TMI BlogCOMPANIES (ACCOUNTING STANDARDS) (AMENDMENT) RULES, 2011 - Indian Accounting Standards [w.e.f. 3-3-2011 to 18-5-2015]X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter called as principal rules), in the Definition for clause 'C, the following shall be substituted, namely,- Annexure means Annexure to the rules ; 3. In the Principal rules, in rule 3, ( i ) the existing sub-rules (1) and (2) shall be re-numbered as sub-rules (3) and (4) respectively; ( ii ) in re-numbered sub-rule (3), for the word 'Annexure', the word Annexure B shall be substituted; ( iii ) before the re-numbered sub-rule (3), the following sub-rules shall be inserted, namely:- (1) The Central Government hereby prescribes Accounting Standards for application by companies specified in sub-rule (4) to be called Indian Accounting Standards (Ind ASs), which are specified in the Annexure A to these rules which shall apply to the following class of companies:- (I) Companies other than Insurance companies, Banking companies and Non- Banking Finance Companies (A) a . Companies which are part of NSE - Nifty 50 b. Companies which are part of BSE - Sensex 30 c. Companies whose shares or other securities are listed on stock exchanges outside India d. Companies, whether listed or not, which have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward until the related revenues are recognised. This Standard deals with the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also deals with the cost formulas that are used to assign costs to inventories. Scope 2. This Standard applies to all inventories, except: ( a ) work in progress arising under construction contracts, including directly related service contracts ( see Ind AS 11, Construction Contracts; ( b ) financial instruments ( see Ind AS 39 , Financial Instruments: Recognition and Measurement and Ind AS 32, Financial Instruments: Presentation); and ( c ) biological assets ( i.e., living animals or plants) related to agricultural activity and agricultural produce at the point of harvest ( See Ind AS 41, Agriculture 1 ) 3. This Standard does not apply to the measurement of inventories held by: ( a ) producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, to the extent that they are measured at net realisable value in accordance with well-established practices in those industries. When such inventori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble value for inventories may not equal fair value less costs to sell. 8. Inventories encompass goods purchased and held for resale including, for example, merchandise purchased by a retailer and held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the entity and include materials and supplies awaiting use in the production process. In the case of a service provider, inventories include the costs of the service, as described in paragraph 19, for which the entity has not yet recognised the related revenue ( see Ind AS 18, Revenue) . Measurement of inventories 9. Inventories shall be measured at the lower of cost and net realisable value. Cost of inventories 10. The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Costs of purchase 11. The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the production process when the products become separately identifiable, or at the completion of production. Most by-products, by their nature, are immaterial. When this is the case, they are often measured at net realisable value and this value is deducted from the cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost. Other costs 15. Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. For example, it may be appropriate to include non-production overheads or the costs of designing products for specific customers in the cost of inventories. 16. Examples of costs excluded from the cost of inventories and recognised as expenses in the period in which they are incurred are: ( a ) abnormal amounts of wasted materials, labour or other production costs; ( b ) storage costs, unless those costs are necessary in the production process before a further production stage; ( c ) administrative overheads that do not contribute to bringing inventories to their present location and condition; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventory that has been marked down to below its original selling price. An average percentage for each retail department is often used. Cost Formulas 23. 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. 24. Specific identification of cost means that specific costs are attributed to identified items of inventory. This is the appropriate treatment for items that are segregated for a specific project, regardless of whether they have been bought or produced. However, specific identification of costs is inappropriate when there are large numbers of items of inventory that are ordinarily interchangeable. In such circumstances, the method of selecting those items that remain in inventories could be used to obtain predetermined effects on profit or loss. 25. The cost of inventories, other than those dealt with in paragraph 23, shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch service is treated as a separate item. 30. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, of the amount the inventories are expected to realise. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. 31. Estimates of net realisable value also take into consideration me purpose for which the inventory is held. For example, the net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess is based on general selling prices. Provisions may arise from firm sales contracts in excess of inventory quantities held or from firm purchase contracts. Such provisions are dealt with under Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. 32. Materials and other supplies held for use in the production of inventories are not written down below cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs to sell; ( d ) the amount of inventories recognised as an expense during the period; ( e ) the amount of any write-down of inventories recognised as an expense in the period in accordance with paragraph 34; ( f ) 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 in accordance with paragraph 34; ( g ) the circumstances or events that led to the reversal of a write-down of inventories in accordance with paragraph 34; and ( h ) the carrying amount of inventories pledged as security for liabilities. 37. Information about the carrying amounts held in different classifications of inventories and the extent of the changes in these assets is useful to financial statement users. Common classifications of inventories are merchandise, production supplies, materials, work in progress and finished goods. The inventories of a service provider may be described as work in progress. 38. [Refer to Appendix 1] 39. An entity adopts a format for profit or loss that results in amounts being disclosed other than the cost of inventories recognised as an expense during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orical changes in cash and cash equivalents of an entity by means of a statement of cash flows which classifies cash flows during the period from operating, investing and financing activities. Scope 1. An entity shall prepare a statement of cash flows in accordance with the requirements of this Standard and shall present it as an integral part of its financial statements for each period for which financial statements are presented. 2. [Refer to Appendix 1 ] 3. Users of an entity's financial statements are interested in how the entity generates and uses cash and cash equivalents. This is the case regardless of the nature of the entity's activities and irrespective of whether cash can be viewed as the product of the entity, as may be the case with a financial institution. Entities need cash for essentially the same reasons however different their principal revenue-producing activities might be. They need cash to conduct their operations, to pay their obligations, and to provide returns to their investors. Accordingly, this Standard requires all entities to present a statement of cash flows. Benefits of cash flow information 4 . A statement of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turity of, say, three months or less from the date of acquisition. Equity investments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example in the case of preference shares acquired within a short period of their maturity and with a specified redemption date. 8. Bank borrowings are generally considered to be financing activities. However, where bank overdrafts which are repayable on demand form an integral part of an entity's cash management, bank overdrafts are included as a component of cash and cash equivalents. A characteristic of such banking arrangements is that the bank balance often fluctuates from being positive to overdrawn. 9 . Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an entity rather than part of its operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents. Presentation of a statement of cash flows 10. The statement of cash flows shall report cash flows during the period classified by operating, investing and financing activities. 11. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 rental to others and subsequently held for sale as described in paragraph 68A of Ind AS 16 Property, Plant and Equipment are cash flows from operating activities. The cash receipts from rents and subsequent sales of such assets are also cash flows from operating activities. 15 . An entity may hold securities and loans for dealing or trading purposes, in which case they are similar to inventory acquired specifically for resale. Therefore, cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities. Similarly, cash advances and loans made by financial institutions are usually classified as operating activities since they relate to the main revenue-producing activity of that entity. Investing activities 16. 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 expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures, 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. Reporting cash flows from operating activities 18 An entity shall report cash flows from operating activities using either: ( a ) the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or ( b ) the indirect method, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows. 19 . Entities are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method. Under the direct method, information about major classes of gross cash receipts and gross cash payments may be obtained either: ( a ) from the accounting records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repayment of: ( a ) principal amounts relating to credit card customers; ( b ) the purchase and sale of investments; and ( c ) other short-term borrowings, for example, those which have a maturity period of three months or less. 24. Cash flows arising from each of the following activities of a financial institution may be reported on a net basis: ( a ) cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date; ( b ) the placement of deposits with and withdrawal of deposits from other financial institutions; and ( c ) cash advances and loans made to customers and the repayment of those advances and loans. Foreign currency cash flows 25. Cash flows arising from transactions in a foreign currency shall be recorded in an entity's functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the cash flow. 26. The cash flows of a foreign subsidiary shall be translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows. 27. Cash flows denomi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or loss. However, it is more appropriate that interest paid and interest and dividends received are classified as financing cash flows and investing cash flows respectively, because they are costs of obtaining financial resources or returns on investments. 34. 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 entity 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. Taxes on income 35. Cash flows arising from taxes on income shall be separately disclosed and shall be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities. 