9911796707
TMI BlogCOMPANIES (ACCOUNTING STANDARDS) (AMENDMENT) RULES, 2011 - Indian Accounting Standards [w.e.f. 3-3-2011 to 18-5-2015]X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for clause 'C, the following shall be substituted, namely,- "Annexure means Annexure to the rules ;" 3. In the Principal rules, in rule 3, (i) the existing sub-rules (1) and (2) shall be re-numbered as sub-rules (3) and (4) respectively; (ii) in re-numbered sub-rule (3), for the word 'Annexure', the word Annexure "B" shall be substituted; (iii) before the re-numbered sub-rule (3), the following sub-rules shall be inserted, namely:- "(1) The Central Government hereby prescribes Accounting Standards for application by companies specified in sub-rule (4) to be called Indian Accounting Standards (Ind ASs), which are specified in the Annexure A to these rules which shall apply to the following class of companies:- (I) Companies other than Insurance companies, Banking companies and Non- Banking Finance Companies (A) a. Companies which are part of NSE - Nifty 50 b. Companies which are part of BSE - Sensex 30 c. Companies whose shares or other securities are listed on stock exchanges outside India d. Companies, whether listed or not, which have a net worth in excess of ₹ 1,000 crores. (B) Companies, whether listed or not, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition as an expense, including any write-down to net realisable value. It also deals with the cost formulas that are used to assign costs to inventories. Scope 2. This Standard applies to all inventories, except: (a) work in progress arising under construction contracts, including directly related service contracts (see Ind AS 11, Construction Contracts; (b) financial instruments (see Ind AS 39 , Financial Instruments: Recognition and Measurement and Ind AS 32, Financial Instruments: Presentation); and (c) biological assets (i.e., living animals or plants) related to agricultural activity and agricultural produce at the point of harvest (See Ind AS 41, Agriculture1) 3. This Standard does not apply to the measurement of inventories held by: (a) producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, to the extent that they are measured at net realisable value in accordance with well-established practices in those industries. When such inventories are measured at net realisable value, changes in that value are recognised in profit or loss in the period of the change. (b) commodity broker-traders who measure t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the entity and include materials and supplies awaiting use in the production process. In the case of a service provider, inventories include the costs of the service, as described in paragraph 19, for which the entity has not yet recognised the related revenue (see Ind AS 18, Revenue). Measurement of inventories 9. Inventories shall be measured at the lower of cost and net realisable value. Cost of inventories 10. The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Costs of purchase 11. The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. Costs of conversion 12. The costs of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost. Other costs 15. Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. For example, it may be appropriate to include non-production overheads or the costs of designing products for specific customers in the cost of inventories. 16. Examples of costs excluded from the cost of inventories and recognised as expenses in the period in which they are incurred are: (a) abnormal amounts of wasted materials, labour or other production costs; (b) storage costs, unless those costs are necessary in the production process before a further production stage; (c) administrative overheads that do not contribute to bringing inventories to their present location and condition; and (d) selling costs. 17. Ind AS 23, Borrowing Costs, identifies limited circumstances where borrowing costs are included in the cost of inventories. 18. An entity may purchase inventories on deferred settlement terms. When the arrangement effectively contains a financing element, that el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of their individual costs. 24. Specific identification of cost means that specific costs are attributed to identified items of inventory. This is the appropriate treatment for items that are segregated for a specific project, regardless of whether they have been bought or produced. However, specific identification of costs is inappropriate when there are large numbers of items of inventory that are ordinarily interchangeable. In such circumstances, the method of selecting those items that remain in inventories could be used to obtain predetermined effects on profit or loss. 25. The cost of inventories, other than those dealt with in paragraph 23, shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. 26. For example, inventories used in one operating segment may have a use to the entity different from the same type of inventories used in another operating segment. However, a difference in geographical location of inventories (or in the respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... events confirm conditions existing at the end of the period. 31. Estimates of net realisable value also take into consideration me purpose for which the inventory is held. For example, the net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess is based on general selling prices. Provisions may arise from firm sales contracts in excess of inventory quantities held or from firm purchase contracts. Such provisions are dealt with under Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. 32. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the reversal of a write-down of inventories in accordance with paragraph 34; and (h) the carrying amount of inventories pledged as security for liabilities. 37. Information about the carrying amounts held in different classifications of inventories and the extent of the changes in these assets is useful to financial statement users. Common classifications of inventories are merchandise, production supplies, materials, work in progress and finished goods. The inventories of a service provider may be described as work in progress. 38. [Refer to Appendix 1] 39. An entity adopts a format for profit or loss that results in amounts being disclosed other than the cost of inventories recognised as an expense during the period. Under this format, the entity presents an analysis of expenses using a classification based on the nature of expenses. In this case, the entity discloses the costs recognised as an expense for raw materials and consumables, labour costs and other costs together with the amount of the net change in inventories for the period. Appendix A References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty generates and uses cash and cash equivalents. This is the case regardless of the nature of the entity's activities and irrespective of whether cash can be viewed as the product of the entity, as may be the case with a financial institution. Entities need cash for essentially the same reasons however different their principal revenue-producing activities might be. They need cash to conduct their operations, to pay their obligations, and to provide returns to their investors. Accordingly, this Standard requires all entities to present a statement of cash flows. Benefits of cash flow information 4. A statement of cash flows, when used in conjunction with the rest of the financial statements, provides information that enables users to evaluate the changes in net assets of an entity, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. Cash flow information is useful in assessing the ability of the entity to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the bank balance often fluctuates from being positive to overdrawn. 9. Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an entity rather than part of its operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents. Presentation of a statement of cash flows 10. The statement of cash flows shall report cash flows during the period classified by operating, investing and financing activities. 11. An entity presents its cash flows from operating, investing and financing activities in a manner which is most appropriate to its business. Classification by activity provides information that allows users to assess the impact of those activities on the financial position of the entity and the amount of its cash and cash equivalents. This information may also be used to evaluate the relationships among those activities. 12. A single transaction may include cash flows that are classified differently. For example, when the instalment paid in respect of a fixed asset acquired on deferred payment basis includes both interest and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curities are classified as operating activities. Similarly, cash advances and loans made by financial institutions are usually classified as operating activities since they relate to the main revenue-producing activity of that entity. Investing activities 16. The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures that result in a recognized asset in the balance sheet are eligible for classification as investing activities. Examples of cash flows arising from investing activities are: (a) cash payments to acquire property, plant and equipment, intangibles and other long-term assets. These payments include those relating to capitalised development costs and self-constructed property, plant and equipment; (b) cash receipts from sales of property, plant and equipment, intangibles and other long-term assets; (c) cash payments to acquire equity or debt instruments of other entities and interests in joint ventures (other than payments for those instruments considered to be cash equivalents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method. Under the direct method, information about major classes of gross cash receipts and gross cash payments may be obtained either: (a) from the accounting records of the entity; or (b) by adjusting sales, cost of sales (interest and similar income and interest expense and similar charges for a financial institution) and other items in the statement of profit and loss for: (i) changes during the period in inventories and operating receivables and payables; (ii) other non-cash items; and (iii) other items for which the cash effects are investing or financing cash flows. 20. Under the indirect method, the net cash flow from operating activities is determined by adjusting profit or loss for the effects of: (a) changes during the period in inventories and operating receivables and payables; (b) non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, and undistributed profits of associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rency and the foreign currency at the date of the cash flow. 26. The cash flows of a foreign subsidiary shall be translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows. 27. Cash flows denominated in a foreign currency are reported in a manner consistent with Ind AS 21 The Effects of Changes in Foreign Exchange Rates. This permits the use of an exchange rate that approximates the actual rate. For example, a weighted average exchange rate for a period may be used for recording foreign currency transactions or the translation of the cash flows of a foreign subsidiary. However, Ind AS 21 does not permit use of the exchange rate at the end of the reporting period when translating the cash flows of a foreign subsidiary. 28. Unrealised gains and losses arising from changes in foreign currency exchange rates are not cash flows. However, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the statement of cash flows in order to reconcile cash and cash equivalents at the beginning and the end of the period. This amount is presented separately from cash flows from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e classified as operating, investing or financing activities in a statement of cash flows. While tax expense may be readily identifiable with investing or financing activities, the related tax cash flows are often impracticable to identify and may arise in a different period from the cash flows of the underlying transaction. Therefore, taxes paid are usually classified as cash flows from operating activities. However, when it is practicable to identify the tax cash flow with an individual transaction that gives rise to cash flows that are classified as investing or financing activities the tax cash flow is classified as an investing or financing activity as appropriate. When tax cash flows are allocated over more than one class of activity, the total amount of taxes paid is disclosed. Investments in subsidiaries, associates and joint ventures 37. When accounting for an investment in an associate or a subsidiary accounted for by use of the equity or cost method, an investor restricts its reporting in the statement of cash flows to the cash flows between itself and the investee, for example, to dividends and advances. 38. An entity which reports its interest in a jointly controlle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f control, such as the subsequent purchase or sale by a parent of a subsidiary's equity instruments, are accounted for as equity transactions (see Ind AS 27, Consolidated and Separate Financial Statements). Accordingly, the resulting cash flows are classified in the same way as other transactions with owners described in paragraph 17. Non-cash transactions 43. Investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows. Such transactions shall be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities. 44. Many investing and financing activities do not have a direct impact on current cash flows although they do affect the capital and asset structure of an entity. The exclusion of non-cash transactions from the statement of cash flows is consistent with the objective of a statement of cash flows as these items do not involve cash flows in the current period. Examples of non-cash transactions are: (a) the acquisition of assets either by assuming directly related liabilities or by means of a finance lease; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the cash flows arising from the operating, investing and financing activities of each reportable segment (see Ind AS 108 Operating Segments) . 51. The separate disclosure of cash flows that represent increases in operating capacity and cash flows that are required to maintain operating capacity is useful in enabling the user to determine whether the entity is investing adequately in the maintenance of its operating capacity. An entity that does not invest adequately in the maintenance of its operating capacity may be prejudicing future profitability for the sake of current liquidity and distributions to owners. 52. The disclosure of segmental cash flows enables users to obtain a better understanding of the relationship between the cash flows of the business as a whole and those of its component parts and the availability and variability of segmental cash flows. Appendix A Illustrative Examples Statement of cash flows for an entity other than a financial institution This appendix accompanies, but is not part of, Ind AS 7. 1. The examples show only current period amounts. Corresponding amounts for the preceding period are required to be presented in accordance with Ind AS 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment at cost 3,730 1,910 Accumulated depreciation (1,450) (1,060) Property, plant and equipment net 2,280 850 Total assets 7,910 6,660 Liabilities Trade payables 250 1,890 Interest payable 230 100 Income taxes payable 400 1,000 Long-term debt 2200 1,040 Short-term borrowing 100 - Total liabilities 3,180 4,030 Shareholders' equity Share capital 1,500 1,250 Retained earnings 3,230 1,380 Total shareholders' equity 4,730 2,630 Total liabilities and shareholders' equity 7,910 6,660 Direct method statement of cash flows (paragraph 18(a)) 20X2 Cash flows from operating activities Cash receipts from customers 30,150 Cash paid to suppliers and employees (27,600) Cash generated from operations 2,550 Income taxes paid (900) Net cash from operating activities 1,650 Cash flows from investing activities Acquisition of subsidiary X, net of cash acquired (Note A) (550) Purchase of property, plant and equipment (Note B) (350) Proceeds from sale of equipment 20 Interest received 200 Dividends received 200 Net cash used in investing activities (480) Cash flows from financing activities Proceeds from issue of share cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase property, plant and equipment. C. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and balances with banks, and investments in money market instruments. Cash and cash equivalents included in the statement of cash flows comprise the following amounts in the balance sheet: 20X2 20X1 Cash on hand and balances with banks 40 25 Short-term investments 190 135 Cash and cash equivalents as previously reported 230 160 Effect of exchange rate changes - (40) Cash and cash equivalents as restated 230 120 Cash and cash equivalents at the end of the period include deposits with banks of 100 held by a subsidiary which are not freely remissible to the holding company because of currency exchange restrictions. The Group has undrawn borrowing facilities of 2,000 of which 700 may be used only for future expansion. D. Segment information Segment A Segment B Total Cash flows from: Operating activities 1,790 (140) 1,650 Investing activities (640) 160 (480) Financing activities (840) (220) (1,060) 310 (200) 110 Alternative presentation (indirect method) As an alternative, in an indirect method statement of cash flows, operating pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting Standard (IAS) 7, Statement of Cash Flows. Comparison with IAS 7, Statement of Cash Flows Ind AS 7 differs from International Accounting Standard (IAS) 7, Statement of Cash Flows, in the following major respects: 1. In case of other than financial entities, IAS 7 gives an option to classify the interest paid and interest and dividends received as item of operating cash flows. Ind AS 7 does not provide such an option and requires these item to be classified as item of financing activity and investing activity, respectively (refer to the paragraph 33). 2. IAS 7 gives an option to classify the dividend paid as an item of operating activity. However, Ind AS 7 requires it to be classified as a part of financing activity only. 3. Different terminology is used in this standard, e.g., the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit and loss' is used instead of 'Statement of comprehensive income'. 4. Paragraph 2 of IAS 7 which states that IAS 7 supersedes the earlier version IAS 7 is deleted in Ind AS 7 as this is not relevant in Ind AS 7. However, paragraph number 2 is retained in Ind AS 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(3C) of the Companies Act, 1956. Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. Prior period errors are omissions from, and misstatements in, the entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that: (a) was available when financial statements for those periods were approved for issue; and (b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements. Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud. Retrospective application is applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied. Retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the Ind AS. 8. Ind ASs set out accounting policies that result in financial statements containing relevant and reliable information about the transactions, other events and conditions to which they apply. Those policies need not be applied when the effect of applying them is immaterial. However, it is inappropriate to make, or leave uncorrected, immaterial departures from Ind ASs to achieve a particular presentation of an entity's financial position, financial performance or cash flows. 9. Ind ASs are accompanied by guidance to assist entities in applying their requirements. All such guidance states whether it is an integral part of Ind ASs. Guidance that is an integral part of the Ind ASs is mandatory. Guidance that is not an integral part of the Ind ASs does not contain requirements for financial statements. 10. In the absence of an Ind AS that specifically applies to a transaction, other event or condition, management shall use its judgment in developing and applying an accounting policy that results in information that is: (a) relevant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in paragraph 14. 16. The following are not changes in accounting policies: (a) the application of an accounting policy for transactions, other events or conditions that differ in substance from those previously occurring; and (b) the application of a new accounting policy for transactions, other events or conditions that did not occur previously or were immaterial. 17. The initial application of a policy to revalue assets in accordance with Ind AS 16 Property, Plant and Equipment or Ind AS 38 Intangible Assets is a change in an accounting policy to be dealt with as a revaluation in accordance with Ind AS 16 or Ind AS 38, rather than in accordance with this Standard. 