interim financial results; e.g., quarterly financial results required by the SEBI.

At present, in India, enterprises are not required to present interim financial report within the
meaning of AS 25. Therefore, no enterprise in India is required to comply with the disclosure and
presentation requirements of AS 25 unless it voluntarily presents interim financial report within the
meaning of AS 25. The recognition and measurement principles contained in AS 25 are also
applicable only to certain Level I enterprises since only these enterprises are required by the
concerned regulators to present interim financial results.

In view of the above, at present, AS 25 is not mandatorily applicable to Level II and Level III
enterprises in any case.
 AS 1 – DISCLOSURE OF ACCOUNTING POLICIES

 Significant Accounting Policies followed in preparation of accounts be disclosed at one place along with
the financial statements.

 Any change and financial impact of such change should be disclosed.

 If fundamental assumptions (going concern, consistency and accrual) are not followed, the fact to be
disclosed.

 Accounting Policies adopted by the enterprise should represent true and fair view of the state of affairs of
the financial statements:

– Major considerations governing selection and application of accounting policies are: 1) Prudence, ii)
Substance over form and iii) Materiality.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-1

1) Are the following fundamental accounting assumptions followed?

(a) Going concern concept? Yes / No

(b) Consistency in accounting policies? Yes / No

(c) Accrual basis of preparing Financial Statement? Yes / No

2) If answer to any of the above is in negative, has disclosure been made? Yes / No
2
3) Have significant accounting policies been listed out and disclosed at one
Place as part of financial statement? Yes / No

4) Is there any change in accounting policy?

(a) (i) Which has a material effect in current period? Yes / No

(ii) If yes, whether disclosed with quantification? Yes / No

(iii) If no, whether indicated the fact, that not possible? Yes / No

(b) (i) Which has a material effect in later period? Yes / No

(ii) If yes, whether disclosed? Yes / No

AS 2 - VALUATION OF INVENTORIES (REVISED)

 The cost of inventories should comprise all costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.

 Inventories are valued at lower of cost or net realizable value. Specific identification method is
required when goods are not ordinarily interchangeable. In other circumstances, the enterprise may
adopt either weighted average cost method or FIFO methods whichever approximates the fairest
possible approximation of cost incurred. Standard costing method or retail inventory method can be
adopted only as a techniques of measurement provided where the results of these measurements
approximates the results that would be arrived at after adopting specific identification method or
weighted average method or FIFO method as may be applicable to the circumstances.

 The financial statements should disclose: (a) the accounting policies adopted in measuring
inventories, including the cost formula used; and (b) the total carrying amount of inventories and its
classification appropriate to the enterprise.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-2

1) (a) Is the inventory valued at lower of cost and net realisable value? Yes / No

(b) Is the disclosure made to that effect in accounting policy? Yes / No

2) (a) Which is the cost formula used

(i) Specific identification? Yes / No

(ii) FIFO? Yes / No

(iii) Weighted Average? Yes / No

(b) Is the disclosure made to that effect in accounting policy? Yes / No

3) Have you ascertained whether cost includes

(a) Cost of purchase (net of Modvatable duties)? Yes / No

(b) Direct labour? Yes / No

(c) Production over heads? Yes / No

(d) Such other direct cost to bring inventory to their present location and
condition? Yes / No

4) Whether fixed overhead is worked out on normal production capacity; i.e.,

after taking into account loss of capacity due to planned maintenance? Yes / No

5) Have you ascertained that cost of conversion does not include the following?

(a) Interest, (Unless permitted by AS 16)? Yes / No

(b) Administrative overheads? Yes / No

(c) Selling and distribution cost? Yes / No

 (d) Abnormal wastage of material, labour and other production cost? Yes / No

6) If standard cost method followed to ascertain cost, whether standards reviewed

periodically? Yes / No

7) In arriving at cost of inventory, whether

(a) Inter-divisional profits eliminated? Yes / No

(b) Foreign currency fluctuation excluded and charged as expense in respect of

foreign currency loan obtained against stock? Yes / No

8) (a) Is physical verification of inventory taken at year-end? Yes / No

(b) In arriving at net realisable value, have you ascertained?

(i) damaged/ obsolete/ non-moving stock? Yes / No

(ii) subsequent sale price after Balance Sheet Date? Yes / No

9) Are the inventory in accounts classified into:

(a) Raw material and components? Yes / No

(b) Stores and spares and tools? Yes / No

(c) Work-in-progress? Yes / No

(d) Finished goods? Yes / No

AS 3 - CASH FLOW STATEMENTS

 The standard sets out the requirement that where the cash flow statement is presented, it shall
disclose a movement in “cash and cash equivalents” segregating various transactions into operating,
investing and financing activity. It requires certain specific items to be addressed in the cash flows
and certain supplemental disclosures for non-cash transactions.

 Cash comprises cash on hand and demand deposits with banks.

 Cash equivalents are short term, highly liquid investments that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value.

 Cash flows are inflows and outflows of cash and cash equivalents.
 Operating activities are the principal revenue-producing activities of the enterprises and other
activities that are not investing or financing activities. Examples, cash receipts from the sale of goods
and the rendering of services; cash receipts from royalties, fees, commissions and other revenue;
cash payments to suppliers for goods and services; cash payments to and on behalf of employees;

 Investing activities are the acquisition and disposal of long-term assets and other investments not
included in cash equivalents. Examples, cash payments to acquire fixed assets (including
intangibles). These payments include those relating to capitalised research and development costs
and self-constructed fixed assets; cash receipts from disposal of fixed assets (including intangibles);
cash payment to acquire shares, warrants or debt instruments of other enterprises and interests in
joint ventures (other than payment for those instruments considered to be cash equivalent and those
held for dealing or trading purposes);

 Financing activities are activities that result in change in the size and composition of the owners’
capital (including preference share capital in case of a company) and borrowings of the enterprise.
Example, cash proceeds from issuing shares or other similar instruments; cash proceeds from,
issuing debentures, loans, notes, bonds, and other short or long term borrowings; and cash
repayments of amounts borrowed.

 Additionally certain items are required to be disclosed separately, like Income Tax, Dividends, etc.

 The enterprise can choose either direct method or indirect method for presentation of its cash flows.

 Cash flows arising from transactions in a foreign currency should be recorded in an enterprise’s
reporting currency by applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the cash flow. A rate that approximates the
actual rate may be used if the result is substantially the same as would arise if the rates at the dates of
the cash flows were used. The effect of changes in exchange rates on cash and cash equivalents held
in a foreign currency should be reported as a separate part of the reconciliation of the changes in cash
and cash equivalents during the period.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-3

1) Is the enterprise

(a) a listed company? Yes / No

(b) business enterprise having turnover exceeding Rs. 50 crores? Yes / No

(c) if yes to any of above, is cash flow statement prepared under indirect method? Yes / No

(d) is necessary reference of cash flow Statement made in the Audit Report? Yes / No

2) Depending upon the principal activity of the enterprise, is the classification of items
 in cash flow appropriate made into operating, financing and investment activities? Yes / No

3) Are the following items specifically addressed

Interest Income or expense?

Dividends Paid or Received?

Income Tax Paid or refunds?

Conversion Gains or losses in banks accounts denominated in foreign currency?

Effect of business acquisition or divestments?

Investment in subsidiaries, equity affiliates and joint venture?

Cash flows of foreign operations?

4) Whether non-cash transactions like following excluded from Cash Flow Statement

(a) acquisition of assets by assuming related liabilities? Yes / No

(b) acquisition of an enterprise by issue of shares? Yes / No

(c) conversion of debt into equity? Yes / No

AS 4 – CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Contingencies

 The amount of a contingent loss should be provided for by a charge in the statement of profit and
loss if: it is probable that future events will confirm that after taking into account any related
probable recovery, an asset has been impaired or a liability has been incurred as at the balance sheet
date, and a reasonable estimate of the resulting loss can be made.

 The existence of a contingent loss should be disclosed in the financial statements if either of the
conditions in above paragraph is not met, unless the possibility of a loss is remote.

 Contingent gains should not be recognised in the financial statements.

Events occurring after the Balance Sheet Date

 Assets and liabilities should be adjusted for events occurring after balance sheet date that provide
additional evidence to assist the estimation o amounts relating to conditions existing at the balance
sheet date or that indicate that the fundamental accounting assumption of going concern (i.e., the
continuance of existence or substratum of the enterprise) is not appropriate.
 Dividends stated to be in respect of the period covered by the financial statements, which are
proposed or declared by the enterprise after the balance sheet date but before approval of the
financial statements, should be adjusted.

 Disclosure should be made in the report of the approving authority of those events occurring after the
balance sheet date that represent material changes and commitments affecting the financial position
of the enterprise.

Disclosure

 If disclosure of contingencies is required by paragraph 11 of this Statement, the following

information should be provided: the nature of the contingency, the uncertainties which may
affect the future outcome, an estimate of the financial effect, or a statement that such an
estimate cannot be made.

 If disclosure of events occurring after the balance sheet date in the report of the approving authority
is required by the Standard than it shall disclose; the nature of the event, an estimate of the financial
effect, or a statement that such an estimate cannot be made.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-4

1) Are contingent liabilities disclosed in accounts by way of notes as to its amount, nature
and uncertainties which may affect the future outcome? Yes / No

2) (a) Out of the contingent liability, have you come across any item which will
result in a loss to the enterprise? Yes / No

(b) If yes, whether provision is made? Yes / No

3) Have you ascertained that no contingent gains are recognised as income? Yes / No

4) (a) Have you inquired about events occurring after balance sheet date? Yes / No

(b) Are any adjustments required to be made in accounts, relating thereto? Yes / No

(c) If not made, whether disclosed with quantification? Yes / No

AS-5 – NET PROFIT / LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGES IN
ACCOUNTING POLICIES

 Prominent definitions includes; Ordinary activities are any activities which are undertaken by an
enterprise as part of its business and such related activities in which the enterprise engages in
furtherance of, incidental to, or arising from, these activities. Extra Ordinary items are income or
expenses that arise from events or transactions that are clearly distinct from the ordinary activities of
the enterprise and, therefore, are not expected to recur frequently or regularly. Prior period items are
income or expenses which arise in the current period as a result of errors or omissions in the
preparation of the financial statements of one or more prior periods. Accounting policies are the
specific accounting principles and the methods of applying those principles adopted by an enterprise
in the preparation and presentation of financial statements.
Accounting treatment and disclosures

 Ordinary activities: When items of income and expense within profit or loss from ordinary activities are
of such size, nature or incidence that their disclosure is relevant to explain the performance of the
enterprise for the period, the nature and amount of such items should be disclosed separately.

 Extraordinary items should be disclosed in the statement of profit and loss as a part of net profit or loss
for the period. The nature and the amount of each extraordinary item should be separately disclosed
in the statement of profit and loss in a manner that its impact on current profit or loss can be
perceived.

 Prior period: The nature and amount of prior period items should be separately disclosed in the
statement of profit and loss in a manner that their impact on the current profit or loss can be
perceived.

 Accounting Estimate: The effect of a change in an accounting estimate should be included in the
determination of net profit or loss in;(a) the period of the change, if the change affects the period
only; or (b) the period of the change and future periods, if the change affects both.

 Accounting Policy: Any change in an accounting policy, which has a material effect, should be
disclosed. The impact of, and the adjustments resulting from, such change, if material, should be
shown in the financial statements of the period in which such change is made, to reflect the effect of
such change. Where the effect of such change is not ascertainable, wholly or in part, the fact should
be indicated. If a change is made in the accounting policies which has material effect on the
financial statement for the current period but which is reasonably expected to have a material effect
in later periods, the fact of such change should be appropriately disclosed in the period in which the
change is adopted.

 A change in accounting policies consequent upon the adoption of an Accounting Standard should be
accounted for in accordance with the specific transitional provisions, if any, contained in that
Accounting Standard. However, disclosures required by paragraph 32 of this Statement should be
made unless the transitional provisions of any other Accounting require alternative disclosures in this
regard.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-5

1) (a) Has any of the following transaction/event taken place during the year

(i) Write down/back of inventories? Yes / No

(ii) Restructuring Cost? Yes / No

(iii) Disposal of fixed assets? Yes / No

(iv) Disposal of long-term investments? Yes / No

(v) Legislative changes having retrospective application? Yes / No

(vi) Litigation Settlement? Yes / No

(vii) Reversal of Provisions? Yes / No

(b) If yes, the same disclosed separately or by way of note? Yes / No

 (c) If yes, are the same not considered as extraordinary items? Yes / No

2) (a) Have you come across any extraordinary item of income or expense
clearly distinct from ordinary activities of the enterprise? Yes / No

(b) Have you come across any income or expense, which has arisen
due to error or omission in the preparation of financial statement
of one or more prior periods? Yes / No

(c) If yes to either a or b, have the amount for each item disclosed
separately in P and L A/c in the manner that its impact on current
profit/loss can be perceived? Yes / No

3) (a) Has the enterprise during the year revised any of its estimates? Yes / No

(b) If yes, and if such change has material effect in current period or
subsequent period whether the nature and amount of such change
disclosed? Yes / No

(c) If no to (b) above, is the reason for non-quantification disclosed? Yes / No

4) (a) Whether the enterprise has revised any accounting policies? Yes / No

(b) If yes, have you ensured that the change is required to made because:

(i) of structure Yes / No

(ii) for compliance with AS Yes / No

3 (iii) such change would result in a more appropriate presentation of the

financial enterprise Yes / No

(c) If the change in accounting policy has a material effect, whether such
change is quantified so as to reflect the effect of such change? Yes / No
5) (a) If change in accounting policy, which is material and not ascertainable
whether such fact is disclosed in notes. Yes / No

(b) If change in accounting policy has no material effect for the current
period but is expected to have material effect in later periods, whether
such change has been appropriately disclosed? Yes / No

(c) Is change in accounting policy arising upon adoption of an Accounting

Standard made as per AS-5, unless the transitional provisions of the
Accounting Standard requires alternative disclosure? Yes / No

AS-6 - DEPRECIATION ACCOUNTING

 Allocate depreciable amount of a depreciable assets on systematic basis to each accounting year over
useful life of asset, useful life may be reviewed periodically.

 Basis must be consistently followed and disclosed. Any change to be quantified and disclosed.

 Rates of depreciation should be disclosed.

 A change in method followed be made only if required by statute, compliance to Accounting Standard,
appropriate preparation or presentation of the financial statement.

 In cases of extension, revaluation or exchange fluctuation, depreciation to be provided on adjusted figure

prospectively over the residual useful life of the asset.

 Deficiency or surplus in case of transfer/ change in method be disclosed.

 Historical cost, depreciation be made from date of use. Change in method of charging depreciation is
change in accounting policy be disclosed.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS- 6

1) Which method of depreciation is followed by the enterprise:

(a) Straight line method? Yes / No

(b) Written down value method? Yes / No

(c) Any other method? Yes / No

2) (a) Are the rates prescribed in Sch. XIV followed? Yes / No

(b) If no, are there any other higher rates followed? Yes / No

(c) If yes, whether disclosed the same in accounting policy? Yes / No

3) (a) Whether historical cost of fixed Asset has undergone a change due to
exchange fluctuation Yes / No

(b) If yes, whether depreciation on such amount provided prospectively over

the residual useful life of the asset? Yes / No

4) (a) Is the method of providing depreciation changed during the year? Yes / No

(b) If yes, whether depreciation as per new method recalculated Retrospectively? Yes / No

(c) If yes, whether deficiency / surplus adjusted in P&L A/c? Yes / No

(d) Whether such change has been treated as a change in accounting policy
and its effect quantified and disclosed so as to reflect the effect of such
change in account as per AS-5? Yes / No

5) (a) Have the fixed assets been revalued? Yes / No

(b) If yes, is depreciation provided based on

(i) revalued amount? And Yes / No

(ii) on the estimate of the remaining useful life of such asset? Yes / No

(c) If yes, how is the additional depreciation on revalued asset accounted

 (i) by charging to P&L A/c? Yes / No

(ii) by recouping from revaluation reserve? Yes / No

6) Is addition / extension to existing asset (not retaining a separate identity) depreciated

over the remaining useful life of the asset? Yes / No

AS 7 - ACCOUNTING FOR CONSTRUCTION CONTRACTS

 It may be mentioned that the standard is applicable in accounting of contracts in the books of the
contractor. It is not applicable for construction projects undertaken by the entity on behalf of its own,
for example, a builder construction flats to be sold. It is also not applicable to Service Contracts,
which are not related to the construction of asset.