36. Taxes on income arise on transactions that give rise to cash flows that are classified as operating, investing or financing activities in a statement of cash flows. While tax expense may be readily identifiable with investing or financing activities, the related tax cash flows are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. 41. The separate presentation of the cash flow effects of obtaining or losing control of subsidiaries or other businesses as single line items, together with the separate disclosure of the amounts of assets and liabilities acquired or disposed of, helps to distinguish those cash flows from the cash flows arising from the other operating, investing and financing activities. The cash flow effects of losing control are not deducted from those of obtaining control. 42. The aggregate amount of the cash paid or received as consideration for obtaining or losing control of subsidiaries or other businesses is reported in the statement of cash flows net of cash and cash equivalents acquired or disposed of as part of such transactions, events or changes in circumstances. 42A . Cash flows arising from changes in ownership interests in a subsidiary that do not result in a loss of control shall be classified as cash flows from financing activities. 42B Changes in ownership interests in a subsidiary that do not result in a loss of control, such as the subsequent purchase or sale by a parent of a subsidiary's equity instruments, are accounted for as equity transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lent balances held by an entity are not available for use by the group 4 . 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. 50. Additional information may be relevant to users in understanding the financial position and liquidity of an entity. Disclosure of this information, together with a commentary by management, is encouraged and may include: ( a ) the amount of undrawn borrowing facilities that may be available for future operating activities and to settle capital commitments, indicating any restricti6ns on the use of these facilities; ( b ) the aggregate amounts of the cash flows from each of operating, investing and financing activities related to interests in joint ventures reported using proportionate consolidation; ( c ) the aggregate amount of cash flows that represent increases in operating capacity separately from those cash flows that are required to maintain operating capacity; and ( d ) the amount of the cash flows arising from the operating, inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170 was paid during the period. Also, 100 relating to interest expense of the prior period was paid during the period. l dividends paid were 1,200. l the liability for tax at the beginning and end of the period was 1,000 and 400 respectively. During the period, a further 200 tax was provided for. Withholding tax on dividends received amounted to 100. l during the period, the group acquired property, plant and equipment with an aggregate cost of 1,250 of which 900 was acquired by means of finance leases. Cash payments of 350 were made to purchase property, plant and equipment. l plant with original cost of 80 and accumulated depreciation of 60 was sold for 20. l accounts receivable as at the end of 20X2 include 100 of interest receivable. Consolidated statement of profit and loss for the period ended 20X2 ( a ) Sales 30,650 Cost of sales (26,000) Gross profit 4,650 Depreciation (450) Administrative and selling expenses (910) Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 - Total liabilities 3,180 4,030 Shareholders' equity Share capital 1,500 1,250 Retained earnings 3,230 1,380 Total shareholders' equity 4,730 2,630 Total liabilities and shareholders' equity 7,910 6,660 Direct method statement of cash flows (paragraph 18( a )) 20X2 Cash flows from operating activities Cash receipts from customers 30,150 Cash paid to suppliers and employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Depreciation 450 Foreign exchange loss 40 Investment income (500) Interest expense 400 3,740 Increase in trade and other receivables (500) Decrease in inventories 1,050 Decrease in trade payables (1,740) Cash generated from operations 2,550 Income taxes paid (900) Net cash from operating activities 1,650 Cash flows from investing activities Acquisition of subsidiary X net of cash acquired (Note A) (550) Purchase of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d equipment During the period, the Group acquired property, plant and equipment with an aggregate cost of 1,250 of which 900 was acquired by means of finance leases. Cash payments of 350 were made to purchase property, plant and equipment. C. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and balances with banks, and investments in money market instruments. Cash and cash equivalents included in the statement of cash flows comprise the following amounts in the balance sheet: 20X2 20X1 Cash on hand and balances with banks 40 25 Short-term investments 190 135 Cash and cash equivalents as previously reported 230 160 Effect of exchange rate changes - (40) Cash and cash equivalents as restated 230 120 Cash and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (23,463) Recoveries on loans previously written off 237 Cash payments to employees and suppliers (997) 4,224 ( Increase ) decrease in operating assets: Short-term funds (650) Deposits held for regulatory or monetary control purposes 234 Funds advanced to customers (288) Net increase in credit card receivables (360) Other short-term negotiable securities (120) Increase ( decrease ) in operating liabilities: Deposits from customers 600 Negotiable certificates of deposit (200) Net cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Cash Flows. Comparison with IAS 7, Statement of Cash Flows Ind AS 7 differs from International Accounting Standard (IAS) 7, Statement of Cash Flows, in the following major respects: 1. In case of other than financial entities, IAS 7 gives an option to classify the interest paid and interest and dividends received as item of operating cash flows. Ind AS 7 does not provide such an option and requires these item to be classified as item of financing activity and investing activity, respectively (refer to the paragraph 33). 2. IAS 7 gives an option to classify the dividend paid as an item of operating activity. However, Ind AS 7 requires it to be classified as a part of financing activity only. 3. Different terminology is used in this standard, e.g. , the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit and loss' is used instead of 'Statement of comprehensive income'. 4. Paragraph 2 of IAS 7 which states that IAS 7 supersedes the earlier version IAS 7 is deleted in Ind AS 7 as this is not relevant in Ind AS 7. However, paragraph number 2 is retained in Ind AS 7 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Accounting Standards Ind ASs are Standards prescribed under section 211(3C) of the Companies Act, 1956. Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. Prior period errors are omissions from, and misstatements in, the entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that: ( a ) was available when financial statements for those periods were approved for issue; and ( b ) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements. Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud. Retrospective application is applying a new accounting policy to tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... influenced in making economic decisions. Accounting policies Selection and application of accounting policies 7. When an Ind AS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the Ind AS. 8. Ind ASs set out accounting policies that result in financial statements containing relevant and reliable information about the transactions, other events and conditions to which they apply. Those policies need not be applied when the effect of applying them is immaterial. However, it is inappropriate to make, or leave uncorrected, immaterial departures from Ind ASs to achieve a particular presentation of an entity's financial position, financial performance or cash flows. 9. Ind ASs are accompanied by guidance to assist entities in applying their requirements. All such guidance states whether it is an integral part of Ind ASs. Guidance that is an integral part of the Ind ASs is mandatory. Guidance that is not an integral part of the Ind ASs does not contain requirements for financial statements. 10 . In the absence of an Ind AS that specifically applies to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity over time to identify trends in its financial position, financial performance and cash flows. Therefore, the same accounting policies are applied within each period and from one period to the next unless a change in accounting policy meets one of the criteria in paragraph 14. 16. The following are not changes in accounting policies: ( a ) the application of an accounting policy for transactions, other events or conditions that differ in substance from those previously occurring; and ( b ) the application of a new accounting policy for transactions, other events or conditions that did not occur previously or were immaterial. 17. The initial application of a policy to revalue assets in accordance with Ind AS 16 Property, Plant and Equipment or Ind AS 38 Intangible Assets is a change in an accounting policy to be dealt with as a revaluation in accordance with Ind AS 16 or Ind AS 38, rather than in accordance with this Standard. 18. Paragraphs 19-31 do not apply to the change in accounting policy described in paragraph 17. Applying changes in accounting policies 19. Subject to paragraph 23: ( a ) an entity shall account for a change in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod. 25. When it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying a new accounting policy to all prior periods, the entity shall adjust the comparative information to apply the new accounting policy prospectively from the earliest date practicable. 26. When an entity applies a new accounting policy retrospectively, it applies the new accounting policy to comparative information for prior periods as far back as is practicable. Retrospective application to a prior period is not practicable unless it is practicable to determine the cumulative effect on the amounts in both the opening and closing balance sheets for that period. The amount of the resulting adjustment relating to periods before those presented in the financial statements is made to the opening balance of each affected component of equity of the earliest prior period presented. Usually the adjustment is made to retained earnings. However, the adjustment may be made to another component of equity (for example, to comply with an Ind AS). Any other information about prior periods, such as historical summaries of financial data, is also adjusted as far back as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the amount of the adjustment, or might have an effect on future periods, an entity shall disclose: ( a ) the nature of the change in accounting policy; ( b ) the reasons why applying the new accounting policy provides reliable and more relevant information; ( c ) for the current period and each prior period presented, to the extent practicable, the amount of the adjustment: ( i ) for each financial statement line item affected; and ( ii ) if Ind AS 33 applies to the entity, for basic and diluted earnings per share; ( d ) the amount of the adjustment relating to periods before those presented, to the extent practicable; and ( e ) if retrospective application is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied. Financial statements of subsequent periods need not repeat these disclosures. 30. When an entity has not applied a new Ind AS that has been issued but is not yet effective, the entity shall disclose: ( a ) this fact; and ( b ) known or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only; or ( b ) the period of the change and future periods, if the change affects both. 37. To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change. 