18. Paragraphs 19-31 do not apply to the change in accounting policy described in paragraph 17. Applying changes in accounting policies 19. Subject to paragraph 23: (a) an entity shall account for a change in accounting policy resulting from the initial application of an Ind AS in accordance with the specific transitional provisions, if any, in that Ind AS; and (b) when an entity changes an accounting policy upon initial application of an Ind AS that does not include specific transitional provisions apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting policy retrospectively, it applies the new accounting policy to comparative information for prior periods as far back as is practicable. Retrospective application to a prior period is not practicable unless it is practicable to determine the cumulative effect on the amounts in both the opening and closing balance sheets for that period. The amount of the resulting adjustment relating to periods before those presented in the financial statements is made to the opening balance of each affected component of equity of the earliest prior period presented. Usually the adjustment is made to retained earnings. However, the adjustment may be made to another component of equity (for example, to comply with an Ind AS). Any other information about prior periods, such as historical summaries of financial data, is also adjusted as far back as is practicable. 27. When it is impracticable for an entity to apply a new accounting policy retrospectively, because it cannot determine the cumulative effect of applying the policy to all prior periods, the entity, in accordance with paragraph 25, applies the new policy prospectively from the start of the earliest period practicable. It therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affected; and (ii) if Ind AS 33 applies to the entity, for basic and diluted earnings per share; (d) the amount of the adjustment relating to periods before those presented, to the extent practicable; and (e) if retrospective application is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied. Financial statements of subsequent periods need not repeat these disclosures. 30. When an entity has not applied a new Ind AS that has been issued but is not yet effective, the entity shall disclose: (a) this fact; and (b) known or reasonably estimable information relevant to assessing the possible impact that application of the new Ind AS will have on the entity's financial statements in the period of initial application. 31. In complying with paragraph 30, an entity considers disclosing: (a) the title of the new Ind AS; (b) the nature of the impending change or changes in accounting policy; (c) the date by which application of the Ind AS is required; (d) the date as at which it plans to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an accounting estimate may affect only the current period's profit or loss, or the profit or loss of both the current period and future periods. For example, a change in the estimate of the amount of bad debts affects only the current period's profit or loss and therefore is recognised in the current period. However, a change in the estimated useful life of, or the expected pattern of consumption of the future economic benefits embodied in, a depreciable asset affects depreciation expense for the current period and for each future period during the asset's remaining useful life. In both cases, the effect of the change relating to the current period is recognised as income or expense in the current period. The effect, if any, on future periods is recognised as income or expense in those future periods. Disclosure 39. An entity shall disclose the nature and amount of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in future periods, except for the disclosure of the effect on future periods when it is impracticable to estimate that effect. 40. If the amount of the effect in future periods is not disclosed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is practicable. 47. When it is impracticable to determine the amount of an error (e.g., a mistake in applying an accounting policy) for all prior periods, the entity, in accordance with paragraph 45, restates the comparative information prospectively from the earliest date practicable. It therefore disregards the portion of the cumulative restatement of assets, liabilities and equity arising before that date. Paragraphs 50-53 provide guidance on when it is impracticable to correct an error for one or more prior periods. 48. Corrections of errors are distinguished from changes in accounting estimates. Accounting estimates by their nature are approximations that may need revision as additional information becomes known. For example, the gain or loss recognised on the outcome of a contingency is not the correction of an error. Disclosure of prior period errors 49. In applying paragraph 42, an entity shall disclose the following: (a) the nature of the prior period error; (b) for each prior period presented, to the extent practicable, the amount of the correction: (i) for each financial statement line item affected; and (ii) if Ind AS 33 applies to the entity, for basic and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is impracticable to distinguish these types of information. When retrospective application or retrospective restatement would require making a significant estimate for which it is impossible to distinguish these two types of information, it is impracticable to apply the new accounting policy or correct the prior period error retrospectively. 53. Hindsight should not be used when applying a new accounting policy to, or correcting amounts for, a prior period, either in making assumptions about what management's intentions would have been in a prior period or estimating the amounts recognised, measured or disclosed in a prior period. For example, when an entity corrects a prior period error in measuring financial assets previously classified as held-to-maturity investments in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement, it does not change their basis of measurement for that period if management decided later not to hold them to maturity. In addition, when an entity corrects a prior period error in calculating its liability for employees' accumulated sick leave in accordance with Ind AS 19 Employee Benefits, it disregards information about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 20X1 5,000 29,450 34,450 Profit for the year ended 31 December 20X2 - 16,800 16,800 Balance at 31 December 20X2 5,000 46,250 51,250 Extracts from the notes 1. Some products that had been sold in 20X1 were incorrectly included in inventory at 31 December 20X1 at ₹ 6,500. The financial statements of 20X1 have been restated to correct this error. The effect of the restatement on those financial statements is summarised below. There is no effect in 20X2. Example 2 - Prospective application of a change in accounting policy when retrospective application is not practicable 2.1 During 20X2, Delta Co. changed its accounting policy for depreciating property, plant and equipment, so as to apply much more fully a components approach, whilst at the same time adopting the revaluation model. 2.2 In years before 20X2, Delta's asset records were not sufficiently detailed to apply a components approach fully. At the end of 20X1, management commissioned an engineering survey, which provided information on the components held and their fair values, useful lives, estimated residual values and depreciable amounts at the beginning of 20X2. However, the survey did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 8 and the corresponding International Accounting Standard (IAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors. Comparison with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors 1. Different terminology is used in this standard, e.g., the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit and loss' is used instead of 'Statement of comprehensive income'. The words 'approval of the financial statements for issue have been used instead of "authorisation of the financial statements for issue ' in the context of financial statements considered for the purpose of events after the reporting period. 2. In paragraph 12 of Ind AS 8, it is mentioned that in absence of an Ind AS, management may first consider the most recent pronouncements of International Accounting Standards Board. Indian Accounting Standard (Ind AS) 10 Events after the Reporting Period (This Indian Accounting Standard includes paragraphs set in bold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the management of an entity approves financial statements for issue to its supervisory board. The supervisory board is made up solely of non-executives and may include representatives of employees and other outside interests. The supervisory board approves the financial statements on 26 March, 20X2. The financial statements are made available to shareholders and others on 1 April, 20X2. The shareholders approve the financial statements at their annual meeting on 15 May, 20X2 and the financial statements are then filed with a regulatory body on 17 May, 20X2. The financial statements are approved for issue on 18 March, 20X2 (date of management approval for issue to the supervisory board). 7. Events after the reporting period include all events up to the date when the financial statements are approved for issue, even if those events occur after the public announcement of profit or of other selected financial information. Recognition and measurement Adjusting events after the reporting period 8. An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period. 9. The following are examples of adjusting events after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the reporting period, but reflects circumstances that have arisen subsequently. Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments. Similarly, the entity does not update the amounts disclosed for the investments as at the end of the reporting period, although it may need to give additional disclosure under paragraph 21. Dividends 12. If an entity declares dividends to holders of equity instruments (as defined in Ind AS 32 Financial Instruments: Presentation) after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period. 13. If dividends are declared after the reporting period but before the financial statements are approved for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes in accordance with Ind AS 1 Presentation of Financial Statements. Going concern 14. An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to liquidate the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od are material, non-disclosure could influence the economic decisions that users make on the basis of the financial statements. Accordingly, an entity shall disclose the following for each material category of non-adjusting event after the reporting period: (a) the nature of the event; and (b) an estimate of its financial effect, or a statement that such an estimate cannot be made. 22. The following are examples of non-adjusting events after the reporting period that would generally result in disclosure: (a) a major business combination after the reporting period Ind AS103 Business Combinations requires specific disclosures in such cases) or disposing of a major subsidiary; (b) announcing a plan to discontinue an operation; (c) major purchases of assets, classification of assets as held for sale in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, other disposals of assets, or expropriation of major assets by Government; (d) the destruction of a major production plant by a fire after the reporting period; (e) announcing, or commencing the implementation of, a major restructuring (see Ind AS 37); (f) major ordinary share tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e distribution. This exclusion applies to the separate, individual and consolidated financial statements of an entity that makes the distribution. 6. In accordance with paragraph 5, this Appendix does not apply when the non-cash asset is ultimately controlled by the same parties both before and after the distribution. Paragraph B2 of Ind AS 103 states that 'A group of individuals shall be regarded as controlling an entity when, as a result of contractual arrangements, they collectively have the power to govern its financial and operating policies so as to obtain benefits from its activities.' Therefore, for a distribution to be outside the scope of this Appendix on the basis that the same parties control the asset both before and after the distribution, a group of individual shareholders receiving the distribution must have, as a result of contractual arrangements, such ultimate collective power over the entity making the distribution. 7. In accordance with paragraph 5, this Appendix does not apply when an entity distributes some of its ownership interests in a subsidiary but retains control of the subsidiary. The entity making a distribution that results in the entity re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll recognise the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the dividend payable in profit or loss. Presentation and disclosures 15. An entity shall present the difference described in paragraph 14 as a separate line item in profit or loss. 16. An entity shall disclose the following information, if applicable: (a) the carrying amount of the dividend payable at the beginning and end of the period; and (b) the increase or decrease in the carrying amount recognised in the period in accordance with paragraph 13 as result of a change in the fair value of the assets to be distributed. 17. If, after the end of a reporting period but before the financial statements are approved for issue, an entity declares a dividend to distribute a non-cash asset, it shall disclose: (a) the nature of the asset to be distributed; (b) the carrying amount of the asset to be distributed as of the end of the reporting period; and (c) the estimated fair value of the asset to be distributed as of the end of the reporting period, if it is different from its carrying amount, and the information about the method used to determine that fair val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet' is used instead of 'Statement of financial position'. The words 'approval of the financial statements for issue have been used instead of 'authorisation of the financial statements for issue' in the context of financial statements considered for the purpose of events after the reporting period. Indian Accounting Standard (Ind AS) 20 Accounting for Government Grants and Disclosure of Government Assistance (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Scope 1. This Standard shall be applied in accounting for, and in the disclosure of, Government grants and in the disclosure of other forms of Government assistance. 2. This Standard does not deal with: (a) the special problems arising in accounting for Government grants in financial statements reflecting the effects of changing prices or in supplementary information of a similar nature. (b) Government assistance that is provided for an entity in the form of benefits that are available in determining taxable profit or tax loss, or are determined or limited on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty may be significant for the preparation of the financial statements for two reasons. Firstly, if resources have been transferred, an appropriate method of accounting for the transfer must be found. Secondly, it is desirable to give an indication of the extent to which the entity has benefited from such assistance during the reporting period. This facilitates comparison of an (entity's financial statements with those of prior periods and with those of other entities. 6. Government grants are sometimes called by other names such as subsidies, subventions, or premiums. Government grants 7. Government grants, including non-monetary grants at fair value, shall not be recognised until there is reasonable assurance that: (a) the entity will comply with the conditions attaching to them; and (b) the grants will be received. 8. A Government grant is not recognised until there is reasonable assurance that the entity will comply with the conditions attaching to it, and that the grant will be received. Receipt of a grant does not of itself provide conclusive evidence that the conditions attaching to the grant have been or will be fulfilled. 9. The manner in which a grant is recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be recognised directly in equity but should be recognised in profit or loss in appropriate periods. (b) Government grants are rarely gratuitous. The entity earns them through compliance with their conditions and meeting the envisaged obligations. They should therefore be recognised in profit or loss over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. (c) because income and other taxes are expenses, it is logical to deal also with Government grants, which are an extension of fiscal policies, in profit or loss. 16. It is fundamental to the income approach that Government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. Recognition of Government grants in profit or loss on a receipts basis is not in accordance with the accrual accounting assumption (see Ind AS 1 Presentation of Financial Statements) and would be acceptable only if no basis existed for allocating a grant to periods other than the one in which it was received. 17. In most cases the periods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or other resources, for the use of the entity. In these circumstances the fair value of the non-monetary asset is assessed and both grant and asset are accounted for at that fair value. Presentation of grants related to assets 24. Government grants related to assets, including non-monetary grants at fair value, shall be presented in the balance sheet by setting up the grant as deferred income. 25. [Refer to Appendix 1]. 26. The grant set up as deferred income is recognised in profit or loss on a systematic basis over the useful life of the asset. 27. [Refer to Appendix 1] 28. The purchase of assets and the receipt of related grants can cause major movements in the cash flow of an entity. For this reason and in order to show the gross investment in assets, such movements are disclosed as separate items in the statement of cash flows.. Presentation of grants related to income 29. Grants related to income are sometimes presented as a credit in the statement of profit and loss, either separately or under a general heading such as 'other income'; alternatively, they are deducted in reporting the related expense. 29A [Refer to Appendix 1] 30. Supporters of the first m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the financial statements may not be misleading. 37. [Refer to Appendix 1] 38. In this Standard, Government assistance does not include the provision of infrastructure by improvement to the general transport and communication network and the supply of improved facilities such as irrigation or water reticulation which is available on an ongoing indeterminate basis for the benefit of an entire local community. Disclosure 39. The following matters shall be disclosed: (a) the accounting policy adopted for Government grants, including the methods of presentation adopted in the financial statements; (b) the nature and extent of Government grants recognised in the financial statements and an indication of other forms of Government assistance from which the entity has directly benefited; and (c) unfulfilled conditions and other contingencies attaching to Government assistance that has been recognised. Appendix A Government Assistance- No Specific Relation to Operating Activities This Appendix is an integral part of Indian Accounting Standard (Ind AS) 20. Issue 1. In some countries Government assistance to entities may be aimed at encouragement or long-term support of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts related to assets have been deleted in Ind AS 20. In order to maintain consistency with paragraph numbers of IAS 20, the paragraph numbers are retained in Ind AS 20: (i) Paragraph 25 (ii) Paragraph 27 (iii) Paragraph 33 3. Requirements regarding presentation of grants related to income in the separate income statement, where separate income statement is presented under paragraph 29A of IAS 20 have been deleted. This change is consequential to the removal of option regarding two statement approach in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss. However, paragraph number 29A has been retained in Ind AS 20 to maintain consistency with paragraph numbers of IAS 20. 4. Different terminology is used in this standard, e.g., the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit and loss' is used instead of 'Statement of comprehensive income'. 5. Paragraph number 37 appear as 'Deleted 'in IAS 20. In order to maintain consistency with paragraph numbers of IAS 20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nslations of financial information into a foreign currency that do not meet these requirements, this Standard specifies information to be disclosed. 7. This Standard does not apply to the presentation in a statement of cash flows of the cash flows arising from transactions in a foreign currency, or to the translation of cash flows of a foreign operation (see Ind AS 7 Statement of Cash Flows). Definitions 8. The following terms are used in this Standard with the meanings specified: Closing rate is the spot exchange rate at the end of the reporting period. Exchange difference is the difference resulting from translating a given number of units of one currency into another currency at different exchange rates. Exchange rate is the ratio of exchange for two currencies. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Foreign currency is a currency other than the functional currency of the entity. Foreign operation is an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the operation accumulates cash and other monetary items, incurs expenses, generates income and arranges borrowings, all substantially in its local currency. (b) whether transactions with the reporting entity are a high or a low proportion of the foreign operation's activities (c) whether cash flows from the activities of the foreign operation directly affect the cash flows of the reporting entity and are readily available for remittance to it. (d) whether cash flows from the activities of the foreign operation are sufficient to service existing and normally expected debt obligations without funds being made available by the reporting entity. 12. When the above indicators are mixed and the functional currency is not obvious, management uses its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. As part of this approach, management gives priority to the primary indicators in paragraph 9 before considering the indicators in paragraphs 10 and 11, which are designed to provide additional supporting evidence to determine an entity's functional currency. 13. An enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a monetary item. Conversely, the essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. Examples include: amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; inventories; property, plant and equipment; and provisions that are to be settled by the delivery of a non monetary asset. Summary of the approach required by this Standard 17. In preparing financial statements, each entity-whether a stand-alone entity, an entity with foreign operations (such as a parent) or a foreign operation (such as a subsidiary or branch)-determines its functional currency in accordance with paragraphs 9-14. The entity translates foreign currency items into its functional currency and reports the effects of such translation in accordance with paragraphs 20-37 and 50. 18. Many reporting entities comprise a number of individual entities (e.g. a group is made up of a parent and one or more subsidiaries). Various types of entities, whether members of a group or otherwise, may have investments in associates or joint ventures. They may also have branches. It is neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the end of each reporting period (a) foreign currency monetary items shall be translated using the closing rate; (b) non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction; and (c) non-monetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was determined. 24. The carrying amount of an item is determined in conjunction with other relevant Standards. For example, property, plant and equipment may be measured in terms of fair value or historical cost in accordance with Ind AS 16 Property, Plant and Equipment. Whether the carrying amount is determined on the basis of historical cost or on the basis of fair value, if the amount is determined in a foreign currency it is then translated into the functional currency in accordance with this Standard. 25. The carrying amount of some items is determined by comparing two or more amounts. For example, the carrying amount of inventories is the lower of cost and net realisable value in accordance with Ind AS 2 Inventories. Similarly, in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e option provided in paragraph 29A in respect of long-term monetary items. 29. When monetary items arise from a foreign currency transaction and there is a change in the exchange rate between the transaction date and the date of settlement, an exchange difference results. When the transaction is settled within the same accounting period as that in which it occurred, all the exchange difference is recognised in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each period up to the date of settlement is determined by the change in exchange rates during each period. Paragraph 29A provides an option to recognise unrealised exchange differences arising on translation of certain long-term monetary assets and long-term monetary liabilities from foreign currency to functional currency. 29A. An entity may exercise the option in respect of recognition of exchange differences arising on translation of long-term monetary items from foreign currency to functional currency as follows: (i) Unrealised exchange differences arising on long-term monetary assets and long- term monetary liabilities denominated in a foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation (see paragraph 15) shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, as appropriate. In the financial statements that include the foreign operation and the reporting entity (e.g. consolidated financial statements when the foreign operation is a subsidiary), such exchange differences shall be recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment in accordance with paragraph 48. 33. When a monetary item forms part of a reporting entity's net investment in a foreign operation and is denominated in the functional currency of the reporting entity, an exchange difference arises in the foreign operation's individual financial statements in accordance with paragraph 28. If such an item is denominated in the functional currency of the foreign operation, an exchange difference arises in the reporting entity's separate financial statements in accordance with par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion previously recognised in other comprehensive income in accordance with paragraphs 32 and 39(c) are not reclassified from equity to profit or loss until the disposal of the operation. When the option provided in paragraph 29A is exercised, exchange differences previously recognised directly in equity and accumulated in a separate component of equity in accordance with that paragraph are not transferred to profit or loss immediately on change of the entity's functional currency. They shall continue to be transferred to profit or loss in the manner stated in that paragraph. Use of a presentation currency other than the functional currency Translation to the presentation currency 38. An entity may present its financial statements in any currency (or currencies). If the presentation currency differs from the entity's functional currency, it translates its results and financial position into the presentation currency. For example, when a group contains individual entities with different functional currencies, the results and financial position of each entity are expressed in a common currency so that consolidated financial statements may be presented. 39. The results and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flationary economy, comparative amounts shall be those that were presented as current year amounts in the relevant prior year financial statements (i.e. not adjusted for subsequent changes in the price level or subsequent changes in exchange rates). 43. When an entity's functional currency is the currency of a hyperinflationary economy, the entity shall restate its financial statements in accordance with Ind AS 29 before applying the translation method set out in paragraph 42, except for comparative amounts that are translated into a currency of a non-hyperinflationary economy [see paragraph 42(b)]. When the economy ceases to be hyperinflationary and the entity no longer restates its financial statements in accordance with Ind AS 29, it shall use as the historical costs for translation into the presentation currency the amounts restated to the price level at the date the entity ceased restating its financial statements. Translation of a foreign operation 44. Paragraphs 45-47, in addition to paragraphs 38-43, apply when the results and financial position of a foreign operation are translated into a presentation currency so that the foreign operation can be included in the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solidation to joint ventures in accordance with Ind AS 28 Investments in Associates and Ind AS 31. 47. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation shall be treated as assets and liabilities of the foreign operation. Thus they shall be expressed in the functional currency of the foreign operation and shall be translated at the closing rate in accordance with paragraphs 39 and 42. Disposal or partial disposal of a foreign operation 48. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in the separate component of equity, shall be reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is recognised (see Ind AS 1 Presentation of Financial Statements). 48A. In addition to the disposal of an entity's entire interest in a foreign operation, the following are accounted for as disposals even if the entity retains an interest in the former subsidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose: (a) the amount of exchange differences recognised in profit or loss except for those arising on financial instruments measured at fair value through profit or loss in accordance with Ind AS 39; (b) net exchange differences recognised in other comprehensive income and accumulated in a separate component of equity, and a reconciliation of the amount of such exchange differences at the beginning and end of the period; and (c) net exchange differences recognised directly in equity and accumulated in a separate component of equity in accordance with paragraph 29A, and a reconciliation of the amount of such exchange differences at the beginning and end of the period. 53. When the presentation currency is different from the functional currency, that fact shall be stated, together with disclosure of the functional currency and the reason for using a different presentation currency. 54. When there is a change in the functional currency of either the reporting entity or a significant foreign operation, that fact, the reason for the change in functional currency and the date of change in functional currency shall be disclosed. 55. When an entity presents its financial statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ind AS 29. The financial statements of Entity S should be restated in accordance with Ind AS 29. This requirement cannot be avoided, for example, by adopting Rupee as the functional currency of Entity S. Example illustrating impairment loss in paragraph 25 Entity A's functional currency is Rupee. It has a building located in US acquired at a cost of US$ 10,000 when the exchange rate was US$ 1=Rs.50. The building is carried at cost in the financial statements of Entity A. For the purpose of this example depreciation is ignored. At the balance sheet date, there is an indication of impairment for this building. Consequently, an impairment test has been made in accordance with Ind AS 36 as at the balance sheet date and the recoverable amount of the building is determined to be US$ 9,500. The exchange rate as at the balance sheet date is US$ 1=Rs.53. Rs. Cost translated at the exchange rate on the date of acquisition- US$10,000 @Rs.50 per US$ 500,000 Recoverable amount translated at the exchange rate on the balance sheet date-US$9,500 @ ₹ 53 per US$ 503,500 Though there is an impairment loss of US$ 500 (US$10,000-US$9,500) in terms of foreign currency, there is no impa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange rate as at 31 March 20X1 (Rs.50 per US$) 960 @ exchange rate as at 31 March 20X0(Rs.48 per US$) 1,000 Exchange gain 40 After translating the financial statements of Entity S1 into Rupees in accordance with paragraphs 38-47 of Ind AS 21, in the consolidated financial statements of Entity P, the exchange gain in terms of Rupee corresponding to US$ 40 i.e. ₹ 1,960 (US$ 40 @ ₹ 49) will be recognised in other comprehensive income and accumulated in equity. Situation 3: Entity S1 owes to Entity P €1,000 towards a loan obtained some years back. Exchange rates: As at 31 March 20X0 As at 31 March 20X1 €1=Rs.60 €1=Rs.61 €1=US$1.3 €1=US$.1.4 Average exchange rate between US$ and Rupee during the financial year ending 31 March 20X1 was US$ 1 = ₹ 45. For the purpose of this example, it is assumed that the use of the average exchange rate provides a reliable approximation of the spot rates during the year. In the separate financial statements of Entity P, an exchange gain of ₹ 1,000 arises as shown below: Rs. Loan asset of €1,000 translated @ exchange rate as at 31 March 20X1 (Rs.61 per €) 61,000 @ exchange rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so even if the inventories were acquired prior to 1 January 20X1. The accumulated FCTR as at 1 January 20X1 in terms of the new functional currency will be US$1,000 (Rs.50,000 translated @ ₹ 50 per US$). This amount is not reclassified from equity to profit or loss until the disposal of the foreign operation. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences between Indian Accounting Standard (Ind AS) 21 and the corresponding International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates. Comparison with IAS 21, The Effects of Changes in Foreign Exchange Rates 1. The transitional provisions given in IAS 21 have not been given in the Ind AS 21, since all transitional provisions related to Indian ASs, wherever considered appropriate, have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 2. Ind AS 21 permits an option to recognise exchange differences arising on translation of certain long-term monetary items from foreign curre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rowing costs may include: (a) interest expense calculated using the effective interest method as described in Ind AS 39 Financial Instruments: Recognition and Measurement; (b) [Refer to Appendix 1] (c) [Refer to Appendix 1] (d) finance charges in respect of finance leases recognised in accordance with Leases', and (e) exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. 6A. With regard to exchange difference required to be treated as borrowing costs in accordance with paragraph 6(e), the manner of arriving at the adjustments stated therein shall be as follows: (i) the adjustment should be of an amount which is equivalent to the extent to which the exchange loss does not exceed the difference between the cost of borrowing in functional currency when compared to the cost of borrowing in a foreign currency. (ii) where there is an unrealised exchange loss which is treated as an adjustment to interest and subsequently there is a realised or unrealised gain in respect of the settlement or translation of the same borrowing, the gain to the extent of the loss previously recognised as an adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the use of loans denominated in or linked to foreign currencies, when the group operates in highly inflationary economies, and from fluctuations in exchange rates. As a result, the determination of the amount of borrowing costs that are directly attributable to the acquisition of a qualifying asset is difficult and the exercise of judgment is required. 12. To the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. 13. The financing arrangements for a qualifying asset may result in an entity obtaining borrowed funds and incurring associated borrowing costs before some or all of the funds are used for expenditures on the qualifying asset. In such circumstances, the funds are often temporarily invested pending their expenditure on the qualifying asset. In determining the amount of borrowing costs eligible for capitalisation during a period, any investment income earned on such funds is deducted from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capitalised, is normally a reasonable approximation of the expenditures to which the capitalisation rate is applied in that period. 19. The activities necessary to prepare the asset for its intended use or sale encompass more than the physical construction of the asset. They include technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits prior to the commencement of the physical construction. However, such activities exclude the holding of an asset when no production or development that changes the asset's condition is taking place. For example, borrowing costs incurred while land is under development are capitalised during the period in which activities related to the development are being undertaken. However, borrowing costs incurred while land acquired for building purposes is held without any associated development activity do not qualify for capitalisation. Suspension of capitalisation 20. An entity shall suspend capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset. 21. An entity may incur borrowing costs during an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to matters contained in other Indian Accounting Standards (Ind ASs) This Appendix is an integral part of Indian Accounting Standard (Ind AS) 23. 1. Appendix A Changes in Existing Decommissioning, Restoration and Similar Liabilities) contained in Ind AS 16 Property, Plant and Equipment makes reference to this Standard also. 2. Appendix A (Service Concession Arrangements contained in Ind AS 11, Construction Contracts, makes reference to this Standard also. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (IndAS) 23 and the corresponding International Accounting Standard (IAS) 23, Borrowing Costs. Comparison with IAS 23, Borrowing Costs 1. IAS 23 provides no guidance as to how the adjustment prescribed in paragraph 6(e) is to be determined. Paragraph 6A is added in Ind AS 23 to provide the guidance. 2. The following paragraph numbers appear as 'Deleted 'in IAS 23. In order to maintain consistency with paragraph numbers of IAS 23, the paragraph numbers are retained in Ind AS 23: (i) paragraph 6(a) (ii) paragraph 6(b) 3. The tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entity prohibit the entity to disclose certain information which is required to be disclosed as per this Standard, disclosure of such information is not warranted. For example, banks are obliged by law to maintain confidentiality in respect of their customers' transactions and this Standard would not override the obligation to preserve the confidentiality of customers' dealings. Purpose of related party disclosures 5. Related party relationships are a normal feature of commerce and business. For example, entities frequently carry on parts of their activities through subsidiaries, joint ventures and associates. In those circumstances, the entity has the ability to affect the financial and operating policies of the investee through the presence of control, joint control or significant influence. 6. A related party relationship could have an effect on the profit or loss and financial position of an entity. Related parties may enter into transactions that unrelated parties would not. For example, an entity that sells goods to its parent at cost might not sell on those terms to another customer. Also, transactions between related parties may not be made at the same amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a plan, the sponsoring employers are also related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. Close members of the family of a person are the persons specified within meaning of 'relative' under the Companies Act 1956 and that person's domestic partner, children of that person's domestic partner and dependants of that person's domestic partner. Compensation includes all employee benefits (as defined in Ind AS 19 Employee Benefits) including employee benefits to which Ind AS 102 Share-based Payments applies. Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unions, (iii) public utilities, and (iv) departments and agencies of a government that does not control, jointly control or significantly influence the reporting entity, simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process). (d) a customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business, simply by virtue of the resulting economic dependence. 12. In the definition of a related party, an associate includes subsidiaries of the associate and a joint venture includes subsidiaries of the joint venture. Therefore, for example, an associate's subsidiary and the investor that has significant influence over the associate are related to each other. Disclosures All entities 13. Relationships between a parent and its subsidiaries shall be disclosed irrespective of whether there have been transactions between them. An entity shall disclose the name of its parent and, if different, the ultimate controlling party. If neither the entity's parent nor the ultimate controlling party produces consolidated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) their terms and conditions, including whether they are secured, and the nature of the consideration to be provided in settlement; and (ii) details of any guarantees given or received; (c) provisions for doubtful debts related to the amount of outstanding balances; and (d) the expense recognised during the period in respect of bad or doubtful debts due from related parties. 19. The disclosures required by paragraph 18 shall be made separately for each of the following categories: (a) the parent; ' (b) entities with joint control or significant influence over the entity; (c) subsidiaries; (d) associates; (e) joint ventures in which the entity is a venturer; (f) key management personnel of the entity or its parent; and (g) other related parties 20. The classification of amounts payable to, and receivable from, related parties in the different categories as required in paragraph 19 is an extension of the disclosure requirement in Ind AS 1 Presentation of Financial Statements for information to be presented either in the balance sheet or in the notes. The categories are extended to provide a more comprehensive analysis of related party balances and apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint control or significant influence over both the reporting entity and the other entity. 