 According to AS-7 (Revised), the enterprise should follow only percentage completion method.

 Where in case the contract revenue or cost or the stage of completion cannot be determined reliably,
the cost incurred on the contract may be carried forward as revenue. All foreseen losses must be fully
provided.

 Under percentage completion method, appropriate allowance for future contingencies shall be made.

 WIP, receipt of progressive payments, advances, retentions and certain other items are required to be
disclosed.

 The standard is followed by appendix, which is illustrative and does not form part of Accounting
Standard. The purpose of the appendix is to illustrate the application of the Accounting Standard to
assist in clarifying its meaning. It gives an example of disclosure of accounting policy, assists in
determining contract revenue and contract cost and clarifies the meaning as contract revenues and
cost and explains with illustration detailed contract disclosures.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-7

1) Is the enterprise involved in

(a) contracts for construction of dams, buildings, roads, ships, refineries,

pipeline? Or Yes / No

(b) contracts for rendering of services, directly related to the construction

of the asset? Yes / No

2) If yes to 1) above, is revised AS-7 followed in respect of construction contracts

entered into on or after 1-4-2003? Yes / No

3) How many contracts at the year end are of:

(a) Fixed Price Contracts?

(b) Cost Plus Contracts?

4) Are the following cost considered as direct cost to the contract cost?
 (a) site labour cost? Yes / No

(b) material costs used in construction? Yes / No

(c) depreciation of machinery used for the contract? Yes / No

(d) cost of moving machinery and materials to and from contract site? Yes / No

(e) cost of hiring machinery for the contract? Yes / No

(f) cost of design/technical assistance directly related to contract? Yes / No

(g) estimated cost of

(i) rectification? Yes / No

(ii) guarantee, including warranty costs? Yes / No

(h) claims from third party relating to contract? Yes / No

5) Are the following attributable costs, allocated to the contract costs?

(a) insurance on materials / machinery? Yes / No

(b) construction overheads? Yes / No

(c) interest cost (if permissible under AS-16)? Yes / No

6) Are the following cost excluded from contract costs?

(a) general administration cost for which reimbursement is not specified
in the contract? Yes / No

(b) selling cost? Yes / No

(c) depreciation of idle plant not used for a particular contract? Yes / No

7) In recognising revenue under fixed price contract, are all the following conditions satisfied:

(a) total contract revenue can be measured reliably? Yes / No

(b) both the contract costs to complete the contract and the stage of contract
completion at the reporting date can be measured reliably? Yes / No

(c) contract costs can be clearly identified and measured reliably, so that
actual cost incurred can be compared with prior estimates? Yes / No

8) In recognising revenue under cost plus contract, can contract costs be clearly identified
and measured reliably? Yes / No

9) Is contract revenue in case of fixed price contract or cost plus contract recognised
using the percentage of completion method? Yes / No

10) Which of the following method is determined to ascertain the stage of completion
 of the contract? Yes / No

(a) the proportion of contract costs incurred bears to the estimated total
contract costs? Yes / No

(b) survey of work performed? Yes / No

(c) completion of physical proportion of the contract work? Yes / No

11) Are contract cost of following nature recovery of which may not be probable, expensed
as and when incurred?

(a) which are not enforceable (validity in question)? Yes / No

(b) completion subject to pending litigation or legislation? Yes / No

(c) relating to properly likely to be condemned (forfeited) or expropriated

(dispossessed)? Yes / No

(d) where customer unable to meet obligations Yes / No

(e) where customer unable to complete contract or meet obligations under

the contract? Yes / No

12) Is expected loss (when contract cost exceeds contract revenue) recognised as an expense,
disregarding whether or not work has commenced on the contract or stage of completion
of contract activity? Yes / No

13) Have the following been disclosed in the financial statements?

(a) amount of contract revenue recognised as income? Yes / No

(b) the methods used to determine the contract revenue? Yes / No

(c) the methods used to determine the stage of completion of contract-in-progress? Yes / No

(d) the aggregate amount of cost incurred and recognised profits / losses
up to the reporting date? Yes / No

(e) the amount of advances received? and Yes / No

(f) the amount of retentions? Yes / No

14) Have the following been presented in the Balance Sheet?

(a) gross amount due from customers for contract work as an asset? And Yes / No

(b) gross amount due from customers for contract work as a liability? Yes / No
 AS 8 – ACCOUNTING FOR RESEARCH & DEVELOPMENT

 Salaries, wages, personnel costs, depreciation, cost of materials and services etc related to research and
development outside institutions, reasonable allocation of overhead costs and amortization of parents
and licenses be included in research and development be included in Profit & Loss Account.

 Such cost to be charged as an expense unless the product or process is separately identifiable etc. It
may then be allocated in future years on systematic basis and to be separately disclosed in balance
sheet and reviewed at the accounting year. Once written off, it should not be reinstated.

It may be mentioned that the standard has been withdrawn w.e.f. 1-04-2004.
 AS 9 – REVENUE RECOGNITION

 At the time of sale or services, if the amount of collection is reasonably expected, when risks and
rewards of ownership is transferred to the buyer, when effective control of the seller as a owner is
lost, then revenue must be recognised.

 In case of services, revenue must be recognised either on completed service method or proportionate
completion method by relating revenue with work accomplishment and certainty of consideration
receivable.

 Interest be recognised on time basis, royalties on accrual and dividend when owners’ right to receive
is established.

 Disclose circumstances in which revenue recognition has been postponed.

 Revenue from sale or service transaction should be recognised when the requirements as to
performance as set out below are satisfied, provided that at the time of performance, it is not
unreasonable to expect ultimate collection. If at the time of raising of any claim, it is unreasonable to
expect ultimate collection, revenue recognition should be postponed.

 In a transaction involving the sale of goods, performance should be regarded as achieved when the
following conditions have been fulfilled: (i) the seller of goods has transferred to the buyer the
property in the goods for a price or all significant risks and rewards of ownership have been
transferred to the buyer and the seller retains no effective control of the goods transferred to a degree
usually associated with ownership; and (ii) no significant uncertainty exists regarding the amount of
the consideration that will be derived from the sale of the goods.

 Revenue arising from the use by others of enterprise resources yielding interest, royalties and
dividends should be recognised when no significant uncertainty as to measurability or collectibility
exists. These revenues are recognised on the following bases:

(i) Interest : on a time proportion basis taking into

account the amount outstanding and the rate
applicable.

(ii) Royalties : on an accrual basis in accordance with the

terms of the relevant agreement.

(iii) Dividends from investments in shares : when the owner’s right to receive payment
is established.

Disclosure

 In addition to the disclosures required by Accounting Standard 1 on ‘Disclosure of Accounting

Policies’ (AS-1), an enterprise should also disclose the circumstances in which revenue recognition
has been postponed pending the resolution of significant uncertainties.

 In cases where revenue cycle of the entity involves collection of excise duty the enterprise is
required to disclose revenue at gross as reduced by excise amount thereby finally arriving net sales
on the face of the profit and loss account.
 The standard is followed by an appendix that though is not part of the standard, illustrate the
application of the standard to a number of commercial situation deals in an endeavor to assist in
clarifying application of the standard.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-9

1) In case of sale of goods whether the revenue is recognised only when all significant
risks and rewards of ownership have been transferred to the buyer and the enterprise
has retained no effective control of the goods transferred? Yes / No

2) In case of rendering of services, whether the revenue is recognised on:

(a) Completed service contract method? or Yes / No

(b) Proportionate completion method? Yes / No

3) In case of interest, royalties and dividends, whether the revenue recognised as under:

(a) Interest on time basis? Yes / No

(b) Royalties in accordance with terms of agreement? Yes / No

(c) Dividend from investments in share when right to receive is established? Yes / No

4) (a) Have you ascertained that when significant uncertainty exists as to the
consideration or measurability, the revenue recognition is postponed and
shall be recognized as revenue of the period in which the uncertainty is
resolved? Yes / No

(b) Have you ascertained that adequate provision is made for expenses to be
incurred for future when revenue has been fully recognized in accordance in
accounts; e.g., warranties on product sold, services to be rendered for which
full fees collected etc? Yes / No

5) (a) is revenue recognized on accrual basis? Yes / No

(b) If revenue recognized is postponed, the circumstances for such postponement

has been disclosed? Yes / No

AS 10 - ACCOUNTING OF FIXED ASSETS

 The cost of a fixed asset should comprise its purchase price and any attributable cost bringing the
asset to its working cost for its intended use.

 Self – constructed assets shall be accounted at cost.

 In case of exchange of assets, fair value of assets acquired or the net book value of asset given up
whichever is more clearly exits shall be considered.
 Revaluation is permitted provided it is done for the entire class of assets. The basis of revaluation
should be disclosed.

 Increase in value on revaluation shall be credited to Revaluation Reserve while the decrease should
be charged to Profit and Loss Accounts.

 Goodwill to be accounted only when paid for.

 Assets acquired on hire purchase shall be recorded at its fair value.

 Gross and net book values at beginning and end of year showing additions, deletions and other
movements is required disclosed.

 Assets should be eliminated from books on disposal/when of no utility value.

 Profit /Loss on disposal be recognized on disposal to Profit and Loss Account.

 Machinery spares that can be used only in conjunction of specific assets shall be capitalized.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-10

1) In case of capitalization of fixed assets whether the following is included in cost:

(a) Purchase price including import duty and non-refundable taxes

or levies (capital MODVAT if availed then excluded from cost)? Yes / No

(b) Interest cost (net of income, if any) specific / general borrowing capitalized? Yes / No

(c) Administrative and other general overheads excluded? Yes / No

(d) Expenditure on test-runs and experimental production till commercial production Yes / No

(e) However, if commercial production prolonged, then expenses incurred after

plant ready to commence commercial production charged to P & L A/c? Yes / No

2) Whether only those expenses, incurred on existing assets, which increase capacity
have been capitalized? Yes / No

3) In case of following Fixed Assets, is their treatment in conformity with AS:

(a) Hire Purchase / Assets taken on lease accounted as per AS-19? Yes / No

(c) Joint ownership, adequate disclosure given in Balance Sheet? Yes / No

(d) Consolidate price apportioned to various assets as determined by competent

valuer? Yes / No

(e) Goodwill recorded is, paid for or arising on merger and goodwill as a prudent
policy written-off over a period? Yes / No

(f) Patents and know-how accounted as per AS-26? Yes / No

4) If assets are revalued, whether

(a) (i) Revaluation is of entire class? Or Yes / No

(ii) Whole class of assets within a unit? Yes / No

(b) Revalued amount presented in financial statement by

(i) Restating both gross book value and accumulated depreciation? Or Yes / No

(ii) Adding the net increase on account of revaluation to net book value? Yes / No

(c) Disclosure in accounting policy is made of

(i) Method adopted to compute the relevalued amount? Yes / No

(ii) Nature of indices used? Yes / No

(iii) Year of appraisal made? And Yes / No

(iv) external valuer involved? Yes / No

5) Whether Fixed assets retired from active use and held for disposal:

(i) Stated at lower of net book value and net realisable value? And Yes / No

(ii) Shown separately as part of other current assets? Yes / No

6) Whether

(i) Standby and servicing equipment’s capitalised? Yes / No

(ii) Critical or stand-alone spares connected with specific fixed assets written off over
the useful life of the Fixed Assets? Yes / No
 AS 11 (REVISED) - ACCOUNTING FOR EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

 Applicable to all enterprises for which accounting period commences on or after 1-4-2004. Its is
applied to transactions in foreign currency and translating financial statements of foreign subsidiary/
branches.

 Monetary items denominated in Foreign Currency shall be reported using closing rates.

 Non-monetary items carried in terms of historical cost in foreign currency shall be reported at the
exchange rate on the date of the transaction.

 Exchange differences shall be recognized as income/expenses in the period in which they arise
except in case of fixed assets and differences on account of forward contracts.

 Translation of foreign exchange transaction of revenue items except opening /closing inventories and
depreciation shall be made by applying rate at the date of the transactions. For convenience purposes
an average rate or weighted average rate may be used, provided it approximates the rate of exchange.
Opening and Closing inventories shall be translated at rates prevalent on opening and closing dates,
respectively and depreciation amount shall be converted by applying the rate used translation of the
asset.

 Translation gains and losses for branches/ subsidiaries forming integral part of operations of the
entity shall be accounted as stated above. However translation gains & losses for non integral
operation shall be directly credited to reserves. Its may be mention that that the method of arriving
translation gain or losses shall be different from that stated above; i.e., all assets and liabilities are
converted at closing rates and revenue items are converted at average rates, where it approximates
the rates at the date of transactions. Integral foreign operation is a foreign operation, the activities of
which are an integral foreign operation is a foreign operation, the activities of which are an integral
part of those of the reporting of the enterprise.

 Exchange differences arising on repayment of liabilities incurred for purchase of fixed assets shall be
adjusted in the carrying amount of respective assets.

 Gain or losses on accounting of forward contract is recognized to through profit & Loss account
unless it relates to fixed assets. However, measurement of gain or losses on forward contract depends
upon the intention for which it is taken. Where it is not for trading or speculative purposes the
premium / discount is amortized over the term of the contracts. Where this are help for either
speculative or trading purposes, the gain or losses is arrived at each reporting date after comparing
the FAIR VALUE of the contact for its remaining term of maturity with the carrying amount at the
reporting date.

 Profit /Loss on cancellation or renewal of forward exchange contract shall be recognized as income /
expenses of the respective except those relating to fixed assets.

 Amount of exchange difference included in Profit & Loss Account adjusted in carrying forward or
amount of fixed assets or forward contacts recognized in profit & loss account for one or more
accounting period must be disclosed.

 It may be mentioned that revised AS-11 is different from its earlier version mainly in two respect;
firstly, revised AS-11 introduce concept that translation gains or losses on non-integral operations
shall be directly credited / debited through reserve and securities specifies accounting of forward
 contract that is held for trading or speculative purposes on basis of its fair value at each dates as
compared to earlier version where all forward contracts were accounted at historical cost, the gain or
loss (forward rate less spot rate) was accounted over its term.
QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-11

1) In case of transaction in foreign currency, how are the following accounted

(a) In respect of transaction in foreign currency entered on or before

31.03.2004 whether AS-11 (1994) followed? Yes / No

(b) In respect of transaction in foreign currency entered on or

after 01.04.2004 whether AS-11 (2003) followed? Yes / No

2) (a) Whether cash flows arising from transaction in a foreign currency and
the transaction of cash flow of a foreign operation in cash flow statement
is presented as per AS-3? Yes / No

(b) Whether the exchange differences arising from foreign borrowing to the
extent that they are regarded as an adjusted to interest cost is presented
as per AS-16? Yes / No

3) Whether the initial transaction is recorded at;

(a) Transaction date? Or Yes / No

(b) Average rate week or month if more transactions? Yes / No

4) At the reporting date; i.e., Balance sheet date, are the following monetary assets
recorded at closing rate or amount likely to be realized, if restriction on remittance;

(a) Cash and Bank Balances? Yes / No

(b) Receivables? Yes / No

(c) Payables? Yes / No

5) At the reporting date; i.e., Balance sheet date, are the following non-monetary
assets recorded at rate prevailing on transaction date;

(a) Investments? Yes / No

(b) Inventories? Yes / No

(d) Fixed Assets? Yes / No

(e) Depreciation? Yes / No

7) Are exchange differences arising on the settlement of monetary items or on reporting an

enterprise’s monetary items at rates different from at which they are initially recorded
during the period or reported in previous financial statement, recognized as income or as
expenses in the period in which they arise? Yes / No

8) If non-monetary item is subsequently measured at fair value or net realizable value, is the
exchange rate taken on the date when such fair value or net realizable value determined? Yes / No
9) (a) Whether exchange differences arising on a monetary item that forms a net
investment in a non- integral foreign operation is accumulated in foreign
currency transactions. Yes / No

(b) On disposal of the net investment in non integral foreign operation, is the
accumulated foreign currency transaction reserve recognized as in come
or expenses in profit and loss statement? Yes / No

10) In the consolidated financial statements, wherein non integral foreign operation
is incorporated are the:

(a) Assets and Liabilities both are monetary and non-monetary of the
non integral foreign operations translated at the closing rate? Yes / No

(b) Income and expenses items of the non-integral foreign operation

translated at exchange rate at the dates of the transaction? Yes / No

(c) Resulting exchange differences accumulated in a foreign currency

translation reserve until the disposal of the net investment? Yes / No

11) (a) Is the liability or assets outstanding at the reporting date converted
using the exchange rate prevailing on that date? Yes / No

(b) Exchange difference arising the forward exchange contracts undertaken

to hedge the foreign currency risk of a firm commitment or a
highly probable forecast transaction accounted when transactions get settled? Yes / No

12) Have the following been disclosed as required by the Accounting Standard;

(a) Amount of exchange difference included in the net profit or loss for
the period?

