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Accounting
Standards Interpretations
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ASI-1 – Substantial Period
of Time
Accounting Standard (AS)
16, Borrowing Costs
Issue
1. Accounting Standard (AS)
16, Borrowing Costs, defines the term ‘qualifying asset’ as "an asset that
necessarily takes a substantial period of time to get ready for its intended
use or sale".
2. The issue is what is the
meaning of the expression ‘substantial period of time’ for the purpose of
this definition.
Consensus
3. The issue as to what
constitutes a substantial period of time primarily depends on the facts and
circumstances of each case. However, ordinarily, a period of twelve months
is considered as substantial period of time unless a shorter or longer
period can be justified on the basis of facts and circumstances of the case.
In estimating the period, time which an asset takes, technologically and
commercially, to get it ready for its intended use or sale should be
considered.
4. The following assets
ordinarily take twelve months or more to get ready for intended use or sale
unless the contrary can be proved by the enterprise:
i. Assets that are
constructed or otherwise produced for an enterprise’s own use, e.g.,
assets constructed under major capital expansions.
ii. Assets intended for
sale or lease that are constructed or otherwise produced as discrete
projects (for example, ships or real estate developments).
5. In case of inventories,
substantial period of time is considered to be involved where time is the
major factor in bringing about a change in the condition of inventories. For
example, liquor is often required to be kept in store for more than twelve
months for maturing.
ASI-2 – Accounting for
Machinery Spares
Accounting Standard (AS)
2, Valuation of Inventories and AS 10, Accounting for Fixed Assets
Issue
1. Which machinery spares
are covered under AS 2 and AS 10 and what should be the accounting for
machinery spares under the respective standards.
Consensus
2. Machinery spares which
are not specific to a particular item of fixed asset but can be used
generally for various items of fixed assets should be treated as inventories
for the purpose of AS 2. Such machinery spares should be charged to the
statement of profit and loss as and when issued for consumption in the
ordinary course of operations.
3. Whether to capitalise a
machinery spare under AS 10 or not will depend on the facts and
circumstances of each case. However, the machinery spares of the following
types should be capitalised being of the nature of capital spares/insurance
spares -
i. Machinery spares
which are specific to a particular item of fixed asset, i.e., they can
be used only in connection with a particular item of the fixed asset,
and
ii. Their use is
expected to be irregular.
4. Machinery spares of the
nature of capital spares/insurance spares should be capitalised separately
at the time of their purchase whether procured at the time of purchase of
the fixed asset concerned or subsequently. The total cost of such capital
spares/insurance spares should be allocated on a systematic basis over a
period not exceeding the useful life of the principal item, i.e., the fixed
asset to which they relate.
5. When the related fixed
asset is either discarded or sold, the written down value less disposal
value, if any, of the capital spares/insurance spares should be written off.
6. The stand-by equipment
is a separate fixed asset in its own right and should be depreciated like
any other fixed asset.
ASI-3 – Accounting for Taxes
on Income in the situations of Tax Holiday under Sections 80-IA and 80-IB of the
Income-tax Act, 1961
Accounting Standard (AS)
22, Accounting for Taxes on Income (AS) 22, Accounting for Taxes on Income
ISS
Issue
1. Sections 80-IA and 80-IB
of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) provide
certain deductions, for certain years, in determining the taxable income of
an enterprise. These deductions are commonly described as ‘tax holiday’ and
the period during which these deductions are available is commonly described
as ‘tax holiday period’.
2. The issue is how AS 22
should be applied in the situations of tax-holiday under sections 80-IA and
80-IB of the Act.
Consensus
3. The deferred tax in
respect of timing differences which originate during the tax holiday period
and reverse during the tax holiday period, should not be recognised to the
extent the enterprise’s gross total income is subject to the deduction
during the tax holiday period as per the requirements of the Act.
4. Deferred tax in respect
of timing differences which originate during the tax holiday period but
reverse after the tax holiday period should be recognised in the year in
which the timing differences originate. However, recognition of deferred tax
assets should be subject to the consideration of prudence as laid down in
paragraphs 15 to 18 of AS 22.
5. For the above purposes,
the timing differences which originate first should be considered to reverse
first.
The Appendix to this
Interpretation illustrates the application of the above requirements.
ASI-4 – Losses under the
head Capital Gains
Accounting Standard (AS)
22, Accounting for Taxes on Income
Issue
1. The issue is how AS 22
should be applied in respect of ‘loss’ arising under the head ‘Capital
gains’ of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’),
which can be carried forward and set-off in future years, only against the
income arising under that head as per the requirements of the Act.