38. Prospective recognition of the effect of a change in an accounting estimate means that the change is applied to transactions, other events and conditions from the date of the change in estimate. A change in an accounting estimate may affect only the current period's profit or loss, or the profit or loss of both the current period and future periods. For example, a change in the estimate of the amount of bad debts affects only the current period's profit or loss and therefore is recognised in the current period. However, a change in the estimated useful life of, or the expected pattern of consumption of the future economic benefits embodied in, a depreciable asset affects depreciation expense for the current period and for each future period during the asset's remaining useful life. In both cases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d equity for the earliest period for which retrospective restatement is practicable (which may be the current period). 45. When it is impracticable to determine the cumulative effect, at the beginning of the current period, of an error on all prior periods, the entity shall restate the comparative information to correct the error prospectively from the earliest date practicable. 46. The correction of a prior period error is excluded from profit or loss for the period in which the error is discovered. Any information presented about prior periods, including any historical summaries of financial data, is restated as far back as is practicable. 47. When it is impracticable to determine the amount of an error ( e.g., a mistake in applying an accounting policy) for all prior periods, the entity, in accordance with paragraph 45, restates the comparative information prospectively from the earliest date practicable. It therefore disregards the portion of the cumulative restatement of assets, liabilities and equity arising before that date. Paragraphs 50-53 provide guidance on when it is impracticable to correct an error for one or more prior periods. 48. Corrections of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins the same as for estimates made in the current period, namely, for the estimate to reflect the circumstances that existed when the transaction, other event or condition occurred. 52. Therefore, retrospectively applying a new accounting policy or correcting a prior period error requires distinguishing information that : ( a ) provides evidence of circumstances that existed on the date( s ) as at which the transaction, other event or condition occurred, and ( b ) would have been available when the financial statements for that prior period were approved for issue from other information. For some types of estimates ( e.g. an estimate of fair value not based on an observable price or observable inputs), it is impracticable to distinguish these types of information. When retrospective application or retrospective restatement would require making a significant estimate for which it is impossible to distinguish these two types of information, it is impracticable to apply the new accounting policy or correct the prior period error retrospectively. 53. Hindsight should not be used when applying a new accounting policy to, or correcting amounts for, a prior period, ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income taxes (6,000) Profit 14,000 1.4 20X1 opening retained earnings was ₹ 20,000 and closing retained earnings was ₹ 34,000. 1.5 Beta's income tax rate was 30 per cent for 20X2 and 20X1. It had no other income or expenses. 1.6 Beta had ₹ 5,000 of share capital throughout, and no other components of equity except for retained earnings. Its shares are not publicly traded and it does not disclose earnings per share. Beta Co. Extract from the statement of profit and loss (restated) 20X2 20X1 Rs. Rs. Sales 104,000 73,500 Cost of goods sold (80.000) (60.000) Profit before income taxes 24,000 13,500 Income taxes (7,200) (4,050) Profit 16,800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fuller components approach retrospectively, or to account for that change prospectively from any earlier date than the start of 20X2. Also, the change from a cost model to a revaluation model is required to be accounted for prospectively. Therefore, management concluded that it should apply Delta's new policy prospectively from the start of 20X2. 2.3 Additional information: Delta's tax rate is 30 per cent Rs. Property, plant and equipment at the end of 20X1: Cost 25,000 Depreciation (14,000) Net book value 11,000 Prospective depreciation expense for 20X2 (old basis) 1,500 Some results of the engineering survey: Valuation 17,000 Estimated residual value 3,000 Average remaining asset life (years) 7 Depreciation expense on existing property, plant and equipment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. ) Objective 1. The objective of this Standard is to prescribe: ( a ) When an entity should adjust its financial statements for events after the reporting period; and ( b ) the disclosures that an entity should give about the date when the financial statements were approved for issue and about events after the reporting period. The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate. Scope 2. This Standard shall be applied in the accounting for, and disclosure of, events after the reporting period. Definitions 3. The following terms are used in this Standard with the meanings specified: Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are approved by the Board of Directors in case of a company, and, by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reporting period 8. An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period. 9. The following are examples of adjusting events after the reporting period that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised: ( a ) the settlement after the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period. The entity adjusts any previously recognised provision related to this court case in accordance with Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets or recognises a new provision. The entity does not merely disclose a contingent liability because the settlement provides additional evidence that would be considered in accordance with paragraph 16 of Ind AS 37. ( b ) the receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted. For example: ( i ) the bankrup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are disclosed in the notes in accordance with Ind AS 1 Presentation of Financial Statements. Going concern 14. An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so. 15. Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate. If the going concern assumption is no longer appropriate, the effect is so pervasive that this Standard requires a fundamental change in the basis of accounting, rather than an adjustment to the amounts recognised within the original basis of accounting. 16. Ind AS 1 specifies required disclosures if: ( a ) the financial statements are not prepared on a going concern basis; or ( b ) management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. The events or conditions requiring disclosure may arise after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, other disposals of assets, or expropriation of major assets by Government; ( d ) the destruction of a major production plant by a fire after the reporting period; ( e ) announcing, or commencing the implementation of, a major restructuring ( see Ind AS 37); ( f ) major ordinary share transactions and potential ordinary share transactions after the reporting period Ind AS 33 Earnings per Share requires an entity to disclose a description of such transactions, other than when such transactions involve capitalisation or bonus issues, share splits or reverse share splits all of which are required to be adjusted under (Ind AS 33); ( g ) abnormally large changes after the reporting period in asset prices or foreign exchange rates; ( h ) changes in tax rates or tax laws enacted or announced after the reporting period that have a significant effect on current and deferred tax assets and liabilities ( see Ind AS 12 Income Taxes); ( i ) entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees; and ( j ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties control the asset both before and after the distribution, a group of individual shareholders receiving the distribution must have, as a result of contractual arrangements, such ultimate collective power over the entity making the distribution. 7. In accordance with paragraph 5, this Appendix does not apply when an entity distributes some of its ownership interests in a subsidiary but retains control of the subsidiary. The entity making a distribution that results in the entity recognising a non-controlling interest in its subsidiary accounts for the distribution in accordance with Ind AS 27. 8. This Appendix addresses only the accounting by an entity that makes a non-cash asset distribution. It does not address the accounting by shareholders who receive such a distribution. Issues 9 . When an entity declares a distribution and has an obligation to distribute the assets concerned to its owners, it must recognise a liability for the dividend payable. Consequently, this Appendix addresses the following issues: ( a ) When should the entity recognise the dividend payable? ( b ) How should an entity measure the dividend payable? ( c ) When an en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the fair value of the assets to be distributed. 17 . If, after the end of a reporting period but before the financial statements are approved for issue, an entity declares a dividend to distribute a non-cash asset, it shall disclose: ( a ) the nature of the asset to be distributed; ( b ) the carrying amount of the asset to be distributed as of the end of the reporting period; and ( c ) the estimated fair value of the asset to be distributed as of the end of the reporting period, if it is different from its carrying amount, and the information about the method used to determine that fair value required by Ind AS 107 paragraph 27( a ) and ( b ). Illustrative examples These examples accompany, but are not part of this appendix Scope of the Appendix (paragraphs 3-8) Image_10 IE1 Assume Company A is owned by public shareholders. No single shareholder controls Company A and no group of shareholders is bound by a contractual agreement to act together to control Company A jointly. Company A distributes certain assets ( e.g. available-for-sale securities) pro rata to the shareholders. This transaction is wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistance (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Scope 1 . This Standard shall be applied in accounting for, and in the disclosure of, Government grants and in the disclosure of other forms of Government assistance. 2. This Standard does not deal with: ( a ) the special problems arising in accounting for Government grants in financial statements reflecting the effects of changing prices or in supplementary information of a similar nature. ( b ) Government assistance that is provided for an entity in the form of benefits that are available in determining taxable profit or tax loss, or are determined or limited on the basis of income tax liability. Examples of such benefits are income tax holidays, investment tax credits, accelerated depreciation. ( c ) Government participation in the ownership of the entity. ( d ) Government grants covered by Ind AS , Agriculture 7 . Definitions 3. The following terms are used in this Standard with the meanings specified: Government refers to Government, Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod. This facilitates comparison of an (entity's financial statements with those of prior periods and with those of other entities. 6. Government grants are sometimes called by other names such as subsidies, subventions, or premiums. Government grants 7 . Government grants, including non-monetary grants at fair value, shall not be recognised until there is reasonable assurance that: ( a ) the entity will comply with the conditions attaching to them; and ( b ) the grants will be received. 