(i) Net exchange differences accumulated in foreign currency

Translation reserve Yes / No
(ii) any amount of such exchange differences at the beginning and end of
the period? Yes / No

(b) When the reporting currency is different from the currency of the
country in which the enterprise is domiciled, along with reason
for using a different currency? Yes / No

(c) When there is a change in the classification of a significant foreign

operation, nature of change in classification, reason for the change,
the impact of the change in classification on shareholder’s funds
and impact on net profit or loss for each prior period presented had
the change in classification occurred at the beginning of the earliest
period presented? Yes / No
 AS 12 – ACCOUNTING FOR GOVERNING GRANTS

 Grants should not be recognized unless reasonably assured to be realized. Grants towards specific
assets be presented as deduction from its gross value. Alternatively, be treated as deferred income in
profit and loss account on rational basis over the useful life of the assets and depreciable. Or non
depreciable assets requiring fulfillment of any obligation, it be credited to profit and loss account during
the concerned period to fulfill obligation.

 Balance of deferred income to be disclose approximately as to promoter’s contribution, be credited to

capital reserves and considered as shareholders funds.

 Grants in the form of non monetary assets given at concessional rate be accounted at their acquisition
cost. Asset given free of cost be recorded at nominal value.

 Grants receivable as compensation of losses/expenses incurred be recognized and disclosed in profit and
loss account in the year it is receivable and shown as extraordinary item if appropriate read with AS-5.

 Contingency related to grant be treated in accordance with AS-4. grants when become refundable, be
shown as extraordinary item read with AS-5.

 Grants related to revenue on becoming refundable be adjusted first against unamortised deferred credit
balance of the grant and then be charged to profit &loss account.

 Grants against specific assets on becoming refundable be recorded by increasing the value of the
respective assets or by reducing Capital Reserve / Deferred income balance of the grant.
 Grant to promoter’s contribution when refundable be reduced from the Capital Reserve.

 Accounting policy adopted for grants including method of presentation, extent of recognition in financial
statements, at concession/ free of cost be disclosed.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-12

1) How are the Government Grants and grants received from similar bodies, in financial statements
presented for the following:

(a) Fixed Assets

(i) Is the grant amount deducted from the gross value of concerned asset? Or Yes / No

(ii) In case of depreciable asset is it treated as deferred income and

recognized in P&L statement over the period and in proportion
in which depreciation is charged? Yes / No

(iii) In case of non- depreciable asset is it credited to capital

reserve? Yes / No

(b) Revenue is grant shown under other income? Or

deducted from related expenses? Yes / No

(c) Promoters contribution is such grants credited to capital reserve? Yes / No

 (d) Non-monetary assets is such asset received at free of cost, recorded at
nominal value? Yes / No

2) Refund of Government grants

(a) Whether refund of Government grant treated as extraordinary item

in Financial Statement? Yes / No

(b) In respect of grant related to specific fixed asset, is

(i) book value of assets increased? Or Yes / No

(ii) capital reserve reduced? Or Yes / No

(iii) deferred income balance reduced? Yes / No

3) (a) In respect of Revenue grants

- if any unamortised deferred credit available whether refund
adjusted there against? Yes / No

- if no deferred credit balance available, whether charged to

P&L Statement? Yes / No

(b) In respect of promoters contribution

- whether capital reserve balance reduced? Yes / No

4) At the time of recognizing Government grants, whether the Enterprise:

(a) has complied with the conditions attached to the grant? And Yes / No

(b) is reasonably certain for the ultimate collection of such benefits earned? Yes / No

5) Have the following disclosures been made

(a) Regarding accounting policy adopted for the Government grants

including methods of presentation in financial statement? Yes / No

(b) The nature and extent of Government grants including Non-monetary

assets received at concessional rate or Free of cost? Yes / No
 AS 13 - ACCOUNTING FOR INVESTMENTS

 Current investments and long term investments shall be disclosed distinctly with further sub-
classification.

 Cost of investment to include acquisition charges, e.g., brokerage, fees and duties.

 Current investments shall be disclosed at lower of costs and fair value.

 Long-term investments shall be disclosed at cost.

 Provision for decline (other than temporary) to be made.

 Adequate disclosure is required for: the accounting policy adopted – classification of investments –
income from investments, profit/loss on disposal and changes in carrying of such investment –
aggregate.

 amount of quoted and unquoted investments giving aggregate market value of quoted investments.

 Significant restrictions on right of ownership, realization of investment and remittance of income and
proceeds of disposal.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE AS - 13

1) Is the accounting policy for determining the carrying amount of investments disclosed? Yes / No

2) Are investments classified into

(a) current investments? Yes / No

(b) long term investments? Yes / No

3) Are investments

(a) Verified /confirmed? And Yes / No

(b) further classified as per requirement of Schedule VI to the Companies Act, 1956? Yes / No

4) Are current investments carried at the lower of cost or fair value

(a) on individual basis? Or Yes / No

(b) category of investment? Yes / No

5) In case of long-term investments

Whether provisions made for diminution other than temporary in value of each
Investments individually? Yes / No

6) Whether the following disclosed in P and L A/c. Yes / No

 (a) interest, dividend and rental on investments shown separately under long-term
and current investments? Yes / No

(b) Profit and Loss on disposal of current and long-term investment and changes
in the carrying amount of such investments? Yes / No

AS 14 – ACCOUNTING FOR AMALGAMATION

 The Accounting Standard is applicable only where it is made in pursuant to a scheme sanctioned by
statute.

 The accounting standard to be adopted depends whether the amalgamation is in nature of merger or
not as defined in para 3(e) of the standard. The definition list out five criteria, all of which must be
satisfied for an amalgamation to basis, accounted on the basis of “Pooling of Interest Method”. If any
criterion is not met than the amalgamation is accounted on using “Purchase Method”, it may be
mentioned that these criteria relates to mode of payment of consideration of merger, shareholding
pattern pre and post merger, intention to carry-on business after the merger, pooling of all assets and
liabilities after the merger and an intention to continue to carry the carrying amounts of assets and
liabilities after the merger.

 Under purchase method, all assets and liabilities of the transferor company is recorded either at
existing carrying amount or consideration is allocated to individual identifiable assets and liabilities
on basis of its fair values at date of amalgamation. The excess or shortfall of consideration over
value of net assets is recognized as goodwill or capital reserve.

 Under the pooling of Interest Method, asset, liabilities and reserves of the Transferor Company are
recorded at existing carrying amount and in the same form as on date of amalgamation. In case of
conflicting accounting policies existing in transferor and transferee company a uniform policy be
adopted on amalgamation, as per AS-5

 Certain specific disclosures as discussed in the questionnaire below are required to be made in
financial statement after amalgamation. In case of amalgamation effected after balance sheet date
but before issue of financial statements of either party, the event be only specifically disclosed and
not given effect in such statements.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-14

1) Is the amalgamation:

(a) in nature of merger? Or Yes / No

(b) in nature of purchase? Yes / No

2) (a) is goodwill arising out of amalgamation? Yes / No

(c) if yes, whether such goodwill is amortized over a period not exceeding five years Yes / No
3) Whether treatment to be given to reserve of transferor company is specified in scheme
of amalgamation? Yes / No

4) Whether following disclosures made in first financial statement following amalgamation:

(a) name and general nature of business of amalgamating companies? Yes / No

(b) Effective date of amalgamation? Yes / No

(c) Method of accounting used to reflect amalgamation? Yes / No

(d) Particulars of the scheme sanctioned under the Companies Act, 1956? Yes / No

5) If amalgamation under pooling of interest method, whether additional disclosure

made in first financial statement following the amalgamation of the following:

(a) Description and number of shares issued, together with percentage of equity
Share exchanged to effect amalgamation? Yes / No

(b) Amount of any difference between the consideration and the value of net
identifiable assets acquired, and the treatment thereof including the period
of amortisation of any goodwill arising on amalgamation? Yes / No

6) If amalgamation in nature of purchase, whether additional disclosure made in

the first financial statement following the amalgamation of the following:

(a) consideration for the amalgamation and a description of the consideration

paid or contingency payable? And Yes / No

(b) the amount of any difference between the consideration and the value of
net identifiable assets acquired, and the treatment thereof including the
period of amortisation of any goodwill arising on amalgamation? Yes / No

AS-15 – ACCOUNTING FOR RETIREMENT BENEFITS IN THE FINANCIAL STATEMENT OF EMPLOYERS

 The method of accounting of retirement benefits depends on the nature of retirement benefits and in
practice it may be incorrect to say that it also depends on the mode of funding.

 On the basis of nature, a retirement benefit scheme can be classified either as defined benefit plan or
defined contribution. Defined contribution schemes where the amounts to be paid as retirement
benefits are determined by contributing a fund together with earnings thereon; e.g., provident fund
schemes. Defined benefit schemes are retirement benefit scheme which amounts to be paid as
retirement benefits are determinable usually by reference to employee’s earnings and/ or service;
e.g., gratuity schemes.

 For defined contribution schemes, contribution payable by employer is charged to P&L A/c.

 For defined benefit schemes, accounting treatment will depend on the type of arrangements, which
the employer has made.

 If payment for retirement benefits is made out of employers’ funds, appropriate charge to P&L A/c
to be made through a provision for accrued liability, calculated according to actuarial valuation.
 If liability for retirement is funded through creation of trust, the excess/ shortfall of contribution paid
against amount required to meet accrued liability as certified by actuary is treated as pre- payment or
charged to profit & loss account.
 If liability for retirement is funded through a scheme administered by an insurer, an actuarial
certificate or confirmation from insurer is obtained. The excess/shortfall of the contribution paid
against the amount required to meet accrued liability as confirmed by insurer is treated as pre-
payment or charged to P&L A/c.

 Any alteration in the retirement benefit is charged or credited to profit & loss a/c and change in
actuarial method is be disclosed.

 Financial statements to disclose method by which retirement benefit cost have been determined.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-15

1) Out of the following which retirement benefits the enterprise is offering to its employees

(a) Provident Fund? Yes / No

(b) Superannuation? Yes / No

(c) Pension? Yes / No

(d) Gratuity? Yes / No

(e) Leave encashment? Yes / No

(f) Post retirement health and welfare schemes? Yes / No

(g) Any other retirement benefits? Yes / No

2) How is the funding done for the following Schemes

(a) Provident Fund

- Through Trust? Yes / No

- Through Government? Yes / No

(b) Superannuation

- Through Trust? Yes / No

- Through Insurer? Yes / No

- Through Own Fund? Yes / No

(c) Pension

- Through Trust? Yes / No

- Through Insurer? Yes / No

 - Through Own Fund? Yes / No

3) (a) Gratuity

- Through Trust? Yes / No

- Through Insurer? Yes / No

- Through Own Fund? Yes / No

(b) Leave encashment

- Through Trust? Yes / No

- Through Insurer? Yes / No

- Through Own Fund? Yes / No

(d) Other retirement benefit

- Through Trust? Yes / No

- Through Insurer? Yes / No

- Through Own Fund? Yes / No

3) How is the accounting done for the following schemes

(a) Provident Fund charged to P&L A/c? Yes / No

(b) Superannuation, charged to P&L A/c on basis of

(i) Actuarial Valuation if managed out of own fund? Yes / No

(ii) Contribution to Trust/ Insurance company based on Actuarial valuation? Yes / No

(c) Gratuity at year-end is charged to P&L a/c on basis of

- Accruing liability calculated according to actuarial valuation? Yes / No

- Amount contributed to Trust/Insurance Company on actuarial valuation? Yes / No

(d) Leave encashment at year end is charged to P&L a/c on basis of

- Accruing liability calculated according to actuarial valuation? Yes / No

- Amount contributed to Trust/Insurance Company on actuarial valuation? Yes / No

(e) Post retirement health and welfare schemes is charged to P&L a/c on basis of

- Accruing liability calculated according to actuarial valuation? Yes / No

- Amount contributed to Trust/Insurance Company on actuarial valuation? Yes / No

3) (a) Whether during the year,

(i) Any more employees covered under a retirement benefit

Scheme? or Yes / No

(ii) Any improvement made in existing scheme? Or Yes / No

(iii) Actuarial method or assumption adopted by actuary changed? Yes / No

(b) If yes, to any of above, whether such expenditure

(i) Charged to P and L a/c? or Yes / No

(ii) Spread over a period not more than the expected

remaining working lives of the participating employees? Yes / No

(c) Whether such change treated as a change in accounting policy

disclosed as per AS-5? Yes / No

5) Have the following disclosures been made :

(a) Method by which retirement benefit cost been determined? Yes / No

(b) If defined benefit scheme are based on actuarial valuation,

whether the financial statement discloses the date of actuarial valuation? Yes / No

(c) If actuarial valuation is at an earlier date than the closing date

of accounts, on what basis / method the accrual for the balance
period been determined, is described? Yes / No

AS 16 – BORROWING COST

 Borrowing costs that are directly attributable to the acquisition, construction or production of any
qualifying assets (assets that taken for a substantial period of time to get ready for its intended use or
sale) should be capitalized.

 Borrowing costs that can be capitalized are interest and other costs that are directly attributable to the
acquisition, construction and production of a qualifying asset.

 Income on the temporary investment of the borrowed funds to be deducted from borrowing costs.

 Capitalization of borrowing costs should be suspended during extended periods in which

development is interrupted.

 Capitalization should cease when completed substantially or if completed parts, all the activities for
intended use or sale are complete.
 Statement does not deal with the actual or imputed cost of owner’s equity / preference capital are
treated as borrowing costs. Financial Statements to disclose accounting policies adopted for
borrowing cost and also the amount of borrowing costs capitalized during the period.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-16

1) (a) Is the enterprise in the process of

(i) Setting-up capital project? Yes / No

(ii) Manufacturing inventories Yes / No

(b) Is time required for (a) above twelve months or more? Yes / No

(c) If no to (b) above, is borrowing cost expensed in the period in which

they are incurred? Yes / No

2) Are any specific borrowing of following nature made by enterprise for 1) above

(a) interest and commitment charges? Yes / No

(b) Amortization of discounts or premium to borrowing? Yes / No

(c) Ancillary cost in connection with borrowings? Yes / No

(d) Finance charges in respect of assets acquired under finance lease? Yes / No

(e) Exchange difference arising from foreign currency borrowing regarded

as interest costs? Yes / No

3) (a) Is expenditure incurred on 2 above capitalized as part of the cost of the asset? Yes / No

(b) Is any income earned on temporary investment out of specific

borrowing deducted from the borrowing costs incurred? Yes / No

4) (a) Are any general borrowing utilized for any of 1 above? Yes / No

(b) If yes, is interest worked out on weighted average of borrowing cost

(other than specific borrowing capitalized) for the purpose of capitalization Yes / No

5) Are all the following condition being fulfilled, when borrowing costs is being capitalized?