Consensus
2. Where an enterprise’s
statement of profit and loss includes an item of ‘loss’ which can be set-off
in future for taxation purposes, only against the income arising under the
head ‘Capital gains’ as per the requirements of the Act, that item is a
timing difference to the extent it is not set-off in the current year and is
allowed to be set-off against the income arising under the head ‘Capital
gains’ in subsequent years subject to the provisions of the Act. In respect
of such ‘loss’, deferred tax asset should be recognised and carried forward
subject to the consideration of prudence. Accordingly, in respect of such
‘loss’, deferred tax asset should be recognised and carried forward only to
the extent that there is a reasonable certainty that sufficient future
taxable income will be available under the head ‘Capital gains’ against
which the loss can be set-off as per the provisions of the Act. However,
where an enterprise has unabsorbed depreciation or carry forward of business
losses under the tax laws, the deferred tax asset in respect of ‘loss’ under
the head ‘Capital gains’ should be recognised and carried forward only to
the extent that there is virtual certainty supported by convincing evidence
that sufficient future taxable income will be available under the head
‘Capital gains’ against which such loss can be set-off as per the provisions
of the Act.
3. In cases where there is
a difference between the amounts of ‘loss’ recognised for accounting
purposes and tax purposes because of cost indexation under the Act in
respect of long-term capital assets, the deferred tax asset should be
recognised and carried forward (subject to the consideration of prudence) on
the amount which can be carried forward and set-off in future years as per
the provisions of the Act.
ASI-5 – Accounting for Taxes
on Income in the situations of Tax Holiday under Sections 10A and 10B of the
Income-tax Act, 1961
Accounting Standard (AS)
22, Accounting for Taxes on Income
Issue
1. Chapter III of the
Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) deals with
incomes which do not form part of total income. Sections 10A and 10B of the
Act are covered under Chapter III. These sections allow certain deductions,
for certain years, from the total income of an assessee. These deductions
are commonly described as ‘tax holiday’ and the period during which these
deductions are available is commonly described as ‘tax holiday period’.
2. The issue is how AS 22
should be applied in the situations of tax-holiday under sections 10A and
10B of the Act.
Consensus
3. The deferred tax in
respect of timing differences which originate during the tax holiday period
and reverse during the tax holiday period, should not be recognised to the
extent deduction from the total income of an enterprise is allowed during
the tax holiday period as per the provisions of sections 10A and 10B of the
Act.
4. Deferred tax in respect
of timing differences which originate during the tax holiday period but
reverse after the tax holiday period should be recognised in the year in
which the timing differences originate. However, recognition of deferred tax
assets should be subject to the consideration of prudence as laid down in
paragraphs 15 to 18 of AS 22.
5. For the above purposes,
the timing differences which originate first should be considered to reverse
first.
ASI-6 – Accounting for Taxes
on Income in the context of Sections 115JB of the Income-tax Act, 1961
Accounting Standard (AS)
22, Accounting for Taxes on Income
Issue
1. The issue is how AS 22
is applied in a situation where a company pays tax under section 115JB
(commonly referred to as Minimum Alternative Tax) of the Income-tax Act,
1961 (hereinafter referred to as the ‘Act’).
2. Another issue is how
deferred tax is measured on the timing differences originating during the
current year if the enterprise expects that these differences would reverse
in a period in which it may pay tax under section 115JB of the Act.
Consensus
3. The payment of tax under
section 115JB of the Act is a current tax for the period.
4. In a period in which a
company pays tax under section 115JB of the Act, the deferred tax assets and
liabilities in respect of timing differences arising during the period, tax
effect of which is required to be recognised under AS 22, should be measured
using the regular tax rates and not the tax rate under section 115JB of the
Act.
5. In case an enterprise
expects that the timing differences arising in the current period would
reverse in a period in which it may pay tax under section 115JB of the Act,
the deferred tax assets and liabilities in respect of timing differences
arising during the current period, tax effect of which is required to be
recognised under AS 22, should be measured using the regular tax rates and
not the tax rate under section 115JB of the Act.
ASI-7 – Disclosure of
deferred tax assets and deferred tax liabilities in the balance sheet of a
company
Accounting Standard (AS)
22, Accounting for Taxes on Income
Issue
The authority of this ASI
is the same as that of the Accounting Standard to which it relates. The
contents of this ASI are intended for the limited purpose of the Accounting
Standard to which it relates. ASI is intended to apply only to material
items.
1. The issue is how should
deferred tax assets and deferred tax liabilities be disclosed in the balance
sheet of a company.
Consensus
2. In case of a company,
deferred tax assets should be disclosed on the face of the balance sheet
separately after the head ‘Investments’ and deferred tax liabilities should
be disclosed on the face of the balance sheet separately after the head
‘Unsecured Loans’.