8 . A Government grant is not recognised until there is reasonable assurance that the entity will comply with the conditions attaching to it, and that the grant will be received. Receipt of a grant does not of itself provide conclusive evidence that the conditions attaching to the grant have been or will be fulfilled. 9. The manner in which a grant is received does not affect the accounting method to be adopted in regard to the grant. Thus a grant is accounted for in the same manner whether it is received in cash or as a reduction of a liability to the Government. 10. A forgivable loan from Government is treated as a Government grant when there is reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They should therefore be recognised in profit or loss over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. ( c ) because income and other taxes are expenses, it is logical to deal also with Government grants, which are an extension of fiscal policies, in profit or loss. 16. It is fundamental to the income approach that Government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. Recognition of Government grants in profit or loss on a receipts basis is not in accordance with the accrual accounting assumption ( see Ind AS 1 Presentation of Financial Statements) and would be acceptable only if no basis existed for allocating a grant to periods other than the one in which it was received. 17. In most cases the periods over which an entity recognises the costs or expenses related to a Government grant are readily ascertainable. Thus grants in recognition of specific expenses are recognised in profit or loss in the same period as the relevant expenses. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to assets 24. Government grants related to assets, including non-monetary grants at fair value, shall be presented in the balance sheet by setting up the grant as deferred income. 25. [Refer to Appendix 1]. 26. The grant set up as deferred income is recognised in profit or loss on a systematic basis over the useful life of the asset. 27. [Refer to Appendix 1] 28. The purchase of assets and the receipt of related grants can cause major movements in the cash flow of an entity. For this reason and in order to show the gross investment in assets, such movements are disclosed as separate items in the statement of cash flows.. Presentation of grants related to income 29. Grants related to income are sometimes presented as a credit in the statement of profit and loss, either separately or under a general heading such as 'other income'; alternatively, they are deducted in reporting the related expense. 29A [Refer to Appendix 1] 30. Supporters of the first method claim that it is inappropriate to net income and expense items and that separation of the grant from the expense facilitates comparison with other expenses not affected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t include the provision of infrastructure by improvement to the general transport and communication network and the supply of improved facilities such as irrigation or water reticulation which is available on an ongoing indeterminate basis for the benefit of an entire local community. Disclosure 39. The following matters shall be disclosed: ( a ) the accounting policy adopted for Government grants, including the methods of presentation adopted in the financial statements; ( b ) the nature and extent of Government grants recognised in the financial statements and an indication of other forms of Government assistance from which the entity has directly benefited; and ( c ) unfulfilled conditions and other contingencies attaching to Government assistance that has been recognised. Appendix A Government Assistance - No Specific Relation to Operating Activities This Appendix is an integral part of Indian Accounting Standard (Ind AS) 20. Issue 1 . In some countries Government assistance to entities may be aimed at encouragement or long-term support of business activities either in certain regions or industry sectors. Conditions to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleted in Ind AS 20. In order to maintain consistency with paragraph numbers of IAS 20, the paragraph numbers are retained in Ind AS 20: ( i ) Paragraph 25 ( ii ) Paragraph 27 ( iii ) Paragraph 33 3. Requirements regarding presentation of grants related to income in the separate income statement, where separate income statement is presented under paragraph 29A of IAS 20 have been deleted. This change is consequential to the removal of option regarding two statement approach in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss. However, paragraph number 29A has been retained in Ind AS 20 to maintain consistency with paragraph numbers of IAS 20. 4. Different terminology is used in this standard, e.g., the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit and loss' is used instead of 'Statement of comprehensive income'. 5. Paragraph number 37 appear as 'Deleted 'in IAS 20. In order to maintain consistency with paragraph numbers of IAS 20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... described as complying with Indian Accounting Standards. For translations of financial information into a foreign currency that do not meet these requirements, this Standard specifies information to be disclosed. 7. This Standard does not apply to the presentation in a statement of cash flows of the cash flows arising from transactions in a foreign currency, or to the translation of cash flows of a foreign operation ( see Ind AS 7 Statement of Cash Flows). Definitions 8. The following terms are used in this Standard with the meanings specified: Closing rate is the spot exchange rate at the end of the reporting period. Exchange difference is the difference resulting from translating a given number of units of one currency into another currency at different exchange rates. Exchange rate is the ratio of exchange for two currencies. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Foreign currency is a currency other than the functional currency of the entity. Foreign operation is an entity that is a subsidiary, associate, joi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... degree of autonomy. An example of the former is when the foreign operation only sells goods imported from the reporting entity and remits the proceeds to it. An example of the latter is when the operation accumulates cash and other monetary items, incurs expenses, generates income and arranges borrowings, all substantially in its local currency. ( b ) whether transactions with the reporting entity are a high or a low proportion of the foreign operation's activities ( c ) whether cash flows from the activities of the foreign operation directly affect the cash flows of the reporting entity and are readily available for remittance to it. ( d ) whether cash flows from the activities of the foreign operation are sufficient to service existing and normally expected debt obligations without funds being made available by the reporting entity. 12. When the above indicators are mixed and the functional currency is not obvious, management uses its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. As part of this approach, management gives priority to the primary ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act to receive (or deliver) a variable number of the entity's own equity instruments or a variable amount of assets in which the fair value to be received (or delivered) equals a fixed or determinable number of units of currency is a monetary item. Conversely, the essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. Examples include: amounts prepaid for goods and services ( e.g. prepaid rent); goodwill; intangible assets; inventories; property, plant and equipment; and provisions that are to be settled by the delivery of a non monetary asset. Summary of the approach required by this Standard 17. In preparing financial statements, each entity-whether a stand-alone entity, an entity with foreign operations (such as a parent) or a foreign operation (such as a subsidiary or branch)-determines its functional currency in accordance with paragraphs 9-14. The entity translates foreign currency items into its functional currency and reports the effects of such translation in accordance with paragraphs 20-37 and 50. 18. Many reporting entities comprise a number of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age rate for a week or a month might be used for all transactions in each foreign currency occurring during that period. However, if exchange rates fluctuate significantly, the use of the average rate for a period is inappropriate. Reporting at the ends of subsequent reporting periods 23. At the end of each reporting period ( a ) foreign currency monetary items shall be translated using the closing rate; ( b ) non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction; and ( c ) non-monetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was determined. 24. The carrying amount of an item is determined in conjunction with other relevant Standards. For example, property, plant and equipment may be measured in terms of fair value or historical cost in accordance with Ind AS 16 Property, Plant and Equipment. Whether the carrying amount is determined on the basis of historical cost or on the basis of fair value, if the amount is determined in a foreign currency it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated on initial recognition during the period or in previous financial statements shall be recognised in profit or loss in the period in which they arise, except: ( i ) exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation as described in paragraph 32; ( ii ) where an entity exercises the option provided in paragraph 29A in respect of long-term monetary items. 29. When monetary items arise from a foreign currency transaction and there is a change in the exchange rate between the transaction date and the date of settlement, an exchange difference results. When the transaction is settled within the same accounting period as that in which it occurred, all the exchange difference is recognised in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each period up to the date of settlement is determined by the change in exchange rates during each period. Paragraph 29A provides an option to recognise unrealised exchange differences arising on translation of certain long-term monetary assets and long-term monetary liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 requires some gains and losses arising on a revaluation of property, plant and equipment to be recognised in other comprehensive income. When such an asset is measured in a foreign currency, paragraph 23( c ) of this Standard requires the revalued amount to be translated using the rate at the date the value is determined, resulting in an exchange difference that is also recognised in other comprehensive income. 32. Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation ( see paragraph 15) shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, as appropriate. In the financial statements that include the foreign operation and the reporting entity ( e.g. consolidated financial statements when the foreign operation is a subsidiary), such exchange differences shall be recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment in accordance with paragraph 48. 33. When a monetary item forms part of a reporting entity' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and services may lead to a change in an entity's functional currency. 