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AllACCOUNTINGSTANDARDS

AccountingStandardsarethedefinedaccountingpoliciesissuedbyGovernmentorexpertinstitute.Thesestandardsareissuedtobringharmonizationinfollowupofaccountingpolicies.

Presently,InstituteofCharteredAccountantsofIndiahasissued29AccountingStandardsaslistedbelow.

AS01.DisclosureofAccountingPolicies

AS02.ValuationofInventories

AS03.CashFlowStatements

AS04.ContingenciesandEventsOccurringAftertheBalanceSheetDate

AS05.NetProfitorLossforthePeriod,PriorPeriodItemsandChangesinAccountingPolicies

AS06.DepreciationAccounting

AS07.ConstructionContracts

AS08.AccountingforResearchandDevelopment(NotApplicablenow)

AS09.RevenueRecognition

AS10.AccountingforFixedAssets

AS11.AccountingfortheEffectsofChangesinForeignExchangeRates

AS12.AccountingforGovernmentGrants

AS13.AccountingforInvestments

AS14.AccountingforAmalgamation

AS15.AccountingforRetirementBenefitsinthefinancialStatementsofEmployers

AS16.BorrowingCosts

AS17.SegmentReporting

AS18.RelatedPartyDisclosure

AS19.Leases

AS20.EarningPerShare

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AS21.ConsolidatedFinancialStatements

AS22.AccountingforTaxesonIncome

AS23.AccountingforInvestmentsinAssociatesinConsolidatedFinancialStatements

AS24.DiscontinuingOperations

AS25.InterimFinancialReporting

AS26.IntangibleAssets

AS27.FinancialReportingofInterestsinJointVentures

AS28.ImpairmentofAssets

AS29.Provisions,ContingentLiabilities&ContingentAssets

ProcedureforIssuingAccountingStandards

..AccountingStandardBoard(ASB)determinesthebroadareasinwhichAccountin

gStandardsneedtobeformulated.

..InthepreparationofAS,ASBisassistedbyStudyGroups.

..ASBalsoholdsdiscussionswithrepresentativeofGovernment,PublicSectorUndertakings,Industryandotherorganizations(ICSI/ICWAI)forascertainingtheirviews.

..Anexposuredraftoftheproposedstandardispreparedandissuedforcomment

sbymembersofICAIandthepublicatlarge.

..Aftertakingintoconsiderationthecommentsreceived,thedraftoftheproposedstandardwillbefinalizedbyASBandsubmittedtothecounciloftheInstitute.

..ThecounciloftheInstitutewillconsiderthefinaldraftoftheproposedStandardandIffoundnecessary,modifythesameinconsultationwithASB.TheASontherelevantsubjectwill

thenbeissuedundertheauthorityofthecouncil.

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ACCOUNTINGSTANDARDS-01

DISCLOSUREOFACCOUNTINGPOLICY

Accountingpoliciesarethespecificaccountingprinciplesandthemethodsofapplyingthoseprinciplesadoptedbyanenterpriseinthepreparationandpresentationoffinancialstatements.

-Allsignificantaccountingpoliciesshouldbedisclosed.

-Suchdisclosureformpartoffinancialstatements.

-Alldisclosuresshouldbemadeatoneplace.

-Specificdisclosurefortheadoptionoffundamentalaccountingassumptionsisnotrequired.

-Disclosureofaccountingpoliciescannotremedyawrongorinappropriatetreatmentoftheitemintheaccounts.

Anychangeinaccountingpolicieswhichhasamaterialeffectinthecurrentperiodorwhichisreasonablyexpectedtohavematerialeffectinlaterperiodsshouldbedisclosed.

Inthecaseofachangeinaccountingpolicies,whichhasamaterialeffectinthecurrentperiod,theamountbywhichanyiteminthefinancialstatementsisaffectedbysuchchangeshouldalsobedisclosedtotheextentascertainable.Wheresuchamountisnotascertainable,thefactshouldbeindicated.

FundamentalAccountingAssumption:(GCA):

1]GoingConcern2]Consistency3]Accrual

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Majorconsiderationsgoverningtheselectionofaccountingpolicies:

1]Prudence2]Substanceoverform(LogicoverLaw)3]Materiality

Thefollowingareexamplesoftheareasinwhichdifferentaccountingpoliciesmaybeadoptedbydifferententerprises:

-Methodsofdepreciation

-Methodsoftranslationofforeigncurrency

-Valuationofinventories

-Valuationofinvestments

-Treatmentofretirementbenefits

-Treatmentofcontingentliabilitiesetc.

ACCOUNTINGSTANDARDS-02

VALUATIONOFINVENTORY

Inventoriesareassets:

heldforsaleinordinarycourseofbusiness;

intheprocessofproductionfrosuchsale(WIP);

intheformofmaterialsorsuppliestobeconsumedintheproductionprocessorintherenderingofservices.

However,thisstandarddoesnotapplytothevaluationoffollowinginventories:

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(a)WIParisingunderconstructioncontract(ReferAS7);

(b)WIParisingintheordinarycourseofbusinessofserviceproviders;

(c)Shares,debenturesandotherfinancialinstrumentsheldasstockintrade;and

(d)Producersinventoriesoflivestock,agriculturalandforestproducts,andmineraloils,oresandgasestotheextentthattheyaremeasuredatnetrealizablevalueinaccordancewithwellestablishedpracticesinthoseindustries.

Inventoriesshouldbevaluedatthelowerofcostandnetrealizablevalue.

Thecostofinventoriesshouldcomprise

a)Allcostsofpurchase

b)Costsofconversion

c)Othercostsincurredinbringingtheinventoriestotheirpresentlocationandcondition.

Thecostsofpurchaseconsistof

a)Thepurchaseprice

b)Dutiesandtaxes(otherthanthosesubsequentlyrecoverablebytheenterprisefromthetaxing

authoritieslikeCENVATcredit)

c)Freightinwardsandotherexpendituredirectlyattributabletotheacquisition.

Tradediscounts(butnotcashdiscounts),rebates,dutydrawbacksandothersimilaritemsaredeductedindeterminingthecostsofpurchase.

Thecostsofconversionincludedirectcostsandsystematicallocationoffixedandvariableproductionoverhead.

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Allocationoffixedoverheadsisbasedonthenormalcapacityoftheproductionfacilities.Normalcapacityistheproduction,expectedtobeachievedonanaverageoveranumberofperiodsorseasonsundernormalcircumstances,takingintoaccountthelossofcapacityresultingfromplannedmaintenance.

UnderRecovery:Unallocatedoverheadsarerecognizedasanexpenseintheperiodinwhichtheyareincurred.

Example:Normalcapacity=20000units

Production=18000units

Sales=16000units

ClosingStock=2000units

FixedOverheads=Rs.60000/-

Then,Recoveryrate=Rs60000/20000=Rs3perunit

FixedOverheadswillbebifurcatedintothreeparts:

CostofSales:16000x3=48000

ClosingStock:2000x3=6000

UnderRecovery:Rs.6000(tobechargedtoP/L)

(Apparentlyitseemsthatfixedcostelementinclosingstockshouldbe60000/18000*2000=Rs6666.67.butthisiswrongasperAS-2)

OverRecovery:Inperiodofhighproduction,theamountoffixedproductionoverheadsisallocatedtoeachunitofproductionisdecreasedsothatinventories.

Example:Normalcapacity=20000units

Production=25000units

Sales=23000units

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ClosingStock=2000units

FixedOverheads=Rs60000/-

Than,RecoveryRate=Rs60000/20000=Rs3perunit

But,RevisedRecoveryRate=Rs60000/25000=Rs.2.40perunit

CostofSales:23000x2.4=Rs.55200

ClosingStock:2000x2.4=Rs.4800

Jointorbyproducts:

Incaseofjointorbyproducts,thecostsincurreduptothestageofsplitoffshouldbeallocatedonarationalandconsistentbasis.Thebasisofallocationmaybesalevalueatsplitoffpointorsalevalueatthecompletionofproduction.Incaseofthebyproducts

ofnegligiblevalueorwastes,valuationmaybetakenatnetrealizablevalue.Thecostofmainproductisthenjointcostminusnetrealizablevalueofbyproductorwaste.

Theothercostsarealsoincludedinthecostofinventorytotheextenttheycontributeinbringingtheinventorytoitspresentlocationandcondition.

Interestandotherborrowingcostsareusuallynotincludedincostofinventory.However,AS-16recommendstheareaswhereborrowingcostsaretakenascostofinventory.

Certaincostsarestrictlynottakenascostofinventory.

(a)Abnormalamountsofwastedmaterials,labour,orotherproductioncosts;

(b)Storagecosts,unlessthosecostsarenecessaryintheproductionprocesspriortoafurtherproductionstage;

(c)Administrativeoverheadsthatdonotcontributetobringingtheinventoriestotheirpresentlocationandcondition;and

(d)SellingandDistributioncosts.

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CostFormula:

..Specificidentificationmethodfordeterminingcostofinventories

Specificidentificationmethodmeansdirectlylinkingthecostwithspecificitemofinventories.Thismethodhasapplicationinfollowingconditions:

..Incaseofpurchaseofitemspecificallysegregatedforspecificprojectandisnotordinarilyinterchangeable.

..Incaseofgoodsofservicesproducedandsegregatedforspecificproject.

..WhereSpecificIdentificationmethodisnotapplicable

Thecostofinventoriesisvaluedbythefollowingmethods;

..FIFO(FirstInFirstOut)Method

..WeightedAverageCost

Costofinventoriesincertainconditions:

Thefollowingmethodsmaybeusedforconvenienceiftheresultsapproximateactualcost.

StandardCost:Ittakesintoaccountnormallevelofconsumptionofmaterialandsupplies,labour,efficiencyandcapacityutilization.Itmustberegularlyreviewedtakingintoconsiderationthecurrentcondition.

RetailMethod:Normallyapplicableforretailtrade.Costofinventoryisdeterm

inedbyreducingthegrossmarginfromthesalevalueofinventory.

NetRealisableValue:NRVmeanstheestimatedsellingpriceinordinarycourseofbusiness,atthetimeofvaluation,lessestimatedcostofcompletionandestimatedcostnecessarytomakethesale.

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Comparisonbetweennetrealizablevalueandcostofinventory

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Thecomparisonbetweencostandnetrealizablevalueshouldbemadeonitem-by-itembasis.(Insomecases,groupofitems-by-groupofitembasis)

ForExample:

CostNRVInventoryValueasperAS-2

ItemA1009090

ItemB100115100

Total200205200190

RawMaterialValuation

Ifthefinishedgoods,towhichrawmaterialisapplied,issoldatprofit,RAWMATERIALisvaluedatcostirrespectiveofitsNRVlevelbeinglowertoitscosts.

ACCOUNTINGSTANDARDS-03

CASHFLOWSTATEMENT

Definitions:

Cashcomprisescashonhandandcashatbank.(DemandDepositswithbank)

CashEquivalentsare

..ShortTerm

..HighlyLiquidInvestments(Maturityaround3months)

..Subjecttoinsignificantriskofchangesinvalue.

CashFlowsareinflowsandoutflowsofcashandcashequivalents.

CashFlowStatementrepresentsthecashflowsduringthespecifiedperiodbyoperating,investing

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andfinancingactivities.

OperatingActivitiesaretheprincipalrevenue-producingactivitiesoftheenterpriseandotheractivitiesthatarenotinvestingactivitiesandfinancingactivities.

Example:

1]Cashreceiptsfromsalesofgoods/services

2]Cashreceiptsfromroyalties,feesandotherrevenueitems

3]Cashpaymentsforsalaries,wagesandrent

4]Cashpaymenttosuppliersforgoods

5]CashpaymentsorrefundsofIncomeTaxunlesstheycanbespecificallyidentifiedwithfinancingorinvestingactivities

6]Cashreceiptsandpaymentstofuturecontracts,forwardcontractswhenthecontractsareheldfor

tradingpurposes.

CashfromoperatingactivitiescanbedisclosedeitherbyDIRECTMETHODORBYINDIRECTMETHOD.

