ASSIGNMENT 1

۞Describe the system of developing Indian Accounting Standards:

Broadly, the following procedure is adopted for formulating Accounting

Standards:

1 The ASB determines the broad areas in which Accounting Standards need to be
formulated and the priority in regard to the selection thereof.

2 In the preparation of Accounting Standards, the ASB will be assisted by Study Groups
constituted to consider specific subjects. In the formation of Study Groups, provision will
be made for wide participation by the members of the Institute and others.

3 The draft of the proposed standard will normally include the following:

(a) Objective of the Standard,

(b) Scope of the Standard,
(c) Definitions of the terms used in the Standard,
(d) Recognition and measurement principles, wherever applicable,
(e) Presentation and disclosure requirements.

4 The ASB will consider the preliminary draft prepared by the Study Group and if any
revision of the draft is required on the basis of deliberations, the ASB will make the same
or refer the same to the Study Group.

5 The ASB will circulate the draft of the Accounting Standard to the Council members of
the ICAI and the following specified bodies for their comments:

(i) Department of Company Affairs (DCA)

Preface to the Statements of Accounting Standards
(ii) Comptroller and Auditor General of India (C&AG)
(iii) Central Board of Direct Taxes (CBDT)
(iv) The Institute of Cost and Works Accountants of India (ICWAI)
(v) The Institute of Company Secretaries of India (ICSI)
(vi) Associated Chambers of Commerce and Industry (ASSOCHAM), Confederation of
Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry
(FICCI)
(vii) Reserve Bank of India (RBI)
(viii) Securities and Exchange Board of India (SEBI)
(ix) Standing Conference of Public Enterprises (SCOPE)
(x) Indian Banks’ Association (IBA)
(xi) Any other body considered relevant by the ASB keeping in view the nature of the
Accounting Standard

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6 The ASB will hold a meeting with the representatives of specified bodies to ascertain
their views on the draft of the proposed Accounting Standard. On the basis of comments
received and discussion with the representatives of specified bodies, the ASB will finalize
the Exposure Draft of the proposed Accounting Standard.

7 The Exposure Draft of the proposed Standard will be issued for comments by the
members of the Institute and the public. The Exposure Draft will specifically be sent to
specified bodies (as listed above), stock exchanges, and other interest groups, as
appropriate.

8 After taking into consideration the comments received, the draft of the proposed
Standard will be finalized by the ASB and submitted to the Council of the ICAI.

9 The Council of the ICAI will consider the final draft of the proposed Standard, and if
found necessary, modify the same in consultation with the ASB. The Accounting
Standard on the relevant subject will then be issued by the ICAI. Preface to the
Statements of Accounting Standards

10 For a substantive revision of an Accounting Standard, the procedure followed for

formulation of a new Accounting Standard, as detailed above, will be followed.

11 Subsequent to issuance of an Accounting Standard, some aspect(s) may require

revisions which are not substantive in nature. For this purpose, the ICAI may make
limited revision to an Accounting Standard. The procedure followed for the limited
revision will substantially be the same as that to be followed for formulation of an
Accounting Standard, ensuring that sufficient opportunity is given to various interest
groups and general public to react to the proposal for limited revision.

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 ASSIGNMENT 2

۞ Briefly discuss all the Indian accounting standards available for

the reporting purpose till date:
A.S. 1 : Disclosure of Accounting Policies:

This statement deals with the disclosure of significant accounting policies followed in
preparing and presenting financial statements.

The view presented in the financial statements of an enterprise of its state of affairs and
of the profit or loss can be significantly affected by the accounting policies followed in
the preparation and presentation of the financial statements. The accounting policies
followed vary from enterprise to enterprise. Disclosure of significant accounting policies
followed is necessary if the view presented is to be properly appreciated.

The purpose of this Statement is to promote better understanding of financial statements

by establishing through an accounting standard the disclosure of significant accounting
policies and the manner in which accounting policies are disclosed in the financial
statements. Such disclosure would also facilitate a more meaningful comparison between
financial statements of different enterprises.