26. If a reporting entity applies the exemption in paragraph 25, it shall disclose the following about the transactions and related outstanding balances referred to in paragraph 25: (a) the name of the government and the nature of its relationship with the reporting entity (i.e. control, joint control or significant influence); (b) the following information in sufficient detail to enable users of the entity's financial statements to understand the effect of related party transactions on its financial statements: (i) the nature and amount of each individually significant transaction; and (ii) for other transactions that are collectively, but not individually, significant, a qualitative or quantitative indication of their extent. Types of transactions include those listed in paragraph 21. 27. In using its judgment to determine the level of detail to be disclosed in accordance with the requirements in paragraph 26(b), the reporting entity shall consider the closeness of the related party relationship and other factors relevant in establishing the level of significance of the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant transaction because of size of transaction In the year ended December 20X1 Government G provided Entity A, a utility company in which Government G indirectly owns 75 per cent of outstanding shares, with a loan equivalent to 50 per cent of its funding requirement, repayable in quarterly instalments over the next five years. Interest is charged on the loan at a rate of 3 per cent, which is comparable to that charged on Entity A's bank loans. See notes Y and Z [of the financial statements] for compliance with other relevant Accounting Standards. Example of disclosure of collectively significant transactions In Entity A's financial statements, an example of disclosure to comply with paragraph 26(b)(ii) for collectively significant transactions could be: Government G, indirectly, owns 75 per cent of Entity A's outstanding shares. Entity A's significant transactions with Government G and other entities controlled, jointly controlled or significantly influenced by Government G are [a large portion of its sales of goods and purchases of raw materials] or [about 50 per cent of its sales of goods and about 35 per cent of its purchases of raw materials]. The company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outcome described in paragraphs IE10 and IE11 would be different, if X had only significant influence over Entity A and not control or joint control; then Entities A and C would not be related to each other. IE13. For Entity A's financial statements, Entity C is related to Entity A because X controls A and is a member of Entity C's key management personnel. [Paragraph 9(b)(vii)-(a)(i)] IE14. Furthermore, the outcome described in paragraph IE13 will be the same if X has joint control over Entity A. IE14A. The outcome described in paragraph IE 13 will also be the same if X is a member of key management personnel of Entity B and not of Enfity C. [Paragraph 9(b)(vii)-(a)(i)] IE15. For Entity B's consolidated financial statements, Entity A is a related party of the Group if X is a member of key management personnel of the Group. [Paragraph 9(b)(vi)-(a)(iii)] Example 4 - Person as investor IE16. A person, X, has an investment in Entity A and Entity B. Image_5 IE17. For Entity A's financial statements, if X controls or jointly controls Entity A, Entity B is related to Entity A when X has control, joint control or significant influence over Entity B. [Paragraph 9(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of a person 3. Paragraph 24A has been included in the Ind AS 24. It provides additional clarificatory guidance regarding aggregation of transactions for disclosure. 4. Different terminology is used in this standard, e.g., the term 'balance sheet' is used instead of 'Statement of financial position'. Indian Accounting Standard (Ind AS) 28 Investments in Associates (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. Scope 1. This Standard shall be applied in accounting for investments in associates. However, it does not apply to investments in associates held by: a. venture capital organisations b. [Refer to Appendix 1] that upon initial recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement. Such investments shall be measured at fair value in accordance with Ind AS 39, with changes in fair value recognised in profit or loss in the period of the change. An entity holding such an investment sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to, or accompany, those financial statements, unless required by law. 5. [Refer to Appendix 1 ] Significant influence 6. If an investor holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the investor holds, directly or indirectly (e.g. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the investor does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an investor from having significant influence. 7. The existence of significant influence by an investor is usually evidenced in one or more of the following ways: a. representation on the board of directors or equivalent governing body of the investee; b. participation in policy-making processes, including participation in decisions about dividends or other distributions; c. material transactions between the investor and the investee; d. interchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other comprehensive income. Such changes include those arising from the revaluation of property, plant and equipment and from foreign exchange translation differences. The investor's share of those changes is recognised in other comprehensive income of the investor (see Ind AS 1 Presentation of Financial Statements) . 12. When potential voting rights exist, the investor's share of profit or loss of the investee and of changes in the investee's equity is determined on the basis of present ownership interests and does not reflect the possible exercise or conversion of potential voting rights. Application of the equity method 13. An investment in an associate shall be accounted for using the equity method except when: a. the investment is classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations; b. [Refer to Appendix 1] c. [Refer to Appendix 1] 14. Investments described in paragraph 13(a) shall be accounted for in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations 15. When an investment in an associate previously classified as held for sale, 40 longer meets the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hensive income by an associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the investor reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over the associate. For example, if an associate has available-for-sale financial assets and the investor loses significant influence over the associate, the investor shall reclassify to profit or loss the gain or loss previously recognised in other comprehensive income in relation to those assets. If an investor's ownership interest in an associate is reduced, but the investment continues to be an associate, the investor shall reclassify to profit or loss only a proportionate amount of the gain or loss previously recognised in other comprehensive income. 20. Many of the procedures appropriate for the application of the equity method are similar to the consolidation procedures described in Ind AS 27. Furthermore, the concepts underlying the procedures used in accounting for the acquisition of a subsidiary are also adopted in accounting for the acquisition of an investment in an associate. 21. A group's share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airment losses recognised by the associate, such as for goodwill or property, plant and equipment. 24. The most recent available financial statements of the associate are used by the investor in applying the equity method. When the end of the reporting period of the investor is different from that of the associate, the associate prepares, for the use of the investor, financial statements as of the same date as the financial statements of the investor unless it is impracticable to do so. 25. When, in accordance with paragraph 24, the financial statements of an associate used in applying the equity method are prepared as of a different date from that of the investor, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the investor's financial statements. In any case, the difference between the end of the reporting period of the associate and that of the investor shall be no more than three months unless it is impracticable to do so. The length of the reporting periods and any difference in the ends of the reporting periods shall be the same from period to period. 26. The investor's financial statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's losses in accordance with paragraph 29, the investor applies the requirements of Ind AS 39 to determine whether it is necessary to recognise any additional impairment loss with respect to the investor's net investment in the associate. 32. The investor also applies the requirements of Ind AS 39 to determine whether any additional impairment loss is recognised with respect to the investor's interest in the associate that does not constitute part of the net investment and the amount of that impairment loss. 33. Because goodwill that forms part of the carrying amount of an investment in an associate is not separately recognised, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in Ind AS 36 Impairment of Assets. Instead, the entire carrying amount of the investment is tested for impairment in accordance with Ind AS 36 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever application of the requirements in Ind AS 39 indicates that the investment may be impaired. An impairment loss recognised in those circumstances is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity method and are as of a date or for a period that is different from that of the investor, and the reason for using a different date or different period; f. the nature and extent of any significant restrictions (e.g. resulting from borrowing arrangements or regulatory requirements) on the ability of associates to transfer funds to the investor in the form of cash dividends, or repayment of loans or advances; g. the unrecognised share of losses of an associate, both for the period and cumulatively, if an investor has discontinued recognition of its share of losses of an associate; h. the fact that an associate is not accounted for using the equity method in accordance with paragraph 13; and i. summarised financial information of associates, either individually or in groups, that are not accounted for using the equity method, including the amounts of total assets, total liabilities, revenues and profit or loss. 38. Investments in associates accounted for using the equity method shall be classified as non-current assets. The investor's share of the profit or loss of such associates, and the carrying amount of those investments, shall be separately disclosed. The invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) has been retained in Ind AS 28 to maintain consistency with IAS 28. 3. Paragraphs 5, 13(b) and 13(c) have been deleted as the applicability or exemptions to the Indian Accounting Standards is governed by the Companies Act and the Rules made thereunder. However, paragraph numbers have been retained in Ind AS 28 to maintain consistency with IAS 28. 4. Paragraph number 16 appears as 'Deleted 'in IAS 28. In order to maintain consistency with paragraph numbers of IAS 28, the paragraph number is retained in Ind AS 28 5. Paragraph 23(b) has been modified on the lines of Ind AS 103 to transfer excess of the investor's share of the net fair value of the associate's identifiable assets and liabilities over the cost of investment in capital reserve whereas in IAS 28, it is recognised in profit or loss. Indian Accounting Standard (Ind AS) 31 Interests in Joint Ventures (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles) . Scope 1. This Standard shall be applied in accounting for interests in joint ventures and the reporting of joint venture assets, lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s share of each of the assets, liabilities, income and expenses of a jointly controlled entity is combined line by line with similar items in the venturer's financial statements or reported as separate line items in the venturer's financial statements. Separate financial statements are those presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees. Significant influence is the power to participate in the financial and operating policy decisions of an economic activity but is not control or joint control over those policies. A venturer is a party to a joint venture and has joint control over that joint venture. 4. Financial statements in which proportionate consolidation or the equity method is applied are not separate financial statements, nor are the financial statements of an entity that does not have a subsidiary, associate or venturer's interest in a jointly controlled entity. 5. Separate financial statements are those presented in addition to consolidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensures that no single venturer is in a position to control the activity unilaterally. 12. The contractual arrangement may identify one venturer as the operator or manager of the joint venture. The operator does not control the joint venture but acts within the financial and operating policies that have been agreed by the venturers in accordance with the contractual arrangement and delegated to the operator. If the operator has the power to govern the financial and operating policies of the economic activity, it controls the venture and the venture is a subsidiary of the operator and not a joint venture. Jointly controlled operations 13. The operation of some joint ventures involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the venturers themselves. Each venturer uses its own property, plant and equipment and carries its own inventories. It also incurs its own expenses and liabilities and raises its own finance, which represent its own obligations. The joint venture activities may be carried out by the venturer's employees alongside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets. For example, a number of oil production companies may jointly control and operate an oil pipeline. Each venturer uses the pipeline to transport its own product in return for which it bears an agreed proportion of the expenses of operating the pipeline. Another example of a jointly controlled asset is when two entities jointly control a property, each taking a share of the rents received and bearing a share of the expenses. 21. In respect of its interest in jointly controlled assets, a venturer shall recognise in its financial statements: (a) its share of the jointly controlled assets, classified according to the nature of the assets; (b) any liabilities that it has incurred; (c) its share of any liabilities incurred jointly with the other venturers in relation to the joint venture; (d) 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 (e) any expenses that it has incurred in respect of its interest in the joint venture. 22. In respect of its interest in jointly controlled assets, each venturer includes in its accounting records and recognises in its financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he joint venture. 26. A common example of a jointly controlled entity is when two entities combine their activities in a particular line of business by transferring the relevant assets and liabilities into a jointly controlled entity. Another example is when an entity commences a business in a foreign country in conjunction with the government or other agency in that country, by establishing a separate entity that is jointly controlled by the entity and the government or agency. 27. Many jointly controlled entities are similar in substance to those joint ventures referred to as jointly controlled operations or jointly controlled assets. For example, the venturers may transfer a jointly controlled asset, such as an oil pipeline, into a jointly controlled entity, for tax or other reasons. Similarly, the venturers may contribute into a jointly controlled entity assets that will be operated jointly. Some jointly controlled operations also involve the establishment of a jointly controlled entity to deal with particular aspects of the activity, for example, the design, marketing, distribution or after-sales service of the product. 28. A jointly controlled entity maintains its own acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation. The venturer may combine its share of each of the assets, liabilities, income and expenses of the jointly controlled entity with the similar items, line by line, in its financial statements. For example, it may combine its share of the jointly controlled entity's inventory with its inventory and its share of the jointly controlled entity's property, plant and equipment with its property, plant and equipment. Alternatively, the venturer may include separate line items for its share of the assets, liabilities, income and expenses of the jointly controlled entity in its financial statements. For example, it may show its share of a current asset of the jointly controlled entity separately as part of its current assets; it may show its share of the property, plant and equipment of the jointly controlled entity separately as part of its property, plant and equipment. Both these reporting formats result in the reporting of identical amounts of profit or loss and of each major classification of assets, liabilities, income and expenses; both formats are acceptable for the purposes of this Standard. 35. Whichever format is used to give effect to proportionate consolidation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in jointly controlled entities that are classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations shall be accounted for in accordance with that Indian Accounting Standard. 43. When an interest in a jointly controlled entity previously classified as held for sale no longer meets the criteria to be so classified, it shall be accounted for using proportionate consolidation or the equity method as from the date of its classification as held for sale. Financial statements for the periods since classification as held for sale shall be amended accordingly. 44. [Refer to Appendix 1 ] 45. When an investor ceases to have joint control over an entity, it shall account for any remaining investment in accordance with Ind AS 39 from that date, provided that the former jointly controlled entity does not become a subsidiary or associate. From the date when a jointly controlled entity becomes a subsidiary of an investor, the investor shall account for its interest in accordance with Ind AS 27 and Ind AS 103 Business Combinations. From the date when a jointly controlled entity becomes an associate of an investor, the investor shall a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 48. When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer shall recognise only that portion of the gain or loss that is attributable to the interests of the other venturers.11 The venturer shall recognise the full amount of any loss when the contribution or sale provides evidence of a reduction in the net realisable value of current assets or an impairment loss. 49. When a venturer purchases assets from a joint venture, the venturer shall not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. A venturer shall recognise its share of the losses resulting from these transactions in the same way as profits except that losses shall be recognised immediately when they represent a reduction in the net realisable value of current assets or an impairment loss. 50. To assess whether a transaction between a venturer and a joint venture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmat for proportionate consolidation or the equity method shall disclose the aggregate amounts of each of current assets, long-term assets, current liabilities, long-term liabilities, income and expenses related to its interests in joint ventures. 57. A venturer shall disclose the method it uses to recognise its interests in jointly controlled entities. APPENDIX A Jointly Controlled Entities - Non-Monetary Contributions by Venturers Issue 1. Paragraph 48 of Ind AS 31 refers to both contributions and sales between a venturer and a joint venture as follows: 'When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction'. In addition, paragraph 24 of Ind AS 31 says that 'a jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity in which each venturer has an interest'. There is no explicit guidance on the recognition of gains and losses resulting from contributions of non-monetary assets to jointly controlled entities ('JCEs'). 2. Contributions to a JCE are transfers of assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be presented as deferred gains or losses in the venturer's consolidated balance sheet. Appendix B References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accounting Standard 31. 