ASI-8 – Interpretation of
the term ‘Near Future’
Accounting Standard (AS)
21, Consolidated Financial Statements, AS 23, Accounting for Investments in
Associates in Consolidated Financial Statements and AS 27, Financial
Reporting of Interests in Joint Ventures
Issue
1. Paragraph 11 of AS 21,
paragraph 7 of AS 23 and paragraph 29 of AS 27 use the words ‘near future’
in the context of exclusions from consolidation, application of the equity
method and application of the proportionate consolidation method,
respectively.
2. The issue is what period
of time should be considered as ‘near future’ for the above purposes.
Consensus
3. The issue as to what
period of time should be considered as near future for the purposes of AS
21, AS 23 and AS 27 primarily depends on the facts and circumstances of each
case. However, ordinarily, the meaning of the words ‘near future’ should be
considered as not more than twelve months from acquisition of relevant
investments unless a longer period can be justified on the basis of facts
and circumstances of the case. The intention with regard to disposal of the
relevant investment should be considered at the time of acquisition of the
investment. Accordingly, if the relevant investment is acquired without an
intention to its subsequent disposal in near future, and subsequently, it is
decided to dispose off the investment, such an investment is not excluded
from consolidation, application of the equity method or application of the
proportionate consolidation method, as the case may be, until the investment
is actually disposed off. Conversely, if the relevant investment is acquired
with an intention to its subsequent disposal in near future, however, due to
some valid reasons, it could not be disposed off within that period, the
same will continue to be excluded from consolidation, application of the
equity method or application of the proportionate consolidation method, as
the case may be, provided there is no change in the intention.
ASI-9 – Virtual certainty
supported by convincing evidence
Accounting Standard (AS)
22, Accounting for Taxes on Income
Issue
1. Paragraph 17 of AS 22
requires that “Where an enterprise has unabsorbed depreciation or carry
forward of losses under tax laws, deferred tax assets should be recognised
only to the extent that there is virtual certainty supported by convincing
evidence that sufficient future taxable income will be available against
which such deferred tax assets can be realised”.
2. The issue is what
amounts to ‘virtual certainty supported by convincing evidence’ for the
purpose of paragraph 17 of AS 22.
Consensus
3. Determination of virtual
certainty that sufficient future taxable income will be available is a
matter of judgement and will have to be evaluated on a case to case basis.
Virtual certainty refers to the extent of certainty, which, for all
practical purposes, can be considered certain. Virtual certainty cannot be
based merely on forecasts of performance such as business plans.
4. Virtual certainty is not
a matter of perception and it should be supported by convincing evidence.
Evidence is a matter of fact. To be convincing, the evidence should be
available at the reporting date in a concrete form, for example, a
profitable binding export order, cancellation of which will result in
payment of heavy damages by the defaulting party. On the other hand, a
projection of the future profits made by an enterprise based on the future
capital expenditures or future restructuring etc., submitted even to an
outside agency, e.g., to a credit agency for obtaining loans and accepted by
that agency cannot, in isolation, be considered as convincing evidence.
ASI-10 – Interpretation of
paragraph 4(e) of AS 16
Accounting Standard (AS)
16, Borrowing Costs
Issue
1. Paragraph 4 (e) of AS
16, ‘Borrowing Costs’, provides that borrowing costs may include “exchange
differences arising from foreign currency borrowings to the extent that they
are regarded as an adjustment to interest costs”.
2. The issue is which
exchange differences are covered under paragraph 4 (e) of AS 16.
Consensus
3. Paragraph 4 (e) of AS 16
covers exchange differences on the amount of principal of the foreign
currency borrowings to the extent of difference between interest on local
currency borrowings and interest on foreign currency borrowings. For this
purpose, the interest rate for the local currency borrowings should be
considered as that rate at which the enterprise would have raised the
borrowings locally had the enterprise not decided to raise the foreign
currency borrowings. If the difference between the interest on local
currency borrowings and the interest on foreign currency borrowings is equal
to or more than the exchange difference on the amount of principal of the
foreign currency borrowings, the entire amount of exchange difference is
covered under paragraph 4 (e) of AS 16.
The Appendix to this
Interpretation illustrates the application of the above requirements.