InvestingActivitiesaretheacquisitionanddisposaloflong-termassetsandotherinvestmentsnotincludedincashequivalents.

Example:

1]Cashpayments/receiptstoacquire/saleoffixedassetsincludingintangibleassets

2]Cashpaymentstoacquiresharesorinterestinjointventures(otherthanthecaseswhereinstrumentsareconsideredascashequivalents)

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3]Cashadvancesandloansmadetothirdparties(Loansanctionedbyafinancialenterpriseisoperatingactivity)

4]DividendsandInterestreceived

5]Cashflowsfromacquisitionsanddisposalofsubsidiaries

FinancingActivitiesareactivitiesthatresultinchangesinthesizeandcompositionoftheownerscapital(includingpreferencesharecapitalinthecaseofacompany)andborrowingoftheenterprise.

Example:

1]Cashproceedsfromissueofsharesanddebentures

2]Buybackofshares

3]RedemptionofPreferencesharesordebentures

4]Cashrepaymentsofamountborrowed.

5]DividendandInterestpaid

Anenterpriseshouldreportseparatelymajorclassesofgrosscashreceiptsandgrosscashpaymentsarisingfrominvestingandfinancingactivities.

However,cashflowsfromfollowingactivitiesmaybereportedonanetbasis.

..Cashreceiptsandpaymentsonbehalfofcustomers

Forexample:Cashcollectedonbehalfof,andpaidoverto,theownersofproperties.

..Cashflowsfromitemsinwhichturnoverisquick,theamountsarelargeandthematuritiesareshort.

Forexample:Purchaseandsaleofinvestments

..ForFinancialEnterprise:Cashreceiptsandpaymentsfortheacceptanceandrepaymentof

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depositswithafixedmaturitydate.

..ForFinancialEnterprise:Depositsplaced/withdrawnfromotherfinancialenterprises

..ForFinancialEnterprise:Cashadvancesandloansmadetocustomersandtherepaymentofthose

advancesandloans.

ForeignCurrencyCashFlows:

Cashflowsarisinginforeigncurrencyshouldberecordedinenterprisereportingcurrency

applyingtheexchangeconversionrateexistingonthedateofcashflow.

Theeffectofchangesinexchangeratesofcashandcashequivalentsheldinforeigncurrencyshouldbereportedasseparatepartofthereconciliationofthechangesincashandcashequivalentsduringtheperiod.

ExtraordinaryItems:Theseitemsshouldbeseparatelyshownunderrespectivehea

dsofcashfromoperating,investingandfinancingactivities.

Investingandfinancingtransactionsthatdonotrequiretheuseofcashandcashequivalentsshouldbeexcludedfromacashflowstatement.ForExample:

A]Theconversionofdebttoequity

B]Acquisitionofanenterprisebymeansofissueofshares

OtherDisclosure:

Componentsofcashandcashequivalents.

Reconciliationofclosingcashandcashequivalentswithitemsofbalancesheet.

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Theamountofsignificantcashandcashequivalentbalancesheldbytheenterprise,whicharenotavailableforusebyit.

ACCOUNTINGSTANDARDS-04

CONTINGENCIESANDEVENTSOCCURRINGAFTERTHEBALANCESHEETDATE

Contingency:Acontingencyisaconditionorsituation,theultimateoutcomeofwhich,gainorloss,willbeknownordeterminedonlyontheoccurrence,ornon-occurrence,ofoneormoreuncertainfutureevents.

AccountingTreatment:

Ifitislikelythatacontingencywillresultin

LOSS:Itisprudenttoprovideforthatlossinthefinancialstatements.

PROFIT:Notrecognizedasrevenue(However,whentherealizationofagainisvirtuallycertain,thensuchgainisnotacontingencyandaccountingforthegainisappropriate.)

Theestimatesoftheoutcomeandofthefinancialeffectofcontingenciesaredetermined

a)bythejudgmentofthemanagementbyreviewofeventsoccurringafterthebalancesheetdate.

b)byexperienceoftheenterpriseinsimilartransaction

c)byreviewingreportsfromindependentexperts.

Ifestimationcannotbemade,disclosureismadeoftheexistenceandnatureofthecontingency.

Provisionsforcontingenciesarenotmadeinrespectofgeneralorunspecifiedrisks.

Theexistenceandamountofguaranteesandobligationsarisingfromdiscounted

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billsofexchangearegenerallydisclosedbywayofnoteeventhoughthepossibilityoflossisremote.

Theamountofacontingentlossshouldbeprovidedforbyachargeinthestatementofprofitandlossif:

itisprobablethatfutureeventswillconfirmthat,aftertakingintoaccountanyrelatedprobablerecovery,anassethasbeenimpairedoraliabilityhasbeenincurredasatthebalancesheetdate,and

areasonableestimateoftheamountoftheresultinglosscanbemade.

Ifeitherofaforesaidtwoconditionsisnotmet,e.g.whereareasonableestimateofthelossisnotpracticable,theexistenceofthecontingencyshouldbedisclosedbywayofnoteunlessthe

possibilityoflossisremote.Suchdisclosureshouldprovidefollowinginformation:

a)Thenatureofthecontingency;

b)Theuncertaintieswhichmayaffectthefutureoutcome;

c)Anestimateofthefinancialeffectorastatementthatsuchanestimatecannotbemade.

EventsOccurringaftertheBalanceSheetDate:

Eventsoccurringafterthebalancesheetdatearethosesignificantevents,bothfavourableandunfavourable,thatoccurbetweenthebalancesheetdateandthedateonwhichthefinancialstatementsareapprovedbytheBoardofDirectorsincaseofacompany,and,bythecorrespondingapprovingauthorityinthecaseofanyotherentity.

Twotypesofeventscanbeidentified:

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AdjustingEvent:

Those,whichprovidefurtherevidenceofconditionsthat,existedatthebalancesheetdate

Actualadjustmentsinfinancialstatementsarerequiredforadjustingevent.

Exceptions:

1]Although,notadjustingevent,Proposeddividendareadjustedinbooksofaccount.

2]Adjustmentsarerequiredfortheevents,whichoccurafterbalancesheetdatethatindicatesthatfundamentalaccountingassumptionofgoingconcernisnolonger,appropriate.

Non-AdjustingEvents:

Those,hitchareindicativeofconditionsthatarosesubsequenttothebalancesheetdate.

Noadjustmentsarerequiredtobemadeforsuchevents.But,disclosuresshouldbemadeinthereportoftheapprovingauthorityofthoseeventsoccurringafterthebalancesheetdatethatrepresentmaterialchangesandcommitmentsaffectingthefinancialpositionoftheenterprise.Suchdisclosureshouldprovidefollowinginformation:

..Thenatureoftheevents

..Anestimateofthefinancialeffect,orastatementthatsuchanestimatecannotbemade.

ACCOUNTINGSTANDARDS-05

NETPROFITORLOSSFORTHEPERIOD,PRIORPERIODITEMSANDCHANGESINACCOUNTINGPOLICY

Allitemsofincomeandexpense,whicharerecognizedinaperiod,shouldbeincludedinthedeterminationofnetprofitorlossfortheperiodunlessanAccountingStandardrequiresorpermitsotherwise.

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Thenetprofitorlossfortheperiodcomprisesthefollowingcomponents,eachofwhichshouldbedisclosedonthefaceofthestatementofprofitandloss:

..Profitorlossfromordinaryactivities;and

..Extraordinaryitems.

OrdinaryActivitiesareanyactivities,whichareundertakenbyanenterpriseaspartofitsbusiness,andsuchrelatedactivitiesinwhichtheenterpriseengagesinfurtheranceof,incidentalto,orarisingfrom,theseactivities.

Whenitemsofincomeandexpenseswithinprofitorlossfromordinaryactivitie

sareofsuchsize,naturethattheirdisclosureisrelevanttoexplaintheperformanceoftheenterprisefortheperiod,thenatureandamountofsuchitemsshouldbedisclosedproperly.Examplesofsuchcircumstancesare:

(ExceptionalItems)

..Disposalofitemsoffixedassets

..Litigationsettlements

..Legislativechangeshavingretrospectiveapplication

..Disposaloflongterminvestments

..Reversalofprovisions

Extraordinaryitemsareincomeorexpensethatarisesfromeventsortransactionsthatareclearlydistinctfromtheordinaryactivitiesoftheenterpriseand,therefore,arenotexpectedtorecurfrequentlyorregularly.

Examplesofeventsortransactionsthatgenerallygiverisetoextraordinaryitemsformost

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enterprisesare:

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..Attachmentofpropertyoftheenterprise;

..Anearthquake

However,claimsfrompolicyholdersarisingfromanearthquakedonotqualifyasanextraordinaryitemforaninsuranceenterprisethatinsuresagainstsuchrisks.

Extraordinaryitemsshouldbedisclosedinthestatementofprofitandlossasapartofnetprofitorlossfortheperiod.Thenatureandtheamountofeachextraordinaryitemshouldbeseparatelydisclosedinthestatementofprofitandlossinamannerthatitsimpactoncurrentprofitorlosscanbeperceived.

PriorPeriodItems:

PriorperioditemsareincomeorexpensesthatariseinthecurrentperiodasaresultofERRORorOMMISSIONSinthepreparationofthefinancialstatementsofoneormorepriorperiods.

Thenatureandamountofpriorperioditemsshouldbeseparatelydisclosedinthestatementofprofitandlossinamannerthattheirimpactonthecurrentprofitorlosscanbeperceived.

ChangesinAccountingPolicy:

Accountingpoliciesarethespecificaccountingprinciplesandthemethodsofapplyingthoseprinciplesadoptedbyanenterpriseinthepreparationandpresentationoffinancialstatements.

Achangeinanaccountingpolicyshouldbemadeonlyiftheadoptionofadiffer

entaccountingpolicyisrequired:

a)Bystatute

b)Forcompliancewithanaccountingstandard

c)Ifitisconsideredthatthechangewouldresultinamoreappropriatepresentationofthefinancialstatementsoftheenterprise.

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Anychangeinaccountingpolicywhichhasamaterialeffect,shouldbedisclosed.Suchchangesshouldbedisclosedinthestatementofprofitandlossinamannerthattheirimpactonprofitorlosscanbeperceived.

Wheretheeffectofsuchchangeisnotascertainable,thefactshouldbeindicated.

Ifachangeismadeintheaccountingpolicieswhichhasnomaterialeffectonthefinancialstatementsforthecurrentperiodbutwhichisreasonablyexpectedtohavematerialeffectinlaterperiods,thefactofsuchchangeshouldbeappropriatelydisclosedintheperiodinwhichthechangeisadopted.

Thefollowingarenotchangesinaccountingpolicies:

a)Theadoptionofanaccountingpolicyforeventswhichdifferinsubstancefrompreviouslyoccurringeventse.g.introductionofaformalretirementgratuityschemebyanemployerinplaceofadhocex-gratiapaymentstoemployeesonretirement;and

b)Theadoptionofanewaccountingpolicyforeventsortransactionswhichdidnotoccurpreviouslyorthatwereimmaterial.

ChangeinAccountingEstimate:

Thenatureandamountofachangeinanaccountingestimatewhichhasamaterialeffectinthecurrentperiod,orwhichisexpectedtohaveamaterialeffectinsubsequentperiods,shouldbedisclosed.Ifitisimpracticabletoquantifytheamount,thisfactshouldbedisclosed.

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Theeffectofachangeinanaccountingestimateshouldbeclassifiedusingthesameclassificationinthestatementofprofitandlossaswaspreviouslyfortheestimate.

Forexample,theeffectofachangeinanaccountingestimatethatwaspreviouslyincludedasanextraordinaryitemisreportedasanextraordinaryitem.

Clarifications:

A)Changeinaccountingestimatedoesnotbringtheadjustmentwithinthedefinitionsofanextraordinaryitemorapriorperioditem.

B)Sometimes,itisdifficulttodistinguishbetweenachangeinanaccountingpolicyandachangeinaccountingestimate.Insuchcases,thechangeistreatedasachangeinanaccountingestimate,withappropriatedisclosures.