(a) Expenditure for the asset is being incurred Yes / No

(b) Borrowing cost is being incurred Yes / No

(c) Activities to prepare the assets for its intended use or sale are in Progress Yes / No

6) Is capitalisation of borrowing cost suspended during the period when active development
is interrupted without any technical or administrative reason? Yes / No

7) Is capitisation of borrowing cost ceased when substantially all the activities relating to the
assets are completes? Yes / No
8) Are the following disclosure made in the financial statements?
(a) the accounting policy adopted for borrowing costs and Yes / No

(b) the amount of borrowing costs capitalized during the period Yes / No
AS 17 - SEGMENT REPORTING

 Requires reporting of financial information about different types of products and services an enterprise
provides and differ geographical areas in which it operates.

 A business segment is distinguishable component of an providing a product or services or group of

products or services that is subject to risk and returns that are different from other business segments.

 A geographical segment is distinguishable component of an enterprise providing products or services

in a particular economic environment that is subject to risk and returns that are different from
components operating in other economic environments.

 Internal financial reporting system is normally the basis for identifying the segment.

 The dominant source and nature of risk and returns of an enterprise should govern whether its primary
reporting format will business segment or geographical segments.

 A business segment or geographical segment is a reportable segment if (a) revenue from sales ti
external customers and from the transactions with other segments exceed 10%of total revenues
(external and internal) of all segments; or (b) segment results whether profit or loss, is 10% or more
of (i) combined results of all segments in profit or (ii) combined result of all segments in loss
whichever is greater in absolute amount; or (c) segment assets are 10% or more of all assets of all the
segments.

 If total external revenue attributable to reportable segment constitutes less than 75% of total revenues
then additional segments should be identified.

 Under primary reporting format for each reportable segment the enterprise should disclose external and
internal segment revenue segment results, amount of segment assets and liabilities, cost of fixed
assets, acquire, depreciation, amortization of assets and other non-cash expenses.

 Reconciliation between information about reportable segment and information in financial statements
of the enterprise is also to be provided.

 Secondary segment information is also required to be disclosed. This includes information about
revenues, assets and cost of fixed assets acquired.

 When primary format is based on geographical segments, certain further disclosures are required.

 Disclosures are also required relating to intra-segment transfer and composition of the segment.

 In case, by applying the definitions of ‘business segment’ contained in AS-17, it is concluded that there
in neither more than one business segment nor more then one geographical segment information as
per AS 17 required to be disclosed.

 It may be mentioned that the illustrative disclosure attached to standard as appendix (though not
forming part of the state illustrative in good level of detail; determination of reportable segments,
information about business segments and sum required disclosures.
 QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OS AS-17
AS-17

1) (a) Is the equity or debt instrument of the company listed on any

stock exchange? Yes / No

(b) Is the turnover of the enterprise exceeding Rs.50 crore during

the accounting year? Yes / No

(c) Is answer to (a) or (b) is in yes, is segment reporting made in

financial statements? Yes / No

2) Is the financial reporting to the BOD / CE based on;

(a) products or services? Or Yes / No

(b) Geographic areas? Yes / No

3) If answer is 2(b) is:

(a) Primary reporting by products or services? And Yes / No

(b) Secondary reporting by products or services? Yes / No

4) If answer to 2 is not obtained, whether the enterprise determines the risk

and returns more related to

(a) Primary reporting by geographical segment? And Yes / No

(b) Secondary reporting by products or services? Yes / No

5) If answer to 2 is not obtained, whether the enterprise determines the

Risk and returns more related to:

(a) Products and services? or

Yes / No
(b) Geographical area in which it operates
Yes / No
6) Having identified segment reporting into business or geographical
segment, are the following identified thereafter?

(a) Segments where revenue is 10% or more both from internal and
external sales.
Yes / No
(b) Segments where profit or loss is 10% or more of combined results of
the segment in relation to profit or loss whichever is greater in
absolute amount.
Yes / No
(c) Segment where assets are 10% or more of the total assets of all
segments. Yes / No

7) (a) Do all the reportable segment put together constitute more than
 75% of the total enterprise revenue?
Yes / No
(b) If no, has management identified additional segment(s) even if
that segment do not meet 10% criteria, such that at least
75% of total enterprise revenue is reported in reportable segment? Yes / No

8) Are the disclosure of the reportable segments made in compliance with

requirement of Accounting Standard? Yes / No

. AS 18 - RELATED PARTY DISCLOSURES

 Parties are considered related if one party has ability to control or exercise significant influence over
the other party in financial and/or operating decisions.

 The statement deals with following related party relationships:

(i) Enterprises that directly or indirectly control or are controlled by or are under common
control with the reporting enterprise

(ii) Associates, Joint Ventures of the reporting entity, investing party or venturer in respect of
which reporting enterprise is an associate or a joint venture,

(iii) Individuals owning voting powers giving control or significant influence,

(iv) Key management personnel and their relatives, and

(v) Enterprises over which any of the persons in (iii) or (iv) are able to exercise significant
influence. Any other relationship is not covered by this standard.

 Following are not considered related parties (i) Two companies merely because of common director,
(ii) Customer, supplier, franchiser, distributor or general agent merely by virtue of economic
dependence; and (iii) Financiers, trade unions, public utilities, government departments and bodies
merely by virtue of their normal dealings with the enterprise.

 Disclosure under the standard is not required in the following cases (i) if such disclosure conflicts
with the duty of confidentially under statute, duty cast by a regulator or a component authority; (ii)
In consolidated financial statements in respect of intra-group transactions, and (iii) In case of State-
Controlled enterprises regarding party relationships and transactions with other State-controlled
enterprises.
 Relative (of an individual) means spouse, son daughter, brother, sister, father and mother who may
expected to influence, or be influenced by, that individual in dealings with the reporting entity.
 Standard also defines inter alia control, significant influence, associate, joint venture and key
management personnel.

 Where there are transactions between the related parties certain information is to be disclosed, viz;
name of the related party, nature of relationship, nature of transaction and its volume (as an amount
or proportion), other elements of transactions if necessary for understanding, amount or appropriate
proportion outstanding pertaining to related parties, provision for doubtful debts from related parties,
amounts written off or written back in respect of debts from or related parties.

 Names of the related party and nature of related party relationship to be disclosed even where there
are no transactions but the control exists.

 Items of similar nature may be type of the related party.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS – 18

1) (a) Is the equity or debt instrument of the enterprise listed on any stock exchange? Yes / No

(b) Is the turnover of the enterprise exceeding Rs. 50 crores during the
accounting year? Yes / No

(c) If answer to (a) or (b) is yes, is Related party disclosures made in

financial statements? Yes / No

2) Have the following been listed out?

(a) Holding company/ies? Yes / No

(b) Subsidiary company/ies? Yes / No

(c) Fellow subsidiary/ies? Yes / No

(d) Person able to appoint or remove all or majority of directors of the

reporting enterprise or vice versa? Yes / No

(e) Person who has substantial interest in voting power (20% or more)
and power to direct by statute or agreement the financial and / or
operating policies of the reporting enterprise or vice versa? Yes / No

4) Have the following been listed out:

(a) Associates (two ways)? Yes / No

(b) Joint ventures (two ways) Yes / No

(c) (i) individuals, directly or indirectly having voting power to control

or significantly influence over the reporting enterprise? And Yes / No

(ii) relatives of any such individual? Yes / No

(d) (i) key management personnel? And Yes / No

 (ii) relatives of any such personnel? Yes / No

(e) enterprises owned or significantly influenced by individuals or their

relatives, who have direct or indirect control or significant influence
over the reporting enterprise? Yes / No

(f) enterprises owned or significantly influenced by key management

personnel or their relatives? Yes / No

5) Is the following disclosure made in financial statements Yes / No

(a) Name of related party as appearing in 1 above even though no

transaction has taken place during the period? Yes / No

(b) If transactions have taken place during the period with parties listed
in either 1 or 2 of above,

(i) the name of the transacting related party? Yes / No

(ii) description of the relationship? Yes / No

(iii) volume of transaction in amount? Yes / No

(iv) outstanding amount of year end and provision made for doubtful
debts relating thereto? Yes / No

(v) Amount written off or written back in the period in respect of

such due from or to such due from or to such parties? Yes / No

(vi) Any other transaction necessary for an understanding of the

financial statement? Yes / No

6) If disclosure for 4(b) not made party wise, are items of similar nature
disclosed in aggregate by type of related party except when separate
disclosure is necessary for understanding effects of related party
transactions on the financial statements of the reporting enterprise? Yes / No

AS 19 - ACCOUNTING OF LEASES

 Applies in accounting for all leases other than leases to explore for or use natural resources, licensing
agreements for items such as motion pictures, films, video recordings, plays etc. and lease for use of
lands.

 A lease is classified as finance lease or an operating lease.

 A finance lease is one where risks and rewards incident to the ownership are transferred substantially;
otherwise it is an operating lease. Examples of situations which normally result in classification of
lease as a finance lease include, lessor transferring the ownership at the end of the lease term, lease
period covers substantial part of economic life, lessee has bargain purchase price option, present
value of minimum lease payment is substantially equal to the asset’s fair value, the subject matter of
lease of specialized nature such that only lessee can use it.
 Treatment in case of finance lease in the books of lessee

 At the inception, lease should be recognised as an asset and a liability at lower of fair value of leased
asset or the present value of minimum lease payments (calculated on the basis of interest rate
implicit in the lease, or if not determinable, at lessee’s incremental borrowing rate).
 Lease payments should be appropriated between finance charges and reduction of outstanding liability so
as to produce a constant periodic rate of interest on the balances of the liability.

 Depreciation policy for leased asset should be consistent with that for other owned depreciable assets and
are to be calculated as per AS 6.

 Disclosure should be made of assets acquired under finance lease, net carrying amount at the balance
sheet date, total minimum lease payments at the balance sheet date and their present value for
specified periods, reconciliation between total minimum lease payments at the balance sheet date and
their present value, contingent rent recognised as income, total of future minimum sub-lease
payments expected to be received and general description of significant leasing arrangements.

Treatment in case of finance lease in the books of lessor

 The lessor should recognise the asset as a receivable equal to net investment in lease.

 Finance income should be based on pattern reflecting a constant periodic return on net investment in
lease.

 Manufacturer/dealer lessor should recognize sales as outright sales. If artificially low interest rates
quoted, profit should be calculated as if commercial rates of interest were charged. Initial direct costs
should be expensed.

 Disclosure should be made of total gross investment in lease and the present value of the minimum lease
payments at specified periods, reconciliation between total gross investment in lease and the present
value of the minimum lease payments, unearned finance income, unguaranteed residual value
accruing to the lessor, accumulated provision for uncollectable minimum lease payments receivable,
contingent rent recognised, accounting policy adopted in respect of initial direct costs, general
description of significant leasing arrangements.

Treatment in case of operating lease in the books of lessee

 Lease payments should be recognised as an expense on straight-line basis or other systematic basis, if
appropriate.

 Disclosure should be made of total future minimum lease payments for the specified periods, total future
minimum sub-lease payments expected to be received, lease payments recognised in the Profit &
Loss statement with separate amount of minimum lease payments and contingent rents, sub-lease
payments recognised in the Profit & Loss statement, general description of significant leasing
arrangements.

Treatment in case of operating lease in the books of lessor

 Lessors should present an asset given on lease under fixed assets and lease income should be recognised
on straight-line basis or other systematic basis, if appropriate.

 Costs including depreciation should be recognised as an expense.

 Initial direct costs are either deferred over lease term or recognised as an expense.

 Disclosure should be made of carrying amount of the leased assets, accumulated depreciation and
impairment loss, depreciation and impairment loss recognised or reversed for the period, future

minimum lease payments in aggregate and for the specified periods, general description of the
leasing arrangements and policy for initial costs.

Sale and leaseback transactions

 If the transaction of sale and leaseback results in a finance lease, any excess or deficiency of sale
proceeds over the carrying amount should be amortised over the lease term in proportion to the
depreciation of the leased assets.

 If the transaction results in an operating lease and is at fair value, profit or loss should be recognised
immediately. But if the sale price is below the fair value any profit or loss should be recognised
immediately, however, the loss which is compensated by future lease payments should be amortised
in proportion to the lease payments over the period for which asset is expected to be used. If the sale
price is above the fair value, the excess over the fair value should be amortised.

 In a transaction resulting in an operating lease, if the fair value is less than the carrying amount, the
difference (loss) should be recognised immediately.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-19

1) Has the enterprise taken asset on:

(a) Finance lease? Yes / No

(b) Operating lease? Yes / No

2) Has the enterprise given asset on:

(a) Finance lease? Yes / No

(b) Operating lease? Yes / No

3) If asset taken on finance lease:

(a) Is the leased asset recognised as asset equal to the fair value? Yes / No

(b) If the fair value exceeds the present value of the minimum lease payments,
is the asset recorded at the present value of the minimum lease payments? Yes / No

(c) Is discount rate in calculating the present value of minimum lease payments taken as:

(i) Interests rate implicit in the lease? Or Yes / No

(ii) If not practicable, then at lessee’s incremental borrowing rate? Yes / No

4) Are lease payments apportioned between finance charge and the reduction of the
outstanding liability? Yes / No

(a) Is depreciation provided at the rate for which own assets are depreciated? Yes / No
 (b) Is disclosure made in financial statements as required by AS? Yes / No

5) If asset given on finance lease:

(a) Is the amount shown as a receivable equal to the net investment in the lease? Yes / No

(b) Is the lease rental apportioned between the finance income and reduction of the
outstanding receivable? Yes / No

(c) If commission and legal fees incurred

(i) Written off immediately? Yes / No

(ii) Allocated against the finance income over the lease term? Yes / No

(d) Is disclosure made in financial statements as required by AS? Yes / No

6) If asset taken on operating lease:

(a) Is the lease payment expensed in the Profit & Loss statement on a
straight line basis? Yes / No

(b) If no to a) above, is it on a systematic basis more representative of the time

pattern of the user’s benefit? Yes / No

(c) Is disclosure made in financial statements as required by AS? Yes / No

7) If asset given on operating lease:

(a) Is the asset shown as fixed asset? Yes / No

(b) Is the income recognised on a straight line basis in the statement of

Profit & Loss? Yes / No

(c) Is depreciation provided at the rates for which similar assets are depreciated? Yes / No

(d) Is disclosure made in financial statements as required by AS? Yes / No

8) Is the enterprise:

(a) Also involved in leasing of the assets sold? Yes / No

(b) If yes, is the sales revenue (and corresponding receivable) recorded at the fair
value of the assets? Yes / No

(c) If no, is profit on sale of asset restricted by applying commercial rate of interest
over lease term? Yes / No

8) (a) Has the enterprise entered into sale and lease back transaction? Yes / No

(b) If the transaction is finance lease, is the excess or deficiency of sale proceeds
over the carrying amount amortised over the lease term in proportion
 to depreciation? Yes / No

(c) If the transaction is operating lease, and the transaction is:

(i) Established at fair value, whether profit or loss recognised immediately? Yes / No

(ii) Below fair value, whether profit or loss recognised immediately, unless
falling in (iii) below? Yes / No

(iii) Below fair value, and loss is to be compensated by charging lower lease
rentals than market value, whether the loss amortised over the expected
use of the asset? Yes / No

(iv) Above fair value, whether the gain deferred and amortised over the
expected use of the asset? Yes / No

AS 20 - EARNINGS PER SHARE

 Basic and diluted EPS is required to be presented on the FACE of profit and loss statement with
equal prominence for all the presented.

 EPS is required to be presented even when it is negative.

 Basic EPS is calculated by dividing net profit or loss for the period attributable to equity shareholders by
weighted average shares outstanding during the period.