1. Appendix A, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds contained in Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets makes reference to this Standard also. Appendix 1 Note : This Appendix is not a part of the Indian Accounting Standard. The purpose of this appendix is only to bring out the differences between Indian Accounting Standard Ind AS) 31 and the corresponding International Accounting Standard (IAS) 31, Interests in Joint Ventures and SIC 13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers issued by the International Accounting Standards Board. Comparison with IAS 31, Interests in Joint Ventures 1. The transitional provisions given in IAS 31 have not been given in Ind AS 31 since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial statements of its net investment in a finance lease; (e) accounting for sale and leaseback transactions; and (f) disclosure about finance leases and operating leases. 4. This Standard does not apply to : (a) biological assets related to agricultural activity (see Ind AS 41 Agriculture12) ; and (b) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. Definitions 5. The following terms are used in this Standard with the meanings specified: Carrying amount is the amount at which an asset is recognised in the balance sheet Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Indian Accounting Standards, e.g. Ind AS 102 Share-based Payment Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. Investment property is property (land or a building-or part of a building-or both) held (by the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hings) property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees (whether or not the employees pay rent at market rates) and owner-occupied property awaiting disposal. (d) [Refer to Appendix 1] (e) property that is leased to another entity under a finance lease. 10. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), an entity accounts for the portions separately. If the portions could not be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. 11. In some cases, an entity provides ancillary services to the occupants of a property it holds. An entity treats such a property as investment property if the services are insignificant to the arrangement as a whole. An example is when the owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred subsequently to add to, replace part of, or service a property. 18. Under the recognition principle in paragraph 16, an entity does not recognise in the carrying amount of an investment property the costs of the day-to-day servicing of such a property. Rather, these costs are recognised in profit or loss as incurred. Costs of day-to-day servicing are primarily the cost of labour and consumables, and may include the cost of minor parts. The purpose of these expenditures is often described as for the 'repairs and maintenance' of the property. 19. Parts of investment properties may have been acquired through replacement. For example, the interior walls may be replacements of original walls. Under the recognition principle, an entity recognises in the carrying amount of an investment property the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met. The carrying amount of those parts that art replaced is derecognised in accordance with the derecognition provisions of this Standard. Measurement at recognition 20. An investment property shall be measured initially at its cost. Transaction costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. The acquired asset is measured in this way even if an entity cannot immediately derecognise the asset given up. If the acquired asset is not measured at fair value, its cost is measured at the carrying amount of the asset given up. 28. An entity determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are expected to change as a result of the transaction. An exchange transaction has commercial substance if: (a) the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred, or (b) the entity-specific value of the portion of the entity's operations affected by the transaction changes as a result of the exchange, and (c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged. For the purpose of determining whether an exchange transaction has commercial substance, the entity-specific value of the portion of the entity' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. The definition of fair value also assumes simultaneous exchange and completion of the contract for sale without any variation in price that might be made in an arm's length transaction between knowledgeable, willing parties if exchange and completion are not simultaneous. 40. The fair value of investment property reflects, among other things, rental income from current leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would assume about rental income from future leases in the light of current conditions. It also reflects, on a similar basis, any cash outflows (including rental payments and other outflows) that could be expected in respect of the property. Some of those outflows are reflected in the liability whereas others relate to outflows that are not recognised in the financial statements until a later date (e.g. periodic payments such as contingent rents). 41. [Refer to Appendix 1] 42. The definition of fair value refers to 'knowledgeable, willing parties'. In this context, 'knowledgeable' means that both the willing buyer and the willing seller are reasonably informed about the nature and characte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. 47. In some cases, the various sources listed in the previous paragraph may suggest different conclusions about the fair value of an investment property. An entity considers the reasons for those differences, in order to arrive at the most reliable estimate of fair value within a range of reasonable fair value estimates. 48. In exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the variability in the range of reasonable fair value estimates will be so great, and the probabilities of the various outcomes so difficult to assess, that the usefulness of a single estimate of fair value is negated. This may indicate that the fair value of the property will not be reliably determinable on a continuing basis (see paragraph 53). 49. Fair value differs from value in use, as defined in Ind AS 36 Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entity becomes able to measure reliably the fair value of an investment property under construction for which the fair value was not previously determined, it shall determine the fair value of that property. Once construction of that property is complete, it is presumed that fair value can be measured reliably. If this is not the case, in accordance with paragraph 53, the entity shall make the disclosures required by paragraphs 79(e)(i), (ii) and (iii). 53B. The presumption that the fair value of investment property under construction can be measured reliably can be rebutted only on initial recognition. An entity that has determined the fair value of an item of investment property under construction may not conclude that the fair value of the completed investment property cannot be determined reliably. 54. In the exceptional cases when an entity is compelled, for the reason given in paragraph 53, to make the disclosures required by paragraphs 79(e)(i), (ii) and (iii), it shall determine the fair value of all its other investment property, including investment property under construction. In these cases, although an entity may make the disclosures required by paragraphs 79(e)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty remains an investment property and is not reclassified as owner-occupied property during the redevelopment. 59. Transfers between investment property, owner-occupied property and inventories do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes. 60-65 [Refer to Appendix 1] Disposals 66. An investment property shall be derecognised (eliminated from the balance sheet) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. 67. The disposal of an investment property may be achieved by sale or by entering into a finance lease. In determining the date of disposal for investment property, an entity applies the criteria in Ind AS 18 for recognising revenue from the sale of goods and considers the related guidance in the Appendix E to Ind AS 18. Ind AS 17 applies to a disposal effected by entering into a finance lease and to a sale and leaseback. 68. If, in accordance with the recognition principle in paragraph 16, an entity recognises in the carrying amount of an asset the cost of a replacement for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an investment property provides lessors' disclosures about leases into which it has entered. An entity that holds an investment property under a finance lease provides lessees' disclosures for finance leases and lessors' disclosures for any operating leases into which it has entered. 75. An entity shall disclose: (a) its accounting policy for measurement of investment property. (b) [Refer to Appendix 1] (c) when classification is difficult (see paragraph 14), the criteria it uses to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business. (d) the methods and significant assumptions applied in determining the fair value of investment property, including a statement whether the determination of fair value was supported by market evidence or was more heavily based on other factors (which the entity shall disclose) because of the nature of the property and lack of comparable market data. (e) the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine the fair value of the investment property reliably, it shall disclose: (i) a description of the investment property; (ii) an explanation of why fair value cannot be determined reliably; and (iii) if possible, the range of estimates within which fair value is highly likely to lie. Appendix A References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accounting Standard (Ind AS) 40 Investment Property. 1. Appendix A Income Taxes-Recovery of Revalued Non-Depreciable Assets contained in Ind AS 12, Income Taxes makes reference to this Standard also. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 40 and the corresponding International Accounting Standard (IAS) 40, Investment Property. Comparison with IAS 40, Investment Property 1. IAS 40 permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind AS 40 permits only the cost model. The following paragraphs of IAS 40 which deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heading 'Fair value model and cost model') and 75(a) (disclosure of accounting policy) as compared to the wording used in IAS 40. 6. Different terminology is used in this Standard e.g., the term 'balance sheet' is used instead of 'Statement of financial position'. 7. The following paragraphs appear as 'Deleted' in IAS 40. In order to maintain consistency with paragraph numbers of IAS 40, the paragraph numbers are retained in Ind AS 40: (i) Paragraph 9(d) (ii) Paragraph 22 (iii) Paragraph 57(e) Indian Accounting Standard (Ind AS) 108 Operating Segments (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Core principle 1. An entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. Scope 2. This Accounting Standard shall apply to companies to which Accounting Standards notified under Part I of the Companies (Accounting Standards) Rules ---- apply. 3. If an en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information, other factors may identify a single set of components as constituting an entity's operating segments, including the nature of the business activities of each component, the existence of managers responsible for them, and information presented to the board of directors. 9. Generally, an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment. The term 'segment manager' identifies a function, not necessarily a manager with a specific title. The chief operating decision maker also may be the segment manager for some operating segments. A single manager may be the segment manager for more than one operating segment. If the characteristics in paragraph 5 apply to more than one set of components of an organisation but there is only one set for which segment managers are held responsible, that set of components constitutes the operating segments. 10. The characteristics in paragraph 5 may apply to two or more overlapping sets of components for which managers are held responsible. That structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss. (c) Its assets are 10 per cent or more of the combined assets of all operating segments. Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if management believes that information about the segment would be useful to users of the financial statements. 14. An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds to produce a reportable segment only if the operating segments have similar economic characteristics and share a majority of the aggregation criteria listed in paragraph 12. 15. If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments shall be identified as reportable segments (even if they do not meet the criteria in paragraph 13) until at least 75 per cent of the entity's revenue is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets, segment liabilities and other material segment items to corresponding entity amounts as described in paragraph 28. Reconciliations of the amounts in the balance sheet for reportable segments to the amounts in the entity's balance sheet are required for each date at which a balance sheet is presented. Information for prior periods shall be restated as described in paragraphs 29 and 30. General information 22. An entity shall disclose the following general information: (a) factors used to identify the entity's reportable segments, including the basis of organisation (for example, whether management has chosen to organise the entity around differences in products and services, geographical areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated), and (b) types of products and services from which each reportable segment derives its revenues. Information about profit or loss, assets and liabilities 23. An entity shall report a measure of profit or loss for each reportable segment. An entity shall report a measure of total assets and liabilities for each reportable segment if such amounts are regularly provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an entity's financial statements and allocations of revenues, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment's profit or loss that is used by the chief operating decision maker. Similarly, only those assets and liabilities that are included in the measures of the segment's assets and segment's liabilities that are used by the chief operating decision maker shall be reported for that segment. If amounts are allocated to reported segment profit or loss, assets or liabilities, those amounts shall be allocated on a reasonable basis. 26. If the chief operating decision maker uses only one measure of an operating segment's profit or loss, the segment's assets or the segment's liabilities in assessing segment performance and deciding how to allocate resources, segment profit or loss, assets and liabilities shall be reported at those measures. If the chief operating decision maker uses more than one measure of an operating segment's profit or loss, the segment's assets or the segment's liabilities, the reported measures shall be those that mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r loss to the entity's profit or loss before tax expense (tax income) and discontinued operations. However, if an entity allocates to reportable segments items such as tax expense (tax income), the entity may reconcile the total of the segments' measures of profit or loss to the entity's profit or loss after those items. (c) the total of the reportable segments' assets to the entity's assets. (d) the total of the reportable segments' liabilities to the entity's liabilities if segment liabilities are reported in accordance with paragraph 23. (e) the total of the reportable segments' amounts for every other material item of information disclosed to the corresponding amount for the entity. All material reconciling items shall be separately identified and described. For example, the amount of each material adjustment needed to reconcile reportable segment profit or loss to the entity's profit or loss arising from different accounting policies shall be separately identified and described. Restatement of previously reported information 29. If an entity changes the structure of its internal organisation in a manner that causes the composition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be disclosed. The amounts of revenues reported shall be based on the financial information used to produce the entity's financial statements. Information about geographical areas 33. An entity shall report the following geographical information, unless the necessary information is not available and the cost to develop it would be excessive: (a) revenues from external customers (i) attributed to the entity's country of domicile and (ii) attributed to all foreign countries in total from which the entity derives revenues. If revenues from external customers attributed to an individual foreign country are material, those revenues shall be disclosed separately. An entity shall disclose the basis for attributing revenues from external customers to individual countries. (b) non-current assets14 other than financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts (i) located in the entity's country of domicile and (ii) located in all foreign countries in total in which the entity holds assets. If assets in an individual foreign country are material, those assets shall be disclosed separately. The amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities (paragraph 27) Factors that management used to identify the entity's reportable segments (paragraph 22(a)) Information about reportable segment profit or loss, assets and liabilities IG3 Reconciliations of reportable segment revenues, profit or loss, assets and liabilities IG4 Geographical information IG5 Information about major customers IG6 Diagram to assist in identifying reportable segments IG7 Guidance on implementing Ind AS 108 Operating Segments This guidance accompanies, but is not part of, Ind AS 108. Introduction IG1 This implementation guidance provides examples that illustrate the disclosures required by Ind AS 108 and a diagram to assist in identifying reportable segments. The formats in the illustrations are not requirements. A format that provides the information in the most understandable manner in the specific circumstances is encouraged. The following illustrations are for a single hypothetical entity referred to as Diversified Company. Descriptive information about an entity's reportable segments IG2 The following illustrates the disclosure of descriptive information about an entity's reportable segments (the paragraph refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presented. Diversified Company does not allocate tax expense (tax income) or non-recurring gains and losses to reportable segments. In addition, not all reportable segments have material non-cash items other than depreciation and amortisation in profit or loss. The amounts in this illustration are assumed to be the amounts in reports used by the chief operating decision maker. Car parts Motor vessels Software Electronics Finance All other Totals Rs. Rs. Rs. Rs. Rs. Rs. Rs. Revenues from external customers 3,000 5,000 9,500 12,000 5,000 1,000(a) 35,500 Intersegment revenues - - 3,000 1,500 - - 4,500 Interest revenue 450 800 1,000 1,500 - - 3,750 Interest expense 350 600 700 1,100 - - 2,750 Net interest revenue(b) - - - - 1,000 - 1,000 Depreciation and amortization 200 100 50 1,500 1,100 - 2,950 Reportable segment profit 200 70 900 2,300 500 100 4,070 Other material non-cash items: Impairment of assets - 200 - - - - 200 Reportable segment assets 2,000 5,000 3,000 12,000 57,000 2,000 81,000 Expenditures for reportable segment non-current assets 300 700 500 800 600 - 2,900 Reportable segment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est revenue 3,750 75 3,825 Interest expense 2,750 (50) 2,700 Net interest revenue (finance segment only) 1,000 - 1,000 Expenditures for assets 2,900 1,000 3,900 Depreciation and amortization 2,950 - 2,950 Impairment of assets 200 - 200 The reconciling item to adjust expenditures for assets is the amount incurred for the corporate headquarters building, which is not included in segment information. None of the other adjustments are material. Geographical information IG5 The following illustrates the geographical information required by paragraph 33. (Because Diversified Company's reportable segments are based on differences in products and services, no additional disclosures of revenue information about products and services are required (paragraph 32).) Geographical information Revenues(a) Non-current assets Rs. Rs. United States 19,000 11,000 Canada 4,200 - China 3,400 6,500 Japan 2,900 3,500 Other countries 6,000 3,000 Total 35,500 24,000 (a) Revenues are attributed to countries on the basis of the customer's location Information about major customers IG6 The following illustrates the information about major customers r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard in preparing and presenting general purpose financial statements in accordance with Indian Accounting Standards (Ind ASs). 