ACCOUNTINGSTANDARDS-06

DEPRECIATIONACCOUNTING

Depreciationisameasureofthewearingout,consumptionorotherlossofvalueofadepreciableassetarisingfromuse,passageoftimeorobsolescencethroughtechnologyandmarketchanges.Depreciationisallocatedsoastochargeafairproportionofthedepr

eciableamountineachaccountingperiodduringtheexpectedusefullifeoftheasset.Depreciationincludesamortisationofassetswhoseusefullifeispredetermined.

Thedepreciableamountofadepreciableassetshouldbeallocatedonasystematicbasistoeachaccountingperiodduringtheusefullifeoftheasset.

Depreciableassetsareassetswhich

[1]areexpectedtobeusedduringmorethanoneaccountingperiod;and

[2]havealimitedusefullife;and

[3]areheldbyanenterpriseforuseintheproductionorsupplyorforadministrativepurposes

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Depreciableamountofadepreciableassetisitshistoricalcost,orotheramountsubstitutedforhistoricalcostlesstheestimatedresidualvalue.

Usefullifeistheperiodoverwhichadepreciableassetisexpectedtobeusedbytheenterprise.Theusefullifeofadepreciableassetisshorterthanitsphysicallife.

Therearetwomethodofdepreciation:

1]StraightLineMethod(SLM)

2]WrittenDownValueMethod(WDVM)

Note:Acombinationofmorethanonemethodmaybeused.

Thedepreciationmethodselectedshouldbeappliedconsistentlyfromperiodtoperiod.Thechangeinmethodofdepreciationshouldbemadeonlyif;

Theadoptionofthenewmethodisrequiredbystatute;ORForcompliancewithanaccountingstandard;ORIfitisconsideredthatchangewouldresultinamoreappropriatepreparationoffinancialstatement;or

Whenthereischangeinmethodofdepreciation,depreciationshouldberecalculatedinaccordancewiththenewmethodfromthedateoftheassetscomingintouse.(i.e.RETROSPECTIVELY)

Thedeficiencyorsurplusarisingfromsuchrecomputationshouldbeadjustedintheyearofchangethroughprofitandlossaccount.

Suchchangeshouldbetreatedasachangeinaccountingpolicyanditseffectshouldbequantifiedanddisclosed.

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Theusefullivesofmajordepreciableassetsmaybereviewedperiodically.Wherethereisarevisionoftheestimatedusefullife,theunamortiseddepreciableamountshouldbechargedovertherevisedremainingusefullife.(i.e.PROSPECTIVELY)

Anyadditionorextensionwhichbecomesanintegralpartoftheexistingassetshouldbedepreciatedovertheremainingusefullifeofthatasset.

Thedepreciationonsuchadditionmayalsobeappliedattherateappliedtotheexistingasset.

Whereanadditionorextensionretainsaseparateidentityandiscapableofbeingusedaftertheexistingassetisdisposedof,depreciationshouldbeprovidedindependentlyonthebasisofestimateofitsownusefullife.

Wherethehistoricalcostofadepreciableassethasundergoneachangeduetoincreaseordecreaseinthelongtermliabilityonaccountofexchangefluctuations,priceadjustments,changesindutiesorsimilarfactors,thedepreciationontherevisedunamortiseddepreciableamountshouldbeprovidedprospectivelyovertheresidualusefullifeoftheasset.

Thisaccountingstandardisnotappliedonthefollowingitems.

Forestsandplantations

Wastingassets

Researchanddevelopmentexpenditure

Goodwill

Livestock

..DisclosureRequirements

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a)Thehistoricalcost

b)Totaldepreciationforeachclasschargedduringtheperiod

c)Therelatedaccumulateddepreciation

d)Depreciationmethodused(Accountingpolicy)

e)Depreciationratesiftheyaredifferentfromthoseprescribedbythestatutegoverningtheenterprise

ACCOUNTINGSTANDARDS-07

CONSTRUCTIONCONTRACT

AConstructioncontractisacontractspecificallynegotiatedfortheconstructionofan

assetoracombinationofassetsthatarecloselyinterrelatedorinterdependentintermsoftheirdesign,technologyandfunctionortheirultimatepurposeoruse.

Recognitionofcontractrevenueandcontractcost

Whentheoutcomeofaconstructioncontractcanbeestimatedreliably,contractrevenueandcontractcostshouldberecognizedasrevenueandexpensesbyreferencetothes

tageofconstruction.(Thisaccountingstandardrecommendstheuseofpercentageofcompletionmethod)

Whentheoutcomeofaconstructioncontractcannotbeestimatedreliably,

Revenueshouldberecognizedonlytotheextentofcontractcostsincurredofwhichrecoveryisprobable.(i.e.Revenuerecognized=CostsIncurred)

Contractcostsshouldberecognizedasanexpenseintheperiodinwhichtheyareincurred.

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Theoutcomeofaconstructioncontractcanbeestimatedreliablywhenallthefollowingconditionsaresatisfied:

a)Totalcontractrevenuecanbemeasuredreliably;

b)Thereceiptofrevenueisprobable;

c)Thecontractcoststocompletethecontractcanbemeasuredreliably;

d)Thestageofcompletionatthereportingdatecanbemeasuredreliably;

e)Thecontractcostsattributabletothecontractcanbeclearlyidentified.

ContractRevenueshouldcomprise:

theinitialamountofrevenueagreedinthecontract;and

variationsinamounttobereceived

-totheextentthatitisprobablethattheywillresultinrevenue;and

-theyarecapableofbeingreliablymeasured.

(Contractcanoftwokinds:FixedPricecontractandCostPluscontract)

ContractCostsshouldcomprise:

(a)coststhatrelatedirectlytothespecificcontract;

(b)coststhatareattributabletocontractactivityingeneralandcanbeallocatedtothecontract.

..Atanystageofcontract,whenitisprobablethattotalcontractcostswillexceedtotalcontractrevenue,theexpectedlossshouldberecognizedasanexpenseimmediately.Theamountofsuchlossisdeterminedirrespectiveof:

-whetherornotworkhascommencedonthecontract;

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-thestageofcompletionofcontractactivity;or

-whetheroutcomeofcontractisestimatedornot

..Whenanuncertaintyarisesaboutthecollectabilityofanamountalreadyincludedincontractrevenue,andalreadyrecognizedinthestatementofprofitandloss,theuncollectableamountortheamountinrespectofwhichrecoveryhasceasedtobeprobableisrecognizedasanexpenseratherthananadjustmentoftheamountofcontractrevenue.

..Contractcoststhatrelatetofutureactivity,arerecognizedasanassetprovideditisprobablethattheywillberecovered.SuchassetisclassifiedasContractWIP.

..Thestageofcompletionofacontractmaybedeterminedbyfollowingways;

-surveysofworkdone

-completionofphysicalproportionofthecontractwork

-theproportionthatcontractcostsincurredforworkperformedupto

-thereportingdatebeartotheestimatedtotalcontractcosts

..Whenacontractcoversanumberofassets,theconstructionofeachassetshouldbetreatedasaseparateconstructionofeachassetshouldbetreatedasseparateconstructioncontractwhen

-separateproposalshavebeensubmittedforeachasset;

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-eachassethasbeensubjecttoseparatenegotiation

-thecostsandrevenuesofeachassetcanbeidentified.

..Agroupofcontracts,whetherwithasinglecustomerorwithseveralcustomers,shouldbetreatedasasingleconstructioncontractwhen

-thegroupofcontractsisnegotiatedasasinglepackage;

-thecontractsareverycloselyinterrelated

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-thecontractsareperformedconcurrentlyorinacontinuoussequence.

..Therecognitionofrevenueandexpensesinconstructioncontractisbasedonreliableestimate.Thisestimatemayvaryfromoneaccountingyeartoanotheraccountingyear.TheeffectofchangeinestimateshouldbetreatedasperAS-5.i.e.Itshouldnotbetreatedaspriorperioditemorextraordinaryitem.

..Disclosure:

-ContractRevenuerecognizedasrevenue

-Methodusedtodeterminethecontractrevenue

-Methodusedtodeterminethestageofcompletion

-Contractcostsincurred+RecognisedProfitRecognisedLoss

-Amountofadvancesreceived

-Amountduefromcustomers

-Amountduetocustomers

ACCOUNTINGSTANDARDS-09

REVENUERECOGNITION

Revenueisthegrossinflowofcash,receivablesorotherconsiderationarising

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inthecourseoftheordinaryactivitiesofanenterprisefromthesaleofgoods,fromtherenderingofservices,andfromtheusebyothersofenterpriseresourcesyieldinginterest,royaltiesanddividends.

RevenueIncludes:

-Proceedsfromsaleofgoods

-Proceedsfromrenderingofservices

-Interest,royaltyanddividends.

Saleofgoods

-Revenuefromsalesshouldberecognizedwhen

-Allsignificantrisksandrewardsofownershiphavebeentransferredtothebuyerfromthe

seller.

-Ultimatereliabilityofreceiptisreasonablycertain.

RenderingofServices

Revenuefromservicetransactionsisusuallyrecognizedastheserviceisperformed,eitherbyproportionatecompletionmethodorbythecompletedservicecontractmethod.

ProportionateCompletionMethodThisisamethodofaccounting,whichrecognisesrevenueinthestatementofprofitandlossproportionatelywithdegreeofcompletionofservicesunderacontract.Revenueisrecognisedbyreferencetotheperformanceofeachact.Therevenuerecognisedunderthismethodwouldbedeterminedonthebasisofcontractvalue,associatedcosts,numberofactsorothersuitablebasis.

CompletedServiceContractMethodThisisamethodofaccounting,whichrecognisesrevenueinthestatementofprofitandlossonlywhentherenderingofservicesunderacontractiscompletedorsubstantiallycompleted.Revenueunderthismethodisrecognisedoncompletionorsubstantialcompletionofthejob.

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RevenuefromInterest:-Recognisedontimeproportionbasis

RevenuefromRoyalties:-Recognisedonaccrualbasisinaccordancewiththetermsoftherelevantagreement.

RevenuefromDividends:-Recognisedwhenrighttoreceiveisestablished

SubsequentUncertaintyInCollection:-Whentheuncertaintyrelatingtocollectabilityarisessubsequenttothetimeofsaleortherenderingofservices,itismoreappropriatetomakeaseparateprovisiontoreflecttheuncertaintyratherthantoadjusttheamountofrevenueoriginallyrecorded.

Disclosure:Anenterpriseshoulddisclosethecircumstancesinwhichrevenuerecognitionhasbeenpostponedpendingtheresolutionofsignificantuncertainties.

EXAMPLES

1]Onsale,buyertakestitleandacceptsbillingbutdeliveryisdelayedatbuyersrequest

-Revenueshouldberecognisednotwithstandingthatphysicaldeliveryhasnotbeencompleted.

2]Deliverysubjecttoinstallationsandinspections

-Revenueshouldnotberecogniseduntilthecustomeracceptsdeliveryandinstallationandinspectionarecomplete.However,wheninstallationprocessisverysimple,revenueshouldberecognised.Forexample,Televisionsalesubjecttoinstallation.

3]Saleonapproval

-Revenueshouldnotberecogniseduntilthegoodshavebeenformallyacceptedortimeforrejectionhaselapsedorwherenotimehasbeenfixed,areasonabletimehaselapsed.

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4]Saleswiththeconditionofmoneybackifnotcompletelysatisfied

-Itmaybeappropriatetorecognizethesalebuttomakesuitableprovisionforreturnsbasedonpreviousexperience.

5]Consignmentsales

-Revenueshouldnotberecogniseduntilthegoodsaresoldtoathirdparty.

6]Installmentsales

-Revenueofsalepriceexcludinginterestshouldberecognisedonthedateofsale.

7]Specialorderandshipments

-Revenuefromsuchsalesshouldberecognizedwhenthegoodsareidentifiedandreadyfordelivery.

8]Wheresellerconcurrentlyagreestorepurchasethesamegoodsatalaterdate

-Thesaleshouldnotberecognised,asthisisafinancialarrangement.