ASI-11 – Accounting for
Taxes on Income in case of an Amalgamation
Accounting Standard (AS)
22, Accounting for Taxes on Income
Issues
1. The following issues
relating to accounting for taxes on income in the case of an amalgamation
are dealt with in this Interpretation:
i. In an amalgamation
in the nature of purchase, where the consideration for the amalgamation
is allocated to the individual identifiable assets/liabilities of the
transferor enterprise on the basis of their fair values at the date of
amalgamation as per AS 14, ‘Accounting for Amalgamations’, and the
carrying amounts thereof for tax purposes continue to be the same as
that for the transferor enterprise, whether deferred tax on the
difference between the values of the assets/liabilities arrived at for
accounting purposes on the basis of their fair values and the carrying
amounts thereof for tax purposes should be recognised.2
ii. If any deferred tax
asset, including in respect of unabsorbed depreciation and carry forward
of losses, was not recognised by the transferor enterprise, because the
conditions relating to prudence laid down in paragraph 15 or paragraph
17, as the case may be, of AS 22, were not satisfied, whether the
transferee enterprise can recognise the same if the conditions relating
to prudence as per AS 22 are satisfied.
2. In case of an
amalgamation in the nature of merger and amalgamation in the nature of
purchase where the transferee enterprise incorporates the assets/liabilities
of the transferor enterprise at their existing carrying amounts as per AS 14
and the carrying amounts thereof for tax purposes continue to be the same as
that for the transferor enterprise, the amalgamation does not, in itself,
give rise to any difference between the carrying amounts of
assets/liabilities for accounting purposes and tax purposes and,
consequently, to any deferred tax asset/liability. Accordingly, in respect
of such amalgamations, this issue does not arise.
Consensus
1. In an amalgamation in
the nature of purchase, where the consideration for the amalgamation is
allocated to the individual identifiable assets/liabilities on the basis of
their fair values at the date of amalgamation as per AS 14, ‘Accounting for
Amalgamations’, and the carrying amounts thereof for tax purposes continue
to be the same as that for the transferor enterprise, deferred tax on the
difference between the values of the assets/liabilities, arrived at for
accounting purposes on the basis of their fair values, and the carrying
amounts thereof for tax purposes should not be recognised as this
constitutes a permanent difference. The consequent differences between the
amounts of depreciation for accounting purposes and tax purposes in respect
of such assets in subsequent years would also be permanent differences.
2. In a situation where any
deferred tax asset, including in respect of unabsorbed depreciation and
carry forward of losses, was not recognised by the transferor enterprise,
because the conditions relating to prudence laid down in paragraph 15 or
paragraph 17, as the case may be, of AS 22, were not satisfied, the
transferee enterprise can recognise the same if the conditions relating to
prudence as per AS 22 are satisfied. In such a case, the accounting
treatment, as described below, depends on the nature of amalgamation as well
as the accounting treatment adopted for amalgamation in accordance with AS
14.
i. Where the
amalgamation is in the nature of purchase and the consideration for the
amalgamation is allocated to individual identifiable assets/liabilities
on the basis of their fair values at the date of amalgamation as
permitted in AS 14, the deferred tax assets should be recognised by the
transferee enterprise at the time of amalgamation itself considering
these as identifiable assets. These deferred tax assets can be
recognised at the time of amalgamation only if the conditions relating
to prudence laid down in paragraph 15 or paragraph 17, as the case may
be, of AS 22, are satisfied from the point of view of the transferee
enterprise at the time of amalgamation. The recognition of deferred tax
assets will automatically affect the amount of the goodwill/capital
reserve arising on amalgamation.
In a case where the
conditions for recognition of deferred tax assets as per AS 22 are not
satisfied at the time of the amalgamation, but are satisfied by the
first annual balance sheet date following the amalgamation, the deferred
tax assets are recognised in accordance with paragraph 19 of AS 22. The
corresponding adjustment should be made to the goodwill/capital reserve
arising on the amalgamation. If, however, the conditions for recognition
of deferred tax assets are not satisfied even by the first annual
balance sheet date following the amalgamation, the corresponding effect
of any subsequent recognition of the deferred tax asset on the
satisfaction of the conditions should be given in the statement of
profit and loss of the year in which the conditions are satisfied and
not in the goodwill/capital reserve.
ii. Where the
amalgamation is in the nature of purchase and the transferee enterprise
incorporates the assets/liabilities of the transferor enterprise at
their existing carrying amounts as permitted in AS 14, the deferred tax
assets should not be recognised at the time of amalgamation. However,
if, by the first annual balance sheet date subsequent to amalgamation,
the unrecognised deferred tax assets are recognised pursuant to the
provisions of paragraph 19 of AS 22 relating to re-assessment of
unrecognised deferred tax assets, the corresponding adjustment should be
made to goodwill/capital reserve arising on the amalgamation. In a case
where the conditions for recognition of deferred tax assets as per AS 22
are not satisfied by the first annual balance sheet date following the
amalgamation, the corresponding effect of any subsequent recognition of
the deferred tax asset on the satisfaction of the conditions should be
given in the statement of profit and loss of the year in which the
conditions are satisfied and not in the goodwill/capital reserve.