A.S. 2 : Valuation of Inventories:

A primary issue in accounting for inventories is the determination of the value at which
inventories are carried in the financial statements until the related revenues are
recognized. This Statement deals with the determination of such value, including the
ascertainment of cost of inventories and any write-down thereof to net realizable value.

The inventories are measured at net realizable value at certain stages of production. This
occurs, for example, when agricultural crops have been harvested or mineral oils, ores
and gases have been extracted and sale is assured under a forward contract or a
government guarantee, or when a homogenous market exists and there is a negligible risk
of failure to sell. These inventories are excluded from the scope of this Statement.

Inventories should be valued at the lower of cost and net realizable value. The cost of
inventories should comprise all costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present location and condition.

A.S. 3 : Cash Flow Statements:

Information about the cash flows of an enterprise is useful in providing users of financial
statements with a basis to assess the ability of the enterprise to generate cash and cash
equivalents and the needs of the enterprise to utilize those cash flows. The economic

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decisions that are taken by users require an evaluation of the ability of an enterprise to
generate cash and cash equivalents and the timing and certainty of their generation.

The Statement deals with the provision of information about the historical changes in
cash and cash equivalents of an enterprise by means of a cash flow statement which
classifies cash flows during the period from operating, investing and financing activities.
An enterprise should prepare a cash flow statement and should present it for each period
for which financial statements are presented. The cash flow statement should report cash
flows during the period classified by operating, investing and financing activities.

A.S. 4 : Contingencies and Events Occurring After the Balance Sheet Date:

This Statement deals with the treatment in financial statements of

(a) Contingencies, and
(b) Events occurring after the balance sheet date.

The term “contingencies” used in this Statement is restricted to conditions or situations at

the balance sheet date, the financial effect of which is to be determined by future events
which may or may not occur.

The estimates of the outcome and of the financial effect of contingencies are determined
by the judgment of the management of the enterprise. This judgment is based on
consideration of information available up to the date, on which the financial statements
are approved and will include a review of events occurring after the balance sheet date,
supplemented by experience of similar transactions and, in some cases, reports from
independent experts.

A.S. 5 : Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies:

The objective of this Statement is to prescribe the classification and disclosure of certain
items in the statement of profit and loss so that all enterprises prepare and present such a
statement on a uniform basis. This enhances the comparability of the financial statements
of an enterprise over time and with the financial statements of other enterprises.
Accordingly, this Statement requires the classification and disclosure of extraordinary
and prior period items, and the disclosure of certain items within profit or loss from
ordinary activities. It also specifies the accounting treatment for changes in accounting
estimates and the disclosures to be made in the financial statements regarding changes in
accounting policies.

This Statement should be applied by an enterprise in presenting profit or loss from

ordinary activities, extraordinary items and prior period items in the statement of profit
and loss, in accounting for changes in accounting estimates, and in disclosure of changes
in accounting policies.

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This Statement deals with, among other matters, the disclosure of certain items of net
profit or loss for the period. These disclosures are made in addition to any other
disclosures required by other Accounting Standards. This Statement does not deal with
the tax implications of extraordinary items, prior period items, changes in accounting
estimates, and changes in accounting policies for which appropriate adjustments will
have to be made depending on the circumstances.

A.S. 6 : Depreciation Accounting:

This Statement deals with depreciation accounting and applies to all depreciable assets,
except the following items to which special considerations apply:—
(i) Forests, plantations and similar regenerative natural resources;
(ii) Wasting assets including expenditure on the exploration for and extraction of
minerals, oils, natural gas and similar non-regenerative resources;
(iii) Expenditure on research and development;
(iv) Goodwill;
(v) Live stock.
This statement also does not apply to land unless it has a limited useful life for the
enterprise.

Different accounting policies for depreciation are adopted by different enterprises.

Disclosure of accounting policies for depreciation followed by an enterprise is necessary
to appreciate the view presented in the financial statements of the enterprise.