9]Subscriptionsreceivedforpublications

-Revenuereceivedorbilledshouldbedeferredandrecognisedeitheronastraight-linebasisovertimeorwheretheitemsdeliveredvaryinvaluefromperiodtoperiod,revenueshouldbebasedonthesalesvalueoftheitemdelivered.

10]Advertisementcommissionreceived

-Itisrecognisedwhentheadvertisementappearsbeforepublic.

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11]Tuitionfeesreceived

-Shouldberecognisedovertheperiodofinstruction.

12]Entranceandmembershipfees

Entrancefeeisgenerallycapitalized

Ifthemembershipfeepermitsonlymembershipandallotherservicesorproductsarepaidforseparately,thefeeshouldberecognisedwhenreceived.Ifthemembershipfeeentitlesthemembertoservicesorpublicationstobeprovidedduringtheyear,itshouldberecognisedonasystematicandrationalbasishavingregardtothetimingandnatureofallservices.

13]Saleofshowtickets

-Revenueshouldberecognisedwhentheeventtakesplace.

14]Guaranteedsalesofagriculturalcrops

-Whensaleisassuredunderforwardcontractorgovernmentguarantee,thecropscanberecognisedatnetrealizablevaluealthoughitdoesnotsatisfythecriteriaofrevenuerecognition.

Theaboveaccountingstandardisnotapplicablefor:

Revenuearisingfromconstructioncontracts

Revenuearisingfromhirepurchase,leaseagreements

RevenuearisingfromGovernmentgrantsandsubsidies

RevenueofInsurancecompaniesarisingfrominsurancecontracts

Profitorlossonsaleoffixedassets

Realisedorunrealizedgainsresultingfromchangesinforeignexchangerates

ACCOUNTINGSTANDARDS-10

ACCOUNTINGFORFIXEDASSETS

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Definitions:

FixedAssetisanassetheldwiththeintentionofbeingusedforthepurposeofproducingorprovidinggoodsorservicesandisnotheldforsaleinthenormalcourseofbusiness.(Itisexpectedtobeusedformorethanoneaccountingperiod.)

Thecostoffixedassetincludes:

Purchaseprice

ImportDutiesandothernon-refundabletaxes

Directcostincurredtobringtheassettoitsworkingcondition

Installationcost

Professionalfeeslikefeesofarchitects

Generaloverheadofenterprisewhentheseexpensesarespecificallyattributabletoacquisition/preparationoffixedassets

Anyexpensesbeforethecommercialproduction,includingcostoftestrunandexperimentalproduction

Anyexpensesbeforetheassetisreadyforusenotputtouse

Lossondeferredpaymentarisingoutofforeigncurrencyliability

Priceadjustment,changesindutiesandsimilarfactors

Thecostoffixedassetisdeductedwith:

Tradediscountsandrebates

Saleproceedsoftestrunproduction

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Amountofgovernmentgrantsreceived/receivableagainstfixedassets(SeeAS-12)

Gainondeferredpaymentarisingoutofforeigncurrencyliability

..Similarly,historicalcostofselfconstructedfixedassetswillinclude:

..Allcostwhicharedirectlyrelatedtothespecificasset

..Allcoststhatareattributabletotheconstructionactivityshouldbeallocatedtofixedassets

..Anyinternalprofitincludedinthecostshouldbeeliminated.

AnyexpensesincurredonassetbetweendateofreadyforuseandputtouseiseitherchargedtoP&LA/cortreatedasdeferredrevenueexpendituretobeamortisedin3-5yearsaftercommencementofproduction.

Whenfixedassetisacquiredinexchangeforanotherasset,thecostoftheassetacquiredshouldberecorded

-eitherat,fairmarketvalue

-orat,thenetbookvalueoftheassetsgivenup

Forthispurpose,fairmarketvaluemaybedeterminedbyreferenceeithertotheassetgivenuportotheassetacquired,whicheverismoreclearlyevident.

FixedassetacquiredinexchangeforsharesorothersecuritiesshouldberecordedatFMVofassetsgivenuporassetacquired,whicheverismoreclearlyevident.(i.etheoptionofrecordingtheassetatnetbookvalueofassetgivenupisclosed)

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Fairmarketvalueisthepricethatwouldbeagreedtoinanopenandunrestrictedmarketbetweenknowledgeableandwillingpartiesdealingatarmslengthdistance.

Subsequentexpendituresrelatedtoanitemoffixedassetshouldbeaddedtoitsbookvalueonlyiftheyincreasethefuturebenefitsfromtheexistingassetbeyonditspreviouslyassessedstandardofperformance.

Materialitemsretiredfromactiveuseandheldfordisposalshouldbestatedattheloweroftheirnetbookvalueandnetrealizablevalueandshownseparately.Fixedassetsshouldbeeliminatedfromthefinancialstatementsondisposalorwhennofurtherbenefitisexpectedfromitsuseanddisposal.Profit/lossonsuchdisposalorwritingoffisrecognizedintheprofitandlossaccount.

REVALUATION

Whenthefixedassetsarerevalued,theseassetsareshownatrevaluedprice.Revaluationoffixedassetsshouldberestrictedtothenetrecoverableamountoffixedasset.

Whenafixedassetisrevalued,anentireclassofassetsshouldberevaluedorselectionofassetsforrevaluationshouldbemadeonasystematicbasis.Thatbasismustbedisclosed.

Accountingtreatmentofrevaluationunderdifferentsituation:

Whenrevaluationismadeupward

FixedAssetsA/cDr.

ToRevaluationReserve

Whenrevaluationismadedownward

P&LA/cDr

ToFixedAssets

Whenrevaluationismadeupwardsubsequenttopreviousupwardrevaluation

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FixedAssetsA/cDr.

ToRevaluationReserve

Whenrevaluationismadedownwardsubsequenttopreviousupwardrevaluation

RevaluationReserveA/cDr.(TotheextentofcarryingamountofR.R)

P&LA/cDr.(BalancingFigure)

ToFixedassets

Whenrevaluationismadeupwardsubsequenttopreviousdownwardrevaluation

FixedassetsA/cDr.

ToP&LA/c(Totheextentofpreviousdownwardrevaluation)

ToRevaluationReserve(BalancingFigure)

Whenrevaluationismadedownwardsubsequenttopreviousdownwardrevaluation

P&LA/cDr.

ToFixedAssets

AccountingtreatmentondisposalofFixedAssets:

Onsaleoffixedassets

BankA/cDr.

P&LA/cDr.(IfLoss)

ToFixedAssets

ToP&LA/c(IfProfit)

Onsaleoffixedassetswhereupwardrevaluationhastakenplace

Ondisposalofapreviouslyrevalueditemoffixedasset,thedifferencebetweennetdisposalproceedsandthenetbookvalueisnormallychargedorcreditedtotheprofitandlossaccount

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exceptthat,totheextentsuchalossisrelatedtoanincreasewhichwaspreviouslyrecordedasacredittorevaluationreserveandwhichhasnotbeensubsequentlyreversedorutilized,itischargeddirectlytothataccount.Theamountstandinginrevaluationreservefollowingtheretirementordisposalofanassetwhichrelatestothatassetmaybetransferredtogeneralreserve.

IfLossIfProfit

BankA/cDr.BankA/cDr.

RevaluationReserveA/cDr.ToFixedAssetsA/c

P&LA/cDr.ToP/LA/c

ToFixedAssets

RevaluationReserveA/cDr.RevaluationReserveA/cDr.

ToGeneralReserveToGeneralReserve

..Inthecaseoffixedassetsownedbytheenterprisejointlywithothers,theextentoftheenterprisesshareinsuchassets,andtheproportionoftheoriginalcost,accumulateddepreciation

andWDVshouldbestatedintheB/S.

Alternatively,theproratacostofsuchjointlyownedassetsmaybegroupedtogetherwithsimilarfullyownedassetswithanappropriatedisclosurethereof.

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..Onlypurchasedgoodwillshouldberecordedinbooks.

..Disclosure:

Grossandnetbookvalueoffixedassetsatthebeginningandendofperiodshowingadditionsanddisposals

Revaluedamountssubstitutedforhistoricalcostsoffixedassets,themethodadoptedtocomputethesameandwhetheranexternalvaluerwasinvolved.

ACCOUNTINGSTANDARDS-12

ACCOUNTINGFORGOVERNMENTGRANTS

Applicability:Mandatoryforallenterpriseswithrespectfrom01/04/1994.

GovernmentGrantsareassistancebygovernmentincashorkindforpastorfuturecompliancewithcertainconditions.

Governmentgrantsmaybereceivedinfollowingways.

Grantsrelatedtoacquisitionoffixedassets

Grantsrelatedtorevenue

Grantsrelatedtopromoterscontribution

Grantsrelatedtocompensationforexpenses

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GovernmentGrantsshouldberecognised

Wherethereisreasonableassurancethattheenterprisewillcomplywiththeconditionsattachedtothem;andThegrantswillbereceived.

AmountofGrant:

MonetaryGrant:Amountearnedshouldbethevalueofgrant.

Non-MonetaryGrant:

Wheregrantsaregivenatconcessionalrate,thensuchassetsareaccountedforattheiracquisitioncost.

Wheregrantsaregivenfreeofcost,thensuchassetsarerecordedatnominalvalue.

AccountingTreatment:

GrantsrelatedtoDepreciableassets:

EITHER,GrantsareshownasdeductionfromGrossvalueofassets

BankA/cDr.

ToGovernmentGrant

GovernmentGrantDr.

ToFixedAssets

(Whengrantisequaltobookvalueofasset,fixedassetisshownatnominalvalue.)

OR,Grantsaretreatedasdeferredincome

BankA/cDr.

ToGrant

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[Inthiscase,GrantsarerecognisedasprofitinP&LA/conasystematicandrationalbasisovertheusefullifeofassets(i.e.inproportiontotheamountofdepreciationchargedoverperiod)]

{NeteffectonProfit&LossA/cwillremainsameinbothcases}

GrantsrelatedtoNon-Depreciableassets:

EITHER,GrantsareshownasdeductionfromGrossvalueofassets

BankA/cDr.

ToGovernmentGrant

GovernmentGrantDr.

ToFixedAssets

(Whengrantisequaltobookvalueofasset,fixedassetisshownatnominalvalue.)

OR,shownasreserves

Whennofutureobligationsaretobefulfilled

BankA/cDr.

ToGov.Grant

Gov.GrantDr.

ToCapitalReserve

Whengrantrequiresfulfillmentofcertainobligations

BankA/cDr.

ToGov.Grant

Gov.GrantDr.(Shouldbecreditedtoincomeoverthesameperiodoverwhichthecostof

ToP&LA/cmeetingsuchexpenseischargedtorevenue)

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(Inrespectiveyears)

Thedeferredincomebalanceshouldbeseparatelydisclosedinthefinancialstatement.

Grantsrelatedtorevenue

Governmentgrantsrelatedtorevenueshouldberecognisedonasystematicbasisintheprofitandlossaccountovertheperiodsnecessarytomatchwiththerelatedcosts,whichtheyareintendedtocompensate.

Grantsrelatedtopromoterscontribution

GrantshouldbetreatedasCapitalReserve.

BankA/cDr.

ToGovGrant

GovGrantA/cDr.

ToCapitalReserve

Grantsrelatedtocompensationforexpenses

Governmentgrantsreceivableascompensationforexpensesorlosses(withnofurthercosts)shouldberecognisedasanincomeintheyearofreceivableasanExtra-ordinaryitem.

REFUNDOFGOVERNMENTGRANT

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Governmentgrantssometimesbecomerefundablebecausecertainconditionsarenotfulfilled.Thegrantrefundableistreatedasanextraordinaryitem.