 To maintain, in arriving earning attributable to equity shareholders even preference dividend for the
period and the attributable are excluded.

 The weighted average number of shares for all the periods presented is RESTATED for bonus issue,
share split and consolidation of shares.

 In case of rights issue at price lower than fair value, there is an embedded bonus element for which
adjustment is made.

 For calculating diluted EPS, net profit or loss attributable to equity shareholders and the weighted
average number of shares are adjusted for the effects of diluted potential equity shares (i.e., assuming
conversion into equity of all dilutive potential equity).

 Potential equity shares are treated as dilutive when their conversion into equity would result in a
reduction in profit per share from continuing operations.

 Effect of anti-dilutive potential equity share is ignored in calculating diluted EPS.

 In calculating diluted EPS, each issue of potential equity share is considered separately and in sequence
from the most dilutive to the least dilutive, which is determined on the basis of earnings per
incremental potential equity.

 If the number of equity shares or potential equity shares outstanding increases or decreases on account of
bonus, splitting or consolidation during the year or EVEN AFTER the balance sheet date but before
the approval of financial statement, basic and diluted EPS are recalculated for all periods presented.
The fact is also disclosed.
 Amounts of earnings used as numerator for computing basic and diluted EPS and their reconciliation
with Profit and Loss statement are disclosed. Also, the weighted average number of equity shares
used in calculating the basic EPS and diluted EPS and the reconciliation between the two EPS is to
be disclosed.

 Nominal value of shares is disclosed along with EPS.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-20

1) Is the company

(a) listed? Yes / No

(b) required by statute (Sch VI) or choosing to disclose earnings per share? Yes / No

(c) If answer to (a) and (b) is yes, is working / disclosure made as per AS-20? Yes / No

2) If there is any fresh equity issue made during the year, is weighted average number of
equity shares outstanding during the period considered for working basic equity per share Yes / No

3) (a) Has the enterprise during the year or after year end but before approval of
accounts by the Board of Directors?

(i) issued bonus shares? Yes / No

(ii) issued Rights issue having a bonus issue? Yes / No

(iii) made split share? Yes / No

(iv) made a reverse share split? Yes / No

(v) made buy-back above fair value? Yes / No

(b) if yes to above, is the basic equity per share for current period as well as
all reported periods worked out after considering the above change? Yes / No

4) (a) Are the following convertible into equity shares?

(i) Preference share? Yes / No

(ii) Debentures? Yes / No

(iii) Loans? Yes / No

(b) If yes to (a) above, is the net profit (numerator) for the period attributable to
equity shareholders for computing Dilutive equity per share: Yes / No
b
(i) increased by the amounts of dividend net of tax saved on
preference shares? Yes / No

(ii) increased by the amount of interest net of tax saved on

debentures / loans? Yes / No

(c) If yes to (b) above, is the Equity Share (Denominator) increased by weighted
 average number of additional equity shares outstanding, assumed to be converted
for working dilutive equity per share? Yes / No

5) (a) Are options issued, convertible at rate less than the fair value? Yes / No

(b) If yes, has the dilutive effect been worked out as a difference between
the number of shares issuable and the number of shares that would have
been issued at fair value? Yes / No

6) (a) Are Anti- dilutive Potential equity shares ignored in calculating diluted
Earnings share? Yes / No

(b) For above working in each series of potential equity shares considered
separately rather than aggregate? Yes / No

7) Has the enterprise disclosed

(a) basic and diluted earnings per share with equal, prominence on face of
profit and loss statement for all periods presented? Yes / No

(b) basic and diluted earnings per share even if there is loss as per profit and
loss statement? Yes / No

(c) (i) amounts used as the numerators in calculating basic and diluted equity
per share? Yes / No

(ii) reconciliation of amount if the net profit as used in numerator is different

from net profit net profit as per profit and loss statement? Yes / No

(d) (i) weighted average number of equity shares as the denominator in

calculating basic and diluted earnings per share? Yes / No
(ii) reconciliation of the weighted average number of equity shares used
in denominator if different for calculating basic and diluted earnings
per share? Yes / No

(e) nominal value of shares along with earnings per share figures? Yes / No

(f) on the face of profit and loss statement basic and diluted earnings per share
excluding extraordinary items net of tax? (though of a recommendatory nature)? Yes / No
 AS 21 - CONSOLIDATED FINANCIAL STATEMENTS

 To be applied in the preparation and presentation of consolidation financial statements for a group of
enterprises under the control of a parent.

 Control means the ownership of more than one- half of the voting power of an enterprise or control of
the competition of the board of directors or such other governing body.

 Control of composition implies power to appoint or remove all or a majority of directors.

 Consolidated financial statements to be presented in addition to separate financial statements.

 All subsidiaries, domestic and foreign to be consolidated except where control is intended to be
temporary or the subsidiary operates under severe long-term restriction impairing transfer of funds to
the parent.

 Consolidation to be done on a line-by-line basis by adding like items of assets, liabilities, income and
expenses, which involve.

 Elimination of cost to the parent of the investment in the subsidiary and the parent’s portion of equity of
the subsidiary at the date of investment.

 Excess of cost over parent’s portion of equity, to be shown as goodwill.

 Where cost to the parent is less than its portion, of equity, difference to be shown as capital reserve.

 Minority interest in the net income to be adjusted against income of the group.

 Minority interest in the net assets to be shown separately as a liability.

 Intra group balances and Intra group transactions and resulting unrealised profits should be eliminated in
full. Unrealised losses should also be eliminated unless cost cannot be recovered.

 Where two or more investments are made in a subsidiary, equity of the subsidiary to be generally
determined on a step by step basis.

 Financial statements used in the consolidation should be drawn up to the same reporting date. If
reporting dates are different, adjustments for effects of significant transactions/ events between the
two dates to be made

 Consolidation should be prepared using same accounting policies. If the accounting policies
followed are different, the fact should be disclosed together with proportion of such item.

 In the year in which parent subsidiary relationship ceases to exist, consolidation to be made up to
date of cessation.

 Disclosure is to be of all subsidiaries giving name, country of incorporation, residence, proportion of

ownership and voting power if different, nature of relationship between parent and subsidiary, effect
of the acquisition and disposal of subsidiaries on the financial position, names of subsidiaries
whose reporting dates are different than that of the parent.
 When the consolidated financial statements are presented for the first time figures for the previous
year need not be given.

 While preparing consolidated financial statements, the tax expense to be shown in the consolidated
financial statements should be the aggregate of the amount of tax expense appearing in the separate
financial statements of the parent and its subsidiaries.

 ‘Near Future’ should be considered as not more than twelve months from acquisition of relevant
investments unless a longer period can be justified on the basis of facts and circumstances of the
case.

 When there are more than one investor in a company in which one of the investor controls the
composition of board of directors and some other investor holds more than half of the voting power,
both these investor are required to consolidate the accounts of the investee in accordance with this
standard.

Note: Not all the notes appearing in standalone financial statements is required to be disclosed in the
consolidated financial statements. Typically notes that are not required to be included are,
managerial remuneration, CIF value of import, capacity, quantitative details,

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-21

1) (a) Has the enterprise Subsidiary/ies? Yes / No

(b) Is the enterprise required to prepare and Consolidated Financial Statement

(at present listed companies only required)? Yes / No

(c) If yes to (b) above, has the enterprise prepared and presented CFS in accordance
with AS-21? Yes / No

2) Has the parent at the time of preparing CFS

(a) Eliminated investment in each subsidiary, worked out goodwill or Capital

Reserve as at the date of investment in the subsidiary? Yes / No

(b) Shown minority interest in the net income? Yes / No

(c) Shown minority interest in the net assets in consolidated balance sheet separately
from liabilities and the equity of the parent’s shareholders? Yes / No

3) Have the following relating to Intra group been eliminated in CFS?

(a) Balances and transaction? Yes / No

(b) Unrealised profits arising out of inventory/fixed assets Yes / No

(c) Unrealised losses unless cost cannot be recovered? Yes / No

4) (a) Are the financial statements of parent and subsidiaries drawn up to the same
reporting date? Yes / No

(b) If no, is the difference between reporting dates not more than six months? Yes / No
5) (a) Are accounting policies uniform of parent and subsidiaries in preparing
consolidated financial statements? Yes / No

(b) If no, is the fact disclosed together with proportions of items in the CFS to
which the different accounting policies applied? Yes / No

6) (a) Is goodwill arising on CFS amortised in Statement of Profit and Loss? Yes / No

(b) If no, to (a) above, is impairment test thereof carried out at each
balance sheet date? Yes / No

9) When consolidated financial statements are presented first time, has the enterprise not
presented comparative figures of previous period? Yes / No

10) Has the enterprise ensured at time of preparing consolidated financial statements that the
tax expense of parent and subsidiaries are not adjusted against one another but only
aggregate the amount of tax expenses as appearing in their separate financial statements? Yes / No

11) Has the enterprise ensured that only material items are disclosed and that statutory
information having no bearing on the true and fair view are not included in the
consolidated financial statements? Yes / No

12) Have the following disclosures been made in consolidated financial

statements:

(a) the reasons for not consolidating a subsidiary in the CFS? Yes / No

(b) non use of uniform accounting policies and the proportions of items in CFS
to which the different accounting policies have been applied? Yes / No

(c) (i) List of all subsidiaries with name? Yes / No

(ii) Country of incorporation? Yes / No

(iii) Proportion of ownership interest? Yes / No

(d) Nature of relationship between the parent and subsidiary, if the parent does not
own directly or indirectly through subsidiaries more than one-half of the voting
power of the subsidiary? Yes / No

(e) (i) the effect on financial position at the reporting date and the results for
the reporting period in case of disposal of subsidiary? Yes / No

(ii) the effect on the financial position at the reporting date of disposal
of subsidiary? Yes / No

(f) The name of subsidiary(ies) of which reporting date is/are different from that of
the parent and the difference in reporting dates? Yes / No
 AS 22 – ACCOUNTING FOR TAXES ON INCOME

1) This statement should be applied for accounting for taxes on income. This includes the determination
of the amount of the expense or saving related to taxes on income in respect of an accounting period
and the disclosure of such an amount in the financial statements.

2) The expense for the period, comprising current tax and deferred tax should be included in the
determination of the net profit or loss for the period.

3) Deferred tax should be recognized for all the timing differences, subject to the consideration of
prudence in respect of deferred tax assets as set out in paragraph below.

4) Except in the situations stated in paragraph 5, deferred tax assets should be recognized and carried
forward only to the extent that there is a reasonable certainty that sufficient future taxable income
will be available, against which such deferred tax assets can be realized.

5) Where an enterprise has unabsorbed depreciation or carry forward of losses under tax laws, deferred
tax assets should be recognized only to the extent that there is virtual certainty supported by
convincing evidence that sufficient future taxable income will be available against which such
deferred tax assets can be realized.

6) Current tax should be measured at the amount expected to be paid to (recovered from) the taxation
authorities, using the applicable tax rates and tax laws.

7) Deferred tax assets and liabilities should be measured using the tax rates and tax laws that have been
enacted or substantively enacted by the balance sheet date.

8) Deferred tax assets or liabilities should not be discounted to their present value.

9) The carrying amount of deferred tax assets should be reviewed at each balance sheet date. An
enterprise should write down the carrying amount of deferred tax asset to the extent that it is no
longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be realized. Any such write down may
be reversed to the extent that it becomes reasonably certain or virtually certain as the case may be
that sufficient future taxable income will be available.

10) An enterprise should offset assets and liabilities representing current tax if the enterprise:

(a) Has a legally enforceable right to set off the recognized amounts; and

(b) Intends to settle the asset and the liability on a net basis.

11) An enterprise should offset deferred tax assets and deferred tax liabilities if:

(a) The enterprise has a legally enforceable right to set off assets against liabilities representing
current tax; and
 (b) The deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the
same governing taxation laws.
12) Deferred tax assets and liabilities should be distinguished from assets and liabilities representing
current tax for the period. Deferred tax assets and liabilities should be disclosed under a separate
heading in the balance sheet of the enterprise, separately from current assets and current liabilities.

13) The breakup of deferred tax assets and deferred tax liabilities into major components of the
respective balances should be disclosed in the notes to accounts.

14) The nature of the evidence supporting the recognition of deferred tax asset should be disclosed, if an
enterprise has unabsorbed depreciation or carry forward of losses under tax laws.

15) On the first occasion that the taxes on income are accounted for in accordance with this statement,
the enterprise should recognize, in the financial statement the deferred tax balance that is
accumulated prior to the adoption of this statement as deferred tax asset/liability wit the
corresponding credit/charge to the revenue reserve, subject to the consideration of prudence in case
of deferred tax assets. The amount so credited /charged to the revenue reserve should be the same as
that which would have resulted if this statement had been in effect from the beginning.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-22

1) Is there a difference between accounting income and taxable income? Yes / No

2) Is the difference a timing difference, comprising of

(a) Depreciation? Yes / No

(b) Section 43B? Yes / No

(c) Deferred revenue expenses partly appearing in balance sheet? Yes / No

(d) Preliminary expenses u/s 35D? Yes / No

(e) Income credited in P&L statement, taxable in subsequent years? Yes / No

(f) Provision for doubtful debts/advances? Yes / No

(g) Voluntary retirement scheme? Yes / No

(h) Lease income? Yes / No

(i) Diminution in value of investment other than temporary? Yes / No

3) Is the difference a permanent difference comprising of:

(a) Scientific research expenditure (weighted deduction)? Yes / No

(b) Penalty for infringement of law? Yes / No

(c) Dividend income (if non-taxable)? Yes / No

(d) Donations to trust u/s 80 G? Yes / No

4) (a) Does reasonable certainty of future taxable income exist when deferred tax
asset is recognized? Yes / No

(b) Does virtual certainty supported by convincing evidence of future taxable income
exist when deferred tax asset is recognized for carried forward loss or unabsorbed
depreciation? Yes / No

5) (a) Is unrecognized deferred tax asset reassessed at each balance sheet date? Yes / No

(b) Is unrecognized deferred tax asset reviewed at each balance sheet date? Yes / No

(c) Is deferred tax asset/liability measured using tax rates

(i) That are enacted? Or Yes / No

(ii) Substantively enacted [if tax rates announced through budget] by the
balance sheet date? Yes / No

(d) Is deferred tax asset/liability created at minimum alternate tax (MAT) rate or at
normal tax rate? Yes / No

(e) Is deferred tax asset and liability presented in financial statement as under:

(i) DTA/DTL disclosed separately from current tax? Yes / No

(ii) DTA/DTL disclosed separately from current assets and current liabilities
in the balance sheet? Yes / No

(f) Break-up of DTA/DTL into major components of balances disclosed in

notes to accounts? Yes / No

(g) The nature of evidence supporting the recognition of DTA disclosed when DTA
comprises of unabsorbed depreciation or carried forward loss? Yes / No

AS-23 ACCOUNTING FOR INVESTMENTS IN ASSOCIATE IN CONSOLIDATED FINANCIAL STATEMENT

1) This statement should be applied in accounting for investments in associates in the preparation and
presentation of consolidated financial statements by an investor.

2) An investor us an associate should be accounted for in a consolidated financial statement under the
equity method except when

(a) the investment is acquired and held exclusively with a view to its in a subsequent disposal in
the near future, or

(b) the associate operates under severe long term restrictions that significantly impair its ability
to transfer funds to its investors. Investment in such associates should be accounted for in
accordance with the Accounting Standard (AS)-13, Accounting for investments. The reason
for not applying the equity methods in accounting for investments in an associate should be
disclosed in the consolidated financial statements.
3) An investor should discontinue the use of equity method from the date that:

(a) it ceases to have significant influence in an associate but retains, either in whole or in part,
its investments, or

(b) the use of the equity method is no longer appropriate because the associate operates under
severe long-term restrictions that significantly impair its ability to transfer funds to the
investors.