Depreciation has a significant effect in determining and presenting the financial position
and results of operations of an enterprise. Depreciation is charged in each accounting
period by reference to the extent of the depreciable amount, irrespective of an increase in
the market value of the assets.

Assessment of depreciation and the amount to be charged in respect there of in an

accounting period are usually based on the following three factors:
(i) Historical cost or other amount substituted for the historical cost of the depreciable
asset when the asset has been revalued;
(ii) Expected useful life of the depreciable asset; and
(iii) Estimated residual value of the depreciable asset.

A.S. 7 : Construction Contracts:

The objective of this Statement is to prescribe the accounting treatment of revenue and
costs associated with construction contracts. Because of the nature of the activity
undertaken in construction contracts, the date at which the contract activity is entered into
and the date when the activity is completed usually fall into different accounting periods.
Therefore, the primary issue in accounting for construction contracts is the allocation of

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contract revenue and contract costs to the accounting periods in which construction work
is performed. This Statement uses the recognition criteria established in the Framework
for the Preparation and Presentation of Financial Statements to determine when contract
revenue and contract costs should be recognized as revenue and expenses in the statement
of profit and loss. It also provides practical guidance on the application of these criteria.
This Statement should be applied in accounting for construction contracts in the financial
statements of contractors.

Construction contracts include:

(a) Contracts for the rendering of services which are directly related to the construction of
the asset, for example, those for the services of project managers and architects; and
(b) Contracts for destruction or restoration of assets, and the restoration of the
environment following the demolition of assets.

A.S. 8 : Accounting for Research and Development:

Accounting Standard (AS) 8, Accounting for Research and Development, is withdrawn from the
date of AS 26, Intangible Assets, becoming mandatory for respective enterprises. AS 26 is
published elsewhere in this Compendium.

A.S. 9 : Revenue Recognition:

This Statement deals with the bases for recognition of revenue in the statement of profit
and loss of an enterprise. The Statement is concerned with the recognition of revenue
arising in the course of the ordinary activities of the enterprise from:
— The rendering of services, and
— The use by others of enterprise resources yielding interest, royalties and dividends.

This Statement does not deal with the following aspects of revenue recognition to which
special considerations apply:
(i) Revenue arising from construction contracts;
(ii) Revenue arising from hire-purchase, lease agreements;
(iii) Revenue arising from government grants and other similar subsidies;
(iv) Revenue of insurance companies arising from insurance contracts.

Revenue recognition is mainly concerned with the timing of recognition of revenue in the
statement of profit and loss of an enterprise. The amount of revenue arising on a
transaction is usually determined by agreement between the parties involved in the
transaction. When uncertainties exist regarding the determination of the amount, or its
associated costs, these uncertainties may influence the timing of revenue recognition.

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A.S. 10 : Accounting for Fixed Assets:

Financial statements disclose certain information relating to fixed assets. In many

enterprises these assets are grouped into various categories, such as land, buildings, plant
and machinery, vehicles, furniture and fittings, goodwill, patents, trade marks and
designs.

This statement does not deal with the specialized aspects of accounting for fixed assets
that arise under a comprehensive system reflecting the effects of changing prices but
applies to financial statements prepared on historical cost basis.

Fixed assets often comprise a significant portion of the total assets of an enterprise, and
therefore are important in the presentation of financial position. Furthermore, the
determination of whether expenditure represents an asset or an expense can have a
material effect on an enterprise’s reported results of operations.

A.S. 11 : The Effects of Changes in Foreign Exchange Rates:

An enterprise may carry on activities involving foreign exchange in two ways. It may
have transactions in foreign currencies or it may have foreign operations. In order to
include foreign currency transactions and foreign operations in the financial statements of
an enterprise, transactions must be expressed in the enterprise’s reporting currency and
the financial statements of foreign operations must be translated into the enterprise’s
reporting currency.

The principal issues in accounting for foreign currency transactions and foreign
operations are to decide which exchange rate to use and how to recognize in the financial
statements the financial effect of changes in exchange rates.

This Statement should be applied:

(a) In accounting for transactions in foreign currencies; and
(b) In translating the financial statements of foreign operations.