37. The effect of a change in functional currency is accounted for prospectively. In other words, an entity translates all items into the new functional currency using the exchange rate at the date of the change. The resulting translated amounts for non-monetary items are treated as their historical cost. Exchange differences arising from the translation of a foreign operation previously recognised in other comprehensive income in accordance with paragraphs 32 and 39( c ) are not reclassified from equity to profit or loss until the disposal of the operation. When the option provided in paragraph 29A is exercised, exchange differences previously recognised directly in equity and accumulated in a separate component of equity in accordance with that paragraph are not transferred to profit or loss immediately on change of the entity's functional currency. They shall continue to be transferred to profit or loss in the manner stated in that paragraph. Use of a presentation currency other than the functional currency Translation to the presentation currency 38 . An entity may present its finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsolidated balance sheet. 42 . The results and financial position of an entity whose functional currency is the currency of a hyperinflationary economy shall be translated into a different presentation currency using the following procedures: ( a ) all amounts ( i.e. assets, liabilities, equity items, income and expenses, including comparatives) shall be translated at the closing rate at the date of the most recent balance sheet, except that ( b ) when amounts are translated into the currency of a non-hyperinflationary economy, comparative amounts shall be those that were presented as current year amounts in the relevant prior year financial statements ( i.e. not adjusted for subsequent changes in the price level or subsequent changes in exchange rates). 43 . When an entity's functional currency is the currency of a hyperinflationary economy, the entity shall restate its financial statements in accordance with Ind AS 29 before applying the translation method set out in paragraph 42, except for comparative amounts that are translated into a currency of a non-hyperinflationary economy [ see paragraph 42(b)]. When the economy ceases to be hyperinflationary an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are made for the effects of any significant transactions or other events that occur between the different dates. In such a case, the assets and liabilities of the foreign operation are translated at the exchange rate at the end of the reporting period of the foreign operation. Adjustments are made for significant changes in exchange rates up to the end of the reporting period of the reporting entity in accordance with Ind AS 27. The same approach is used in applying the equity method to associates and joint ventures and in applying proportionate consolidation to joint ventures in accordance with Ind AS 28 Investments in Associates and Ind AS 31. 47. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation shall be treated as assets and liabilities of the foreign operation. Thus they shall be expressed in the functional currency of the foreign operation and shall be translated at the closing rate in accordance with paragraphs 39 and 42. Disposal or partial disposal of a foreign operation 48. On the disposal of a foreign opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnised in other comprehensive income is reclassified to profit or loss at the time of a write-down. Tax effects of all exchange differences 50. Gains and losses on foreign currency transactions and exchange differences arising on translating the results and financial position of an entity (including a foreign operation) into a different currency may have tax effects. Ind AS 12 Income Taxes applies to these tax effects. Disclosure 51. In paragraphs 53 and 55-57 references to 'functional currency' apply, in the case of a group, to the functional currency of the parent. 52. An entity shall disclose: ( a ) the amount of exchange differences recognised in profit or loss except for those arising on financial instruments measured at fair value through profit or loss in accordance with Ind AS 39; ( b ) net exchange differences recognised in other comprehensive income and accumulated in a separate component of equity, and a reconciliation of the amount of such exchange differences at the beginning and end of the period; and ( c ) net exchange differences recognised directly in equity and accumulated in a separate component of equity in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endix lists the appendix which is a part of another Indian Accounting Standard and makes reference to Ind AS 21, The Effects of Changes in Foreign Exchange Rates. 1. Appendix D Hedges of a Net Investment in a Foreign Operation contained in Ind AS 39, Financial instruments: Recognition and Measurement makes reference to this Standard also. Appendix B This Appendix accompanies, but is not part of Ind AS 21. Example illustrating paragraph 14 Entity P has a subsidiary Entity S. Functional currencies of Entities P and S determined in accordance with Ind AS 21 are Rupee and CU respectively. Further, currency CU is determined as currency of a hyperinflationary economy within the meaning of Ind AS 29. The financial statements of Entity S should be restated in accordance with Ind AS 29. This requirement cannot be avoided, for example, by adopting Rupee as the functional currency of Entity S. Example illustrating impairment loss in paragraph 25 Entity A's functional currency is Rupee. It has a building located in US acquired at a cost of US$ 10,000 when the exchange rate was US$ 1=Rs.50. The building is carried at cost in the financial statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate as at 31 March 20X0(Rs.48 per US$) 48,000 Exchange gain 2,000 In the consolidated financial statements of Entity P, the exchange gain of ₹ 2,000 will be recognised in other comprehensive income and accumulated in equity. Situation 2: Entity S1 owes to Entity P ₹ 48,000 towards a loan obtained some years back. For the purpose of this example, it is assumed that the use of the average exchange rate provides a reliable approximation of the spot rates during the year. Exchange rates as at 31 March 20X0 and 31 March 20X1 were US$ 1=Rs.48 and US$ 1=Rs.50 respectively. Average exchange rate during the financial year ending 31 March 20X1 was US$ 1=Rs.49. In the above situation, in the separate financial statements of Entity P, no exchange difference arises on the loan since it is denominated in its own functional currency. In the individual financial statements of Entity S1, an exchange gain of US$40 arises as shown below: US$ Loan liability of ₹ 48,000 translated @ exchange rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with paragraphs 38-47 of Ind AS 21, in the consolidated financial statements of Entity P, the exchange loss in terms of Rupee corresponding to US$100 i.e. ₹ 4,500 (US$100 @ ₹ 45) will be recognised in other comprehensive income and accumulated in equity. Example illustrating paragraph 37 Right from inception, Entity A's functional currency has been Rupee. It has one foreign operation with Euro as its functional currency. As a result of change in circumstances affecting the operations of the entity, the management determines that with effect from 1 January 20X1, the entity's functional currency will be US$. The exchange rate on that date is US$ 1=Rs.50. On that date, the carrying amount of inventories carried at cost in terms of previous functional currency is ₹ 100,000. The entity has previously recognised in other comprehensive income exchange differences arising on translation of its foreign operation and accumulated in equity as Foreign Currency Translation Reserve ('FCTR'). The accumulated FCTR as at 1 January 20X1 in terms of the previous functional currency is ₹ 50,000. There is no change in the functional currency of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 14, 25, 33 and 37 have been added in Ind AS 21. 5 . When there is a change in functional currency of either the reporting currency or a significant foreign operation, IAS 21 requires disclosure of that fact and the reason for the change in functional currency. Ind AS 21 requires an additional disclosure of the date of change in functional currency. 6 . Different terminology is used in this Standard e.g., the term 'balance sheet is used instead of 'Statement of financial position'. Indian Accounting Standard (Ind AS) 23 Borrowing Costs (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Core principle 1. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense. Scope 2 . An entity shall apply this Standard in accounting for borrowing costs. 3 . The Standard does not deal with the actual or imputed cost of equity, including preferred capital not classified as a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets. Recognition 8 . An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. An entity shall recognise other borrowing costs as an expense in the period in which it incurs them. 9 . Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are included in the cost of that asset. Such borrowing costs are capitalised as part of the cost of the asset when it is probable that they will result in future economic benefits to the entity and the costs can be measured reliably. When an entity applies Ind AS 29 Financial Reporting in Hyperinflationary Economies, it recognises as an expense the part of borrowing costs that compensates for inflation during the same period in accordance with paragraph 21 of that Standard. Borrowing costs eligible for capitalisation 10. The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that an entity capitalises during a period shall not exceed the amount of borrowing costs it incurred during that period. 15 . In some circumstances, it is appropriate to include all borrowings of the parent and its subsidiaries when computing a weighted average of the borrowing costs; in other circumstances, it is appropriate for each subsidiary to use a weighted average of the borrowing costs applicable to its own borrowings. Excess of the carrying amount of the qualifying asset over recoverable amount 16. When the carrying amount or the expected ultimate cost of the qualifying asset exceeds its recoverable amount or net realisable value, the carrying amount is written down or written off in accordance with the requirements of other Standards. In certain circumstances, the amount of the write-down or write-off is written back in accordance with those other Standards. Commencement of capitalisation 17. An entity shall begin capitalising borrowing costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out substantial technical and administrative work. An entity also does not suspend capitalising borrowing costs when a temporary delay is a necessary part of the process of getting an asset ready for its intended use or sale. For example, capitalisation continues during the extended period that high water levels delay construction of a bridge, if such high water levels are common during the construction period in the geographical region involved. Cessation of capitalisation 22 . An entity shall cease capitalising borrowing costs when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. 23 . An asset is normally ready for its intended use or sale when the physical construction of the asset is complete even though routine administrative work might still continue. If minor modifications, such as the decoration of a property to the purchaser's or user's specification, are all that are outstanding, this indicates that substantially all the activities are complete. 24 . When an entity completes the construction of a qualifying asset in parts and each part is capable of being used while construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of international Financial Reporting Standards. Indian Accounting Standard (Ind AS) 24 Related Party Disclosures (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.). Objective 1. The objective of this Standard is to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances, including commitments, with such parties. Scope 2. This Standard shall be applied in: ( a ) identifying related party relationships and transactions; ( b ) identifying outstanding balances, including commitments, between an entity and its related parties; ( c ) identifying the circumstances in which disclosure of the items in ( a ) and ( b ) is required; and ( d ) determining the disclosures to be made about those items. 