From the date of discontinuing the use of equity method., investments in such associate should be
accounted for in accordance with Accounting Standard (AS)-13, Accounting for Investments. For
this purpose, the carrying amount of investments at that date should be regarded as the cost
thereafter.

4) Goodwill/capital reserve arising on the acquisition of an associate by an investor should be included

in the carrying amount of investment in the associate but should be disclosed separately.

5) In using equity method for accounting for investment in an associate, unrealized profits and losses,
resulting from transfer between the investor (or its consolidated subsidiaries) and the associate
should be eliminated to the extent of the investor interest in the associate. Unrealized losses should
not be eliminated if and to the extent the cost of the transferred asset cannot be recovered.

6) The carrying amount of investments in an associate should be reduced to recognize a decline, other
than temporary, in the value of the investment, such reduction being determined and made for each
investment individually.

7) In addition to the disclosures required by paragraphs 2 and 4, an appropriate listing and description
of associates including the proportion of ownership interest and, if different, the proportion of voting
power held should be disclosed in the consolidated financial statements.

8) Investments in associate accounted for using the equity method should be classified as long-term
investments and disclosed separately in the consolidated balance sheet. The investor’s share of the
profits or losses of such investments should be separately in the consolidated statement of profit and
loss. The investor’s share of any extraordinary or prior period item should also be separately
disclosed.

9) The names(s) of the associates(s) of which reporting dates(s) is/are different from that of the
financial statements of an investor and the differences in reporting dates should be disclosed in the
consolidated financial statement.

10) In case an associate uses accounting policies other than those adopted for the consolidated financial
statements for like transaction and events in similar circumstances and it is not practicable to make
appropriate adjustments to the associate financial statement, the fact should be disclosed along with a
brief description of the differences in the accounting policies.

11) On the first occasion when investment in an associate is accounted for in consolidated financial
statement in accordance with the statement, the carrying amount of investment in the associate
should be brought to the amount that would have result had the equity method of accounting been
followed as per this statement since the acquisition of the associate. The corresponding adjustment
in this regard should be made in the retained earning in the consolidated financial statements,.

12) Adjustments to the carrying amount of investment in an associate arising from changes in the
associate’s equity that have not been included in the statement of profit and loss of the associate
should be directly made in the carrying amount of investment without routing it through the
 consolidated statement of profit and loss. For example, in case the adjustment arises because of
revaluation of fixed assets by the associate, apart from adjusting the carrying amount of investment
to the extent of proportionate share of the investor in the revalued amount, the corresponding amount
of revaluation reserve should be shown in the consolidated balance sheet.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE AS-23

1) (a) Is the enterprise required to prepare consolidated financial statement? Yes / No

(b) If yes, to (a) above, does the enterprise have investments in a company,
considered as an associate? Yes / No

(c) If yes, to (b) above, is associate also considered in consolidated financial

statement? Yes / No

2) Has the enterprise worked out goodwill/capital reserve arising at the time of acquisition? Yes / No

3) Is the carrying amount of the investment is associate increased or decreased to recognize

investor’s share of the profit or losses of the associate after the acquisition? Yes / No

4) Are the unrealized profits resulting from transactions between the investor and its
subsidiaries with associate eliminated to the extent of investor’s interest in the associate? Yes / No

4) (a) Is investment in associate acquired and held exclusively with a view to its
subsequent disposal in near future? Or Yes / No

(b) Does the associate operate under severe long term restrictions that significantly
Impair its ability to transfer funds to the investor? Yes / No

(c) If yes, to (a) or (b) above, investment in associate accounted for in accordance
with AS – 13, Accounting for Investments Yes / No

5) Has the enterprise disclosed the following

(a) reasons for not applying equity method in accounting for investments? Yes / No

(b) Goodwill/capital reserve arising on acquisition separately in the carrying

amount of investment in the associate? Yes / No

(c) Name and description of associate, including the proportion of ownership interest
and if different, the proportion of voting power held? Yes / No

(d) (i) Investments in associates classified as long-term investments and shown

separately? Yes / No

(ii) Share of profit or losses and extraordinary or prior period items

separately? Yes / No

(e) difference in reporting date(s) along with the names of the associates(s)? Yes / No

(f) difference in accounting policies not adjusted in financial statements and a

brief description of the differences in the accounting policies? Yes / No
 AS 24 – DISCONTINUING OPERATIONS

 The objective of this statement is to establish principles for reporting information about
discontinuing operations, thereby enhancing the ability of users of financial statements to make
projections of an enterprise’s cash flows, earning-generating capacity, and financial position by
segregating information about discontinuing operation from information about continuing
operations.

 A discontinuing operation is a component of an enterprise that the enterprise, pursuant to a single

plan, is: (1) Disposing of substantially in its entirety, such as by selling the component in a single
transaction or by demerger or spin-off of ownership of the component to the enterprise’s
shareholder; or (2) Disposing of piecemeal, such as by selling of the component’s assets and settling
its liabilities individually; or (3) Terminating through abandonment; and that represents a separate
major line of business or geographical area of operations; and that can be distinguished operationally
and for financial reporting purposes.

 With respect to a discontinuing operation, the initial disclosure event is the occurrence of one of the
following, whichever occurs earlier a) the enterprise has entered into a binding sale agreement for
substantially all of the assets attributable to the discontinuing operation; or b) the enterprise’s board
of directors or similar governing body has both i) approved a detailed, formal plan for the
discontinuance and ii) made an announcement of the plan.

 An enterprise should apply the principles of recognition and measurement that are set out in other
accounting standards for the purpose of deciding as to when and hoe to recognize and measure the
changes in assets and liabilities and the revenue, expenses, gains, losses and cash flows relating to a
discontinuing operation.

 When an enterprise disposes of assets or settles liabilities attributable to a discontinuing operation or

enters into binding agreements for the sale of such assets or the settlement of such liabilities, it
should include, in its financial statements, the following information when the events occur a) for
any gain or loss that is recognized on the disposal of assets or settlement of liabilities attributable to
the discontinuing operation, i) the amount of the pre-tax gain or loss and ii) income tax expense
relating to the gain or loss; and b) the net selling price of range of prices (which is after deducting
expected disposal costs) of those net assets for which the enterprise has entered into one or more
binding sale agreements, the expected timing of receipt of those cash flows and the carrying amount
of those net assets on the balance sheet date.

 Any disclosures required by this statement should be presented separately for each discontinuing
operation. Referring to questionnaire below may quickly assess the disclosure requirements.

 An appendix to the standard (though not a part of the of the standard) set out detailed illustration
explaining significant disclosure requirements of the standard.
 QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-24

1) Is a component of the enterprise that represents a separate major line of business

or geographical area of operation and that can be distinguished operationally
and for financial reporting purposes been decided to be:

(a) Sold off substantially in its entirety? Yes / No

(b) Sold off in piecemeal? Yes / No

(c) Terminated by abandonment? Yes / No

(d) If yes to (a) above, then has the

(i) Enterprise entered into a binding sale agreement for sale of the assets
attributable to the discontinuing operations? Yes / No

(ii) Enterprise’s board of directors approves a detailed formal plan for

the discontinuance and made an announcement of the plan? Yes / No

2) Has the enterprise measured the changes in the assets and liabilities and revenue, expenses
relating to discontinuing operation as set out in other accounting standards mainly
impairment of assets? Yes / No

3) Is separate disclosure made for each discontinuing operation? Yes / No

4) Are prior period figures restated to segregate assets, liabilities, revenue, expenses, and
cash flow of continuing and discontinuing operation as disclosed in current year? Yes / No

6) Has the enterprise disclosed the following in the notes (except a (vii) and b (i) to be shown
on face of profit and loss statement) to the financial statement:

(a) In relation to initial disclosures:

(i) A description of the discontinuing operation? Yes / No

(ii) Business or geographical segment as reported in segment reporting? Yes / No

(iii) Date and nature of the initial disclosure events? Yes / No

(iv) Date or period in which the discontinuance expected to be completed

if known or determinable? Yes / No

(v) The carrying amount as of the balance sheet date of the total assets
(to be disposed of) and liabilities (to be settled)? Yes / No

(vi) Amount of revenue and expenses in respect of the ordinary activities

attributable to discontinuing operation during the current year? Yes / No

(vii) Amount of profit / loss before tax and income tax (current and
deferred) thereon from ordinary activities attributable to discontinuing
operation? Yes / No

(viii) Amount of net cash flow attributable to operating, investing

 and financing activities of discontinuing operation? Yes / No

7) (a) In relation to other disclosures, when the events occur;

(i) The amount of pre-tax gain or loss and income tax expense relating
thereto on disposal of assets or settlement of liabilities attributable
to the discontinuing operation? Yes / No

(ii) The net selling price or range of prices of those net assets for which
one or more binding sale agreements are entered into, the expected
timing of receipt of those cash flows, and the carrying amount of those
net assets on the balance sheet date? Yes / No

(b) In relation to updating of disclosures:

(i) Description of any significant changes in the amount or timing of cash

flows relating to the assets to be disposed or liabilities to be settled? And Yes / No

(ii) Events causing those changes? Yes / No

(c) In relation to completion of discontinuance:

(i) Disclosure to be made till the plan is substantially completed or

abandoned, though full payment may not be received from the buyer? Yes / No

(d) In relation to abandonment or withdrawal of plans previously reported as

a discontinuing operation:

(i) Facts, reasons therefore and its effects be disclosed? Yes / No

(g) In relation to each discontinuing operation:

(i) Disclosure is made for each discontinuing operation separately? Yes / No

AS 25 – INTERIM FINANCIAL REPORTING

 Accounting Standard (AS)-25, ‘Interim Financial Reporting’, issued by the Council of the Institute of
Chartered Accountants of India, comes into effect in respect of accounting periods commencing on
or after 1-4-2002. If an enterprise is required to prepare and present an interim financial report, it
should comply with this standard.

 The objective of this Statement is to prescribe the minimum content of an interim financial report and to
prescribe the principles for recognition and measurement in complete or condensed financial
statements for an interim period. Timely and reliable interim financial reporting improves the ability
of investors, creditors and others to understand an enterprise’s capacity to generate earnings and
cash flows, its financial condition and liquidity.
 Interim period is a financial reporting period shorter than a full financial year. Interim financial report
means a financial report containing either a complete set of financial statements or a set of
condensed financial statements (as described in this Statement) for an interim period.

 An interim financial report should include, at a minimum, the following components (a) condensed
balance sheet; (b) condensed statement of profit and loss; (c) condensed cash flow statement; and
(d) selected explanatory notes.

 An enterprise should include the following information, as a minimum, in the notes to its interim
financial statements, if material and if not disclosed elsewhere in the interim financial report: (a) a
statement that the same accounting policies are followed in the interim financial statements as those
followed in the most recent annual financial statements or, if those policies have been changed, a
description of the nature and effect of the change; (b) explanatory comments about the seasonality
of interim operations; (c) the nature and amount of items affecting assets, liabilities, equity, net
income or cash flows that are unusual because of their nature, size or incidence, Net Profit or Loss
for the period, Prior Period Items and Changes in Accounting Policies; (d) the nature and amount of
changes in estimates of amounts reported in prior interim periods of the current financial year or
changes in estimates of amounts reported in prior financial years, if those changes have a material
effect in the current interim period; (e) issuances, buy-backs, repayments and restructuring of debt,
equity and potential equity shares; (f) dividends, aggregate or per share (in absolute or percentage
terms), separately for equity shares and other shares; (g) segment revenue, segment capital
employed (segment assets minus segment liabilities) and segment result for business segments or
geographical segments, whichever is the enterprise’s primary basis of segment reporting (disclosure
of segment information is required in an enterprise’s interim financial report only if the enterprise is
required, in terms of AS-17, Segment Reporting, to disclose segment information in its annual
financial statements); (h) the effect of changes in the composition of the enterprise during the
interim period, such as amalgamations, acquisition or disposal of subsidiaries and long-term
investments, restructurings and discontinuing operations; and (i) material changes in contingent
liabilities since the last annual balance sheet date.

 Interim reports should include interim financial statements (condensed or complete) for periods as (a)
balance sheet as of the end of the current interim period and a comparative balance sheet as of the
end of the immediately preceding financial year; (b) statement of Profit and Loss for the current
interim period and cumulatively for the current financial year to date, with comparative statement of
profit and loss for the comparable interim periods (current and year to date) of the immediately
preceding financial year; (c) cash flow statement cumulatively for the current financial year to date,
with a comparative statement for the comparable year to date period of the immediately preceding
financial year.

 An enterprise should apply the same accounting policies in its interim financial statements as are applied
in its annual financial statements, except for accounting policy changes made after the date of the
most recent annual financial statements that are to be reflected in the next annual financial
statements. However, the frequency of an enterprise’s reporting (annual, half-yearly or quarterly)
should not affect the measurement of its annual results. To achieve that objective, measurements for
interim reporting purposes should be made on a year-to-date basis.

 Four appendices are attached to the standard (which though not a part of the standard), sets out detailed
illustration explaining inter alia;

- Illustrative format of Condensed Balance Sheet, Condensed Profit and Loss Account,
Condensed Cash Flows

- Illustration of periods required to be presented

 - Examples of applying the recognition and measurement principles

- Examples of use of estimates

 It may be mentioned that the companies required to disclose quarterly results are not required to
follow the Disclosure-Relating requirements of the standard. Thus, the presentation format is not
mandatory. However, its a normal practice to adopt the recognition and measurement principles.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-25

1) (a) Is the enterprise required to prepare and present interim financial report? Yes / No

(b) If yes to (a) above, has the enterprise prepared and presented information for the
interim date as per the form and content as applicable to annual complete set
of financial statement unless otherwise required in a different form as per statute
or as per regulatory body governing the enterprise? Yes / No

2) Are the following information, if material and not disclosed elsewhere in interim
Financial statements have been disclosed by way of notes:

(a) a statement that same accounting policies are followed or if changed

a description of the nature and effect of the change? Yes / No

(b) comments about the seasonality of interim operations? Yes / No

(c) nature and amount of items affecting assets, liabilities, equity, net income or
cash flows that are unusual because of their nature, size or incidence? Yes / No

(d) nature and amount of changes in estimates of amounts reported in prior interim
periods of current financial year or changes in estimates of amount reported in
prior financial years? Yes / No

(e) issuances, buy-backs, repayments and restructuring of debt, equity and

potential equity shares? Yes / No

(f) dividends, aggregate or per share? Yes / No

(h) segment revenue, segment capital employed and segment result for business
segments or geographical segments, depending upon enterprise’s primary
basis of segment reporting? Yes / No

(h) effect of changes in composition f the enterprise during the interim period,
such as amalgamations, acquisitions or disposal of subsidiaries and long-term
investments, restructuring and discontinuing operations? Yes / No

(i) material changes in contingent liabilities since the last annual balance sheet date? Yes / No

3) Has the enterprise in its interim financial statement (condensed or complete) for the
period included the following? Yes / No

(a) Balance sheet as of the end of current interim period and a comparative balance
sheet as of the end of the immediately preceding financial year? Yes / No

(b) Statement of Profit and Loss for the current interim period and cumulatively for
 the current financial year to date, with comparative statements of profit and loss
for the comparable interim periods (current and year-to-date) of the immediately
preceding financial year? Yes / No

(c) Cash flow statements cumulatively for the current financial year to date, with a
Comparative statement for the comparable year to date period of the immediately
preceding financial year? Yes / No

4) Has the enterprise followed the recognition and measurement principles in

preparation of interim financial statement as illustrated in the AS in respect of:

(a) Gratuity and other defined Benefit Schemes? Yes / No

(b) Major planned periodic maintenance or overhaul or other seasonal expenditure? Yes / No

(c) Provisions? Yes / No

(d) Year end bonuses where there is legal obligation or payable as per last practice? Yes / No

(e) Intangible Assets? Yes / No

(f) Other planned (discretionary in nature) but irregularly occurring costs? Yes / No

(g) Income-tax expense for interim period? Yes / No

(h) Income-tax expense when difference in financial reporting year and tax year? Yes / No

(i) Tax deductions / exemptions for determining tax payable? Yes / No

(j) Carry forward of tax losses? Yes / No

(k) Contractual purchase price changes such as discount, rebates not of a

discretionary nature? Yes / No

(l) Depreciation and amortisation? Yes / No

(m) Inventories? Yes / No

(n) Foreign Currency Translation? Yes / No

(o) Impairment of Assets? Yes / No

5) (a) Has the enterprise changed its accounting policy other than one as
specified by an Accounting Standard? Yes / No

(b) If yes to (a) above, are financial statements of prior interim periods of
current financial year, restated? Yes / No

6) If the enterprise is listed and required to follow listing guidelines for quarterly or
half yearly results has the enterprise followed:

(a) the disclosure requirements of the listing agreements? and Yes / No

(b) recognition and measurement principles as per the Accounting Standard 25? Yes / No
 AS-26 INTANGIBLE ASSETS

 This Standard is applicable w.e.f. April1, 2003 to enterprise that are listed companies and/or having
turnover exceeding 50 crores. For other enterprises these are applicable from April 1, 2004.