iii. Where the
amalgamation is in the nature of merger, the deferred tax assets should
not be recognised at the time of amalgamation. However, if, by the first
annual balance sheet date subsequent to the amalgamation, the
unrecognised deferred tax assets are recognised pursuant to the
provisions of paragraph 19 of AS 22 relating to re-assessment of
unrecognised deferred tax assets, the corresponding adjustment should be
made to the revenue reserves. In a case where the conditions for
recognition of deferred tax assets as per AS 22 are not satisfied by the
first annual balance sheet date following the amalgamation, the
corresponding effect of any subsequent recognition of the deferred tax
asset on the satisfaction of the conditions should be given in the
statement of profit and loss of the year in which the conditions are
satisfied and not in the revenue reserves.
ASI-12 – Applicability of AS
20
Accounting Standard (AS)
20, Earnings Per Share
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 1/2002, issued in March 2002 stands withdrawn.]
Issue
1. Whether companies which
are required to give information under Part IV of Schedule VI to the
Companies Act, 1956, should calculate and disclose earnings per share in
accordance with AS 20.
Consensus
2. Every company, which is
required to give information under Part IV of Schedule VI to the Companies
Act, 1956, should calculate and disclose earnings per share in accordance
with AS 20, whether or not its equity shares or potential equity shares are
listed on a recognised stock exchange in India.
ASI-13 – Interpretation of
paragraphs 26 and 27 of AS 18
Accounting Standard (AS)
18, Related Party Disclosures
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 2/2002, issued in May 2002 stands withdrawn.]
Issues
1. Paragraph 23 of AS 18
requires certain disclosures in respect of transactions between related
parties. Paragraph 26 of AS 18, inter alia, provides that items of a similar
nature may be disclosed in aggregate by type of related party. The issue is
as to what is the meaning of type of related party for this purpose.
2. Paragraph 27 of AS 18
provides that "Disclosure of details of particular transactions with
individual related parties would frequently be too voluminous to be easily
understood. Accordingly, items of a similar nature may be disclosed in
aggregate by type of related party. However, this is not done in such a way
as to obscure the importance of significant transactions. Hence, purchases
or sales of goods are not aggregated with purchases or sales of fixed
assets. Nor a material related party transaction with an individual partly
is clubbed in an aggregated disclosure" (emphasis added). The issue is as to
how the test of the materiality should be applied for this purpose.
Consensus
3. The type of related
party for the purpose of aggregation of items of a similar nature should be
construed to mean the related party relationships given in paragraph 3 of AS
18. The manner of disclosure required by paragraph 23 of AS 18, read with
paragraph 26 thereof, in accordance with the above requirement, is
illustrated in the Appendix to this Interpretation.
4. Materiality primarily
depends on the facts and circumstances of each case. In deciding whether an
item or an aggregate of items is material, the nature and the size of the
item(s) are evaluated together. Depending on the circumstances, either the
nature or the size of the item could be the determining factor. As regards
size, for the purpose of applying the test of materiality as per paragraph
27 of AS 18, ordinarily a related party transaction, the amount of which is
in excess of 10% of the total related party transactions of the same type
(such as purchase of goods), is considered material, unless on the basis of
facts and circumstances of the case it can be concluded that even a
transaction of less than 10% is material. As regards nature, ordinarily the
related party transactions which are not entered into in the normal course
of the business of the reporting enterprise are considered material subject
to the facts and circumstances of the case.
ASI-14 – Disclosure of
Revenue from Sales Transactions
Accounting Standard (AS)
9, Revenue Recognition
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 3/2002, issued in June 2002 stands withdrawn.]
Issue
1. What should be the
manner of disclosure of excise duty in the presentation of revenue from
sales transactions (turnover) in the statement of profit and loss.
Consensus
2. The amount of turnover
should be disclosed in the following manner on the face of the statement of
profit and loss:
Turnover (Gross) XX
Less: Excise Duty XX
Turnover (Net) XX
ASI-15 – Notes to the
Consolidated Financial Statements
Accounting Standard (AS)
21, Consolidated Financial Statements
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 5/2002, issued in June 2002, stands withdrawn.]
Issue
1. Whether all the notes
appearing in the separate financial statements of the parent enterprise and
its subsidiaries should be included in the notes to the consolidated
financial statements.