This Statement also deals with accounting for foreign currency transactions in the nature
of forward exchange contracts.

A.S. 12 : Accounting for Government Grants:

This Statement dealswith accounting for government grants.Government grants are

sometimes called by other names such as subsidies, cash incentives, duty drawbacks, etc.

This Statement does not deal with:

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(i) 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;
(ii) Government assistance other than in the form of government grants;
(iii) Government participation in the ownership of the enterprise.

The receipt of government grants by an enterprise is significant for preparation of the

financial statements for two reasons. Firstly, if a government grant has been received, an
appropriate method of accounting therefore is necessary. Secondly, it is desirable to give
an indication of the extent to which the enterprise has benefited from such grant during
the reporting period. This facilitates comparison of an enterprise’s financial statements
with those of prior periods and with those of other enterprises.

A.S. 13 : Accounting for Investments:

This Statement deals with accounting for investments in the financial statements of
enterprises and related disclosure requirements.

Enterprises hold investments for diverse reasons. For some enterprises, investment
activity is a significant element of operations, and assessment of the performance of the
enterprise may largely, or solely, depend on the reported results of this activity.

For some investments, an active market exists from which a market value can be
established. For such investments, market value generally provides the best evidence of
fair value. For other investments, an active market does not exist and other means are
used to determine fair value.

An enterprise should disclose current investments and long term investments distinctly in
its financial statements.

A.S. 14 : Accounting for Amalgamations:

This statement deals with accounting for amalgamations and the treatment of any
resultant goodwill or reserves. This statement is directed principally to companies
although some of its requirements also apply to financial statements of other enterprises.

For all amalgamations, the following disclosures are considered appropriate in the first
financial statements following the amalgamation:
(a) Names and general nature of business of the amalgamating companies;
(b) Effective date of amalgamation for accounting purposes;
(c) The method of accounting used to reflect the amalgamation; and
(d) Particulars of the scheme sanctioned under a statute.

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A.S. 15 : Employee Benefits:

The objective of this Statement is to prescribe the accounting and disclosure for
employee benefits. The Statement requires an enterprise to recognise:
(a) a liability when an employee has provided service in exchange for employee benefits
to be paid in the future; and
(b) an expense when the enterprise consumes the economic benefit arising from service
provided by an employee in exchange for employee benefits.

This Statement should be applied by an employer in accounting for all employee benefits,
except employee share-based payments.

This Statement does not deal with accounting and reporting by employee benefit plans.

Employee benefits include:

(a) short-term employee benefits, such as wages, salaries and social security
contributions
(b) Post-employment benefits such as gratuity, pension, and other retirement benefits.
(c) Other long-term employee benefits, including long-service leave or sabbatical
Leave etc.

A.S. 16 : Borrowing Costs:

The objective of this Statement is to prescribe the accounting treatment for borrowing
costs.

Borrowing costs that are directly attributable to the acquisition, construction or

production of a qualifying asset should be capitalized as part of the cost of that asset. The
amount of borrowing costs eligible for capitalization should be determined in accordance
with this Statement. Other borrowing costs should be recognized as an expense in the
period in which they are incurred.

Borrowing costs are capitalized as part of the cost of a qualifying asset when it is
probable that they will result in future economic benefits to the enterprise and the costs
can be measured reliably. Other borrowing costs are recognized as an expense in the
period in which they are incurred.

The financial statements should disclose:

(a) The accounting policy adopted for borrowing costs; and
(b) The amount of borrowing costs capitalized during the period.

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A.S. 17 : Segment Reporting:

The objective of this Statement is to establish principles for reporting financial

information, about the different types of products and services an enterprise produces and
the different geographical areas in which it operates. Such information helps users of
financial statements:
(a) Better understand the performance of the enterprise;
(b) Better assess the risks and returns of the enterprise; and
(c) Make more informed judgments about the enterprise as a whole.

This Statement should be applied in presenting general purpose financial statements.

The requirements of this Statement are also applicable in case of consolidated financial
statements.