 This Statement should be applied by all enterprises in accounting for intangible asset, except:
intangible assets that are covered by other Accounting Standard; financial assets, mineral rights and
expenditure on the exploration for, or development and extraction minerals, oil, natural gas and
similar non regenerative resources; intangible assets arising in insurance enterprises from contracts
policyholders and expenditure in respect of termination benefits.

 The Prominent concepts introduced/emphasized by the standard includes; An asset is a resource; (a)
controlled by an enterprise as a result of past events; and (b) from which future economic benefits
are expected to flow to the enterprise. An intangible asset is an identifiable non-monetary asset,
without physical substance, held for use in the production or supply of goods or services, for rental
to others, or for administrative purposes. Research is original and planned investigation undertaken
with the prospect of gaining new scientific or technical knowledge and understanding. Development
is the application of research finding or other knowledge to a plan or design for the production of
new or substantially improved material, devices, products, processes, systems or services prior to the
commencement of commercial production or use.

 An acquired intangible asset is recognised if it is (a) identifiable, (b) controllable by enterprise, (c)
where future benefit is expected and (d) cost of acquisition can be measured reliably.

 Expenditure incurred on internally generated intangible asset is expensed to the extent that it related
to Research Phase.

 An intangible asset arising from development (or from the development phase of an internal project)
should be recognised if, and only if, an enterprise can demonstrate all of the following:

--- The technical feasibility of completing asset so that it will be available for use or sale

--- Its intention to complete the intangible asset and use or sell it;
--- Its ability to use or sell the intangible asset;

--- How the intangible asset will generate probable future economic benefits. Among other things,
the enterprise should demonstrate the existence of a market for the output of the intangible asset
or the intangible asset i6tself, if it is to be used internally, the usefulness of the intangible asset;

--- the availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and

--- its ability to measure the expenditure attributable to the intangible asset during its development
reliably.

 The standard is supplemented with two appendix one of which covers exhaustive illustration on
accounting of website development cost and software generated for internal use other one covers
various examples on application of various aspects of the standard.
 QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE AS-26

1) Has the enterprise expended resources or incurred liabilities on

(a) Acquisition? Yes / No

(b) Development Yes / No

(c) Enhancement of intangible resources? Such as:

(i) Scientific or technical knowledge? Yes / No

(ii) Design and implementation of new process or systems? Yes / No

(iii) Licenses or licensing agreements (e.g., motion picture films, video

recordings)? Yes / No

(iv) Intellectual property (e.g., computer software)? Yes / No

(v) Market knowledge? Yes / No

(vi) Trademarks, Copyrights, Patents? Yes / No

3) Is the following criteria met in relation to above in respect of:

(a) Identifiable? Yes / No

(b) Control over the asset? Yes / No

(c) Future economic benefits? Yes / No

(d) Cost can be measured reliably? Yes / No

4) If all four criteria as mentioned in (3) above are not met, is the expenditure to acquire it
or internally generate it, recognised as an expense when incurred? Yes / No

5) Is software, which is not an intangible part of hardware (plant), treated as an intangible

asset? Yes / No

6) (a) Is intangible asset acquired in amalgamation (in the nature of purchase), capable
of being Measured reliably as to its cost; i.e., fair value? Yes / No

(b) If yes, to (a) above is intangible asset recognised in books of the enterprise
(transfer) even if not recognised in financial statement of transferor? Yes / No

(c) If no, to above, is the intangible asset recognised part of goodwill in books of the
enterprise (Transferee)? Yes / No

(d) If active market do not exist for an intangible asset as recognised in (b) above, is
Cost recognised for such Intangible asset restricted to an amount that does not
 create or increase any capital Reserve at the date of amalgamation? Yes / No

7) (a) Is the enterprise incurring expenses on research and development? Yes / No

(b) Is the expenditure ion research such as obtaining new knowledge, or search for
new alternative materials, processes, systems, and formulation, design, related
thereto recognised an expense when incurred? Yes / No

(c) Is tangible asset arising from development phase fulfilling all of the following:

(i) Technical feasibility of completing intangible asset? Yes / No

(ii) Intention to complete intangible asset? Yes / No

(iii) Ability to use or sell the intangible asset? Yes / No

(iv) Generate future economic benefits? Yes / No

(v) Availability of adequate, technical financial and other resources to

complete the development and to use or sell the intangible asset? Yes / No

(vi) Ability to measure cost attributable to development stage of

intangible asset? Yes / No

8) Are following internally generated item or expenditure incurred not recognised as intangible assets?

(a) Brands? Yes / No

(b) Mastheads? Yes / No

(c) Publishing titles? Yes / No

(d) Customer list? Yes / No

(e) Goodwill? Yes / No

(f) Start up cost (unless covered under AS-10) Yes / No

(g) Staff training cost? Yes / No

(h) Advertising and promotional activities? Yes / No

(i) Relocating or re-organizing part or all of the enterprise? Yes / No

(j) Voluntary retirement separation? Yes / No

(k) Product launching expenses? Yes / No

(l) Preliminary expenses? Yes / No

9) Is the intangible asset amortised?

(a) Over the best estimate of its useful life? Yes / No

(b) If not as per (a), over 10 years? Yes / No

 (c) If not as per (a) or (b), then as per persuasive evidence that the useful life longer
than ten years? Yes / No

10) Is the enterprise amortising the intangible asset(s) using pone or more of the following
methods, for different intangible assets:

(a) straight line method? Yes / No

(b) diminishing balance method? Yes / No

(c) unit of production method? Yes / No

11) (a) Is the amortisation period and the amortisation method reviewed at least at each
financial year end? Yes / No

(b) Is amortisation period/method changed if review denotes

(i) expected useful life of asset significantly different from previous

estimates? Or Yes / No

(ii) significant change in the expected pattern of economic benefits

from the asset? Yes / No

12) (a) Has the enterprise not recognised as part of the cost of an intangible asset at a later
date in respect of expenditure that was initially recognised as expense in previous
annual financial statement, or interim financial report? Yes / No

(b) Has the enterprise revalued intangible assets? Yes / No

13) Has the enterprise estimated the recoverable amount (as per AS –28 Impairment of asset)
atleast at each financial year in respect of the following:

a (a) intangible asset that is not yet available for use? Yes / No
b
(b) Intangible asset that is amortised over a period exceeding ten years? Yes / No

14) Are the following disclosures made in the financial statement:

14.1) For each class of intangible assets, distinguishing between internally generated
intangible assets and intangible assets

(a) The useful life or the amortisation rates used? Yes / No

(b) The amortisation method used? Yes / No

(c) The gross carrying amount at the accumulated amortisation at the beginning and
end of the period? Yes / No

(d) A reconciliation of the carrying amount at the beginning and end of the period showing:

(i) additions, indicating separately those from internal development and

through amalgamation? Yes / No
 (ii) Retirements and disposals? Yes / No

(iii) Impairment losses recognised in the statement of profit and loss

during the period? Yes / No

(iv) Impairment losses reversed in the statement of profit and loss during
the period? Yes / No

(v) Amortisation recognised during the period? Yes / No

(vi) Other change in the carrying amount during the period? Yes / No

14.2) (a) the reasons why it is presumed that the useful life of intangible asset will exceed
ten years, if an intangible asset is amortised over more than ten years? Yes / No

(b) a description, the carrying amount and remaining amortisation period of any
individual intangible asset that is material to the financial statement of the
enterprise as a whole? Yes / No

(c) the existence and carrying amounts of intangible assets whole title is restricted
and the carrying amount of intangible asset pledge as security for
intangible assets? Yes / No

(d) the amount of commitments for the acquisition of intangible assets? Yes / No

14.3) Aggregate amount of research and development expenditure recognised as an expense

during the period? Yes / No

14.4) Description of any fully amortised intangible asset still in use. (optional disclosure)? Yes / No

AS 27 FINANCIAL REPORTING OF INTEREST IN JOINT VENTURE

 This standard defines what is a joint venture. Some of the important concepts includes; joint
venture is a contractual arrangement whereby two or more parties undertake an economic activity,
which is subject to joint control. Joint control is the contractually agreed ring of control over an
economic activity.

 Control is the power to govern the financial and operating policies of an economic activity so as to
obtain benefits from it. Proportionate Consolidation is a method of accounting and reporting
whereby a venturer’s share of each of the assets, liabilities, income and expenses in a jointly
controlled entity is reported as separate line items in the venturer’s financial statements.

 The Accounting treatments depends on the nature of joint venture which can be one of the three i.e.
jointly controlled operations or jointly controlled assets.
 In respect of its interests in jointly controlled operations, a venturer should recognize in its separate
financial statements and consequently its consolidated financial statements; the assets that it controls
and the liabilities that it incurs; and the expenses that it incurs and its share of the income that it
earns from the joint venture.

 In respect of its interests in jointly controlled assets, a venturer should recognize in its separate
financial statements and consequently its consolidated financial statements; its share of the jointly
controlled assets, classified according to the nature of the assets; any liabilities which it has incurred;
its share of any liabilities incurred jointly with the other venturers in relation to the joint venture; any
income from the sale or use of its share of the output of the joint venture, together with its share of
any expenses incurred by the joint venturer; and any expenses which it has incurred in respect of its
interest in the joint venture.

 In respect of jointly controlled operations, the accounting treatment depends upon whether it is to be
accounted in stand alone financial statements or consolidated financial statement. In case of stand
alone financial statements the investments are accounted at cost in accordance with AS-13 whereas
in case of consolidated financial statements where these are prepared (or required to be prepared) the
investment in joint venture is accounted using proportionate consolidation method unless these are
subsidiaries in which case these are consolidated under AS 21.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-27

1) (a) Is the enterprise required to prepare consolidated financial statement? Yes / No

(b) If yes, does the enterprise have investments in a joint venture entity? Yes / No

(c) If yes to (b), is joint venture entity also considered in the financial Statements? Yes / No

2) (a) Is the joint venture in nature of jointly controlled operations? Yes / No

(b) If yes to (a) above, has the venturer in its separate financial statement as well
as in its consolidated financial statements recognized the following:

(i) the assets that it controls and the liabilities that it incurs? And Yes / No

(ii) the expenses that it incurs and its share of the income that it
earns from the joint venture? Yes / No

3) (a) Is the joint venture in nature of jointly controlled assets? Yes / No

(b) If yes to (a) above, has the venturer in its separate financial statements
As well in its consolidated financial statements recognized the following:

(i) its share of the jointly controlled assets, classified according to the
nature of the assets? Yes / No

(ii) any liabilities which it has incurred? Yes / No

(ii) its share of any liabilities incurred jointly with the other venturers
in relation to the joint venture? Yes / No

(iii) any income from the sale or use of its share of the output of the joint
 venture, together with its share of any expenses incurred by
the joint venture? And Yes / No

(v) any expenses separately incurred for the purpose of the joint venture? Yes / No

4) (a) is the joint venture in nature of jointly controlled entity? Yes / No

(b) if yes to (a) above, has the venturer in its separate financial statement accounted
investment in accordance with AS-13, Accounting for investments? Yes / No

(c) has the venturer in its consolidated financial statements reported as a separate
line item, its interest in the assets, liabilities, income and expenses of the jointly
controlled entity by using the proportionate consolidation method? Yes / No

5) Has the venturer in its consolidated financial statements separately disclosed goodwill
or capital reserve, considering net asset position of the jointly controlled entity at the
date on which interest is acquired? Yes / No

6) (a) Is the investment in joint venture not resulting in joint control? Yes / No

(b) if yes to (a), has the investor in its consolidated financial statements reported
its interest in accordance with Yes / No

(i) AS-13? Or Yes / No

(ii) AS-21? Or Yes / No

(iii) AS-23? Yes / No

(c) if yes to (a), has the investor in its separate financial statements accounted for
interest in the joint venture as per AS-13? Yes / No

7) Has the venturer disclosed in its separate financial statement the aggregate amounts
related to its interest in the jointly controlled entities

(i) Assets controlled? Yes / No

(ii) Liabilities incurred? Yes / No

(iii) Income that is earned from? Yes / No

(iv) Expenses incurred? Yes / No

8) Has the venturer disclosed in its separate financial statement as well as consolidated
financial statements separately the aggregate amount of the following:

(a) (i) any contingent liabilities it has incurred in relation to its interest in the
joint venture? And Yes / No

(ii) its share in each of the contingent liabilities which have been incurred
jointly with other venturers? Yes / No

(b) its share of the contingent liabilities of the joint ventures themselves for which it
is contingently liable? And Yes / No
 (c) those contingent liabilities that arise because the venturer is contingently liable
for the liabilities of the other venturers of a joint venture? Yes / No

(d) (i) any capital commitments of the venturer in relation to its interest in
joint venture? And Yes / No

(ii) its share in the capital commitments that have been incurred jointly with
other venturers? Yes / No

(e) its share of capital commitment of the joint venture themselves? Yes / No

9) Has the venturer in its separate financial statement as well as the consolidated financial
Statements disclosed:

(a) list of all joint venturers and description of interest in significant joint venturers? Yes / No

(b) In case of jointly controlled entities,

(i) the proportion of ownership interest? Yes / No

(ii) name and country of incorporation or residence? Yes / No

AS 28 - IMPAIRMENT OF ASSETS

 This standard should be applied in accounting for the impairment of all assets, other than:

1) inventories (see AS-2, Valuation of Inventories);

2) assets arising from construction contracts (see AS-7, Accounting for Construction
Contracts);

3) financial assets, including investments that are included in the scope of AS-13, Accounting
for Investments; or

4) Deferred tax assets (see AS-22, Accounting for taxes on income).

 Prominent concepts introduced by the standard include: An impairment loss is the amount by which
the carrying asset exceeds its recoverable amount. Recoverable amount is the higher of an asset’s
net selling price and its value.

 Value in use is the present value of estimated future cash flows expected to arise from the
continuous use of an asset disposal at the end of its useful life.

 Carrying Amount is the amount at which an asset is recognised in the balance sheet after deducting
any accumulated depreciation (amortisation) and accumulated impairment losses thereon. A cash-
generating unit is the smallest identifiable group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows from other assets or group of assets.

 Corporate assets are assets other than goodwill that contribute to the future cash inflows of both the
cash-generating unit under review and other cash-generating units.
 At each balance sheet date, it needs to be assessed as to whether there is triggering event that
requires the impairment testing to be made. Triggering event shall be assessed based on external
information like fall in interest rate or industry growth rate, change in law, etc., and internal
information like forecasts, obsolescence, damage, etc. Where there is a triggering event, the
impairment loss needs to be assessed at the level of each Cash-Generating Unit. Where all the assets
of the enterprise are allocated to cash-generating unit, only bottom-up testing method coupled with
and followed by top-down testing method is applied.

 In measuring value in use the standard specifies certain factors that needs to be considered in
arriving the discount rate and cash flow projection.