Consensus
2. All the notes appearing
in the separate financial statements of the parent enterprise and its
subsidiaries need not be included in the notes to the consolidated financial
statements. For preparing consolidated financial statements, the following
principles should be observed in respect of notes and other explanatory
material that form an integral part thereof:
a. Notes which are
necessary for presenting a true and fair view of the consolidated
financial statements should be included in the consolidated financial
statements as an integral part thereof.
b. Only the notes
involving items which are material need to be disclosed. Materiality for
this purpose should be assessed in relation to the information contained
in consolidated financial statements. In view of this, it is possible
that certain notes which are disclosed in separate financial statements
of a parent or a subsidiary would not be required to be disclosed in the
consolidated financial statements when the test of materiality is
applied in the context of consolidated financial statements.
c. Additional statutory
information disclosed in separate financial statements of the subsidiary
and/or a parent having no bearing on the true and fair view of the
consolidated financial statements need not be disclosed in the
consolidated financial statements. For instance, in the case of
companies, the information such as the following given in the notes to
the separate financial statements of the parent and/or the subsidiary,
need not be included in the consolidated financial statements:
i. Source from
which bonus shares are issued, e.g., capitalisation of profits or
Reserves or from Share Premium Account.
ii. Disclosure of
all unutilised monies out of the issue indicating the form in which
such unutilised funds have been invested.
iii. The name(s) of
small scale industrial undertaking(s) to whom the company owe any
sum together with interest outstanding for more than thirty days.
iv. A statement of
investments (whether shown under "Investment" or under "Current
Assets" as stock-in-trade) separately classifying trade investments
and other investments, showing the names of the bodies corporate
(indicating separately the names of the bodies corporate under the
same management) in whose shares or debentures, investments have
been made (including all investments, whether existing or not, made
subsequent to the date as at which the previous balance sheet was
made out) and the nature and extent of the investment so made in
each such body corporate.
v. Quantitative
information in respect of sales, raw materials consumed, opening and
closing stocks of goods produced/traded and purchases made, wherever
applicable.
vi. A statement
showing the computation of net profits in accordance with section
349 of the Companies Act, 1956, with relevant details of the
calculation of the commissions payable by way of percentage of such
profits to the directors (including managing directors) or manager
(if any).
vii. In the case of manufacturing companies, quantitative
information in regard to the licensed capacity (where licence is in
force); the installed capacity; and the actual production.
viii. Value of
imports calculated on C.I.F. basis by the company during the
financial year in respect of :-
a. raw
materials;
b. components
and spare parts;
c. capital
goods.
ix. Expenditure in
foreign currency during the financial year on account of royalty,
know-how, professional, consultation fees, interest, and other
matters.
x. Value of all
imported raw materials, spare parts and components consumed during
the financial year and the value of all indigenous raw materials,
spare parts and components similarly consumed and the percentage of
each to the total consumption.
xi. The amount
remitted during the year in foreign currencies on account of
dividends, with a specific mention of the number of non-resident
shareholders, the number of shares held by them on which the
dividends were due and the year to which the dividends related.
xii. Earnings in
foreign exchange classified under the following heads, namely:-
a. export of
goods calculated on F.O.B. basis;
b. royalty,
know-how, professional and consultation fees;
c. interest and
dividend;
d. other
income, indicating the nature thereof.
ASI-16 – Treatment of
Proposed Dividend under AS 23 Accounting Standard (AS) 23, Accounting for
Investments in Associates
Issue
1. In case an associate has
made a provision for proposed dividend in its financial statements, whether
the investor should consider the same while computing its share of the
results of operations of the associate
Consensus
2. In case an associate has
made a provision for proposed dividend in its financial statements, the
investor’s share of the results of operations of the associate should be
computed without taking into consideration the proposed dividend.
ASI-17 – Adjustments to the
Carrying Amount of Investment arising from Changes in Equity not Included in the
Statement of Profit and Loss of the Associate
Accounting Standard (AS)
23, Accounting for Investments in Associates in Consolidated Financial
Statements
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 7/2002, issued in June 2002, stands withdrawn.]
Issue
1. The issue is as to how
the adjustments to the carrying amount of investment in an associate arising
from changes in the associate’s equity that have not been included in the
statement of profit and loss of the associate, should be made.
Consensus
2. Adjustments to the
carrying amount of investment in an associate arising from changes in the
associate’s equity that have not been included in the statement of profit
and loss of the associate should be directly made in the carrying amount of
investment without routing it through the consolidated statement of profit
and loss. The corresponding debit/credit should be made in the relevant head
of the equity interest in the consolidated balance sheet. For example, in
case the adjustment arises because of revaluation of fixed assets by the
associate, apart from adjusting the carrying amount of investment to the
extent of proportionate share of the investor in the revalued amount, the
corresponding amount of revaluation reserve should be shown in the
consolidated balance sheet.
