ACCOUNTING STANDARDS

Group 9:

Arijit Nayak (15P189)

Gaurav Gupta (15P199)

Mounica Chilla (15P209)

Puneeth Putcha (15P219)

Sarin Babu (15P229)

Vishal Garga (15P239)

VALUATION OF INVENTORIES

Scope exceptions:1. Livestock, forest and

agricultural products

2. work in progress arising under construction contracts, including directly related service contracts

3. shares, debentures and other financial instruments held as stock-in-trade

4. work in progress arising in the ordinary course of business of service providers

Scope exceptions:1. Livestock, forest and

agricultural products2. work in progress

arising under construction contracts

3. Financial instruments

4. Inventories of commodity brokers and traders

Indian AS 2 IFRS IAS 2

Should be valued at lower of cost or net realisable value

Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale

Should be valued at lower of cost and net realisable value

Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale

Indian AS2 IFRS IAS2

Excluded costs

1. abnormal amounts of wasted materials, labour or other production costs

2. storage costs, unless those costs are necessary in the production process before a further production stage

3. administrative overheads that do not contribute to bringing inventories to their present location and condition

4. selling & distribution costs

Excluded costs

1. abnormal amounts of wasted materials, labour or other production costs

2. storage costs, unless those costs are necessary in the production process before a further production stage

3. administrative overheads that do not contribute to bringing inventories to their present location and condition

4. selling costs

Indian AS2 IFRS IAS2

The cost of inventories will be assigned by using the first-in, first-out (FIFO) or weighted average cost formula

Cost formula - The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects should be assigned by specific identification of their individual costs

The cost of inventories will be assigned by using the first-in, first-out (FIFO) or weighted average cost formula

Cost formula - The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs

Indian AS2 IFRS IAS2

Disclosures:1. The accounting policies

adopted in measuring inventories, including the cost formula used

2. The total carrying amount of inventories and its classification appropriate to the enterprise

Disclosures: the accounting policies adopted in

measuring inventories, including the cost formula used

the total carrying amount of inventories and the carrying amount in classifications appropriate to the entity

the carrying amount of inventories carried at fair value less costs to sell

the amount of inventories recognised as an expense during the period

the amount of any write-down of inventories recognised as an expense in the period

the amount of any reversal of any write-down that is recognised as a reduction in the amount of inventories recognised as expense in the period

the circumstances or events that led to the reversal of a write-down of inventories

the carrying amount of inventories pledged as security for liabilities.

Indian AS2 IFRS IAS2

CASH FLOW STATEMENT

Cash comprises cash on hand and demand deposits with banks

Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value

Cash flows are inflows and outflows of cash and cash equivalents

Cash comprises cash on hand and demand deposits

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value

Bank borrowings are generally considered to be financing activities. However, in some countries, bank overdrafts which are repayable on demand form an integral part of an entity’s cash management. In these circumstances, bank overdrafts are included as a component of cash and cash equivalents

Cash flows are inflows and outflows of cash and cash equivalents

AS03 IFRS IAS 07

CASH FLOW STATEMENT

Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities

Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents

Financing activities are activities that result in changes in the size and composition of the owners’ capital (including preference share capital in the case of a company) and borrowings of the enterprise

The cash flow statement should report cash flows during the period classified by operating, investing and financing activities

Operating activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities

Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents

Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity

The statement of cash flows shall report cash flows during the period classified by operating, investing and financing activities

AS03 IFRS IAS 07

CASH FLOW STATEMENT

Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the enterprise. Therefore, they generally result from the transactions and other events that enter into the determination of net profit or loss

Some transactions, such as the sale of an item of plant, may give rise to a gain or loss which is included in the determination of net profit or loss. However, the cash flows relating to such transactions are cash flows from investing activities

Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the entity. Therefore, they generally result from the transactions and other events that enter into the determination of profit or loss

Some transactions, such as the sale of an item of plant, may give rise to a gain or loss that is included in recognized profit or loss. The cash flows relating to such transactions are cash flows from investing activities. However, cash payments to manufacture or acquire assets held for rental to others and subsequently held for sale as described in paragraph 68A of IAS 16 Property, Plant and Equipment are cash flows from operating activities

AS03 IFRS IAS 07

CASH FLOW STATEMENT

The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows

cash payments to acquire fixed assets, acquire shares, warrants or debt instruments of other enterprises and interests in joint ventures

The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures that result in a recognized asset in the statement of financial position are eligible for classification as investing activities

cash payments to acquire property, plant and equipment, intangibles, other long-term assets, equity or debt instruments of other entities and interests in joint ventures

