accounting std1

Presentation on Accounting Standards

17,18,29By

Rajan DasguptaDigen Pd Sah

Nirbhay Kumar

AS-17

SEGMENT REPORTING

Objective

To establish the principles for reporting financial information about the different types of products and services an enterprises produces and different geographical areas in which it operates

Segment Reporting helps to user of financial statements

• To better understand the performance of the enterprise

• To better assess the risks & returns of the enterprise

• To make more informed judgement about the

enterprises as a whole.

Segment

Business Segment:• It is distinguishable component of an

enterprise

• It is engaged in providing an individual product or services

• It is subject to risk & returns that are different from those of other business segment .

Geographical Segment:

•Distinguishable component of an enterprise

•Engaged in providing products or services within a particular economic environment

•That is subject to risks and returns that are different from those of components operating in other economic environments

•Enterprise Revenue

•Segment Revenue

•Segment Expense

•Segment Result

•Segment Assets

•Segment Liabilities

Definitions

Identification of Reportable Segments

• Segment revenue – 10% or more

• Segment result – 10% or more

• Segment asset – 10% or more • Segment - Management discretion • At least 75% of total external revenue

Reportable Segments

Primary Secondary

Basis of Classification

Risks & return mainly effect by difference in product

• Primary – Business • Secondary – Geographical

Risks & return mainly effect by geographical area• Primary – Geographical• Secondary – Business

Risks & return mainly effect by both of by difference in product & its operation in different geographical area

• Primary – Business • Secondary – Geographical

Disclosure

•Segment Revenue from sales to external customers

•Segment revenue from transactions with other segments

•Segment Result

•Total carrying amount of segment assets

•Total segment liabilities

•Additions to tangible & intangible fixed assets

•Depreciation & ammortisation for the period

•Significant other non-cash expenses

AS-18

RELATED PARTY DISCLOSURE

Need & Objective Sometimes business transactions between related parties lose the feature and character of the arms length transaction.

Related Party • Holding companies(a company having one or more subsidiaries),

Subsidiaries & Fellow subsidiaries(a company is considered to be fellow susidiary of another company if both are susidiaries of the self holding company)

• Associates(an enterprise in which an investing reporting party has significant influence and which is neighter an subsidiary nor a joint venture of that party) & Joint venture(The cooperation of two or more individuals or businessness in which each agrees to share profit,loss and control in a specific enterprise)

• Individuals owing , directly or indirectly interest in the voting power

• Relative of such individual –Spouse, son, daughter, mother, father, brother, sister.

. Key management personnel(those persons who have the authority and resposibility for planning, directing and controlling the activities of the reporting enterprise) & relative of such personnel

What should be disclosed

• Related party relationship

• Transactions between a reporting enterprises and its related parties

Control Concept • Control by ownership (directly or indirectly more than

50% of the voting power

• Control over composition of BOD or other governing body

• Control of substantial interest in the voting power & power to direct the financial or operating policies of the enterprise

Significant Influence

• By representation of the Board of Directors

• Participation in policy-making process

• Material inter-company transactions

• Inter-charge of management personnel

• Dependence on technical information

Exception of Related Party

• Two companies have a director in common dealing between the companies

• A Single customer or supplier or distributor

• Provider of finance

• enterprises.

• Trade union

• Govt. department & agencies

• State controlled enterprises with other State

controlled enterprises.

Related Party Transactions

• Purchase/Sales of goods

• Purchase/Sales of fixed assets

• Rendering /receiving of services

• Leasing or hire purchase arrangements

• Transfer of research and development

• License agreement

• Finance (incl. loan & equity)

• Guarantees & collateral

• Management contracts of deputation employees

Disclosure

• Name of the related party should be disclosed

• Nature of the related party relationship should be disclosed

Details of Disclosure

• Name of the related party

• Description of related party

• Description of the nature of transaction

• Volume of the transactions either as an amount or as an appropriate proportion

• Any other element of the transaction, which is essential for understanding the financial statements

• Amount or appropriate proportion of outstanding items & provision for doubtful debts

• Amount written off or written back in the period in

respect of debts due from doubtful debts.

AS-29PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT

ASSETS

To prescribed the accounting for – Provisions

Contingent liabilities

Contingent assets

Provision for restructuring cost

Objective

Provision is liability

What is provision

What is liability

• Liability is a present obligation

• Arising from past events

• Settlement of which result in outflow of resources

What is Present Obligation

An obligation is present obligation if based on evidence available its existence in the balance sheet date is considered probable i.e., more likely than not.

Onerous Contract

A contact in which the unavoidable costs of meeting the obligation under the contract exceed the economic benefits expected to be recovered under it.

Recognition of Provision

• Present probable obligation as a result of a past obligating event

• An outflow of resources embodying economic benefits in settlement

• A reliable estimate

• Number of similar obligations – to consider the outflow of resources ‘probable’ obligation as a whole to be considered

Measurement of provision

• Best estimate of the expenditure required

• No discounting

• No tax effect

• Additional evidence after balance sheet to be considered

• Re-imbursement of expenditure • Review of provision

Contingent Liability

• Possible obligation (not probable) as a result of past event.

• Existence of which will be confirmed only by the occurrence or non-occurrence of future event.

• Future event not wholly within the control of the

enterprises.

Contingent Liability

Contingent liability is a possible obligation however it may also be a present obligation

• Probability of outflow of resources is very low.• Reliable estimate of the amount of the present obligation cannot be made.

What is Contingent Assets?

• Possible asset as a result of past events.

• Existence of contingent assets is to be confirmed by the occurrence & non-occurrence of one or more future events.

• Future event not wholly within the control of the

enterprise.

Recognition Principles of Contingent Asset

• An enterprise should not recognise a contingent asset

• No disclosure is required of contingent asset

Provision for Restructuring Cost

• AS-29 deals with provision of restructuring cost

• AS-29 does not prescribe the accounting of restructuring cost

What is Restructuring ?

• Sale or termination of line of business.

• Relocation of business activities from one country or region to another.

What is Restructuring ?

• Change in management structure

• Fundamental re-organization that has material effect on the nature & focus of the enterprise operations

Restructuring does not include

• Retraining or relocating continuing staff

• Marketing

• Investment in new system & distribution networks

What is Restructuring Cost?

Provision for restructuring cost should include only the direct expenditure arising from restructuring & not associated with the ongoing activities of the enterprises.

Financial Instrument carried at Fair Value. Resulting from Executory Contract. Insurance Enterprise Those covered under another Accounting

Standards.. A.S-7, A.S-15, A.S-19, A.S-22.

Accounting Standard 29 is not applicable…to…