ASI-18 – Consideration of
Potential Equity Shares for Determining whether an Investee is an Associate
under AS 23
Accounting Standard (AS)
23, Accounting for Investments in Associates in Consolidated Financial
Statements
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 8/2002, issued in June 2002, stands withdrawn.]
Issue
1. For applying the
definition of an ‘associate’, whether the potential equity shares of the
investee held by the investor should be taken into account for determining
the voting power of the investor.
Consensus
2. The potential equity
shares of the investee held by the investor should not be taken into account
for determining the voting power of the investor.
ASI-19 – Interpretation of
the term ‘intermediaries’
Accounting Standard (AS)
18, Related Party Disclosures
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 9/2002, issued in October 2002, stands withdrawn.]
Issue
1. The issue is how the
term ‘intermediaries’ should be interpreted for the purposes of paragraphs 3
and 13 of AS 18.
Consensus
2. For the purposes of
paragraphs 3 and 13 of AS 18, the term ‘intermediaries’ should be confined
to mean enterprises which are ‘subsidiaries’ as defined in AS 21,
Consolidated Financial Statements.
ASI-20 – Disclosure of
Segment Information
Accounting Standard (AS)
17, Segment Reporting
[Pursuant to the
issuance of this Accounting Standards Interpretation, General Clarification
(GC) – 11/2002, issued in October 2002, stands withdrawn.]
Issue
1. Whether an enterprise,
which has neither more than one business segment nor more than one
geographical segment, is required to disclose segment information as per AS
17.
Consensus
2. In case, by applying the
definitions of ‘business segment’ and ‘geographical segment’, contained in
AS 17, it is concluded that there is neither more than one business segment
nor more than one geographical segment, segment information as per AS 17 is
not required to be disclosed.
ASI-21 – Non-Executive
Directors on the Board – whether related parties
Accounting Standard (AS)
18, Related Party Disclosures
Issues
1. The issue is as to
whether a non-executive director on the Board of Directors of a company is a
key management person.
2. Another related issue is
as to whether a non-executive director is covered by AS 18 in case he
participates in the financial and/or operating policy decisions of an
enterprise.
Consensus
3. A non-executive director
of a company should not be considered as a key management person under AS 18
by virtue of merely his being a director unless he has the authority and
responsibility for planning, directing and controlling the activities of the
reporting enterprise.
4. The requirements of AS
18 should not be applied in respect of a non-executive director even if he
participates in the financial and/or operating policy decision of the
enterprise, unless he falls in any of the categories in paragraph 3 of AS
18.
ASI-22 – Treatment of
Interest for determining Segment Expense
Accounting Standard (AS)
17, Segment Reporting
Issues
1. Whether interest expense
relating to overdrafts and other operating liabilities identified to a
particular segment should be included in the segment expense or not.
2. Another issue is that in
case interest is included as a part of the cost of inventories where it is
so required as per Accounting Standard (AS) 16, Borrowing Costs, read with
Accounting Standard (AS) 2, Valuation of Inventories, and those inventories
are part of segment assets of a particular segment, whether such interest
would be considered as a segment expense.
Consensus
3. The interest expense
relating to overdrafts and other operating liabilities identified to a
particular segment should not be included as a part of the segment expense
unless the operations of the segment are primarily of a financial nature or
unless the interest is included as a part of the cost of inventories as per
paragraph 4 below.
4. In case interest is
included as a part of the cost of inventories where it is so required as per
AS 16, read with AS 2, Valuation of Inventories, and those inventories are
part of segment assets of a particular segment, such interest should be
considered as a segment expense.
In this case, the amount of
such interest and the fact that the segment result has been arrived at after
considering such interest should be disclosed by way of a note to the
segment result.
ASI-23 – Remuneration paid
to key management personnel – whether a related party transaction
Accounting Standard (AS)
18, Related Party Disclosures
Issues
1. The issue is whether
remuneration paid to key management personnel is a related party
transaction. Another related issue is whether remuneration paid to
non-executive directors on the Board of Directors is a related party
transaction.
Consensus
2. Remuneration paid to key
management personnel should be considered as a related party transaction
requiring disclosures under AS 18. In case non-executive directors on the
Board of Directors are not related parties (see Accounting Standards
Interpretation 21), remuneration paid to them should not be considered a
related party transaction.
ASI-24 – Definition of
‘Control’
Accounting Standard (AS)
21, Consolidated Financial Statements
Issue
1. In case an enterprise is
controlled by two enterprises - one controls by virtue of ownership of
majority of the voting power of that enterprise and the other controls, by
virtue of an agreement or otherwise, the composition of the board of
directors so as to obtain economic benefits from its activities - whether in
such a case both the controlling enterprises should consolidate the
financial statements of the first mentioned enterprise.