Theamountrefundableinrespectofagovernmentgrantrelatedtoaspecificassetisrecordedbyincreasingthebookvalueoftheassetorbyreducingthecapitalreserveorthedeferredincomebalance,asappropriate,bytheamountrefundable.(Wherethebookvalueofassetisincreased,thedepreciationshouldbeprovidedonnewassetvalueprospectively)

Wheretheamountrefundableisinrespectofagovernmentgrantrelatedtorevenue,therefundisappliedfirstagainstanyunamortiseddeferredcreditremaininginrespectofthegrant.Restamountofrefundshouldbechargedtoprofitandlossaccount.

Where,theamountrefundableisinrespectofpromoterscontribution,thecapital

reserveshouldbereducedbytheamountrefundable.

ContingencyrelatedtoGovt.Grant

AcontingencyrelatedtoGovt.grantreceivableandrefundableshouldbetreatedinaccordancewithAS-4.

Disclosures:

Theaccountingpolicyadopted

Thenatureandextentofgov.grantsrecognisedinthefinancialstatements.

ACCOUNTINGSTANDARDS-13

ACCOUNTINGFORINVESTMENTS(REV.03)

Applicability:Mandatoryforallenterprises.

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InvestmentsareclassifiedasLongTermInvestmentsandShortTermInvestments.

CurrentInvestmentisintendedtobeheldfornotmorethanoneyearandreadilyrealisable.

LongtermInvestmentisaninvestmentotherthanacurrentinvestment.

Thecarryingamountofcurrentinvestmentsislowerofcostandfairvalue.

Itisprudenttocarryinvestmentsindividuallyatthelowerofcostandfairvalue.But,suchcomparisoncanalsobemadecategory-wise.

Thecarryingamountoflong-terminvestmentsiscarriedatcost.However,whenthereispermanentdeclineinthevalueofalong-terminvestment,thecarryingamountisreducedtorecognizethedecline.Thecarryingamountoflong-terminvestmentsshouldbedeterminedonindividualbasis.

AnyreductionorreversalofreductioninvalueofinvestmentisadjustedthroughP&LA/c.

CostofInvestments:

Thecostofaninvestmentshouldincludeacquisitionchargessuchasbrokerage,feesandduties.

Ifaninvestmentisacquired-

-byissueofsharesorothersecurities;thentheinvestmentsshouldbevaluedatthefairvalueoftheissuedsecurity.(i.e.Issuepricedeterminedbystatutoryauthority)

-Byexchangeofanotherasset;thentheinvestmentsshouldbevaluedatfairvalueoftheassetgivenuporassetacquired,whicheverismoreclearlyevident.

InvestmentProperty-InvestmentPropertyisinvestmentinlandorbuildingstha

tisnotintendedtobeoccupiedsubstantiallyforuseby,orintheoperationsof,theinvestingenterprise.Aninvestmentpropertyisclassifiedaslong-terminvestment.

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DisposalofInvestments-Ondisposal,thedifferencebetweenthecarryingamountandthedisposalproceeds,netofexpenses,isrecognizedintheprofitandlossstatement.

ReclassificationofInvestments-Long-termtoshort-term:Transfersfromoneclasstoanotherclassaremadeatlowerofcostandcarryingamountatthedateoftransfer.Currenttolong-term:Transfersaremadeatlowerofcostandfairvalueatthedateoftransfer.

Disclosure:

1]Accountingpoliciesfordeterminationofcarryingamount

2]ClassificationofInvestments

3]TheamountsincludedinProfitandlossstatement

-profitsorlossesondisposalandchangesincarryingamountofcurrentandlongterminvestments

-interest,dividends(showingseparatelydividendsfromsubsidiary)andrentalsoninvestmentsshowingseparatelysuchincomefromcurrentandlongterminvestments.

-GrossIncomeshouldbedisclosed(i.e.TheamountofTDSshouldbeshownunderadvancetaxespaid)

4]Aggregateamountofquotedandunquotedinvestmentsgivingtheaggregatemarketvalueofquotedinvestments.

ACCOUNTINGSTANDARDS-15

ACCOUNTINGFORRETIREMENTBENEFITS

(Revisedin2005&titledasEmployeesBenefit)

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Applicability:Itismandatoryforallenterprises.

RetirementBenefitsconsistsof:

1.ProvidentFund

2.Superannuation/Pension

3.Gratuity

4.LeaveEncashmentBenefit

5.OtherRetirementBenefits

AccountingtreatmentunderDefinedContributionScheme/ProvidentFund

Contributionpayablebytheemployerinayearischargedtoprofit&lossaccount.

AccountingtreatmentunderDefinedBenefitScheme/Gratuity/LeaveEncashment

PaymentofRetirementBenefitoutofitsownfund

Appropriateprovisionforaccruingliabilityiscreatedthroughprofit&lossac

count.Accruingliabilityiscalculatedbyactuarialmethod.

Note:Actuarialvaluationistheprocessusedbyanactuary(expert)toestimatethepresentvalueofbenefitstobepaidunderaretirementbenefitscheme.Actuarialvaluationshouldnormallybeconductedatleastonceineverythreeyears.DifferencesarisingafterfreshactuaryvaluationshouldbeadjustedthroughProfit&Lossaccountintheyearinwhichfreshactuaryvaluationis

conducted.

Benefitsfundedthroughcreationofatrust

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Amounttobecontributedtothetrusteveryyearisprovidedthroughprofit&lossaccount.Theamounttobecontributediscalculatedbyactuarialvaluation.

Benefitsfundedthroughaschemeadministratedbytheinsurer

Thepremiumpaidtotheinsurerischargedtoprofit&lossaccount.Suchpremiumiscalculatedthroughactuarialvaluation.

ReviewofActuarialMethod/Assumption

Anyalterationsintheretirementbenefitcosts,arisingduetochangeinmethod/assumption,are

EITHER,chargedtocreditedtoprofitandlossaccountintheyearofchangein

accordancewith

AccountingStandard5.PriorPeriodandextraordinaryitemandchangesinaccountingpolicies.

OR,spreadoveraperiodnotmorethantheexpectedremainingworkinglivesoftheparticipatingEmployees.

Disclosure:

Methodbywhichretirementbenefitcostsfortheperiodhavebeendefined

Whenaccountingismadeasperactuarialvaluation,dateonwhichsuchvaluationwasconducted.

ACCOUNTINGSTANDARDS-17

SEGMENTALREPORTING

ABUSINESSSEGMENTisadistinguishablecomponentofanenterprisethatisengagedinprovidinganindividualproductorserviceoragroupofrelatedproductsorservicesandthatissubjecttorisksandreturnsthataredifferentfromthoseofotherbusinesssegments.

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AGEOGRAPHICALSEGMENTisadistinguishablecomponentofanenterprisethatisengagedinprovidingproductsorserviceswithinaparticulareconomicenvironmentandthatissubjecttorisksandreturnsthataredifferentfromthoseofcomponentsoperatinginothereconomicenvironments.

Therisksandreturnsofanenterprisearebothbythegeographicallocationofproductionorservicefacilitiesandotherassetsofanenterpriseandlocationofitscustomers.Thedefinitionallowsgeographicalsegmentstobebasedonanyofthetwo.

AREPORTABLESEGMENTisabusinesssegmentorageographicalsegmentidentifiedonthebasisofforegoingdefinitionsforwhichsegmentinformationisrequiredtobedisclosedbythestandard.

ENTERPRISEREVENUEisrevenueisrevenuefromsalestoexternalcustomersasreportedinthestatementofprofitandloss.(i.e.Salesmadetoexternalcustomersbyallsegments)

SEGMENTREVENUEistheaggregateofrevenuedirectlyattributabletosegmentsrevenuereasonablyallocatedtosegment;andrevenuefromtransactionswithothersegments.

SEGMENTEXPENSEistheaggregateofoperatingexpensedirectlyattributabletosegmentexpensesreasonablyallocatedtosegment;andexpensesrelatingtotransactionswithothersegments.

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However,SEGMENTREVENUE/EXPENSEdoesnotinclude

(a)ExtraordinaryitemsasdefinedinAS-5

(b)Interestordividend(includingearned/incurredonloanstoothersegment)unlesstheoperationsofthesegmentareprimarilyofafinancialnature

(c)Gainsonsalesofinvestmentsoronextinguishmentsofdebt(Capitalgain/loss)unlesstheoperationsofthesegmentareprimarilyofafinancialnature.

(d)Generaladministrationexpenses,headofficeexpensesandotherexpensesthatariseattheenterpriselevelandrelatetotheenterpriseasawhole.

SEGMENTRESULTissegmentrevenuelesssegmentexpenses.

SEGMENTASSETSarethoseoperatingassetsthatareemployedbyasegmentinitsoperatingactivitiesandthateitheraredirectlyattributablethesegmentorcanbeallocatedtothesegmentonareasonablebasis.

SEGMENTLIABILITIESarethoseoperatingliabilitiesthatresultfromoperatingactivitiesandthateitheraredirectlyattributablethesegmentorcanbeallocatedtothesegmentonareasonablebasis.

(Ifthesegmentresultofasegmentincludesinterestexpense,itssegmentliabilitiesincludetherelatedinterest-bearingliabilitiesandviceversa.)

..(Segmentliabilitiesdonotincludeincometaxliabilitiesandviceversa.)

Similarly,ifdepreciationsegmentexpensesthenrelatedassetscomesundersegmentassets.

PrimarysegmentandSecondarysegment

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Oneamongthetwo,BusinessSegmentandGeographicalSegment,isprimarysegmentandotherbecomessecondarysegment.Thereportingrequirementsfortheprimaryandsecondarysegmentsaredifferent.

Basisforidentifyingprimaryandsecondarysegments

Risksandreturnsarethemaincriteriaforidentifyingprimaryandsecondarysegments.

..Iftherisksandreturnsofanenterpriseareaffectedpredominantlybydifferencesintheproducts,businesssegmentsarerecognizedasprimarysegmentsandgeographicalsegmentsassecondarysegmentsandviceversa.

..Iftherisksandreturnsofanenterpriseareaffectedbothbydifferencesintheproductsaswellasdifferencesinthelocationsinwhichitoperates,thentheenterprises

houldusebusinesssegmentsasitsprimarysegmentandgeographicalsegmentasitssecondarysegment.

..Ifrisksandreturnsofanenterpriseareaffectedneitherbydifferencesinproducts/servicesnorbydifferencesingeographicalareasofoperations,themanagementmayelectanyofthetwoasprimarywithotherbeingsecondarysegment.

(InternalorganizationandmanagementstructureofanenterpriseanditssystemofinternalfinancialreportingtotheboardofdirectorsandtheCEOshouldnormallybethebasisforidentifyingthepredominantsourceandnatureofrisksanddifferingratesofreturnfacingtheenterprise.)

ReportableSegments

Abusinesssegmentorgeographicalsegmentshouldbeidentifiedasreportablesegmentif:

(a)itsrevenuefromsalestoexternalcustomersandfromtransactionswithothersegmentsis10%ormoreofthetotalrevenue,externalandinternal,ofallsegments;or

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(b)itssegmentresult,whetherprofitorloss,is10%ormoreof-thecombinedresultofallsegmentsinprofit,orthecombinedresultofallsegmentsinloss,whicheverisgreaterinabsoluteamount;or

(c)itssegmentassetsare10%ormoreofthetotalassetsofallsegments.

Abusiness/reportablesegmentthatisnotareportablesegmentasperabove,mayberecognizedasreportablesegmentdespiteitssizeatthediscretionofthemanagementoftheenterprise.

Iftotalexternalrevenueattributabletoreportablesegmentsconstituteslessthan75%ofthe

totalenterpriserevenue,additionalsegmentsshouldbeidentifiedasreportablesegments,eveniftheydonotmeet10%thresholdsasabove,untilatleast75%percentofthetotalenterpriserevenueisincludedinreportablesegments.

Asegmentidentifiedasareportablesegmentintheimmediatelyprecedingperiodbecauseitsatisfiedtherelevant10%thresholdsshouldcontinuetobeareportablesegmentforthecurrentperiodnotwithstandingthatitsrevenue,result,andassetsnolongermeetthe10%thresholds.