3. Other Ind ASs set out the recognition, measurement and disclosure requirements for specific transactions and other events. 4. This Standard does not apply to the structure and content of condensed interim financial statements prepared in accordance with Ind AS 34 Interim Financial Reporting. However, paragraphs 15-35 apply to such financial statements. This Standard applies equally to all entities, including those that present consolidated financial statements and those that present separate financial statements as defined in Ind AS 27 Consolidated and Separate Financial Statements. 5. This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves. 6. Similarly, entities whose share capital is not equity may need to adapt the financial statement pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty, Plant and Equipment and Ind AS 38) Intangible Assets; (b) actuarial gains and losses on defined benefit plans recognised in accordance with paragraphs 92 and 129A of Ind AS 19 Employee Benefits; (c) gains and losses arising from translating the financial statements of a foreign operation (see Ind AS 21 The Effects of Changes in Foreign Exchange Rates); (d) gains and losses on remeasuring available-for-sale financial assets (see Ind AS 39 Financial Instruments: Recognition and Measurement); (e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see Ind AS 39). Owners are holders of instruments classified as equity. Profit or loss is the total of income less expenses, excluding the components of other comprehensive income. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An entity shall present with equal prominence all of the financial statements in a complete set of financial statements. 12. As per paragraph 81. an entity shall present the components of profit or loss and components of other comprehensive income as part of a single statement of profit and loss. 13. Many entities present, outside the financial statements, a financial review by management that describes and explains the main features of the entity's financial performance and financial position, and the principal uncertainties it faces. Such a report may include a review of: (a) the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity's response to those changes and their effect, and the entity's policy for investment to maintain and enhance financial performance, including its dividend policy; (b) the entity's sources of funding and its targeted ratio of liabilities to equity; and (c) the entity's resources not recognised in the balance sheet in accordance with Ind ASs. 14. Many entities also present, outside the financial statements, reports and statements such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld conflict with the objective of financial statements set out in the Framework, the entity shall depart from that requirement in the manner set out in paragraph 20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure. 20. When an entity departs from a requirement of an Ind AS in accordance with paragraph 19, it shall disclose: (a) that management has concluded that the financial statements present a true and fair view of the entity's financial position, financial performance and cash flows; (b) that it has complied with applicable Ind ASs, except that it has departed from a particular requirement to present a true and fair view; (c) the title of the Ind AS from which the entity has departed, the nature of the departure, including the treatment that the Ind AS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopted; and (d) for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework. Going concern 25. When preparing financial statements, management shall make an assessment of an entity's ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern. 26. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand the transactions, other events and conditions that have occurred and to assess the entity's future cash flows. Measuring assets net of valuation allowances-for example, obsolescence allowances on inventories and doubtful debts allowances on receivables-is not offsetting. 34. Ind A3 18 Revenue defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. An entity presents the results of such transactions, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. For example: (a) an entity presents gains and losses on the disposal of non-current assets, including investments and operating assets, by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses; and (b) an entity may net expenditure related to a provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample, an entity discloses in the current period details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved. Users benefit from information that the uncertainty existed at the end of the immediately preceding reporting period, and about the steps that have been taken during the period to resolve the uncertainty. 41. When the entity changes the presentation or classification of items in its financial statements, the entity shall reclassify comparative amounts unless reclassification is impracticable. When the entity reclassifies comparative amounts, the entity shall disclose: (a) the nature of the reclassification; (b) the amount of each item or class of items that is reclassified; and (c) the reason for the reclassification. 42. When it is impracticable to reclassify comparative amounts, an entity shall disclose: (a) the reason for not reclassifying the amounts, and (b) the nature of the adjustments that would have been made if the amounts had been reclassified. 43. Enhancing the inter-period comparability of information assists users in making economic decisions, especially by allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the financial statements. Identification of the financial statements 49. An entity shall clearly identify the financial statements and distinguish them from other information in the same published document. 50. Ind ASs apply only to financial statements, and not necessary to other information presented in an annual report, a regulatory filing, or another document. Therefore, it is important that users can distinguish information that is prepared using Ind ASs from other information that may be useful to users but is not the subject of those requirements. 51. An entity shall clearly identify each financial statement and the notes. In addition, an entity shall display the following information prominently, and repeat it when necessary for the information presented to be understandable: (a) the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period; (b) whether the financial statements are of an individual entity or a group of entities; (c) the date of the end of the reporting period or the period covered by the set of financial statements or notes; (d) the presentation currency, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classifications in its balance sheet, it shall not classify deferred tax assets (liabilities) as current assets (liabilities). 57. This Standard does not prescribe the order or format in which an entity presents items. Paragraph 54 simply lists items that are sufficiently different in natures function to warrant separate presentation in the balance sheet. In addition: (a) line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity's financial position; and (b) the descriptions used and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions, to provide information that is relevant to an understanding of the entity's financial position. For example, a financial institution may amend the above descriptions to provide information that is relevant to the operations of a financial institution. 58. An entity makes the judgment about whether to present additional items separately on the basis of an assessment of: (a) the nature and liquidity of assets; (b) the function of assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations. 65. Information about expected dates of realisation of assets and liabilities is useful in assessing the liquidity and solvency of an entity. Ind AS 107 Financial Instruments: Disclosures requires disclosure of the maturity dates of financial assets and financial liabilities. Financial assets include trade and other receivables, and financial liabilities include trade and other payables. Information on the expected date of recovery of non-monetary assets such as inventories and expected date of settlement for liabilities such as provisions is also useful, whether assets and liabilities are classified as current or as non-current. For example, an entity discloses the amount of inventories that are expected to be recovered more than twelve months after the reporting period. Current assets 66. An entity shall classify an asset as current when: (a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading; (c) it expects to realise the asset within twelve months after the reporting period; or (d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Other current liabilities are not settled as part of the normal operating cycle, but are due for settlement within twelve months after the reporting period or held primarily for the purpose of trading. Examples are some financial liabilities classified as held for trading in accordance with Ind AS 39, bank overdrafts, and the current portion of non-current financial liabilities, dividends payable, income-taxes and other non-trade payables. Financial liabilities that provide financing on a long-term basis (i.e. are not part of the working capital used in the entity's normal operating cycle) and are not due for settlement without twelve months after the reporting period are non-current liabilities, subject to paragraphs 74 and 75. 72. An entity classifies its financial liabilities as current when they are due to be settled within twelve months after the reporting period, even if: (a) the original term was for a period longer than twelve months, and (b) an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are approved for issue. 73. If an entity expects, and has the discretio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volved. An entity also uses the factors set out in paragraph 58 to decide the basis of sub-classification. The disclosures vary for each item, for example: (a) items of property, plant and equipment are disaggregated into classes in accordance with Ind AS 16; (b) receivables are disaggregated into amounts receivable from trade customers, receivables from related parties, prepayments and other amounts; (c) inventories are disaggregated, in accordance with Ind AS 2 Inventories, into classifications such as merchandise, production supplies, materials, work-in-progress and finished goods; (d) provisions are disaggregated into provisions for employee benefits and other items; and (e) equity capital and reserves are disaggregated into various classes, such as paid-in capital, share premium and reserves. 79. An entity shall disclose the following, either in the balance sheet or in the statement of changes in equity which is part of the balance sheet, or in the notes : (a) for each class of share capital : (i) the number of shares authorised; (ii) the number of shares issued and fully paid, and issued but not fully paid; (iii) par value per share, or that the shares have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other comprehensive income of associates and joint ventures accounted for using the equity method; and (i) total comprehensive income. 83. An entity shall disclose the following items in the statement of profit and loss as allocations for the period: (a) profit or loss for the period attributable to: (i) non-controlling interests, and (ii) owners of the parent. (b) total comprehensive income for the period attributable to: (i) non-controlling interests, and (ii) owners of the parent. 84. [Refer to Appendix 1] 85. An entity shall present additional line items, headings and sub-totals in the statement of profit and loss, when such presentation is relevant to an understanding of the entity's financial performance. 86. Because the effects of an entity's various activities, transactions and other events differ in frequency, potential for gain or loss and predictability, disclosing the components of financial performance assists users in understanding the financial performance achieved and in making projections of future financial performance. An entity includes additional line items in the statement of profit and loss, and it amends the descriptions used and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as unrealised gains in the current or previous periods. Those unrealised gains must be deducted from other comprehensive income in the period in which the realised gains are reclassified to profit or loss to avoid including them in total comprehensive income twice. 94. An entity may present reclassification adjustments in the statement of profit and loss or in the notes. An entity presenting reclassification adjustments in the notes presents the components of other comprehensive income after any related reclassification adjustments. 95. Reclassification adjustments arise, for example, on disposal of a foreign operation (see Ind AS 21), on derecognition of available-for-sale financial assets (see Ind AS 39) and when a hedged forecast transaction affects profit or loss (see paragraph 100 of Ind AS 39 in relation to cash flow hedges). 96. Reclassification adjustments do not arise on changes in revaluation surplus recognised in accordance with Ind AS 16 or Ind AS 38 or on actuarial gains and losses on defined benefit plans recognised in accordance with paragraphs 92 and 129A of Ind AS 19. These components are recognised in other comprehensive income and are not reclassified to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. [Refer to Appendix 1] 104. [Refer to Appendix 1]. 105. [Refer to Appendix 1]. Statement of changes in equity 106. An entity shall present a statement of changes in equity as a part of balance sheet as required by paragraph 10. The statement of changes in equity includes the following information: (a) total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests; (b) for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with Ind AS 8; (c) [Refer to Appendix 1] (d) for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing each changes resulting from: (i) profit or loss; (ii) each item of other comprehensive income; (iii) transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control; and (iv) any item recognised directly in equity such as amount recognised directly in equity as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cash equivalents and the needs of the entity to utilise those cash flows. Ind AS 7 sets out requirements for the presentation and disclosure of cash flow information. Notes Structure 112. The notes shall: (a) present information about the basis of preparation of the financial statements and the specific accounting policies used in accordance with paragraphs 117-124; (b) disclose the information required by Ind ASs that is not presented elsewhere in the financial statements; and (c) provide information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them. 113. An entity shall present notes in a systematic manner. An entity shall cross-reference each item in the balance sheet, in the statement of changes in equity which is a part of the balance sheet and in the statement of profit and loss, and statement of cash flows to any related information in the notes. 114. An entity normally presents notes in the following order, to assist users to understand the financial statements and to compare them with financial statements of other entities: (a) statement of compliance with Ind ASs (see paragraph 16); (b) summary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are reflected in reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Ind ASs. An example is disclosure of whether a venturer recognises its interest in a jointly controlled entity using proportionate consolidation or the equity method (see Ind AS 31 Interests in Joint Ventures). Some Ind ASs specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, Ind AS 16 requires disclosure of the measurement bases used for classes of property, plant and equipment. 120. Each entity considers the nature of its operations and the policies that the users of its financial statements would expect to be disclosed for that type of entity. For example, users would expect an entity subject to income-taxes to disclose its accounting policies for income-taxes, including those applicable to deferred tax liabilities and assets. When an entity has significant foreign operations or transactions in foreign currencies, users would expect disclosure of accounting policies for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes shall include details of: (a) their nature, and (b) their carrying amount as at the end of the reporting period. 126. Determining the carrying amounts of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. For example, in the absence of recently observed market prices, future-oriented estimates are necessary to measure the recoverable amount of classes of property, plant and equipment, the effect of technological obsolescence on inventories, provisions subject to the future outcome of litigation in progress, and long-term employee benefit liabilities such as pension obligations. These estimates involve assumptions about such items as the risk adjustment to cash flows or discount rates, future changes in salaries and future changes in prices affecting other costs. 127. The assumptions and other sources of estimation uncertainty disclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent from the assumption could require a material adjustment to the carrying amount of the asset or liability affected. In all cases, the entity discloses the nature and carrying amount of the specific asset or liability (or class of assets or liabilities) affected by the assumption. 132. The disclosures in paragraph 122 of particular judgments that management made in the process of applying the entity's accounting policies do not relate to the disclosures of sources of estimation uncertainty in paragraph 125. 133. Other Ind ASs require the disclosure of some of the assumptions that would otherwise be required in accordance with paragraph 125. For example, Ind AS 37 requires disclosure, in specified circumstances, of major assumptions concerning future events affecting classes of provisions. Ind AS 107 requires disclosure of significant assumptions the entity uses in estimating the fair values of financial assets and financial liabilities that are carried at fair value. Ind AS 16 requires disclosure of significant assumptions that the entity uses in estimating the fair values of revalued items of property, plant and equipment. Capital 134. An entity shall disclose informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod; (c) the expected cash outflow on redemption or repurchase of that class of financial instruments; and (d) information about how the expected cash outflow on redemption or repurchase was determined. Other disclosures 137. An entity shall disclose in the notes: (a) the amount of dividends proposed or declared before the financial statements were approved for issue but not recognised as a distribution to owners during the period, and the related amount per share; and (b) the amount of any cumulative preference dividends not recognised. 138. An entity shall disclose the following, if not disclosed elsewhere in information published with the financial statements: (a) the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office); (b) a description of the nature of the entity's operations and its principal activities; (c) the name of the parent and the ultimate parent of the group; and (d) if it is a limited life entity, information regarding the length of its life. Appendix A References to matters contained in other Indian Accounting S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he separate statement of changes in equity. As Ind AS 1 does not require it, the same is deleted. However, paragraph number 10(c) has been retained in Ind AS 1 to maintain consistency with paragraph numbers of IAS 1. 3. Different terminology is used in Ind AS 1 e.g., the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of Profit and Loss' is used instead of 'Statement of comprehensive income'. The words 'approval of the financial statements for issue' have been used instead of 'authorisation of the financial statements for issue' in the context of financial statements considered for the purpose of events after the reporting period. 4. Paragraph 8 of IAS 1 gives the option to individual entities to follow different terminology for the titles of financial statements. Ind AS 1 is changed to remove alternatives by giving one terminology to be used by all entities. However, paragraph number 8 has been retained in Ind AS 1 to maintain consistency with paragraph numbers of IAS 1. 5. Paragraph 37 of IAS 1 permits the periodicity, for example, of 52 weeks for preparation of financial statements. As In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets related to agricultural activity (See Ind AS 41, Agriculture15); (c) the recognition and measurement of exploration and evaluation assets (see Ind AS 106 Exploration for and Evaluation of Mineral Resources); or (d) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. However, this Standard applies to property, plant and equipment used to develop or maintain the assets described in (b)-(d). 