An enterprise should comply with the requirements of this Statement fully and not
selectively.

If a single financial report contains both consolidated financial statements and the
separate financial statements of the parent, segment information need be presented only
on the basis of the consolidated financial statements. In the context of reporting of
segment information in consolidated financial statements, the references in this Statement
to any financial statement items should construed to be the relevant item as appearing in
the consolidated financial statements.

A.S. 18 : Related Party Disclosures:

The objective of this Statement is to establish requirements for disclosure of:

(a) Related party relationships; and
(b) Transactions between a reporting enterprise and its related parties.

This Statement should be applied in reporting related party relationships and transactions
between a reporting enterprise and its related parties. The requirements of this Statement
apply to the financial statements of each reporting enterprise as also to consolidated
financial statements presented by a holding company.

No disclosure is required in consolidated financial statements in respect of intra-group

transactions.

Disclosure of transactions between members of a group is unnecessary in consolidated

financial statements because consolidated financial statements present information about
the holding and its subsidiaries as a single reporting enterprise.

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No disclosure is required in the financial statements of state controlled enterprises as
regards related party relationships with other state-controlled enterprises and transactions
with such enterprises.

A.S. 19 : Leases

The objective of this Statement is to prescribe, for lessees and lessors, the appropriate
accounting policies and disclosures in relation to finance leases and operating leases.

This Statement should be applied in accounting for all leases other than:
(a) lease agreements to explore for or use natural resources, such as oil, gas, timber,
metals and other mineral rights; and
(b) licensing agreements for items such as motion picture films, video recordings, plays,
manuscripts, patents and copyrights; and
(c) Lease agreements to use lands.

This Statement applies to agreements that transfer the right to use assets even though
substantial services by the lessor may be called for in connection with the operation or
maintenance of such assets. On the other hand, this Statement does not apply to
agreements that are contracts for services that do not transfer the right to use assets from
one contracting party to the other.

A.S. 20 : Earnings Per Share:

The objective of this Statement is to prescribe principles for the determination and
presentation of earnings per share which will improve comparison of performance among
different enterprises for the same period and among different accounting periods for the
same enterprise. The focus of this Statement is on the denominator of the earnings per
share calculation. Even though earnings per share data has limitations because of
different accounting policies used for determining ‘earnings’, a consistently determined
denominator enhances the quality of financial reporting.

This Statement should be applied by enterprises whose equity shares or potential equity
shares are listed on a recognized stock exchange in India. An enterprise which has neither
equity shares nor potential equity shares which are so listed but which discloses earnings
per share should calculate and disclose earnings per share in accordance with this
Statement.

In consolidated financial statements, the information required by this Statement should be

presented on the basis of consolidated information.

This Statement applies to enterprises whose equity or potential equity shares are listed on
a recognized stock exchange in India. An enterprise which has neither equity shares nor
potential equity shares which are so listed is not required to disclose earnings per share.

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However, comparability in financial reporting among enterprises is enhanced if such an
enterprise that is required to disclose by any statute or chooses to disclose earnings per
share calculates earnings per share in accordance with the principles laid down in this
Statement. In the case of a parent (holding enterprise), users of financial statements are
usually concerned with, and need to be informed about, the results of operations of both
the enterprise itself as well as of the group as a whole. Accordingly, in the case of such
enterprises, this Statement requires the presentation of earnings per share information on
the basis of consolidated financial statements as well as individual financial statements of
the parent. In consolidated financial statements, such information is presented on the
basis of consolidated information.

A.S. 21 : Consolidated Financial Statements:

The objective of this Statement is to lay down principles and procedures for preparation
and presentation of consolidated financial statements. Consolidated financial statements
are presented by a parent (also known as holding enterprise) to provide financial
information about the economic activities of its group. These statements are intended to
present financial information about a parent and its subsidiary (ies) as a single economic
entity to show the economic resources controlled by the group, the obligations of the
group and results the group achieves with its resources.

This Statement should be applied in the preparation and presentation of consolidated

financial statements for a group of enterprises under the control of a parent.