 Discount rate shall be independent of capital structure of the enterprise or its incremental borrowing
cost. As a starting point, the enterprise may take into account the following rates: the enterprise’s
weighted average cost of capital determined using the techniques such as the Capital Asset Pricing
Model; the enterprise’s incremental borrowing rate; and other market borrowing rates. These rates
are adjusted: to reflect the way that the market would asses the specific risks associated with the
projected cash flows; and to exclude risks that are not relevant to the projected cash flows.

 Consideration is given to risks such as country risk, currency risk, price risk and cash flow risk.

 Cash flow projections should be based on reasonable and supportable assumptions that represent
management’s best estimate of the set of economic conditions that will exist over the remaining
useful life of the asset. Greater weight should be given to external evidence; cash flow projections
should be based on the most recent financial budgets/forecasts that have been approved by
management. Projections based on these budgets/forecasts should cover a maximum period of five
years, unless a longer period can be justified; and cash flow projections beyond the period covered
by the most recent budgets/forecasts should be estimated by extrapolating the projections based on
the budgets/forecasts using a steady or declining growth rate for subsequent years, unless an
increasing rate can be justified. The growth rate should exceed the long-term average growth rate for
the products, industries or countries in which the enterprise operates, or for the market in which the
asset is used, unless a higher rate can be justified. Project cash flows shall not consider impact of
future capital expenditure or restructuring unless these are committed.

 Reversal of impairment loss is allowed to an extent that would be additional carrying amount of asset
had there be no impairment. However, in case of reversal of impairment loss relating to goodwill
additional condition needs to be satisfied.

 The detailed text of the standard spreads across 124 paragraphs and is supplemented with 8 examples
(which are not part of the standard). One is expected to go through it in detail before applying the
standard.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-28

1) Has the enterprise assessed at the balance sheet date whether there is any of the
following indication that indicate impairment of an asset?

(a) Significant decline in market value of an asset? Yes / No

(b) significant changes with adverse effect in the technological, market, economic
or legal environment in which the enterprise operates? Yes / No
 (c) increase in market interest rates or market rate of return on investment that
is likely to affect the discount rate used in calculating an asset’s value in use
and decrease the asset’s recoverable amount materially? Yes / No

(d) carrying amount of the net assets of the enterprise is more than its market
capitalisation? Yes / No

(e) evidence available of obsolescence or physical damage of an asset? Yes / No

(e) significant change with adverse effect in the extent to which or manner in
which an asset is expected to be used such as plan to discontinue or restructure
operations or dispose of an asset before the previously expected date? Yes / No

(g) evidence that the economic performance of an asset is or will be worse

than expected? Yes / No

2) (a) Is the following determined of an asset

(i) net selling price? Yes / No

(ii) value in use of an asset determined? Yes / No

(b) Is the carrying amount of an asset lower than

(i) the net selling price? Yes / No

(ii) the value in use? Yes / No

(c) If yes to (b) above, is the amount by which the carrying amount of an asset exceeds
recoverable amount [higher of b (I) & (ii)] considered as an impairment loss? Yes / No

2) Is the net selling price of an asset determined based on

(a) a binding sale agreement? Yes / No

(b) market price? Yes / No

(d) best information available to reflect the amount that an enterprise could obtain,
at the balance sheet date? Yes / No

3) 4) Is the value in use of an asset measured based on:

(a) Cash flow projections based on recent financial budgets/forecasts upto

a maximum period of five years? Yes / No

(b) Cash flow projections using a steady or declining growth rate for subsequent
years, unless an increasing rate can be justified? Yes / No

(c) Cash flow projections which uses a pre-tax discount rate that takes into
adjustment specific risks associated with projected cash flow and takes into
account either of the following rates:

(i) the enterprise’s weighted average cost of capital determined using

techniques such as capital asset pricing model? Yes / No
 (ii) enterprise’s incremental borrowing rate? and Yes / No

(iii) other market borrowing rates? Yes / No

5) Have the following not been considered in estimating future cash flows?

(a) a future restructuring to which enterprise is not yet committed? Yes / No

(b) a future capital expenditure that will improve or enhance the asset
in excess of its originally assessed standard of performance? Yes / No

(c) cash inflows and outflows from financing activities? Yes / No

6) (a) Is the impairment loss for an individual asset or for a cash-generating unit? Yes / No

(b) if the impairment loss is for an individual asset, has the following been
recognised and measured

(i) the carrying amount of an asset reduced to its recoverable amount? Yes / No

(ii) impairment loss recognised as an expense in the statement of

profit and loss immediately? Yes / No

(iii) impairment loss on a revalued asset is recognised directly against

any revaluation surplus for the asset to the extent that the impairment
loss does not exceed the amount held in revaluation surplus? Yes / No

(iv) is depreciation for the asset adjusted in future periods to allocate the
assets revised carrying amount less its residual value (if any) on a
systematic basis over its remaining useful life? Yes / No

7) (a) if the

(i) asset’s value in use cannot be estimated to be close to its net selling
price? And Yes / No
(ii) the asset does not generate cash inflows from continuing use that are
largely independent of those from other assets? Yes / No

(b) if no to above, has the enterprise identified the recoverable amount of the lowest
aggregation of assets (cash generating unit) that generate largely independent
cash flows from continuing use? Yes / No

8) (a) Is goodwill recognised in the financial statements? Yes / No

(b) Can goodwill be allocated on a reasonable and consistent basis to the cash-
generating unit for impairment [bottom-up approach]? Yes / No

(c) If no to (b) above, has the smallest cash-generating unit that includes the
cash-generating unit for impairment and to which goodwill can be allocated
on reasonable basis been identified (top-down approach)? Yes / No

(d) Is impairment loss first allocated to reduce the carrying amount of goodwill
allocated to the cash-generating unit and then to other assets of the unit? Yes / No
9) (a) Has the enterprise assessed at each balance sheet date, whether there is any
indication that an impairment loss recognised for an asset in prior accounting
period may no longer exist or may have decreased? Yes / No

(b) If yes to (a) above, has the enterprise estimated the recoverable amount of that
asset? Yes / No

(c) If the recoverable amount is more than the reduced carrying amount is the
carrying amount increased to its recoverable amount? Yes / No

(d) Is the increased carrying amount (due to reversal of impairment) for an

individual asset not exceeding the carrying amount that would have been
determined (net of depreciation) had no impairment loss been recognised for the
asset in prior accounting periods? Yes / No

(e) Is the reversal of impairment loss for an asset recognised as income immediately
in the statement of profit or loss except in cases of revalued asset in which case
is any reversal of an impairment loss on a revalued asset treated as a revaluation
increase? Yes / No

(f) Is depreciation charge after reversal of an impairment loss, adjusted in future

Periods to allocate the assets revised carrying amount less its residual value
(if any) on a systematic basis over its remaining useful life? Yes / No

(g) Is the reversal of an impairment loss for a cash-generating unit? Yes / No

(i) If yes to (g) above is the increase allocated in the following order :

(i) first assets other than goodwill? Yes / No

(ii) then to goodwill, if impairment loss was caused by a specific external

event of an exceptional nature that is not expected to recur and subsequent
external events have occurred that reverse the effect of that event? Yes / No

(i) Is the carrying amount for a cash-generating unit increased lower of

i
ii (i) its recoverable amount? And Yes / No
iii
(ii) the carrying amount that would have been determined
(net of depreciation) had no impairment loss been recognised for the
asset in prior accounting periods? Yes / No

10) (a) Have the following disclosures in financial statements for each class of
assets made? Yes / No

(i) amount of impairment losses recognised in the statement of profit and loss
during the period and line item (s) of the statement of profit and loss in
which those impairment losses are included? Yes / No

(ii) amount of reversal of impairment losses recognised in statement of

profit and loss during the period and the line item(s) of the statement
 of profit and loss in which those impairment losses are reversed? Yes / No

(iii) the amount of impairment losses recognised directly against

revaluation surplus during the period? And Yes / No

(iv) the amount of reversal of impairment losses recognised directly in

revaluation surplus during the period? Yes / No

(b) Has the enterprise that applies AS-17, Segment Reporting disclosed the
following for each reportable segment based on primary format

(i) amount of impairment losses recognised in the statement of profit

and loss and directly against revaluation surplus during the period? And Yes / No

(ii) amount of reversal of impairment losses recognised in the statement

of profit and loss directly in revaluation surplus during the period? Yes / No

(c) If impairment loss for an individual asset or a cash generating unit recognised
or reversed during the period is material to the financial statement, as a
whole, has the enterprise disclosed.

(i) the event and circumstances that led to the recognition or reversed? Yes / No

(ii) The amount of the impairment loss recognised or reversed? Yes / No

(iii) for individual asset

iv --- the nature of the asset? And Yes / No

v --- the reportable segment to which the asset belongs, based on the
enterprise’s primary segment? Yes / No

(iv) for a cash-generating unit

--- a description of the cash-generating unit (product line, a plant,

a business operation, a geographical area, a reportable segment as
defined in AS-17)? Yes / No

--- the amount of the impairment loss recognised or reversed by class of

assets and by reportable segment based on the enterprise’s primary
format (AS-17)? Yes / No

--- if the aggregation of the assets for identifying the cash–generating

unit has changed since the previous estimate, the enterprise should
describe the current and former way of aggregating assets and the
reasons for changing the way the cash generating unit is identified? Yes / No

(v) whether the recoverable amount of the asset (cash generating unit) is its
net selling price or its value in use? Yes / No
 (vi) if recoverable amount is net selling price, the basis used to determine
net selling price? Yes / No

(vii) If recoverable amount is value in use, the discount rate used in the
current estimate and previous estimate (in any) of value in use? Yes / No

(d) if impairment losses recognised (reversed) during the period are material in
aggregate to the financial statement as a whole, has the enterprise disclosed
a brief description of the following:

(i) the main classes of assets affected by impairment losses (reversal) for
which no these impairment losses for which no information is disclosed
under para 10(c)? Yes / No

(ii) the main events and circumstances that led to the recognition (reversal)
of these impairment losses for which no information is disclosed under
paragraph 10(c)? Yes / No

(e) Has the enterprise disclosed key assumptions used to determine the recoverable
amount of assets (cash generating units) during the period (optional disclosure)? Yes / No

AS 29 – PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The standard prescribes the accounting and disclosure for all provisions, contingent liabilities and 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. Executory contracts
are contracts under which neither party has performed any of its obligations or both parties have
partially performed their obligations to an equal extent;

(c) those arising in insurance entities from contracts with policyholders; or

(d) those covered by another Standard.

Provisions

The standard defines provisions as a liability, which can be measured only by using a substantial degree of
estimation.

 A provision should be recognised when, and only when:

(a) an entity has a present obligation (legal or constructive) as a result of past event;

(b) it is probable (i.e., more likely than not) that an outflow of resources embodying economic
benefits will be required to settle the obligation; and

(c) a reliable estimate can be made of the amount of the obligation. The Standard notes that it is
only in extremely rare cases that a reliable estimate will not be possible.
 The amount recognised as a provision should be the best estimate of the expenditure required to
settle the present obligation at the balance sheet date.

 The provisions shall not be discounted.

 Gains from the expected disposal of assets should not be taken into account, even if the expected
disposal is closely linked to the event-giving rise to the provision.

 An entity may expect reimbursement of some or all of the expenditure required to settle a provision
(for example, through insurance contracts, indemnity clauses or suppliers’ warranties). An entity
should: (a) recognise a reimbursement when, and only when, it is virtually certain that
reimbursement will be received if the entity settles the obligation. The amount recognised for the
reimbursement should not exceed the amount of the provision; and (b) recognise the reimbursement
as a separate asset. In the income statement, the expense relating to a provision may be presented net
of the amount recognised for a reimbursement.

 Provisions should be reviewed at each balance sheet date and adjusted to reflect the current best
estimate. If it is no longer probable that an outflow of resources embodying economic benefits will
be required to settle the obligation, the provision should be reversed.

 A provision should be used only for expenditures for which the provision was originally recognised.

 Provisions should not be recognised for future operating losses. An expectation of future operating
losses is an indication that certain assets of the operation may be impaired. In this case, an entity
tests these assets for impairment under AS 28 Impairment of Assets.

 The Standard defines a restructuring as a programme that is planned and controlled by management,
and materially changes either: (a) the scope of a business undertaken by an entity; or (b) the manner
in which that business is conducted.

 A provision for restructuring costs is recognised only when the general recognition criteria for
provisions are met.

Contingent Liabilities

This Standard defines a contingent liability as:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
the entity; or

(b) a present obligation that arises from past events but is not recognised because:

(i) it is not probable that an outflow of resources embodying economic benefits will be required
to settle the obligation; or

(ii) the amount of the obligation cannot be measured with sufficient reliability.

An entity should recognise a contingent liability.

QUESTIONNAIRE FOR ASCERTAINING COMPLIANCE OF AS-29

1) Have the provisions, contingent liability or contingent assets in respect of the following been
addressed as per respective Accounting Standards?
 (a) Construction Contracts? (AS-7) Yes / No

(b) Taxes on Income? (AS-22) Yes / No

(c) Leases? (AS-19) Yes / No

(d) Retirement benefits? (AS-15) Yes / No

2) Are all the following conditions been met, when a provision is made;

(a) the enterprise has a present obligation as a result of past event? Yes / No

(b) it is probable that an outflow of resources embodying economic benefit will be

required to settle the obligation? and Yes / No

(c) a reliable estimate can be made of the amount of the obligation? Yes / No

3) Have you ensured that

(a) where it is more likely than not a present obligation exist at a balance sheet
date, the enterprise recognizes a provision? Yes / No

(b) where it is more likely that no present obligation exists at a balance sheet date,
the enterprise discloses a contingent liability, unless the possibility of an outflow
of resources embodying economic benefits is remote? Yes / No

4) Have you ensured that the enterprise has not;

(a) recognised any contingent asset? Yes / No

(b) recognised gains from the expected disposal of assets? Yes / No

(c) made provisions for future operating losses? Yes / No

5) Have you ensured that provisions have been made in respect of the following liabilities:

(a) Warranties? Yes / No

(b) Legislation virtual certain to be enacted? Yes / No

(c) Requirements of a licensing agreement; e.g., an offshore oil field to remove the
oil rig at the end of production and restore the seabed, where the oil rig has been
constructed and where it is estimated that ninety per cent of the eventual cost
relate to the removal of oil rig? Yes / No

(d) Where a retail store has a policy of refunding purchases by dissatisfied

customers? Yes / No

(e) Guarantees which give rise to a legal obligation? Yes / No

(f) Court cases where the enterprise will be found liable? Yes / No

6) Have you ensured that provisions have not been made in respect of the following future
 liabilities?

(a) staff training as a result of say change in income tax system? Yes / No

(b) guarantee given which does not give rise to an obligation? Yes / No

(c) a court case, where enterprise will not be found liable? Yes / No

(d) refurbishing (future) cost; e.g., cost of relining a furnace every five years where
there is no legislation? Yes / No

(e) refurbishing (future); e.g., overhaul an aircraft once in three years where there is
a legislative requirement? Yes / No

7) Have you at each balance sheet reviewed the provision and adjusted to reflect the current
best estimate? Yes / No

8) Are the following disclosures been made as required by the accounting standard;

(j) for each class of provision (not applicable to level III enterprise)

(a) the carrying amount at the beginning and end of the period? Yes / No

(b) additional provision made in the period? Yes / No

(c) amount used during the period? Yes / No

(d) unused amounts reversed during the period? Yes / No

(ii) for each class of provision (not applicable to level II enterprise)

(a) a brief description of the nature of obligation and the expected resulting
outflows of economic benefits? Yes / No

(b) an indication of the uncertainties about those outflows? Yes / No

(c) the amount of any expected reimbursement, stating the amount of any
assets that has been recognised for that expected reimbursement? Yes / No

(iii) for each class of contingent liability along with a brief description

(a) an estimate of its financial? Yes / No

(b) an indication of the uncertainties relating to any outflow? Yes / No

(c) the possibility of any reimbursement? Yes / No