4. Other Indian Accounting Standards may require recognition of an item of property, plant and equipment based on an approach different from that in this Standard. For example, Ind AS 17 Leases requires an entity to evaluate its recognition of an item of leased property, plant and equipment on the basis of the transfer of risks and rewards. However, in such cases other aspects of the accounting treatment for these assets, including depreciation, are prescribed by this Standard. 5. An entity accounting for investment property in accordance with Ind AS 40 Investment Property shall use the cost model in this Standard. Definitions 6. The following terms are used in this Standard with the meanings specified: Carrying amount is the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... major spare parts, stand-by equipment and servicing equipment qualify as property, plant and equipment when an entity expects to use them during more than one period. 9. This Standard does not prescribe the unit of measure for recognition, i.e. what constitutes an item of property, plant and equipment. Thus, judgment is required in applying the recognition criteria to an entity's specific circumstances. It may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies, and to apply the criteria to the aggregate value. 10. An entity evaluates under this recognition principle all its property, plant and equipment costs at the time they are incurred. These costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. Initial costs 11. Items of property, plant and equipment may be acquired for safety or environmental reasons. The acquisition of such property, plant and equipment, although not directly increasing the future economic benefits of any particular existing item of property, plant and equipment, may be necessary for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised. This occurs regardless of whether the cost of the previous inspection was identified in the transaction in which the item was acquired or constructed. If necessary, the estimated cost of a future similar inspection may be used as an indication of what the cost of the existing inspection component was when the item was acquired or constructed. Measurement at recognition 15. An item of property, plant and equipment that qualifies for recognition as an asset shall be measured at its cost. Elements of cost 16. The cost of an item of property, plant and equipment comprises: (a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. (b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner intended by management has yet to be brought into use or is operated at less than full capacity; (b) initial operating losses, such as those incurred while demand for the item's output builds up; and (c) costs of relocating or reorganising part or all of an entity's operations. 21. Some operations occur in connection with the construction or development of an item of property, plant and equipment, but are not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management. These incidental operations may occur before or during the construction or development activities. For example, income may be earned through using a building site as a car park until construction starts. Because incidental operations are not necessary to bring an item to the location and condition necessary for it to be capable of operating in the manner intended by management, the income and related expenses of incidental operations are recognised in profit or loss and included in their respective classifications of income and expense. 22. The cost of a self-constructed asset is determined using the same principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in (a) or (b) is significant relative to the fair value of the assets exchanged. For the purpose of determining whether an exchange transaction has commercial substance, the entity-specific value of the portion of the entity's operations affected by the transaction shall reflect post-tax cash flows. The result of these analyses may be clear without an entity having to perform detailed calculations. 26. The fair value of an asset for which comparable market transactions do not exist is reliably measurable if (a) the variability in the range of reasonable fair value estimates is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value. If an entity is able to determine reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident. 27. The cost of an item of property, plant and equipment held by a lessee under a finance lease is determined in accordance with Ind AS 17. 28. [Refer to Appendix 1]. Measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that the carrying amount of the asset after revaluation equals its revalued amount. This method is often used when an asset is revalued by means of applying an index to determine its depreciated replacement cost. (b) eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset. This method is often used for buildings. The amount of the adjustment arising on the restatement or elimination of accumulated depreciation forms part of the increase or decrease in carrying amount that is accounted for in accordance with paragraphs 39 and 40. 36. If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs shall be revalued. 37. A class of property, plant and equipment is a grouping of assets of a similar nature and use in an entity's operations. The following are examples of separate classes: (i) land; (ii) land and buildings; (iii) machinery; (iv) ships; (v) aircraft; (vi) motor vehicles; (vii) furniture and fixtures; and (viii) office equipment. 38. The items within a class of property, plant and equipment are revalued simultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, it may be appropriate to depreciate separately the airframe and engines of an aircraft, whether owned or subject to a finance lease. Similarly, if an entity acquires property, plant and equipment subject to an operating lease in which it is the lessor, it may be appropriate to depreciate separately amounts reflected in the cost of that item that are attributable to favourable or unfavourable lease terms relative to market terms. 45. A significant part of an item of property, plant and equipment may have a useful life and a depreciation method that are the same as the useful life and the depreciation method of another significant part of that same item. Such parts may be grouped in determining the depreciation charge. 46. To the extent that an entity depreciates separately some parts of an item of property, plant and equipment, it also depreciates separately the remainder of the item. The remainder consists of the parts of the item that are individually not significant. If an entity has varying expectations for these parts, approximation techniques may be necessary to depreciate the remainder in a manner that faithfully represents the consumption pattern and/or useful life of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. However, under usage methods of depreciation the depreciation charge can be zero while there is no production. 56. The future economic benefits embodied in an asset are consumed by an entity principally through its use. However, other factors, such as technical or commercial obsolescence and wear and tear while an asset remains idle, often result in the diminution of the economic benefits that might have been obtained from the asset. Consequently, all the following factors are considered in determining the useful life of an asset: (a) expected usage of the asset. Usage is assessed by reference to the asset's expected capacity or physical output. (b) expected physical wear and tear, which depends on operational factors such as the number of shifts for which the asset is to be used an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the units of production method. Straight-line depreciation results in a constant charge over the useful life if the asset's residual value does not change. The diminishing balance method results in a decreasing charge over the useful life. The units of production method results in a charge based on the expected use or output. The entity selects the method that most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. That method is applied consistently from period to period unless there is a change in the expected pattern of consumption of those future economic benefits. Impairment 63. To determine whether an item of property, plant and equipment is impaired, an entity applies Ind AS 36 Impairment of Assets. That Standard explains how an entity reviews the carrying amount of its assets, how it determines the recoverable amount of an asset, and when it recognises, or reverses the recognition of, an impairment loss. 64. [Refer Appendix 1] Compensation for impairment 65. Compensation from third parties fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion principle in paragraph 7, an entity recognises in the carrying amount of an item of property, plant and equipment the cost of a replacement for part of the item, then it derecognises the carrying amount of the replaced part regardless of whether the replaced part had been depreciated separately. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed. 71. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 72. The consideration receivable on disposal of an item of property, plant and equipment is recognised initially at its fair value. If payment for the item is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicies selected by management and enables comparisons to be made with other entities. For similar reasons, it is necessary to disclose: (a) depreciation, whether recognised in profit or loss or as a part of the cost of other assets, during a period; and (b) accumulated depreciation at the end of the period. 76. In accordance with Ind AS 8 an entity discloses the nature and effect of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in subsequent periods. For property, plant and equipment, such disclosure may arise from changes in estimates with respect to: (a) residual values; (b) the estimated costs of dismantling, removing or restoring items of property, plant and equipment; (c) useful lives; and (d) depreciation methods. 77. If items of property, plant and equipment are stated at revalued amounts, the following shall be disclosed: (a) the effective date of the revaluation; (b) whether an independent valuer was involved; (c) the methods and significant assumptions applied in estimating the items' fair values; (d) the extent to which the items' fair values were determined directly by referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing decommissioning, restoration or similar liability that is both: (a) recognised as part of the cost of an item of property, plant and equipment in accordance with Ind AS 16; and (b) recognised as a liability in accordance with Ind AS 37. For example, a decommissioning, restoration or similar liability may exist for decommissioning a plant, rehabilitating environmental damage in extractive industries, or removing equipment. Issue 3. This Appendix addresses how the effect of the following events that change the measurement of an existing decommissioning, restoration or similar liability should be accounted for: (a) a change in the estimated outflow of resources embodying economic benefits (e.g., cash flows) required to settle the obligation; (b) a change in the current market-based discount rate as defined in paragraph 47 of Ind AS 37 (this includes changes in the time value of money and the risks specific to the liability); and (c) an increase that reflects the passage of time (also referred to as the unwinding of the discount). Accounting Principles 4. Changes in the measurement of an existing decommissioning, restoration and similar liability that result fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in profit or loss or in other comprehensive income under (a). If a revaluation is necessary, all assets of that class shall be revalued. (d) Ind AS 1 requires disclosure in the statement of profit and loss of each component of other comprehensive income or expense. In complying with this requirement, the change in the revaluation surplus arising from a change in the liability shall be separately identified and disclosed as such. 7. The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability shall be recognised in profit or loss as they occur. This applies under both the cost model and the revaluation model. 8. The periodic unwinding of the discount shall be recognised in profit or loss as a finance cost as it occurs. Capitalisation under Ind AS 23 is not permitted. Illustrative examples of Changes in Existing Decommissioning, Restoration and Similar Liabilities (These examples accompany, but are not part of, Appendix A.) Common facts IE1. An entity has a nuclear power plant and a related decommissioning liability. The nuclear power plant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted cash flow basis, some valuers may value the asset without deducting any allowance for decommissioning costs (a 'gross' valuation), whereas others may value the asset after deducting an allowance for decommissioning costs (a 'net' valuation), because an entity acquiring the asset will generally also assume the decommissioning obligation. For financial reporting purposes, the decommissioning obligation is recognised as a separate liability, and is not deducted from the asset. Accordingly, if the asset is valued on a net basis, it is necessary to adjust the valuation obtained by adding back the allowance for the liability, so that the liability is not counted twice.16 (b) if an asset is valued on a depreciated replacement cost basis, the valuation obtained may not include an amount for the decommissioning component of the asset. If it does not, an appropriate amount will need to be added to the valuation to reflect the depreciated replacement cost of that component. IE8. Assume that a market-based discounted cash flow valuation of ₹ 115,000 is obtained at 31 December, 2002. It includes an allowance of ₹ 11,600 for decommissioning costs, which repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, is therefore ₹ 114,200. The following additional journal entry is needed : Rs. Rs. Dr. accumulated depreciation (1) 3,420 Cr. asset at valuation 3,420 Dr. revaluation surplus (2) 8,980 Cr. asset at valuation (3) 8,980 Notes: (1) Eliminating accumulated depreciation of ₹ 3,420 in accordance with the entity's accounting policy. (2) The debit is to revaluation surplus because the deficit arising on the revaluation does not exceed the credit balance existing in the revaluation surplus in respect of the asset. (3) Previous valuation (before allowance for decommissioning costs) ₹ 126,600, less cumulative depreciation ₹ 3,420, less new valuation (before allowance for decommissioning costs) ₹ 114,200. IE12. Following this valuation, the amounts included in the balance sheet are: Rs. Asset at valuation 114,200 Accumulated depreciation nil Decommissioning liability (7,200) Net assets 107,000 Retained earnings (1) (14,620) Revaluation surplus (2) 11,620 Notes: (1) Rs. 10,600 at 31 December, 2002 plus 2003's depreciation expense of ₹ 3 420 and discount expense of ₹ 600 = ₹ 14,620. (2) Rs. 15,600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment grant received in respect of such an item, which is permitted in IAS 20. However, to maintain consistency with paragraph numbers of IAS 16, this paragraph number is retained in Ind AS 16. 4. Paragraph number 64 appears as 'Deleted 'in IAS 16. In order to maintain consistency with paragraph number of IAS 16, the paragraph number is retained in Ind AS 16. 5. Paragraphs 5 of Ind AS 16 and IE 7 of Appendix A of Ind AS 16 have been modified, since Ind AS 40, Investment Property, prohibits the use of fair value model. Indian Accounting Standard (Ind AS) 29 Financial Reporting in Hyperinflationary Economies (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) . Scope 1. This Standard shall be applied to the financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy. 2. In a hyperinflationary economy, reporting of operating results and financial position in the local currency without restatement is not useful. Money loses purchasing power at such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses, to measure at fair value. For example, property, plant and equipment may be revalued to fair value and biological assets are generally required to be measured at fair value. Some entities, however, present financial statements that are based on a current cost approach that reflects the effects of changes in the specific prices of assets held. 7. In a hyperinflationary economy, financial statements, whether they are based on a historical cost approach or a current cost approach, are useful only if they are expressed in terms of the measuring unit current at the end of the reporting period. As a result, this Standard applies to the financial statements of entities reporting in the currency of a hyperinflationary economy. Presentation of the information required by this Standard as a supplement to unrestated financial statements is not permitted. Furthermore, separate presentation of the financial statements before restatement is discouraged. 8. The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be stated in terms of the measuring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quipment, inventories of raw materials and merchandise, goodwill, patents, trademarks and similar assets are restated from the dates of their purchase. Inventories of partly-finished and finished goods are restated from the dates on which the costs of purchase and of conversion were incurred. 16. Detailed records of the acquisition dates of items of property, plant and equipment may not be available or capable of estimation. In these rare circumstances, it may be necessary, in the first period of application of this Standard, to use an independent professional assessment of the value of the items as the basis for their restatement. 17. A general price index may not be available for the periods for which the restatement of property, plant and equipment is required by this Standard. In these circumstances, it may be necessary to use an estimate based, for example, on the movements in the exchange rate between the functional currency and a relatively stable foreign currency. 18. Some non-monetary items are carried at amounts current at dates other than that of acquisition or that of the balance sheet, for example property, plant and equipment that has been revalued at some earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all items in the statement of profit and loss are expressed in terms of the measuring unit current at the end of the reporting period. Therefore all amounts need to be restated by applying the change in the general price index from the dates when the items of income and expenses were initially recorded in the financial statements. Gain or loss on net monetary position 27. In a period of inflation, an entity holding an excess of monetary assets over monetary liabilities loses purchasing power and an entity with an excess of monetary liabilities over monetary assets gains purchasing power to the extent the assets and liabilities are not linked to a price level. This gain or loss on the net monetary position may be derived as the difference resulting from the restatement of non-monetary assets, owners' equity and items in the statement of profit and loss and the adjustment of index linked assets and liabilities. The gain or loss may be estimated by applying the change in a general price index to the weighted average for the period of the difference between monetary assets and monetary liabilities. 28. The gain or loss on the net monetary position is included in profit or los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of earlier periods is also expressed in terms of the measuring unit current at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, paragraphs 42(b) and 43 of Ind AS 21 apply. Consolidated financial statements 35. A parent that reports in the currency of a hyperinflationary economy may have subsidiaries that also report in the currencies of hyperinflationary economies. The financial statements of any such subsidiary need to be restated by applying a general price index of the country in whose currency it reports before they are included in the consolidated financial statements issued by its parent. Where such a subsidiary is a foreign subsidiary, its restated financial statements are translated at closing rates. The financial statements of subsidiaries that do not report in the currencies of hyperinflationary economies are dealt with in accordance with Ind AS 21. 36. If financial statements with different ends of the reporting periods are consolidated, all items, whether non-monetary or monetary, need to be restated into the measuring unit current at the date of the consolidated financial statements. Selection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirement'... stated in terms of the measuring unit current at the end of the reporting period' in paragraph 8 of Ind AS 29 be interpreted when an entity applies the Standard? (b) how should an entity account for opening deferred tax items in its restated financial statements? Accounting Treatment 3. In the reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, not having been hyperinflationary in the prior period, the entity shall apply the requirements of Ind AS 29 as if the economy had always been hyperinflationary. Therefore, in relation to non-monetary items measured at historical cost, the entity's opening balance sheet at the beginning of the earliest period presented in the financial statements shall be restated to reflect the effect of inflation from the date the assets were acquired and the liabilities were incurred or assumed until the end of the reporting period. For non-monetary items carried in the opening balance sheet at amounts current at dates other than those of acquisition or incurrence, that restatement shall reflect instead the effect of inflation from the dates those carrying a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent were acquired in December, 20X0. Property, plant and equipment are depreciated over their useful life, which is five years. 