Consensus
2. In a rare situation,
when an enterprise is controlled by two enterprises as per the definition of
‘control’ under AS 21, the first mentioned enterprise will be considered as
subsidiary of both the controlling enterprises within the meaning of AS 21
and, therefore, both the enterprises should consolidate the financial
statements of that enterprise as per the requirements of AS 21.
ASI-25 – Exclusion of a
subsidiary from consolidation
Accounting Standard (AS)
21, Consolidated Financial Statements
Issue
1. In case an enterprise
owns majority of the voting power of another enterprise but all the shares
are held as ‘stock-in-trade’, whether this will amount to temporary control
within the meaning of paragraph 11(a) of AS 21.
Consensus
2. Where an enterprise owns
majority of voting power by virtue of ownership of the shares of another
enterprise and all the shares held as ‘stock-in-trade’ are acquired and held
exclusively with a view to their subsequent disposal in the near future, the
control by the first mentioned enterprise should be considered to be
temporary within the meaning of paragraph 11(a).
ASI-26 – Accounting for
taxes on income in the consolidated financial statements
Accounting Standard (AS)
21, Consolidated Financial Statements
Issue
1. For preparing
consolidated financial statements, whether the tax expense (comprising
current tax and deferred tax) should be recomputed in the context of
consolidated information or the tax expense appearing in the separate
financial statements of the parent and its subsidiaries should be aggregated
and no further adjustments should be made for the purposes of consolidated
financial statements.
Consensus
2. While preparing
consolidated financial statements, the tax expense to be shown in the
consolidated financial statements should be the aggregate of the amounts of
tax expense appearing in the separate financial statements of the parent and
its subsidiaries.
ASI-27 – Applicability of AS
25 to Interim Financial Results
Accounting Standard (AS)
25, Interim Financial Reporting
Issue
1. Whether AS 25 is
applicable to interim financial results presented by an enterprise pursuant
to the requirements of a statute/regulator, for example, quarterly financial
results presented under Clause 41 of the Listing Agreement entered into
between Stock Exchanges and the listed enterprises.
Consensus
2. The presentation and
disclosure requirements contained in AS 25 should be applied only if an
enterprise prepares and presents an ‘interim financial report’ as defined in
AS 25. Accordingly, presentation and disclosure requirements contained in AS
25 are not required to be applied in respect of interim financial results
(which do not meet the definition of ‘interim financial report’ as per AS
25) presented by an enterprise. For example, quarterly financial results
presented under Clause 41 of the Listing Agreement entered into between
Stock Exchanges and the listed enterprises do not meet the definition of
‘interim financial report’ as per AS 25. However, the recognition and
measurement principles laid down in AS 25 should be applied for recognition
and measurement of items contained in such interim financial results.
ASI-28 – Disclosure of
parent’s/venturer’s shares in postacquisition reserves of a subsidiary/jointly
controlled entity
Accounting Standard (AS)
21, Consolidated Financial Statements and AS 27, Financial Reporting of
Interests in Joint Ventures
Issue
1. What should be the
manner of disclosure of the parent’s/venturer’s share in the
post-acquisition reserves of a subsidiary/jointly controlled entity in the
consolidated balance sheet?
Consensus
2. The parent’s share in
the post-acquisition reserves of a subsidiary, forming part of the
corresponding reserves in the consolidated balance sheet, is not required to
be disclosed separately in the consolidated balance sheet.
3. While applying
proportionate consolidation method, the venturer’s share in the
post-acquisition reserves of the jointly controlled entity should be shown
separately under the relevant reserves in the consolidated financial
statements.
ASI-29 – Turnover in case of
Contractors
Turnover in case of
Contractors Accounting Standard (AS) 7, ConstructionContracts (revised 2002)
Issue
1. AS 7, Construction
Contracts (revised 2002) deals, inter-alia, with revenue recognition in
respect of construction contracts in the financial statements of
contractors. It requires recognition of revenue by reference to the stage of
completion of a contract (referred to as ‘percentage of completion
method’).This method results in reporting of revenue which can be attributed
to the proportion of work completed. Under this method, contract revenue is
recognised as revenue in the statement of profit and loss in the accounting
period in which the work is performed. The issue is whether the revenue so
recognised in the financial statements of contractors as per the
requirements of AS 7 can be considered as ‘turnover’.
Consensus
2. The amount of contract
revenue recognised as revenue in the statement of profit and loss as per the
requirements of AS 7 should be considered as ‘turnover’.
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