AS-14:

Accounting for Amalgamations

Amalgamation in nature of merger be accounted for under Pooling of Interest Method and in nature of purchase be accounted for under Purchase Method. Under the Pooling of the Interest Method, assets, liabilities and reserves of the transferor company be recorded at existing carrying amount and in the same form as it was appearing in the books of the transferor. In case of conflicting accounting policies, a uniform policy be adopted on amalgamation. Effect on financial statement of such change in policy be reported as per AS5. Difference between the amount recorded as share capital issued and the amount of capital of the transferor company should be adjusted in reserves. Under Purchase Method, all assets and liabilities of the transferor company be recorded at existing carrying amount or consideration be allocated to individual identifiable assets and liabilities on basis of fair values at date of amalgamation. The reserves of the transferor company shall lose its identity. The excess or shortfall of consideration over value of net assets be recognised as goodwill or capital reserve. Disclosures to include effective date of amalgamation for accounting, the method of accounting followed, particulars of the scheme sanctioned. In case of amalgamation under the Pooling of Interest Method the treatment given to the difference between the consideration and the value of the net identified assets acquired is to be disclosed. In case of amalgamation under the Purchase Method the consideration and the treatment given to the difference compared to the value of the net identifiable assets acquired including period of amortization of goodwill arising on amalgamation is to be disclosed.

AS-30 Disclosures in Fin. Statements of Banks in Similar Fin. Institutions Objective of AS 30 The objective of IAS 30 is to prescribe appropriate presentation and disclosure standards for banks and similar financial institutions (hereafter called 'banks'), which supplement the requirements of other Standards. The intention is to provide users with appropriate information to assist them in evaluating the financial positionand performance of banks, and to enable them to obtain a better understanding of the special characteristics of the operations of banks. Presentation and Disclosure A bank's income statement should group income and expenses by nature. A bank's income statement or notes should report the following specific amounts:

interest income interest expense dividend income fee and commission income fee and commission expense net gains/losses from securities dealing net gains/losses from investment securities net gains/losses from foreign currency dealing

A bank's balance sheet should group assets and liabilities by nature and list them in liquidity sequence.. It also include guidelines for the limited circumstances in which income and expense items or asset and liability items are offset. A bank must disclose the fair values of each class of its financial assets and financial liabilities . Disclosures are also required about:

specific contingencies and commitments (including off-balance sheet items) requiring disclosure specified disclosures for the maturity of assets and liabilities concentrations of assets, liabilities and off-balance sheet items losses on loans and advances general banking risks assets pledged as security

IAS-31 Financial Reporting of Interests in Joint Ventures (Revised Dec 2003) Objective of IAS 31 The objective of IAS 31 is to prescribe the accounting treatment required for interests in joint ventures, irrespective of the structures or forms under which the joint venture activities take place. For the purposes of the Standard, joint ventures are classified as jointly controlled operations, jointly controlled assets and jointly controlled entities. Key Definitions Joint venture: A contractual arrangement by which two or more parties (venturers) undertake an economic activity that is subject to joint control. A joint venture can take the form of: [IAS 31.3]

jointly controlled operation; jointly controlled assets; and jointly controlled entity.

Jointly Controlled Operations Jointly controlled operations involves the use of assets and other resources of the venturers rather than the establishment of a separate entity. Each venturer uses its own assets, incurs its own expenses and liabilitiesand raises its own finance. The revenue from the sale of the joint product and any expenses incurred in common are usually shared among the venturers . Jointly Controlled Assets Jointly controlled assets involve the joint control, and often the joint ownership, of assets dedicated to the joint venture. Each venturer may take a share of the output from the assets and each bears a share of the expenses incurredJointly Controlled Entities A jointly controlled entity is an entity in which two or more venturers has an interest, with a contractual arrangement which establishes joint control over the entity. IAS 31 allows two treatments of accounting for an investment in jointly controlled entities:

Under the benchmark treatment, in its consolidated financial statements, a venturer should report its interest in a jointly controlled entity using proportionate consolidation. [IAS 31.25] The allowed alternative treatment specifies that, in its consolidated financial statements, a venturer should report its interest in a jointly controlled entity using the equity method of accounting. [IAS 31.32]

The requirements for recognition of gains and losses apply equally to non-monetary contributions unless the gain or loss cannot be measured, or the other venturers contribute similar assets. Unrealised gains or losses should be eliminated against the underlying assets (proportionate consolidation) or against the investment (equity method). [SIC 13] When a venturer purchases assets from a jointly controlled entity, it should not recognise its share of the gain until it resells the asset to an independent party. Losses should be recognised if they are indicative of a permanent decline in value. Financial Statements of an Investor An investor in a joint venture who does not have joint control should report its interest in a joint venture in its consolidated financial statements either: [IAS 31.42]

in accordance with IAS 28 (r2000) Accounting for Investments in Associates, where the investor has significant influence in the joint venture; or in accordance with IAS 39 (r2000) Financial Instruments: Recognition and Measurement.

Disclosure A venturer should disclose:

information about contingent liabilities it has incurred in connection with the joint venture. capital commitments with respect to the joint venture . a listing and description of interests in significant joint ventures .

AS-32 Financial Instruments: Disclosure and Presentation (Revised Dec 2003)

Objective of AS 32 The stated objective of AS 32 is to enhance users' understanding of the significance of on-balance sheet and off-balance sheet financial instruments to an enterprise's financial position, performance, and cash flows. AS 32 addresses this in essentially three ways:

Clarifying the classification of a financial instrument issued by an enterprise as a liability or as equity. Prescribing strict conditions under which assets and liabilities may be offset in the balance sheet. Requiring a broad range of disclosures about financial instruments, including information as to their fair values.

Scope AS 32 applies in presenting and disclosing information about all types of financial instruments, whether recognised in the balance sheet or not, with the following exceptions:

investments in subsidiaries investments in equity method associates , and investments in joint ventures . obligations for post-employment benefits employers' obligations under employee stock option and stock purchase plans and obligations arising under insurance contracts [this is the subject of a current IASB agenda project].

Key Definitions The definition of financial instrument used is the same . Classification as liability or equity

The fundamental principle of IAS 32 is that an instrument should be classified as either a liability or an equity instrument according to its substance, not its legal form. The enterprise must make the decision at the time the instrument is initially recognised. The classification is not subsequently changed based on changed circumstances. The key distinguishing feature is that a financial liability involves a contractual obligation either to deliver cash or another financial asset, or to issue another financial instrument, under terms that are potentially unfavourable to the issuer. An instrument that does not give rise to such a contractual obligation is an equity instrument. [IAS 32.18] For each class of financial asset, financial liability, and equity, both recognised and unrecognised, AS 32 requires disclosure of:

the extent and nature of the financial instruments, including significant terms and conditions (including principal amount, maturity, early settlement or conversion options, amount and timing of cash flows, stated interest or dividend rates, collateral held or pledged, denomination in a foreign currency, and restrictive conditions and covenants); accounting policies and methods adopted, including recognition criteria and measurement principles; specified information about exposure to interest rate risk (including repricing dates and effective interest rates); specified information about exposure to credit risk (including amounts and significant concentrations); specified information about the fair value of the financial instrument, or a statement that it is not practicable to provide such information; and special information if a financial asset is carried in excess of its fair value (the impairment provisions of IAS 39 would generally prohibit this).