2. Deferred tax liability The deferred tax liability at 31 December, 20X2 of ₹ 30 million is measured as the taxable temporary difference between the carrying amount of property; plant and equipment of ₹ 300 and their tax base of ₹ 200. The applicable tax rate is 30 per cent. Similarly, the deferred tax liability at 31 December, 20X1 of ₹ 20 million is measured as the taxable temporary difference between the carrying amount of property, plant and equipment of ₹ 400 and their tax base of ₹ 333. IE3. Assume that the entity identifies the existence of hyperinflation in, for example, April 20X2 and therefore applies Ind AS 29 from the beginning of 20X2. The entity restates its financial statements on the basis of the following general price indices and conversion factors. General price indices Conversion factors at 31 Dec. 20X2 December 20X0 (a) 95 2.347 December 20X1 135 1.652 December 20X2 223 1.000 (a) For example, the conversion factor for December 20X0 is 2.347=223/95 Restatement IE4. The restatemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions in Ind AS 12, i.e., on the basis of its restated financial statements. However, because deferred tax items are a function of carrying amounts of assets or liabilities and their tax bases, an entity cannot restate its comparative deferred tax items by applying a general price index. Instead, in the reporting period in which an entity applies the restatement approach under Ind AS 29, it (a) remeasures its comparative deferred tax items in accordance with Ind AS 12 after it has restated the nominal carrying amounts of its non-monetary items at the date of the opening balance sheet of the current reporting period by applying the measuring unit at that date, and (b) restates the remeasured deferred tax items for the change in the measuring unit from the date of the opening balance sheet of the current period up to the end of the reporting period. In the example, the restated deferred tax liability is calculated as follows: Rs. million At the end of the reporting period: Restated carrying amount of property, plant and equipment (see note 1) 704 Tax base (200) Temporary difference 504 @ 30 per cent tax rate = Restated deferred tax liability 31 December, 20X2 151 Compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ationary Economies. Comparison with IAS 29, Financial Reporting in Hyperinflationary Economies 1. Ind AS 29 requires an additional disclosure regarding the duration of the hyperinflationary situation existing in the economy as compared to IAS 29. 2. Paragraph number 23 appears as 'Deleted 'in IAS 29. In order to maintain consistency with paragraph numbers of IAS 29, the paragraph number is retained in Ind AS 29. 3. Different terminology is used in this standard, e.g., term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit and loss is used instead of 'Statement of comprehensive income'. Indian Accounting Standard (Ind AS) 105 Non-current Assets Held for Sale and Discontinued Operations (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles) . Objective 1. The objective of this Indian Accounting Standard is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. In particular, the Indian Accounting Standard requires: (a) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Indian Accounting Standard19 do not apply to the following assets, which are covered by the Indian Accounting Standards listed, either as individual assets or as part of a disposal group: (a) deferred tax assets (Ind AS 12 Income Taxes) . (b) assets arising from employee benefits (Ind AS 19 Employee Benefits) . (c) financial assets within the scope of Ind AS 39 Financial Instruments: Recognition and Measurement. (d) [Refer to Appendix 1] (e) non-current assets that are measured at fair value less costs to sell in accordance with Ind AS 41 Agriculture20. (f) contractual rights under insurance contracts as defined in Ind AS 104 Insurance Contracts. 5A. The classification, presentation and measurement requirements in this Indian Accounting Standard applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners). 5B. This Indian Accounting Standard specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the sale is highly probable. 8A. An entity that is committed to a sale plan involving loss of control of a subsidiary shall classify all the assets and liabilities of that subsidiary as held for sale when the criteria set out in paragraphs 6-8 are met, regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale. 9. Events or circumstances may extend the period to complete the sale beyond one year. An extension of the period required to complete a sale does not preclude an asset (or disposal group) from being classified as held for sale if the delay is caused by events or circumstances beyond the entity's control and there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group). This will be the case when the criteria in Appendix B are met. 10. Sale transactions include exchanges of non-current assets for other non- current assets when the exchange has commercial substance in accordance with Ind AS 16 Property, Plant and Equipment. 11. When an entity acquires a non-current asset (or disposal group) exclusively with a view to its subsequent disposal, it shall classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r disposal groups) that are to be closed rather than sold. 14. An entity shall not account for a non-current asset that has been temporarily taken out of use as if it had been abandoned. Measurement of non-current assets (or disposal groups) classified as held for sale Measurement of a non-current asset (or disposal group) 15. An entity shall measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell. 15A. An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of its carrying amount and fair value less costs to distribute.21 16. If a newly acquired asset (or disposal group) meets the criteria to be classified as held for sale (see paragraph 11), applying paragraph 15 will result in the asset (or disposal group) being measured on initial recognition at the lower of its carrying amount had it not been so classified (for example, cost) and fair value less costs to sell. Hence, if the asset (or disposal group) is acquired as part of a business combination, it shall be measured at fair value less costs to sell. 17. When the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. Again or loss not previously recognised by the date of the sale of a non-current asset (or disposal group) shall be recognised at the date of derecognition. Requirements relating to derecognition are set out in: (a) paragraphs 67-72 of Ind AS 16 for property, plant and equipment, and (b) paragraphs 112-117 of Ind AS 38 Intangible Assets for intangible assets. 25. An entity shall not depreciate (or amortise) a non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognised. Changes to a plan of sale 26. If an entity has classified an asset (or disposal group) as held for sale, but the criteria in paragraphs 7-9 are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale. 27. The entity shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of: (a) its carrying amount before the asset (or disposal group) was classifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An entity shall disclose: (a) a single amount in the statement of profit and loss comprising the total of: (i) the post-tax profit or loss of discontinued operations, and (ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation. (b) an analysis of the single amount in (a) into: (i) the, revenue, expenses and pre-tax profit or loss of discontinued operations; (ii) the related income tax expense as required by paragraph 81(h) of Ind AS 12; (iii) the gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation; and (iv) the related income tax expense as required by paragraph 81(h) of Ind AS 12. The analysis may be presented in the notes or in the statement of profit and loss. If it is presented in the statement of profit and loss it shall be presented in a section identified as relating to discontinued operations, i.e., separately from continuing operations. The analysis is not required for disposal groups that are newly acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol of a subsidiary shall disclose the information required in paragraphs 33-36 when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with paragraph 32. Gains or losses relating to continuing operations 37. Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation shall be included in profit or loss from continuing operations. Presentation of a non-current asset or disposal group classified as held for sale 38. An entity shall present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the balance sheet. The liabilities of a disposal group classified as held for sale shall be presented separately from other liabilities in the balance sheet. Those assets and liabilities shall not be offset and presented as a single amount. The major classes of assets and liabilities classified as held for sale shall be separately disclosed either in the balance sheet or in the notes, except as permitted by paragraph 39. An entity shall present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup), excluding finance costs and income tax expense. current asset An entity shall classify an asset as current when: (a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading; (c) it expects to realise the asset within twelve months after the reporting period; or (d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. discontinued operation A component of an entity that either has been disposed of or is classified as held for sale and: (a) represents a separate major line of business or geographical area of operations, (b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or (c) is a subsidiary acquired exclusively with a view to resale. disposal group A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one year. (b) an entity obtains a firm purchase commitment and, as a result, a buyer or others unexpectedly impose conditions on the transfer of a non- current asset (or disposal group) previously classified as held for sale that will extend the period required to complete the sale, and: (i) timely actions necessary to respond to the conditions have been taken, and (ii) a favourable resolution of the delaying factors is expected. (c) during the initial one-year period, circumstances arise that were previously considered unlikely and, as a result, a non-current asset (or disposal group) previously classified as held for sale is not sold by the end of that period, and: (i) during the initial one-year period the entity took action necessary to respond to the change in circumstances, (ii) the non-current asset (or disposal group) is being actively marketed at a price that is reasonable, given the change in circumstances, and (iii) the criteria in paragraphs 7 and 8 are met. Appendix C References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accounting Standard 105. This appendix makes reference to Appendix A, Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a buyer until after construction of the new building is completed (and it vacates the existing building). The delay in the timing of the transfer of the existing building imposed by the entity (seller) demonstrates that the building is not available for immediate sale. The criterion in paragraph 7 would not be met until construction of the new building is completed, even if a firm purchase commitment for the future transfer of the existing building is obtained earlier. Example 2 An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyer. At the plan commitment date, there is a backlog of uncompleted customer orders. (a) The entity intends to sell the manufacturing facility with its operations. Any uncompleted customer orders at the sale date will be transferred to the buyer. The transfer of uncompleted customer orders at the sale date will not affect the timing of the transfer of the facility. The criterion in paragraph 7 would be met at the plan commitment date. (b) The entity intends to sell the manufacturing facility, but without its operations. The entity does not intend to transfer the facility to a buyer until after it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property will be accounted for as a sale and finance leaseback. Exceptions to the criterion in paragraph 8 An exception to the one-year requirement in paragraph 8 applies in limited situations in which the period required to complete the sale of a non-current asset (or disposal group) will be (or has been) extended by events or circumstances beyond an entity's control and specified conditions are met (paragraphs 9 and B1). Examples 5-7 illustrate those situations Example 5 An entity in the power generating industry is committed to a plan to sell a disposal group that represents a significant portion of its regulated operations. The sale requires regulatory approval, which could extend the period required to complete the sale beyond one year. Actions necessary to obtain that approval cannot be initiated until after a buyer is known and a firm purchase commitment is obtained. However, a firm purchase commitment is highly probable within one year. In that situation, the conditions in paragraph B1(a) for an exception to the one-year requirement in paragraph 8 would be met. Example 6 An entity is committed to a plan to sell a manufacturing facility in its present condition a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indian Accounting Standard specify requirements for when assets are to be treated as abandoned. Example 8 illustrates when an asset has not been abandoned. Example 8 An entity ceases to use a manufacturing plant because demand for its product has declined. However, the plant is maintained in workable condition and it is expected that it will be brought back into use if demand picks up. The plant is not regarded as abandoned. Presenting a discontinued operation that has been abandoned Paragraph 13 of the Indian Accounting Standard prohibits assets that will be abandoned from being classified as held for sale. However, if the assets to be abandoned are a major line of business or geographical area of operations, they are reported in discontinued operations at the date at which they are abandoned. Example 9 illustrates this. Example 9 In October 20X5 an entity decides to abandon all of its cotton mills, which constitute a major line of business. All work stops at the cotton mills during the year ended 31 December 20X6. In the financial statements for the year ended 31 December 20X5, results and cash flows of the cotton mills are treated as continuing operations. In the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of impairment loss Rs. Rs. Rs. Goodwill 1,500 (1,500) 0 Property, plant and equipment (carried at revalued amounts) 4,000 (165) 3,835 Property, plant and equipment (carried at cost) 5,700 (235) 5,465 Inventory 2,200 - 2,200 AFS financial assets 1,500 - 1,500 Total 14,900 (1,900) 13,000 First, the impairment loss reduces any amount of goodwill. Then, the residual loss is allocated to other assets pro rata based on the carrying amounts of those assets. Presenting discontinued operations in the statement of profit and loss Paragraph 33 of the Indian Accounting Standard requires an entity to disclose a single amount in the statement of profit and loss for discontinued operations with an analysis in the notes or in a section of the statement of profit and loss separate from continuing operations. Example 11 illustrates how these requirements might be met. Example 11 XYZ GROUP - STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31 DECEMBER 20X2 (illustrating the classification of expenses by function) (Rupees in thousands) 20X2 20X1 Continuing operations Revenue X X Cost of sales (X) (X) Gross profit X X Other income X X Distribution cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated in equity relating to non-current assets held for sale 400 - X X Non-controlling interests X X Total equity X X The presentation requirements for assets (or disposal groups) classified as held for sale at the end of the reporting period do not apply retrospectively. The comparative balance sheet for any previous periods are therefore not re-presented. Measuring and presenting subsidiaries acquired with a view to resale and classified as held for sale A subsidiary acquired with a view to sale is not exempt from consolidation in accordance with Ind AS 27 Consolidated and Separate Financial Statements. However, if it meets the criteria in paragraph 11, it is presented as a disposal group classified as held for sale. Example 13 illustrates these requirements. Example 13 Entity A acquires an entity H, which is a holding company with two subsidiaries, S1 and S2. S2 is acquired exclusively with a view to sale and meets the criteria to be classified as held for sale. In accordance with paragraph 32(c), S2 is also a discontinued operation. The estimated fair value less costs to sell of S2 is ₹ 135. A accounts for S2 as follows: l initially, A measures the iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead of 'authorisation of the financial statements for issue' in the context of financial statements considered for the purpose of events after the reporting period. 3. Requirements regarding presentation of discontinued operations in the separate income statement, where separate income statement is presented under paragraph 33A of IFRS 5 have been deleted. This change is consequential to the removal of option regarding two statement approach in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss. However, paragraph number 33A has been retained in Ind AS 105 to maintain consistency with paragraph numbers of IFRS 5. 4. Paragraph 5(d) of IFRS 5 deals with non-current assets that are accounted for in accordance with the fair value model in IAS 40 Investment Property. Since Ind AS 40 prohibits the use of fair value model, this paragraph is deleted in Ind AS105. Indian Accounting Standard (Ind AS) 10626 Exploration for and Evaluation of Mineral Resources (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Exploration and Evaluation Assets Measurement at recognition 8. Exploration and evaluation assets shall be measured at cost. Elements of cost of exploration and evaluation assets 9. An entity shall determine an accounting policy specifying which expenditures are; recognised as exploration and evaluation assets and apply the policy consistently. In making this determination, an entity considers the degree to which the expenditure can be associated with finding specific mineral resources. The following are examples of expenditures that might be included in the initial measurement of exploration and evaluation assets (the list is not exhaustive): (a) acquisition of rights to explore; (b) topographical, geological, geochemical and geophysical studies; (c) exploratory drilling; (d) trenching; (e) sampling; and (f) activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource. 10. Expenditures related to the development of mineral resources shall not be recognised as exploration and evaluation assets. The Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Charte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Exploration and evaluation assets shall be assessed for impairment, and any impairment loss recognised, before reclassification. Impairment Recognition and measurement 18. Exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount, an entity shall measure, present and disclose any resulting impairment loss in accordance with Ind AS 36, except as provided by paragraph 21 below. 19. For the purposes of exploration and evaluation assets only, paragraph 20 of this Accounting Standard shall be applied rather than paragraphs 8-17 of Ind AS 36 when identifying an exploration and evaluation asset that may be impaired. Paragraph 20 uses the term 'assets' but applies equally to separate exploration and evaluation assets or a cash-generating unit. 20. One or more of the following facts and circumstances indicate that an entity should test exploration and evaluation assets for impairment (the list is not exhaustive): (a) the period for which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsistent with how the assets are classified. Appendix A Defined Terms This Appendix is an integral part of the Indian Accounting Standard. exploration and evaluation assets Exploration and evaluation expenditures recognised as assets in accordance with the entity's accounting policy. exploration evaluation expenditures Expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Exploration for and evaluation of mineral resources The search for mineral resources, including minerals, oil, natural gas and similar non-regenerative resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 106 and the corresponding International Financial Reporting Standard (IFRS) 6, Exploration ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