3. This Standard requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated party relationship even if related party transactions do not occur. The mere existence of the relationship may be sufficient to affect the transactions of the entity with other parties. For example, a subsidiary may terminate relations with a trading partner on acquisition by the parent of a fellow subsidiary engaged in the same activity as the former trading partner. Alternatively, one party may refrain from acting because of the significant influence of another-for example, a subsidiary may be instructed by its parent not to engage in research and development. 8. For these reasons, knowledge of an entity's transactions, outstanding balances, including commitments, and relationships with related parties may affect assessments of its operations by users of financial statements, including assessments of the risks and opportunities facing the entity. Definitions 9. The following terms are used in this Standard with the meanings specified: A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the 'reporting entity'). ( a ) A person or a close member of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Compensation includes: ( a ) short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees; ( b ) post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care; ( c ) other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within twelve months after the end of the period, profit-sharing, bonuses and deferred compensation; ( d ) termination benefits; and ( e ) share-based payment. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Joint control is the contractually agreed sharing of control over an economic activity. Key management personnel are those persons having authority and responsibili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party. If neither the entity's parent nor the ultimate controlling party produces consolidated financial statements available for public use, the name of the next most senior parent that does so shall also be disclosed. 14 . To enable users of financial statements to form a view about the effects of related party relationships on an entity, it is appropriate to disclose the related party relationship when control exists, irrespective of whether there have been transactions between the related parties. This is because the existence of control relationship may prevent the reporting entity from being independent in making its financial and operating decisions. The disclosure of the name of the related party and the nature of the related party relationship where control exists may sometimes be at least as relevant in appraising an entity's prospects as are the operating results and the financial position presented in its financial statements. Such a related party may establish the entity's credit standing, determine the source and price of its raw materials, and determine to whom and at what price the product is sold. 15 . The requirement to disclose related party r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S 1 Presentation of Financial Statements for information to be presented either in the balance sheet or in the notes. The categories are extended to provide a more comprehensive analysis of related party balances and apply to related party transactions. 21 . The following are examples of transactions that are disclosed if they are with a related party: ( a ) purchases or sales of goods (finished or unfinished); ( b ) purchases or sales of property and other assets; ( c ) rendering or receiving of services; ( d ) leases; ( e ) transfers of research and development; ( f ) transfers under licence agreements; ( g ) transfers under finance arrangements (including loans and equity contributions in cash or in kind); ( h ) provision of guarantees or collateral; ( i ) commitments to do something if a particular event occurs or does not occur in the future, including executory contracts 9 (recognized and unrecognised); ( j ) settlement of liabilities on behalf of the entity or by the entity on behalf of that related party; ( k ) management contracts including for deputation of employees. 22. Participation by a parent or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pes of transactions include those listed in paragraph 21. 27. In using its judgment to determine the level of detail to be disclosed in accordance with the requirements in paragraph 26( b ), the reporting entity shall consider the closeness of the related party relationship and other factors relevant in establishing the level of significance of the transaction such as whether it is: ( a ) significant in terms of size; ( b ) carried out on non-market terms; ( c ) outside normal day-to-day business operations, such as the purchase and sale of businesses; ( d ) disclosed to regulatory or supervisory authorities; ( e ) reported to senior management; ( f ) subject to shareholder approval. Illustrative examples The following examples accompany, but are not part of, Ind AS 24 Related Party Disclosures. They illustrate: l the partial exemption for government-related entities; and l how the definition of a related party would apply in specified circumstances. In the examples, references to 'financial statements' relate to the individual, separate or consolidated financial statements. Partial exemption for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample of disclosure to comply with paragraph 26( b )( ii ) for collectively significant transactions could be: Government G, indirectly, owns 75 per cent of Entity A's outstanding shares. Entity A's significant transactions with Government G and other entities controlled, jointly controlled or significantly influenced by Government G are [a large portion of its sales of goods and purchases of raw materials] or [about 50 per cent of its sales of goods and about 35 per cent of its purchases of raw materials]. The company also benefits from guarantees by Government G of the company's bank borrowing. See note X [of the financial statements] for disclosure of government assistance as required by Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance and notes Y and Z [of the financial statements] for compliance with other relevant Accounting Standards. Definition of a related party The references are to subparagraphs of the definition of a related party in paragraph 9 of Ind AS 24. Example 2 - Associates and subsidiaries IE4. Parent entity has a controlling interest in Subsidiaries A, B and C and has significant influ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty A. IE14A. The outcome described in paragraph IE 13 will also be the same if X is a member of key management personnel of Entity B and not of Enfity C. [ Paragraph 9 ( b )( vii ) - ( a )( i )] IE15. For Entity B's consolidated financial statements, Entity A is a related party of the Group if X is a member of key management personnel of the Group. [ Paragraph 9 ( b )( vi ) - ( a )( iii )] Example 4 - Person as investor IE16. A person, X, has an investment in Entity A and Entity B. Image_5 IE17 . For Entity A's financial statements, if X controls or jointly controls Entity A, Entity B is related to Entity A when X has control, joint control or significant influence over Entity B. [ Paragraph 9 ( b )( vi ) - ( a )( i ) and 9 ( b )( vii ) - ( a )( i )] IE18. For Entity B's financial statements, if X controls or jointly controls Entity A, Entity A is related to Entity B when X has control, joint control or significant influence over Entity B. [ Paragraph 9 ( b )( vi ) - ( a )( i ) and 9 ( b )( vi ) - ( a )( ii )] IE19. If X has significant influence over both Entity A and Entity B, Entities A and B are not related to each other. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet' is used instead of 'Statement of financial position'. Indian Accounting Standard (Ind AS) 28 Investments in Associates ( This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. Scope 1. This Standard shall be applied in accounting for investments in associates. However, it does not apply to investments in associates held by: a. venture capital organisations b. [Refer to Appendix 1] that upon initial recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement. Such investments shall be measured at fair value in accordance with Ind AS 39, with changes in fair value recognised in profit or loss in the period of the change. An entity holding such an investment shall make the disclosures required by paragraph 37( f ). Definitions 2. The following terms are used in this Standard with the meanings specified: An associate is an entity, including an unincor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, directly or indirectly ( e.g. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the investor holds, directly or indirectly ( e.g. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the investor does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an investor from having significant influence. 7. The existence of significant influence by an investor is usually evidenced in one or more of the following ways: a. representation on the board of directors or equivalent governing body of the investee; b. participation in policy-making processes, including participation in decisions about dividends or other distributions; c. material transactions between the investor and the investee; d. interchange of managerial personnel; or e. provision of essential technical information. 8. An entity may ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of property, plant and equipment and from foreign exchange translation differences. The investor's share of those changes is recognised in other comprehensive income of the investor ( see Ind AS 1 Presentation of Financial Statements ) . 12. When potential voting rights exist, the investor's share of profit or loss of the investee and of changes in the investee's equity is determined on the basis of present ownership interests and does not reflect the possible exercise or conversion of potential voting rights. Application of the equity method 13. An investment in an associate shall be accounted for using the equity method except when: a. the investment is classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations; b. [Refer to Appendix 1] c. [Refer to Appendix 1] 14. Investments described in paragraph 13( a ) shall be accounted for in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations 15. When an investment in an associate previously classified as held for sale, 40 longer meets the criteria to be so classified, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprehensive income by an associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the investor reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over the associate. For example, if an associate has available-for-sale financial assets and the investor loses significant influence over the associate, the investor shall reclassify to profit or loss the gain or loss previously recognised in other comprehensive income in relation to those assets. If an investor's ownership interest in an associate is reduced, but the investment continues to be an associate, the investor shall reclassify to profit or loss only a proportionate amount of the gain or loss previously recognised in other comprehensive income. 20. Many of the procedures appropriate for the application of the equity method are similar to the consolidation procedures described in Ind AS 27. Furthermore, the concepts underlying the procedures used in accounting for the acquisition of a subsidiary are also adopted in accounting for the acquisition of an investment in an associate. 21. A gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses after acquisition are made for impairment losses recognised by the associate, such as for goodwill or property, plant and equipment. 