This Statement should also be applied in accounting for investments in subsidiaries in the
separate financial statements of a parent.

In the preparation of consolidated financial statements, other Accounting Standards also

apply in the same manner as they apply to the separate financial statements.

This Statement does not deal with:

(a) Methods of accounting for amalgamations and their effects on consolidation,
including goodwill arising on amalgamation (see AS 14, Accounting for Amalgamations);
(b) Accounting for investments in associates (at present governed by AS 13, Accounting
for Investments); and
(c) Accounting for investments in joint ventures (at present governed by AS 13,
Accounting for Investments).

A.S. 22 : Accounting for Taxes on Income:

The objective of this Statement is to prescribe accounting treatment for taxes on income.
Taxes on income are one of the significant items in the statement of profit and loss of an
enterprise. In accordance with the matching concept, taxes on income are accrued in the

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same period as the revenue and expenses to which they relate. Matching of such taxes
against revenue for a period poses special problems arising from the fact that in a number
of cases, taxable income may be significantly different from the accounting income. This
divergence between taxable income and accounting income arises due to two main
reasons. Firstly, there are differences between items of revenue and expenses as
appearing in the statement of profit and loss and the items which are considered as
revenue, expenses or deductions for tax purposes. Secondly, there are differences
between the amount in respect of a particular item of revenue or expense as recognized in
the statement of profit and loss and the corresponding amount which is recognized for the
computation of taxable income.

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

For the purposes of this Statement, taxes on income include all domestic and foreign
taxes which are based on taxable income.

This Statement does not specify when, or how, an enterprise should account for taxes that
are payable on distribution of dividends and other distributions made by the enterprise.

A.S. 23 : Accounting for Investments in Associates in Consolidated Financial

Statements:

The objective of this Statement is to set out principles and procedures for recognizing, in
the consolidated financial statements, the effects of the investments in associates on the
financial position and operating results of a group.

This Statement should be applied in accounting for investments in associates in the

preparation and presentation of consolidated financial statements by an investor.

This Statement does not deal with accounting for investments in associates in the
preparation and presentation of separate financial statements by an investor.

On the first occasion when investment in an associate is accounted for in consolidated

financial statements in accordance with this Statement, the carrying amount of investment
in the associate should be brought to the amount that would have resulted had the equity
method of accounting been followed as per this Statement since the acquisition of the
associate. The corresponding adjustment in this regard should be made in the retained
earnings in the consolidated financial statements.

A.S. 24 : Discontinuing Operations:

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

This Statement applies to all discontinuing operations of an enterprise.

The requirements related to cash flow statement contained in this Statement are
applicable where an enterprise prepares and presents a cash flow statement.

A.S. 25 : Interim Financial Reporting:

The objective of this Statement is to prescribe the minimum content of an interim

financial report and to prescribe the principles for recognition and measurement in
complete or condensed financial statements for an interim period. Timely and reliable
interim financial reporting improves the ability of investors, creditors, and others to
understand an enterprise's capacity to generate earnings and cash flows, its financial
condition and liquidity.

This Statement does not mandate which enterprises should be required to present interim
financial reports, how frequently, or how soon after the end of an interim period. If an
enterprise is required or elects to prepare and present an interim financial report, it should
comply with this Statement.

A statute governing an enterprise or a regulator may require an enterprise to prepare and

present certain information at an interim date which may be different in form and/or
content as required by this Statement. In such a case, the recognition and measurement
principles as laid down in this Statement are applied in respect of such information,
unless otherwise specified in the statute or by the regulator.

The requirements related to cash flow statement, complete or condensed, contained in

this Statement are applicable where an enterprise prepares and presents a cash flow
statement for the purpose of its annual financial report.

A.S. 26 : Intangible Assets:

The objective of this Statement is to prescribe the accounting treatment for intangible
assets that are not dealt with specifically in another Accounting Standard. This Statement
requires an enterprise to recognize an intangible asset if, and only if, certain criteria are
met. The Statement also specifies how to measure the carrying amount of intangible
assets and requires certain disclosures about intangible assets.