PrimaryReportingFormat

Thefollowingdisclosuresarerequiredforeachreportablesegmentofprimarysegment:

(1)Segmentrevenue,(withclassificationofexternalandinternal)

(2)Segmentresult

(3)Totalcarryingamountofsegmentassets

(4)Totalamountofsegmentliabilities

(5)Totalcostincurredduringtheperiodtoacquiresegmentassets

(6)Depreciationandamortisationrecognizedasexpense,and

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(7)TotalnoncashexpensesotherthanDep.Andamortisationrecognizedasexpense.

Disclosersrequiredpursuanttoclause(6)and(7)above,neednotbemadeinrespectofasegment,iftheenterprisereportscashflowsarisingfromoperating,investingandfinancingactivitiesforsuchsegment.

Anenterpriseshouldpresentareconciliationbetweentheinformationdisclosedforreportablesegmentsandaggregatedinformationintheenterprisefinancialstatements(inrespectofclause1to4above)

SecondaryReportingFormat

Whereprimarysegmentsarebusinesssegments

Segmentrevenuefromexternalcustomersforeachgeographicalsegmentwhoserevenuefromsalestoexternalcustomersis10%ormoreofenterprisesrevenue;

Thetotalcarryingamountofsegmentassetsforeachgeographicalsegmentwhosesegmentassetsis10%ormoreofthetotalassetsofallgeographicalsegments;

Newassetsacquiredforeachgeographicalsegmentwhosesegmentassetsis10%or

moreofthetotalassetsofallgeographicalsegments.

Whereprimarysegmentsaregeographicalsegmentsbasedonlocationofassets

Thefollowinginformation(point1to3)shouldbedisclosedforeachbusinesssegmetwhoserevenuefromsalestoexternalcustomersis10%ormoreofenterpriserevenueorwhosesegmentassetsare10%ormoreofthetotalassetsofallbusinesssegments;

Segmentrevenuefromexternalcustomers;

thetotalcarryingamountofsegmentassets;and

newsegmentassetsacquired;

Iflocationofcustomersisdifferentfromlocationofitsassets,thentheenterpriseshouldalsoreportrevenuefromsalestoexternalcustomersforeachcustomersbasedgeographicalsegmentwhoserevenuefromsalestoexternalcustomersis10%ormoreofenterpriserevenue.

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Whereprimarysegmentsaregeographicalsegmentsbasedonlocationtocustomers

Points1to3asabove.

Iflocationsofassetsaredifferentfromlocationsofcustomers,thentheenterpriseisrequiredtoreportthefollowingsegmentinformationforeachassetbasedgeographicalsegmentwhoserevenuefromsalestoexternalcustomersis1%ormoreofenterpriserevenueorwhosesegmentassetsare10%ormoreoftotalenterpriseassets

i)Thetotalcarryingamountofsegmentassetsbygeographicallocationoftheassets;and

ii)Newsegmentassetsacquiredbylocationofassets.

OtherDisclosures:

Inmeasuringandreportingsegmentrevenuefromtransactionswithothersegments,inter-

segmenttransfersshouldbemeasuredonthebasisthattheenterpriseactuallyusedtopricethosetransfers.Thetransfer-pricingbasisshouldbedisclosedinthefinancialstatements.

Anenterpriseshouldindicatethetypesofproductsandservicesincludedineachreportedbusinesssegmentandindicatethecompositionofeachreportedgeographicalsegment,primaryandsecondary,ifnototherwisedisclosedinthefinancialstatements.

ACCOUNTINGSTANDARDS-16

BORROWINGCOSTS

Applicability:Mandatoryforallenterprisesw.e.f.01/04/2000.

BorrowingCostsinclude:

Interestandcommitmentchargesonborrowings

Amortizationofdiscountsorpremiumsrelatingtoborrowings

Amortisationofancillarycostsincurredinconnectionwiththearrangementofborrowings

Exchangedifferencearisingfromborrowingstotheextentitamountstointerestcosts.

Borrowingcostsshouldberecognizedasanexpenseintheperiodinwhichtheya

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reincurred.

Borrowingcoststhataredirectlyattributabletotheacquisition,constructionorproductionofaqualifyingassetshouldbecapitalizedaspartofthatasset.

QualifyingAssetisanassetthatnecessarilytakesasubstantialperiodoftimetogetreadyforitsintendeduseorsale.e.g.HeavyPlant&Machinery.

BORROWINGCOSTELIGIBLEFORCAPITALISATION

SpecificBorrowingforacquisitionofqualifyingasset:Borrowingcosttobecapitalised

Amountofborrowingcost=SpecificBorrowingCostIncomefromtemporaryinvestment

GeneralBorrowingandusedforacquisitionofqualifyingasset:Borrowingcostshouldbecapitalisedwiththefollowingamount;

AmountofBorrowingCost=ExpenditurecostonassetorAssetcost*Capitalisat

ionrate

CapitalisationRate=WeightedAverageBorrowingcostsongeneralborrowing

(i.e.Excludingcostofspecificborrowing)

Note:Whenwiththecapitalizationofborrowingcost,thecostexceedsthenetrecoverableamount,thecarryingamountiswrittendowntonetrecoverableamountaspertherecommendationofotheraccountingstandards.

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COMMENCEMENTOFCAPITALISATION

CapitalisationofBorrowingshouldcommencewhenallthefollowingconditionsaresatisfied

1.Expenditurefortheacquisitionofaqualifyingassetisbeingincurred

2.Borrowingcostsarebeingincurred;and

3.Activitiesthatarenecessarytopreparetheassetforitsintendeduseorsaleareinprogress

SUSPENSIONOFCAPITALISATION

Capitalisationofborrowingcostsshouldbesuspendedduringextendedperiodsinwhichactivedevelopmentisinterrupted.

Howevercapitalizationshouldnotbesuspendedwhenatemporarydelayisanecessarypartoftheprocessofgettinganassetreadyforitsintendeduseorsale.

Example:

Borrowingcostsincurredwhilelandisunderdevelopmentarecapitalizedduringtheperiodinwhichactivitiesrelatedtothedevelopmentarebeingundertaken.However,itshouldnotbecapitalizedwhenlandacquiredforbuildingpurposesisheldwithoutuse.

CESSATIONOFCAPITALISATION

Capitalisationofborrowingcostsshouldceasewhensubstantiallyalltheactivitiesnecessarytopreparethequalifyingassetforitsintendeduseorsalearecomplete.

Whentheconstructionofaqualifyingassetiscompletedinpartsandacompletedpartiscapableofbeingusedwhileconstructioncontinuesfortheotherparts,capitali

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zationofborrowingcostsinrelationtothatpartshouldceasewhensubstantiallyalltheactivitiesnecessarytopreparethatpartforitsintendeduseorsalearecomplete.

Example:

Housingcomplexcomprisingseveralbuildings:Ifindividualbuildingcanbeusedseparately,itscapitalisationshouldcease.

Disclosure:

TheAccountingPoliciesadoptedforborrowingcosts.

Theamountofborrowingcostscapitalizedduringtheperiod.

ACCOUNTINGSTANDARDS-18

RELATEDPARTYDISCLOSURES(REV.03)

Applicability:Mandatoryforallenterpriseswithrespectfrom01/04/2004

Relatedpartyisconsideredtoberelatedifatanytimeduringthereportingperiodonepartyhastheabilitytocontroltheotherpartyorexercisesignificantinfluenceovertheotherpartyinmaking

financialand/oroperatingdecisions.ThefollowingrelatedpartyrelationshiparecoveredunderAS-18:

Enterprisesthatdirectly,orindirectlythroughoneormoreintermediaries,control,orarecontrolledby,orareundercommoncontrolwiththereportingenterprise(e.g.Holdingcompanies,subsidiariesandfellowsubsidiaries)

AssociatesandjointventuresofthereportingenterpriseIndividualsowning,directlyorindirectly,aninterestinthevotingpowerofthereportingenterprisethatgivesthemcont

rolorsignificant

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influenceovertheenterprise,andrelativesofanysuchindividual;Keymanagementpersonnelandrelativesofsuchpersonnel;andEnterprisesoverwhichanypersondescribedin(4)or(5)isabletoexercisesignificantinfluence.

KeyManagementPersonnel

Thosepersonswhohavetheauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesofthereportingenterprise.

Thefollowingarenotdeemedtoberelatedparty:

Twocompaniessimplybecausetheyhavecommondirector

Asinglecustomer/supplierwithwhomanenterprisetransactsasignificantvolum

eofbusinessmerelybyvirtueoftheresultingeconomicdependence

Providersoffinance

TradeUnions

PublicUtilities

GovernmentdepartmentsandGovernmentsponsoredbodies

DISCLOSURE

Iftherehavebeentransactionsbetweenrelatedparties,duringtheexistenceofarelatedpartyrelationships,thereportingenterpriseshoulddisclosethefollowings:

Nameofthetransactingrelatedparty

Descriptionoftherelationship

Descriptionofnatureoftransaction

Volumeoftransaction(Amountwiseorproportionwise)

Anyotherinformationnecessaryforunderstandingfinancialstatements

Outstanding(Amountwiseorproportionwise)andanyprovisionfordoubtfuldebtduefromsuchparty

Amountswrittenofforwrittenbackinrespectofdebtsduefromortorelatedparties.

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Thefollowingsaretheexamplesoftherelatedpartytransactions

Purchaseorsaleofgoods

Renderingorreceivingservices

Purchasesorsalesoffixedassets

Licenceagreements

Leasingorhirepurchaseagreements

Guaranteesandcollaterals

Managementcontractsincludingfordeputationofemployees.

ACCOUNTINGSTANDARDS19

LEASES

Applicability:-Mandatoryforallenterprisesw.e.f.1.04.2001.

Itshouldbeappliedinaccountingforallleasesotherthan:

a)leaseagreementstoexplorefororusenaturalresources;

b)licensingagreementsforitemssuchasplays,manuscripts,patentsandcopyrights;and

c)leaseagreementstouselands.

Lease:Aleaseisanagreementwherebythelessorconveystothelesseeinreturnforapaymentorseriesofpaymentstherighttouseanassetforanagreedperiodoftime.

FinanceLease:Allrisksandrewardsincidenttoownershipofanassetistransferred.

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OperatingLease:Leaseotherthanfinancelease;i.e.whichdoesnottransferalltheriskandrewardincidentaltoownership.

MinimumLeasePayments:

ForLessor

TotalLeaserenttobepaidovertheleaseterm+AnyGuaranteedResidualValuebyoronbehalfofLessee+ResidualValueGuaranteedbyThirdParty-ContingentRent-CostforServiceandtaxtobepaidbyandreimbursedtolessor

ForLessee

TotalLeaserenttobepaidovertheleaseterm+AnyGuaranteedResidualValuebyoronbehalfofLessee-ContingentRent-CostforServiceandtaxtobepaidbyandreimbursed

tolessor

AccountingforFinanceLeaseInthebooksoflessee

Thelesseeshouldrecognizetheleaseasanassetatlowerofthefollowing

-FairValueoftheleasedasset

-Presentvalueofminimumleasepayments

(Incalculatingthepresentvalueoftheminimumleasepayments,thediscountrateistheinterestrateimplicitinthelease.Ifimplicitrateisnotknown,thelesseesincrementalborrowingrateshouldbeused.)Entryrequiredtobepassed:

LeaseAssetsA/cDr

ToLessor

Allleasepaymentsshouldthenbeapportionedbetweenthefinancechargeandthereductionoftheoutstandingliability.FinancechargeshouldbedebitedtoP&LA/c.

LessorA/cDr

P&LA/cDr(Withtheamountoffinancecharge)

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ToBankA/c(Withtheamountofleasepayment)

ThelesseeasperAS-6shoulddepreciatetheleasedasset.

AccountingforFinanceLeaseInthebooksoflessor

Thelessorshouldrecognizethetransactionassalewiththecashprice.Ifartificiallylowratesofinterestarequoted,profitonsaleshouldberestrictedtothatwhichwouldapplyifacommercialrateofinterestwerecharged.Thecostofsalerecognizedatthecommencementoftheleasetermisthecost/carryingamountlessthepresentvalueoftheunguaranteedresidualvalue.