24. The most recent available financial statements of the associate are used by the investor in applying the equity method. When the end of the reporting period of the investor is different from that of the associate, the associate prepares, for the use of the investor, financial statements as of the same date as the financial statements of the investor unless it is impracticable to do so. 25. When, in accordance with paragraph 24, the financial statements of an associate used in applying the equity method are prepared as of a different date from that of the investor, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the investor's financial statements. In any case, the difference between the end of the reporting period of the associate and that of the investor shall be no more than three months unless it is impracticable to do so. The length of the reporting periods and any difference in the ends of the reporting periods shall be the same from period to pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. After application of the equity method, including recognising the associate's losses in accordance with paragraph 29, the investor applies the requirements of Ind AS 39 to determine whether it is necessary to recognise any additional impairment loss with respect to the investor's net investment in the associate. 32. The investor also applies the requirements of Ind AS 39 to determine whether any additional impairment loss is recognised with respect to the investor's interest in the associate that does not constitute part of the net investment and the amount of that impairment loss. 33. Because goodwill that forms part of the carrying amount of an investment in an associate is not separately recognised, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in Ind AS 36 Impairment of Assets. Instead, the entire carrying amount of the investment is tested for impairment in accordance with Ind AS 36 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever application of the requirements in Ind AS 39 indicates that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant influence; e. the end of the reporting period of the financial statements of an associate, when such financial statements are used in applying the equity method and are as of a date or for a period that is different from that of the investor, and the reason for using a different date or different period; f. the nature and extent of any significant restrictions (e.g. resulting from borrowing arrangements or regulatory requirements) on the ability of associates to transfer funds to the investor in the form of cash dividends, or repayment of loans or advances; g. the unrecognised share of losses of an associate, both for the period and cumulatively, if an investor has discontinued recognition of its share of losses of an associate; h. the fact that an associate is not accounted for using the equity method in accordance with paragraph 13; and i. summarised financial information of associates, either individually or in groups, that are not accounted for using the equity method, including the amounts of total assets, total liabilities, revenues and profit or loss. 38. Investments in associates accounted for using the equity method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b ) of IAS 28 has been deleted in Ind AS 28 as the Companies Act, 1956, is not applicable to mutual funds, unit trusts and similar entities including investment linked insurance funds and, thus, this standard would not be applicable to such entities. However, paragraph number 1( b ) has been retained in Ind AS 28 to maintain consistency with IAS 28. 3. Paragraphs 5, 13( b ) and 13( c ) have been deleted as the applicability or exemptions to the Indian Accounting Standards is governed by the Companies Act and the Rules made thereunder. However, paragraph numbers have been retained in Ind AS 28 to maintain consistency with IAS 28. 4. Paragraph number 16 appears as 'Deleted 'in IAS 28. In order to maintain consistency with paragraph numbers of IAS 28, the paragraph number is retained in Ind AS 28 5. Paragraph 23( b ) has been modified on the lines of Ind AS 103 to transfer excess of the investor's share of the net fair value of the associate's identifiable assets and liabilities over the cost of investment in capital reserve whereas in IAS 28, it is recognised in profit or loss. Indian Accounting Standard (Ind AS) 31 Interests in Joint Ventures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers). A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Proportionate consolidation is a method of accounting whereby a venturer's share of each of the assets, liabilities, income and expenses of a jointly controlled entity is combined line by line with similar items in the venturer's financial statements or reported as separate line items in the venturer's financial statements. Separate financial statements are those presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees. Significant influence is the power to participate in the financial and operating policy decisions of an economic activity but is not control or joint control over those policies. A venturer is a party to a joint venture and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity, duration and reporting obligations of the joint venture; ( b ) the appointment of the board of directors or equivalent governing body of the joint venture and the voting rights of the venturers; ( c ) capital contributions by the venturers; and ( d ) the sharing by the venturers of the output, income, expenses or results of the joint venture. 11. The contractual arrangement establishes joint control over the joint venture. Such a requirement ensures that no single venturer is in a position to control the activity unilaterally. 12. The contractual arrangement may identify one venturer as the operator or manager of the joint venture. The operator does not control the joint venture but acts within the financial and operating policies that have been agreed by the venturers in accordance with the contractual arrangement and delegated to the operator. If the operator has the power to govern the financial and operating policies of the economic activity, it controls the venture and the venture is a subsidiary of the operator and not a joint venture. Jointly controlled operations 13. The operation of some joint ventures involves the use of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Each venturer may take a share of the output from the assets and each bears an agreed share of the expenses incurred. 19. These joint ventures do not involve the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the venturers themselves. Each venturer has control over its share of future economic benefits through its share of the jointly controlled asset. 20. Many activities in the oil, gas and mineral extraction industries involve jointly controlled assets. For example, a number of oil production companies may jointly control and operate an oil pipeline. Each venturer uses the pipeline to transport its own product in return for which it bears an agreed proportion of the expenses of operating the pipeline. Another example of a jointly controlled asset is when two entities jointly control a property, each taking a share of the rents received and bearing a share of the expenses. 21. In respect of its interest in jointly controlled assets, a venturer shall recognise in its financial statements: ( a ) its share of the jointly controlled assets, classified according to the nature of the assets; ( b ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an interest. The entity operates in the same way as other entities, except that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity. 25. A jointly controlled entity controls the assets of the joint venture, incurs liabilities and expenses and earns income. It may enter into contracts in its own name and raise finance for the purposes of the joint venture activity. Each venturer is entitled to a share of the profits of the jointly controlled entity, although some jointly controlled entities also involve a sharing of the output of the joint venture. 26. A common example of a jointly controlled entity is when two entities combine their activities in a particular line of business by transferring the relevant assets and liabilities into a jointly controlled entity. Another example is when an entity commences a business in a foreign country in conjunction with the government or other agency in that country, by establishing a separate entity that is jointly controlled by the entity and the government or agency. 27. Many jointly controlled entities are similar in substance to those joint ventures referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. The application of proportionate consolidation means that the balance sheet of the venturer includes its share of the assets that it controls jointly and its share of the liabilities for which it is jointly responsible. The statement of profit and loss of the venturer includes its share of the income and expenses of the jointly controlled entity. Many of the procedures appropriate for the application of proportionate consolidation are similar to the procedures for the consolidation of investments in subsidiaries, which are set out in Ind AS 27. 34. Different reporting formats may be used to give effect to proportionate consolidation. The venturer may combine its share of each of the assets, liabilities, income and expenses of the jointly controlled entity with the similar items, line by line, in its financial statements. For example, it may combine its share of the jointly controlled entity's inventory with its inventory and its share of the jointly controlled entity's property, plant and equipment with its property, plant and equipment. Alternatively, the venturer may include separate line items for its share of the assets, liabilities, income and expenses o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e use of the equity method because proportionate consolidation better reflects the substance and economic reality of a venturer's interest in a jointly controlled entity, that is to say, control over the venturer's share of the future economic benefits. Nevertheless, this Standard permits the use of the equity method, as an alternative treatment, when recognising interests in jointly controlled entities. 41. A venturer shall discontinue the use of the equity method from the date on which it ceases to have joint control over, or have significant influence in, a jointly controlled entity. Exceptions to proportionate consolidation and equity method 42. Interests in jointly controlled entities that are classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations shall be accounted for in accordance with that Indian Accounting Standard. 43. When an interest in a jointly controlled entity previously classified as held for sale no longer meets the criteria to be so classified, it shall be accounted for using proportionate consolidation or the equity method as from the date of its classification as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehensive income in relation to those assets. If an investor's ownership interest in a jointly controlled entity is reduced, but the investment continues to be a jointly controlled entity, the investor shall reclassify to profit or loss only a proportionate amount of the gain or loss previously recognized in other comprehensive income. Separate financial statements of a venturer 46. An interest in a jointly controlled entity shall be accounted for in a venturer's separate financial statements in accordance with paragraphs 38-43 of Ind AS 27. 47. This Standard does not mandate which entities produce separate financial statements available for public use. Transactions between a venturer and a joint venture 48. When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer shall recognise only that portion of the gain or loss that is attributable to the interests of the other venturers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntingently liable for the liabilities of the other venturers of a joint venture. 55. A venturer shall disclose the aggregate amount of the following commitments' in respect of its interests in joint ventures separately from other commitments: ( a ) any capital commitments of the venturer in relation to its interests in joint ventures and its share in the capital commitments that have been incurred jointly with other venturers; and ( b ) its share of the capital commitments of the joint ventures themselves. 