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This Statement should be applied by all enterprises in accounting for intangible assets,
except:
(a) Intangible assets that are covered by another Accounting Standard;
(b) Financial assets;
(c) Mineral rights and expenditure on the exploration for, or development and extraction
of, minerals, oil, natural gas and similar non-regenerative resources; and
(d) Intangible assets arising in insurance enterprises from contracts with policyholders.
This Statement applies to, among other things, expenditure on advertising, training, start-
up, and research and development activities. Research and development activities are
directed to the development of knowledge. Therefore, although these activities may result
in an asset with physical substance (for example, a prototype), the physical element of the
asset is secondary to its intangible component, that is the knowledge embodied in it. This
Statement also applies to rights under licensing agreements for items such as motion
picture films, video recordings, plays, manuscripts, patents and copyrights. These items
are excluded from the scope of AS 19.

A.S. 27 : Financial Reporting of Interests in Joint Ventures:

The objective of this Statement is to set out principles and procedures for accounting for
interests in joint ventures and reporting of joint venture assets, liabilities, income and
expenses in the financial statements of venturers and investors.

This Statement should be applied in accounting for interests in joint ventures and the
reporting of joint venture assets, liabilities, income and expenses in the financial
statements of venturers and investors, regardless of the structures or forms under which
the joint venture activities take place.

The requirements relating to accounting for joint ventures in consolidated financial

statements, contained in this Statement, are applicable only where consolidated financial
statements are prepared and presented by the venturers.

A venturer should disclose, in its separate financial statements, the aggregate amounts of
each of the assets, liabilities, income and expenses related to its interests in the jointly
controlled entities.

A.S. 28 : Impairment of Assets:

The objective of this Statement is to prescribe the procedures that an enterprise applies to
ensure that its assets are carried at no more than their recoverable amount. An asset is
carried at more than its recoverable amount if its carrying amount exceeds the amount to
be recovered through use or sale of the asset. If this is the case, the asset is described as
impaired and this Statement requires the enterprise to recognize an impairment loss. This

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Statement also specifies when an enterprise should reverse an impairment loss and it
prescribes certain disclosures for impaired assets.

This Statement does not apply to inventories, assets arising from construction contracts,
deferred tax assets or investments because existing Accounting Standards applicable to
these assets already contain specific requirements for recognizing and measuring the
impairment related to these assets.
This Statement applies to assets that are carried at cost. It also applies to assets that are
carried at revalued amounts in accordance with other applicable Accounting Standards.
However, identifying whether a revalued asset may be impaired depends on the basis
used to determine the fair value of the asset.

A.S. 29 : Provisions, Contingent Liabilities and Contingent Assets:

The objective of this Statement is to ensure that appropriate recognition criteria and
measurement bases are applied to provisions and contingent liabilities and that sufficient
information is disclosed in the notes to the financial statements to enable users to
understand their nature, timing and amount. The objective of this Statement is also to lay
down appropriate accounting for contingent assets.

This Statement applies to financial instruments (including guarantees) that are not carried
at fair value.

Executory contracts are contracts under which neither party has performed any of its
obligations or both parties have partially performed their obligations to an equal extent.
This Statement does not apply to executory contracts unless they are onerous.

This Statement applies to provisions, contingent liabilities and contingent assets of

insurance enterprises other than those arising from contracts with policy-holders.

This Statement defines provisions as liabilities which can be measured only by using a
substantial degree of estimation. The term’ provision’ is also used in the context of items
such as depreciation, impairment of assets and doubtful debts: these are adjustments to
the carrying amounts of assets and are not addressed in this Statement.

This Statement applies to provisions for restructuring (including discontinuing

operations). Where a restructuring meets the definition of a discontinuing operation,
additional disclosures are required by AS 24, Discontinuing Operations.

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 ASSIGNMENT 3

۞Bring out a brief comparison of Indian Accounting Standards with

International Accounting Standards:

INTERNATIONAL ACCOUNTING INDIAN ACCOUNTING

STANDARDS (I.A.S.) STANDARDS (.A.S.)