AS03 IFRS IAS 07

CASH FLOW STATEMENT

The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds

(a) cash proceeds from issuing shares or other similar instruments;

(b) cash proceeds from issuing debentures, loans, notes, bonds, and other short or long-term borrowings; and

(c) cash repayments of amounts borrowed

The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of capital to the entity

(a) cash proceeds from issuing shares or other equity instruments;

(b) cash payments to owners to acquire or redeem the entity’s shares;

(c) cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short-term or long-term borrowings;

(d) cash repayments of amounts borrowed; and

(e) cash payments by a lessee for the reduction of the outstanding liability relating to a finance lease

AS03

]

IFRS IAS 07

CASH FLOW STATEMENT

Some argue that dividends paid may be classified as a component of cash flows from operating activities in order to assist users to determine the ability of an enterprise to pay dividends out of operating cash flows. However, it is considered more appropriate that dividends paid should be classified as cash flows from financing activities because they are cost of obtaining financial resources

Interest paid and interest and dividends received are usually classified as operating cash flows for a financial institution. However, there is no consensus on the classification of these cash flows for other entities. Interest paid and interest and dividends received may be classified as operating cash flows because they enter into the determination of profit or loss. Alternatively, interest paid and interest and dividends received may be classified as financing cash flows and investing cash flows respectively, because they are costs of obtaining financial resources or returns on investments.

AS03

]

IFRS IAS 07

CASH FLOW STATEMENT

Disclosures : Investing and financing

transactions that do not require the use of cash or cash equivalents should be excluded from a cash flow statement. Such transactions should be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities

An enterprise should disclose the components of cash and cash equivalents and should present a reconciliation of the amounts in its cash flow statement with the equivalent items reported in the balance sheet

Disclosures : Investing and financing

transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows. Such transactions shall be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities

An entity shall disclose the components of cash and cash equivalents and shall present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position

AS03

]

IFRS IAS 07

CASH FLOW STATEMENT

An enterprise should disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it

Examples include cash and cash equivalent balances held by a branch of the enterprise that operates in a country where exchange controls or other legal restrictions apply as a result of which the balances are not available for use by the enterprise

An entity shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use by the group

Examples include cash and cash equivalent balances held by a subsidiary that operates in a country where exchange controls or other legal restrictions apply when the balances are not available for general use by the parent or other subsidiaries

The disclosure of segmental cash flows enables users to obtain a better understanding of the relationship between the cash flows of the business as a whole and those of its component parts and the availability and variability of segmental cash flows

AS03

]

IFRS IAS 07

FIXED ASSETS

Fixed Assets: Fixed asset is an asset held

with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business

Exceptions- Forests, Plantations, and

similar regenerative resources. Wasting assets like minerals ,

oil, and natural gas. Expenditure on real estate

development. Live stock

Property plant and equipment :

Tangible assets Held for Use in the production or

supply of goods or services Rental to others Administrative purposes Assets held by a lessee under finance

lease is also included in this category

Exclusions - PPT held for sale – IFRS 5 Biological assets related to

agricultural activity – IAS 41 Exploration and evaluation assets –

IFRS 6 Mineral rights and mineral reserves

like oil and natural gas etc.

Indian AS1O IFRS IAS16

Fixed assets shall be shown in financial statement by two ways:-

I. Historical Cost

II. Revalued Price Historical Cost: Purchase price Import duties and other non-refundable taxes Any directly attributable cost of bringing the

asset to the working condition for its intended use like; site preparation, delivery and handling cost, professional fees

Any internal profit included un the cost should be eliminated. – Self constructed Asset

By re-stating the gross book value and accumulated depreciation.

By re-stating net book value adding there in the net increase on account of revaluation.

Revaluation of fixed assets should be restricted to the net recoverable amount of fixed assets

Improvements and Repair: If expected future benefits from fixed assets do

not change. – charged to P&L If expected future benefits from fixed assets

will increase beyond the previously assessed standard performance.- added to gross value of fixed asset

In IFRS , frequency of revaluation needs to be mentioned.

In IFRS ,replacement of parts is capitalised.

The cost of any major inspection or overhaul occurring in regular intervals is capitalised.

Indian AS10 IFRS IAS16

Gross and net book values of fixed assets at the beginning and at the end of accounting period showing, disposal, acquisition and other movements.

Expenditure incurred on account of fixed assets in the course of construction or acquisition.

Revalued amount substituted for historical cost of fixed assets, the method adopted to compute the revalued amount, and whether an external valuer has valued the fixed assets, in case where fixed external has valued amount.

If there is loss then it can be adjusted against the balance of revaluation reserve.

Disclosures – AS10

DEPRECIATION AS 6 VS IAS 16

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