AccountingforOperatingLeaseInthebooksoflessee

Leasepayments(excludingcostsforservicessuchasinsuranceandmaintenance)arerecognizedasanexpenseinthestatementofprofitorlossonastraight-linebasisunlessanothersystematicbasisismoreappropriate.

AccountingforOperatingLeaseInthebooksoflessor

Leasereceiptsarerecognizedasanincomeinthestatementofprofitorlossonastraight-linebasisunlessanothersystematicbasisismoreappropriate.Thelessorshoul

dpresentanassetgivenunderoperatingleaseinitsbalancesheetunderfixedassets.

Initialdirectcostsincurredspecificallytoearnrevenuesfromanoperatingleaseare

..Either,deferredandallocatedtoincomeovertheleaseterminproportionofincome

..Or,recognizedasanexpenseinthestatementofcurrentyearprofitandloss

.

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SALEANDLEASEBACKTRANSACTIONS

Asaleandleasebacktransactioninvolvesthesaleofanassetbythevendorandtheleasingofthesameassetbacktothevendor.

Ifsaleandleasebacktransactionresultsinfinancelease:

Excessordeficiencyofsaleproceedsoverthecarryingamountshouldbedeferredandamortisedovertheleaseterminproportiontothedepreciationoftheleasedasset.Itshouldnotbeimmediatelyrecognizedasincomeorlossinthefinancialstatements.

Ifsaleandleasebacktransactionresultsinoperatinglease:

Ifthesalepriceisequaltofairvalue

-Anyprofitorlossshouldberecognizedimmediately.

Ifthesalepriceisbelowfairvalue

-Anyprofitorlossshouldberecognizedimmediately,exceptthat,iftheloss

iscompensatedbyfutureleasepaymentsatbelowmarketprice

-Ifthelossiscompensatedbyfutureleasepaymentsatbelowmarketprice,theprofitorlossshouldbedeferredandamortisedinproportiontotheleasepayments.

Ifthesalepriceisabovefairvalue

-Theexcessoverfairvalueshouldbedeferredandamortisedovertheperiodforwhichtheassetisexpectedtobeused.

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Further,ifthefairvalueatthetimeofasaleandleasebacktransactionislessthanthecarryingamountoftheasset,alossequaltotheamountofthedifferencebetweenthecarryingamountandfairvalueshouldberecognizedimmediately.

DisclosureRequirements:

Inthebooksoflesseeincaseoffinanciallease

Assetsacquiredunderfinancelease

Reconciliationbetweenthetotalofminimumleasepaymentsandtheirpresentvalueasatthebalancesheetdatewithfollowingsegregation

notlaterthanoneyear

laterthanoneyearandnotlaterthanfiveyears

laterthanfiveyears

Contingentrentsrecognizedasexpense

Futureminimumsubleasepaymentsexpectedtobereceivedundernon-cancellablesubleases

Generaldescriptionoftheleasingarrangements

Inthebooksoflessorincaseoffinanciallease

Generaldescriptionofthesignificantleasingarrangement

Accountingpolicyforinitialdirectcost

Reconciliationoftotalgrossinvestmentinleaseandpresentvalueofminimumleasepayment(MLP)receivableatthebalancesheetdate

MLPreceivableinfollowingcategories

notlaterthanoneyear

laterthanoneyearandnotlaterthanfiveyears

laterthanfiveyears

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Inthebooksoflesseeincaseofoperatinglease

Generaldescriptionofthesignificantleasingarrangement

Totaloffutureminimumleasepaymentsinthefollowingperiod

notlaterthanoneyear

laterthanoneyearandnotlaterthanfiveyears

laterthanfiveyears

3.Leasepaymentsrecognizedinprofit&lossaccountfortheperiod

Inthebooksoflessorincaseofoperatinglease

Generaldescriptionofthesignificantleasingarrangement

Accountingpolicyfortheinitialdirectpayment

Futureleasepaymentsinaggregateclassifiedas:

notlaterthanoneyear

laterthanoneyearandnotlaterthanfiveyears

laterthanfiveyears

ACCOUNTINGSTANDARDS-20

EARNINGPERSHARE(REV.04)

Applicability:-Mandatoryw.e.f.1.04.2001inrespectofenterpriseswhoseequitysharesorpotentialequitysharesarelistedonarecognizedstockexchangeinIndia.

AnenterpriseshouldpresentBASIC&DILUTEDEPSonthefaceofthestatementofprofitandlossaccountforeachclassofequitysharesthathasadifferentrighttoshareinthenetprofitfortheperiod.EPStobecalculated&presentedevenincaseoflosses.

BasicEPS=Netprofit/lossfortheperiodattributabletoequityshareholders

WeightedAverageNo.ofEquityShares

DilutedEPS=AdjustedNetprofit/lossfortheperiodattributabletoequityshareholders.

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WeightedAverageNo.of(EquityShares+DilutivePotentialEquityShares)

Wherenetprofit/lossforequityshareholders=PATlessPreferenceDividendincludingCDT

(PreferenceDividendshouldbedeductedwhetherornotprovidedincaseofCumulativePreferenceShares).

Equitysharesissuedforcash

Dateonwhichcashisreceived

Debenturesconvertedtocash

Dateofconversion

EquitysharesissuedinexchangeforsettlementOfaliability

Datewhensettlementbecomeseffective

Equitysharesissuedforrenderingofservices

Dateonwhichservicesarerendered

EquitySharesissuedincourseofAmalgamationinthenatureofPurchase

DateoftheAcquisition

EquitySharesissuedincourseofAmalgamationinthenatureofPurchase

Beginningofthereportingperiod

Datefromwhichthesharesareincludedforcalculationofweightedno.ofshares:

Partlypaidequitysharesaretreatedasafractionofanequitysharetothee

xtentthattheywereentitledtoparticipateindividendsrelativetoafullypaidequityshares.

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Whereanenterprisehasequitysharesofdifferentnominalvaluesbutwiththesamedividendrights,thenumberofequitysharesiscalculatedbyconvertingallsuchequitysharesintoequivalentnumberofsharesofthesamenominalvalue.

BONUSISSUE,SHARESPLIT,REVERSESHARESPLITetc.

Inthesecases,sharesareissuedtoexistingshareholdersfornoadditionalconsideration.Therefore,thenumberofequitysharesoutstandingisincreasedwithoutanincreaseinresources.

RIGHTSISSUE

Inrightsissue,theexercisepriceisoftenlessthanthefairvalueoftheshares.Therefore,arightissuegenerallyincludesabonuselement.Hence,numberofequitysharestobetakenfor

calculatingBasicEPSshouldbe:

RightShares+(EquitySharespriortoright*conversionfactor)

Where,conversionfactor=Fairvaluepershareimmediatelypriortotheexerciseofrights

Theoreticalex-rightsfairvaluepershare

Where,Theoreticalex-rightsfairvalue=(FairvalueofPriorshares+RightProceeds)

PostRighttotalno.ofequityshares

DILUTEDEARNINGSPERSHARE

DilutedEPS=AdjustedNetprofit/lossfortheperiodattributabletoequityshareholders

WeightedAverageNo.of(EquityShares+DilutivePotentialEquityShares)

IncalculatingdilutedEPS,thenetprofit(consideredforBASICEPS)isadjuste

dwiththecorrespondingchangesinprofitsthatshallarisewhendilutivepotentialsharesareissued.Forexample:Whendebenturesareconvertedtoshares,thenetprofitshouldbeaddedwithinterestamountandfurtheradjustedwithrelatedtaxexpense.

Potentialequitysharesshouldbetreatedasdilutivewhen,andonlywhen,thei

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rconversiontoequityshareswoulddecreasenetprofitpersharefromcontinuingordinaryoperations.

DISCLOSURE

Basic&DilutedEPS

Amountusedasnumerator&reconciliationwithPAT

NumberusedasdenominatorforBasic&DilutedEPS&reconciliationthereon

NominalvalueofsharesalongwithEPSfigures

ACCOUNTINGSTANDARDS-22

ACCOUNTFORTAXESONINCOME

Applicability:-a)Mandatoryw.e.f.1-04-2001inrespectofthefollowing:

1.EnterpriseswhoseequityordebtsecuritiesarelistedonarecognizedstockexchangeinIndia;

2.Alltheenterprisesofagroup,iftheparentpresentsconsolidatedfinancialstatements.

b)Mandatoryw.e.f.1.04.2002,inrespectofcompaniesnotcoveredbya);

c)Mandatoryw.e.f.1.04.2006inrespectofallotherenterprises.

AccountingIncome(loss)isthenetprofitorlossforaperiod,asreportedinthestatementofprofitandloss,beforedeductingincometaxexpenseoraddingincometaxsaving.(i.e.PBTasperP/LA/c)

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TaxableIncome(taxloss)istheamountofincome(loss)foraperiod,determinedinaccordancewiththetaxlaws,baseduponwhichincometaxpayable(recoverable)isdetermined.(i.e.GTI)

TaxExpense(taxsaving)istheaggregateofcurrenttaxanddeferredtaxchargedorcreditedtothestatementofprofitandlossfortheperiod.(i.e.taxwhichistobedebitedorcreditedtoP/LA/c)

Currenttaxistheamountofincometaxdeterminedtobepayable(recoverable)inrespectofthetaxableincome(taxloss)foraperiod.(i.e.taxasperIncometaxAct)

Deferredtaxisthetaxeffectoftimingdifferences.Modeljournalentriestobepassedinbooksofaccountshouldbeasunder:

CurrentTaxA/c...Dr

ToProvisionforCurrentTax

DeferredTaxA/c.Dr

ToDeferredTaxLiabilityA/c

OR

DeferredTaxAssetsA/c..Dr

ToDeferredTaxA/c

TaxExpenseA/c..Dr

DeferredTaxA/c..Dr(IncaseDTAiscreated)

ToCurrentTaxA/c

ToDeferredTaxA/c(IncaseDTLiscreated)

P/LA/c..Dr

ToCurrentTaxA/c

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PermanentDifferencesarethedifferencesbetweentaxableincomeandaccountingincomeforaperiodthatoriginateinoneperiodanddonotreversesubsequently.

Examples:

ExpendituredisallowedasperIncomeTaxAct(Forever)

ExcessexpenditureallowedbyIncomeTaxAct,1961inrespectofScientificExpenditure

TimingDifferencesarethedifferencesbetweentaxableincomeandaccountingincomeforaperiodthatoriginateinoneperiodandarecapableofreversalinoneormoresubsequentperiods.

Examples:

-Depreciationrate/methoddifferentasperAccountsandIncometaxCalculation

-ExpenditureofthenaturementionedinSection43B(e.g.salestaxchargedinaccountonaccrualbasisbutnotpaid;suchsalestaxwillbeanallowableexpenditureintheyearofpaymentandadisallowableexpenditureintheyearinwhichaccrued)

HintsforcreationofDTLorDTA

Whenaccountingprofit/lossishigherthantaxableprofit/loss:DeferredTaxliabilityiscreatedorDeferredtaxassetisreversed.

Whenaccountingprofit/lossislessthantaxableprofit/loss:DeferredtaxassetiscreatedorDeferredTaxLiabilityisreversed.

Whentaxablelossiscarriedforwardforsetoff:DeferredTaxAssetiscreated.

Whencarriedforwardtaxablelossissetoff:DeferredTaxAssetisreversed.

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However,DeferredTaxAsset(DTA)shouldberecognizedandcarriedforwardonlytotheextentthatthereisareasonablecertaintythatsufficientfuturetaxableincomewillbeavailableagainstwhichsuchdeferredtaxassetscanbereversed/realized.

Example:DeferredTaxAssetshouldbecreatedinrespectoftaxablelossbeingcarriedforward,whenthereisreasonablecertaintythatcarriedforwardtaxablelosswillbesetoff.(i.e.Adequatetaxableprofitisexpectedinfuture)

Thecarryingamountofdeferredtaxassetsshouldbereviewedateachbalancesheetdate.Anenterpriseshouldwritedownthecarryingamountofdeferredtaxassettotheextentthatitisnolongerreasonablycertainthatsufficientprofitswillbeavailable.