Serial No. Accounting Title of Accounting Title of

Standard Standard Standard Standard
Number Number

1 I.A.S. 1 Presentation of A.S. 1 Disclosure of

financial accounting
statements policies

2 I.A.S. 2 Inventories A.S. 2 Valuations of

inventories

3 I.A.S. 7 Cash flow A.S. 3 Cash flow

statement statement

4 Corresponding A.S. 6 Depreciation

I.A.S. has been accounting
withdrawn since
the matter is not
covered by
I.A.S. 16 &
I.A.S. 38

5 I.A.S. 8 Accounting A.S. 5 Net Profit or

Policies, Loss for the
Changes Period, Prior
in Accounting Period Items
Estimates and and Changes in
Errors Accounting
Policies

17
6 I.A.S. 10 Events After the A.S. 4 Contingencies
Balance and Events
Sheet Date Occurring after
the Balance
Sheet Date

7 I.A.S. 11 Construction A.S. 7 Construction

Contracts Contracts

8 I.A.S. 12 Income Taxes A.S. 22 Accounting for

Taxes on Income

9 I.A.S. 14 Segment A.S. 17 Segment

Reporting Reporting

10 I.A.S. 16 Property, Plant A.S. 10 Property, Plant

and Equipment and Equipment

11 I.A.S. 17 Leases A.S. 19 Leases

12 I.A.S. 18 Revenue A.S. 9 Revenue

13 I.A.S. 19 Employee A.S. 15 Employee

Benefits Benefits

14 I.A.S. 20 Accounting for A.S. 12 Accounting for

Government Government
Grants and Grants
Disclosure of
Government
Assistance

18
15 I.A.S. 21 The Effects of A.S. 11 The Effects of
Changes in Changes in
Foreign Foreign
Exchange Rates Exchange Rates

16 I.A.S. 23 Borrowing A.S. 16 Borrowing

Costs Costs

17 I.A.S. 24 Related Party A.S. 18 Related Party

Disclosures Disclosures

18 I.A.S. 27 Consolidated A.S. 21 Consolidated

and Separate Financial
Financial Statements
Statements

19 I.A.S. 28 Investments in A.S. 23 Accounting for

Associates Investments
in Associates in
Consolidated
Financial
Statements

20 I.A.S. 31 Interests in A.S. 27 Financial

Joint Ventures Reporting of
Interests in
Joint Ventures

21 I.A.S. 33 Earnings Per A.S. 20 Earnings Per

Share Share

22 I.A.S. 34 Interim A.S. 25 Interim

Financial Financial
Reporting Reporting

23 I.A.S. 36 Impairment of A.S. 28 Impairment of

Assets Assets

24 I.A.S. 37 Provisions, A.S. 29 Provisions,

Contingent Contingent
Liabilities and Liabilities and
Contingent Contingent
Assets Assets

25 I.A.S. 38 Intangible A.S. 26 Intangible

Assets Assets

19
26 Corresponding A.S. 13 Accounting for
IAS has been Investments
Withdrawn
since the matter
is now covered
by IAS 32, 39
and 40 and
IFRS 7

27 I.F.R.S. 3 Business A.S. 14 Accounting for

Combinations Amalgamations

28 I.F.R.S. 5 Non-current A.S. 24 Discontinuing

Assets Held for Operations2.
Sale and Further, AS 10
Discontinued deals with
Operations accounting for
fixed assets
retired from
active use.

NOTE:

1 It may be noted that International Accounting Standards nos. 3, 4, 5,

6, 9, 13, 15, 22,25, 30 and 35 have already been withdrawn by the
International Accounting Standards Board (IASB).

2 IASB has issued IFRS 5 and withdrew IAS 35, Discontinuing

Operations, on which AS 24 is based. An Indian Accounting Standard
corresponding to IFRS 5 is under preparation. After the issuance of this
Indian AS, AS 24 is proposed to be withdrawn.

20