Such,writtendownvaluecanbere-statedifitbecomesvirtuallycertainthats

ufficientprofitswillbeavailable(forsetoff).

Alsoateachbalancesheetdate,anenterprisere-assessesunrecognizeddeferredtaxassets.Theenterpriserecognizespreviouslyunrecognizeddeferredtaxassetstotheextentthatithasbecomereasonablycertainthatsufficientfuturetaxableincomewillbeavailableagainstwhichsuchdeferredtaxassetscanberealized.

Presentation&Disclosure

IntheBalanceSheet,aDeferredTaxAssetshouldbeshownaftertheheadINVESTMENTandDeferredTaxLiabilityshouldbeshownaftertheheadUNSECUREDLOAN.

CurrentTaxassetsandliabilitiesshouldbeseparatelyshownwithDeferredTax

assetsandliabilities.

DeferredTaxassetisset-offwithdeferredtaxliabilitieswhen

-theenterprisehasalegallyenforceablerighttoset-offassetsagainstliabilitiesrepresentingcurrenttax;and

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-thedeferredtaxassetsandthedeferredtaxliabilitiesrelatetotaxesonincomeleviedbythesamegoverningtaxationlaws.

Thenatureoftheevidencesupportingtherecognitionofdeferredtaxassetsshouldbedisclosed,ifanenterprisehasunabsorbeddepreciationorcarryforwardoflossesundertaxlaws.

ACCOUNTINGSTANDARDS-24

DISCONTINUINGOPERATIONS

Adiscontinuingoperationisacomponentofanenterprise:

(a)thattheenterprise,pursuanttoasingleplan,is:

-disposingofsubstantiallyinitsentirety(exampledemerger)

-disposingofpiecemeal(sellingandsettlingassetsandliabilitiesonebyone)

-terminatingthroughabandonment;and

(b)Thatrepresentsaseparatemajorlineofbusinessorgeographicalareaofoperations;and

(c)Thatcanbedistinguishedoperationallyandforfinancialreportingpurposes.

Examplesofactivitiesthatmaynotsatisfycriteria(a)abovebutthatcanbediscontinuingoperationsincombinationwithothercircumstancesinclude:

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-gradualorevolutionaryphasingoutofaproductlineorclassofservice;

-discontinuing,evenifrelativelyabruptly,severalproductswithinanongoinglineofbusiness;

-shiftingofsomeproductionormarketingactivitiesforaparticularlineofbusinessfromonelocationtoanother;and

-closingofafacilitytoachieveproductivityimprovementsorothercostsavings;

-Sellingsharesofsubsidiarywhoseactivitiesaresimilartothoseoftheparentorothersubsidiaries.(IncaseofConsolidatedFinancialStatements)

AreportablebusinesssegmentorgeographicalsegmentasdefinedinAS-17wouldnormallysatisfycriteria(b)above.

Acomponentthatcanbedistinguishedoperationallyandforfinancialreportingpurposes{criteria[c]above}ifallthefollowingconditionsaremet:

theoperatingassetsandliabilitiesofthecomponentcanbedirectlyattributed

toit;

itsrevenuecanbedirectlyattributedtoit;

atleastamajorityofitsoperatingexpensescanbedirectlyattributedtoit.

PresentationandDisclosure

Anenterpriseshouldincludethefollowinginformationrelatingtoadiscontinui

ngoperationinitsfinancialstatementsbeginningwiththefinancialstatementsfortheperiodinwhichtheinitialdisclosureeventoccursanduptoandincludingtheperiodinwhichdiscontinuanceiscompleted.:

INITIALDISCLOSURE:

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Adescriptionofthediscontinuingoperation(s);

thebusinessorgeographicalsegment(s)inwhichitisreportedasperAS17

thedateandnatureoftheinitialdisclosureevent;

thedateorperiodinwhichthediscontinuanceisexpectedtobecompletedifknownordeterminable;

thecarryingamounts,asofthebalancesheetdate,ofthetotalassetstobedisposedofandthetotalliabilitiestobesettled;

revenueandexpensesfromsuchdiscontinuingoperationincurrentreportingperiod;

pre-taxprofit/lossfromdiscontinuingoperationduringthecurrentfinancialreportingperiod,andincometaxexpense.

netcashflowsattributabletotheoperating,investing,andfinancingactivitie

softhediscontinuingoperationduringthecurrentfinancialreportingperiod.

Withrespecttoadiscontinuingoperation,theinitialdisclosureeventistheoccurrenceofoneofthefollowing,whicheveroccursearlier

theenterprisehasenteredintoabindingsaleagreementforsubstantiallyalloftheassetsofthe

discontinuingoperation;or

theenterprisesboardofdirectorsorsimilargoverningbodyhasboth

(i)approvedaformalplan;and

(ii)madeanannouncementoftheplan.

OtherDisclosures

Whenanenterprisedisposesofassetsorsettlesliabilitiesattributabletoa

discontinuingoperationorentersintobindingagreementsforthesaleofsuchassetsorthesettlementofsuchliabilities,itshouldinclude,initsfinancialstatements,thefollowinginformationwhentheeventoccurs.

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Gainorlossrecognizedonsuchdisposal.

Netsellingprices(orrangeofprices)ofthoseassetsforwhihtheenterprisehasenteredintobindingcontract,theexpectedtimingofreceiptofcashflowandthecarryingamountofthoseassets.

Thedisclosuresrequiredaboveshouldbepresentedinthenotestothefinancialstatementsexceptthefollowing,whichshouldbeshownonthefaceofthestatementsofprofitorloss;

pre-taxprofit/lossfromordinaryactivitiesofdiscontinuingoperationandrelatedincometaxexpense

pre-taxgainorlossrecognizedondisposalofassetsorsettlementofliabilities.

Ifanenterpriseabandonsorwithdrawsfromaplanthatwaspreviouslyreportedasadiscontinuingoperation,thatfact,reasonthereforanditseffectshouldbedisclosed.

Comparativeinformationforpriorperiodsinrespectofdiscontinuingoperationsshouldalsobedeemedasdiscontinuingoperations.

ACCOUNTINGSTANDARDS-28

IMPAIRMENTOFASSETS

ImpairmentofAssetsmeansweakeninginthevalueofasset.Anenterpriseshouldassessateachbalancesheetdatewhetherthereisanyindicationthatanassetmaybeimpaired.Ifanysuchindicationexists,theenterpriseshouldestimatetherecoverableamountofthe

asset.

IndicationofImpairmentofanasset

-ExternalSourcesofInformation

Marketvaluehasdeclinedsignificantlymorethanthatwouldbeexpectedasare

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sultofdepreciation.

Adverseeffectontheenterpriseduetochangeintechnology,marketconditions,etc.

Changeininterestrates.

Thecarryingamountofthenetassetsofthereportingenterpriseismorethanitsmarketcapitalization.

-InternalSourcesofInformation

Physicaldamageofasset

Significantchangeinstyleorextentofuseofasset.

InternalReportingindicatesthattheeconomicperformanceofanassetis,orwillbe,worsethanexpected.

Assets-ThisASdoesnotapplyto

Inventories(AS-2)

AssetsarisingfromConst.Contracts(AS-7)

FinancialAssetsincludingInvestments(AS-13)

AFinancialAssetisanyassetthatis:-

Cash;

Acontractualrighttoreceivecashoranotherfinancialassetfromanotherenterprise;

Acontractualrighttoexchangefinancialinstrumentswithanotherenterpriseunderconditionsthatarepotentiallyfavorable;or

Anownershipinterestinanotherenterprise.

DeferredtaxAsset(AS-22)

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RECOVERABLEAMOUNT:(ofassetorcashgeneratingunit)

HIGHEROF

-NETSELLINGPRICEOFASSET

-VALUEINUSE

NetSellingPrice:Itistheamountobtainablefromsaleofanassetinanarmslengthtransactionbetweenknowledgeable,willingpartieslessthecostsofdisposal.

Valueinuse:ItisthepresentvalueofestimatedfutureCashflowexpectedtoarisefromcontinueuseofanassetandfromitsdisposalattheendofitsusefullife.

Estimatingthevalueinuseofanassetinvolvesthefollowingsteps:-

-Estimationoffuturecashinflows&Outflows.

-Applicationofappropriatediscountrate.

Projectionofcashflowshouldbebasedon

-Mostrecentfinancialbudgets/forecasts.

-Reasonableandsupportableassumptionsontheeconomicconditions.Givingmoreweightstoexternalevidence.

-Steadyordeclininggrowthratefortheperiodbeyondtheperiodcoveredbymostrecentbudgets/forecasts.

Increasinggrowthratecanbetakenwhenitcanbeproperlyjustified.However,growthrateshouldnotexceedthelong-termaveragegrowthratefortheproducts/industries/countriesinwhich

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theenterpriseoperates.

Futurecashflowsshouldbeestimatedfortheassetinitscurrentcondition.Estimatesoffuturecashflowsshouldnotincludeestimatedfuturecashinflowsoroutflowsthatareexpectedtoarisefrom:-

afuturerestructuringtowhichanenterpriseisnotyetcommitted;or

futurecapitalexpenditurethatwillimproveorenhancetheassetinexcessofitsoriginallyassessedstandardofperformance.

Estimatesoffuturecashflowsshouldnotinclude;

Cashinflowsoroutflowsfromfinancingactivities;or

Incometaxreceiptsorpayments.

ForeignCurrencyFutureCashFlows:Futurecashflowsareestimatedinthecurrencyinwhichtheywillbegeneratedandthendiscountedusingadiscountrateappropriateforthecurrency.Anenterprisetranslatesthepresentvalueobtainedusingtheexchangerateatthebalancesheetdate(describeinAccountingstandard(AS)11,AccountingfortheEffectsofchangesinForeignExchangerates,astheclosingrate).

DISCOUNTRATE:ThediscountrateshouldbePRETAXRATE.Thatreflectscurrentmarketassessmentsofthetimevalueofmoney&theriskspecifictotheasset.

Asastartingpointtheenterprisemaytakeintoaccountthefollowingrates:-

-Weightedaveragecostofcapital.

-Marketborrowingrate.

-EnterprisesincrementalBorrowingrates.

IMPAIRMENTLOSS

AnImpairmentLossistheamountbywhichthecarryingamountofanassetexceedsits

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recoverableamounti.e.

Impairmentloss=Carryingamount(-)Recoverableamount.

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AnimpairmentlossorarevaluedassetisrecognizedasanexpenseinthestatementofProfitorLoss.However,animpairmentlossonarevaluedassetisrecognizeddirectlyagainstanyrevaluationsurplusfortheassettotheextentthattheimpairmentlossdoesnotexceedtheamountheldintherevaluationsurplusforthesameasset.

Whentheamountestimatedforanimpairmentlossisgreaterthanthecarryingamountoftheassettowhichitrelates,anenterpriseshouldrecognizealiabilityif,andonlyif,thatisrequiredbyanotherAccountingStandards.

AccountingentriesrequiredtobepassedonrecognitionofImpairmentloss:-

ImpairmentLossA/c.Dr.

ToAssetsA/c.

P/LA/c/revaluationreserveA/c..Dr.

ToImpairmentLossA/c

AftersuchrecognitionDepreciationshouldbecalculatedprospectivelyconsideringsuchloss:

CASHGENERATINGUNIT

Cashgeneratingunitisthe

..Smallestidentifiablegroupofassets.

..Thatgeneratescashinflows.

..Thatarelargelyindependentofthecashinflowsfromotherassets.

Ifthereisanyindicationthatanassetmaybeimpaired,therecoverableamountshouldbeestimatedfortheindividualasset.

Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,anenterpriseshoulddeterminetherecoverableamountofthecashgeneratingunittowhichthe

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assetbelongs(theassetscashgeneratingunit).

Therecoverableamountofanindividualassetcannotbedeterminedif:

Theassetsvalueinusecannotbeestimated(tobeclosetoitsnetsellingprice);and

Theassetdoesnotgeneratec