56. A venturer shall disclose a listing and description of interests in significant joint ventures and the proportion of ownership interest held in jointly controlled entities. A venturer that recognises its interests in jointly controlled entities using the line-by-line reporting format for proportionate consolidation or the equity method shall disclose the aggregate amounts of each of current assets, long-term assets, current liabilities, long-term liabilities, income and expenses related to its interests in joint ventures. 57. A venturer shall disclose the method it uses to recognise its interests in jointly controlled entities. APPENDIX A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been transferred to the JCE; or ( b ) the gain or loss on the non-monetary contribution cannot be measured reliably; or ( c ) the contribution transaction lacks commercial substance, as that term is described in Ind AS 16. If exception ( a ), ( b ) or ( c ) applies, the gain or loss is regarded as unrealised and therefore is not recognised in profit or loss unless paragraph 6 also applies. 6. If, in addition to receiving an equity interest in the JCE, a venturer receives monetary or non-monetary assets, an appropriate portion of gain or loss on the transaction shall be recognised by the venturer in profit or loss. 7. Unrealised gains or losses on non-monetary assets contributed to JCEs shall be eliminated against the underlying assets under the proportionate consolidation method or against the investment under the equity method. Such unrealised gains or losses shall not be presented as deferred gains or losses in the venturer's consolidated balance sheet. Appendix B References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accounting Standard 31. 1. Appendix A, Rights to Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Objective 1. The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements. Scope 2. This Standard shall be applied in the recognition, measurement and disclosure of investment property. 3. Among other things, this Standard applies to the measurement in a lessee's financial statements of investment property interests held under a lease accounted for as a finance lease and to the measurement in a lessor's financial statements of investment property provided to a lessee under an operating lease. This Standard does not deal with matters covered in Ind AS 17 Leases, including: ( a ) classification of leases as finance leases or operating leases; ( b ) recognition of lease income from investment property ( see also Ind AS 18 Revenue ) ; ( c ) measurement in a lessee's financial statements of property interests held under a lease accounted for as an operating lease; ( d ) measurement in a lessor's financial statements of its net investment in a finance lease; ( e ) accounting for sale and leaseback transactions; and ( f ) disclosure about fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined future use. (If an entity has not determined that it will use the land as owner-occupied property or for short-term sale in the ordinary course of business, the land is regarded as held for capital appreciation.) ( c ) a building owned by the entity (or held by the entity under a finance lease) and leased out under one or more operating leases. ( d ) a building that is vacant but is held to be leased out under one or more operating leases. ( e ) property that is being constructed or developed for future use as investment property. 9. The following are examples of items that are not investment property and are therefore outside the scope of this Standard: ( a ) property intended for sale in the ordinary course of business or in the process of construction or development for such sale ( see Ind AS 2 Inventories ) , for example, property acquired exclusively with a view to subsequent disposal in the near future or for development and resale. ( b ) property being constructed or developed on behalf of third parties ( see Ind AS 11 Construction Contracts ) . ( c ) owner-occupied property ( see Ind AS 16), including (among other things) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the definition of investment property and with the related guidance in paragraphs 7-13. Paragraph 75( c ) requires an entity to disclose these criteria when classification is difficult. 15. In some cases, an entity owns property that is leased to, and occupied by, its parent or another subsidiary. The property does not qualify as investment property in the consolidated financial statements, because the property is owner-occupied from the perspective of the group. However, from the perspective of the entity that owns it, the property is investment property if it meets the definition in paragraph 5. Therefore, the lessor treats the property as investment property in its individual financial statements. Recognition 16. Investment property shall be recognised as an asset when, and only when: ( a ) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and ( b ) the cost of the investment property can be measured reliably. 17. An entity evaluates under this recognition principle all its investment property costs at the time they are incurred. These costs include costs incurred ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an investment property shall be as prescribed for a finance lease by paragraph 20 of Ind AS 17, i.e., the asset shall be recognised at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount shall be recognised as a liability in accordance with that same paragraph. 26. Any premium paid for a lease is treated as part of the minimum lease payments for this purpose, and is therefore included in the cost of the asset, but is excluded from the liability. If a property interest held under a lease is classified as investment property, the item accounted for at fair value is that interest and not the underlying property. Guidance on determining the fair value of a property interest is set out in paragraphs 33-52. That guidance is also relevant to the determination of fair value when that value is used as cost for initial recognition purposes. 27. One or more investment properties may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The following discussion refers to an exchange of one non-monetary asset for another, but it also applies to all exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair value of investment property for the purpose of disclosure even though they are required to follow the cost model. An entity is encouraged, but not required, to determine the fair value of investment property on the basis of a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. 32A-32C [Refer to Appendix 1] Fair value determination 33-35 [Refer to Appendix 1] 36. The fair value of investment property is the price at which the property could be exchanged between knowledgeable, willing parties in an arm's length transaction ( see paragraph 5). Fair value specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale. 37. An entity determines fair value without any deduction for transaction costs it may incur on sale or other disposal. 38. The fair value of investment property shall reflect market conditions at the end of the reportin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of fair value refers to an arm's length transaction. An arm's length transaction is one between parties that do not have a particular or special relationship that makes prices of transactions uncharacteristic of market conditions. The transaction is presumed to be between unrelated parties, each acting independently. 45. The best evidence of fair value is given by current prices in an active market for similar property in the same location and condition and subject to similar lease and other contracts. An entity takes care to identify any differences in the nature, location or condition of the property, or in the contractual terms of the leases and other contracts relating to the property. 46. In the absence of current prices in an active market of the kind described in paragraph 45, an entity considers information from a variety of sources, including: ( a ) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences; ( b ) recent prices of similar properties on less active markets, with adjustments to reflect any changes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill improve or enhance the property and does not reflect the related future benefits from this future expenditure. 52. [Refer to Appendix 1] Inability to determine fair value reliably 53. There is a rebuttable presumption that an entity can reliably determine the fair value of an investment property on a continuing basis. However, in exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the fair value of the investment property is not reliably determinable on a continuing basis. This arises when, and only when, comparable market transactions are infrequent and alternative reliable estimates of fair value (for example, based on discounted cash flow projections) are not available. If an entity determines that the fair value of an investment property under construction is not reliably determinable but expects the fair value of the property to be reliably determinable when construction is complete, it shall determine the fair value of that investment property either when its fair value becomes reliably determinable or construction is compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sale (or are included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations. Investment properties that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) shall be measured in accordance with Ind AS 105. Transfers 57. Transfers to, or from, investment property shall be made when, and only when, there is a change in use, evidenced by: ( a ) commencement of owner-occupation, for a transfer from investment property to owner-occupied property; ( b ) commencement of development with a view to sale, for a transfer from investment property to inventories; ( c ) end of owner-occupation, for a transfer from owner-occupied property to investment property; or ( d ) commencement of an operating lease to another party, for a transfer from inventories to investment property. ( e ) [Refer to Appendix 1] 58. Paragraph 57( b ) requires an entity to transfer a property from investment property to inventories when, and only when, there is a change in use, evidenced by commencement of deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on disposal of an investment property is recognised initially at fair value. In particular, if payment for an investment property is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 using the effective interest method. 71. An entity applies Ind AS 37 or other Standards, as appropriate, to any liabilities that it retains after disposal of an investment property. 72. Compensation from third parties for investment property that was impaired, lost or given up shall be recognised in profit or loss when the compensation becomes receivable. 73. Impairments or losses of investment property, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately as follows: ( a ) impairments of investment property are recognised in accordance with Ind AS 36; ( b ) retirements or disposals of investment property are recognised in accordance with parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trictions on the realisability of investment property or the remittance of income and proceeds of disposal. ( h ) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements. 76.-78 . [Refer to Appendix 1] 79. In addition to the disclosures required by paragraph 75, an entity shall disclose: ( a ) the depreciation methods used; ( b ) the useful lives or the depreciation rates used; ( c ) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; ( d ) a reconciliation of the carrying amount of investment property at the beginning and end of the period, showing the following: ( i ) additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised as an asset; ( ii ) additions resulting from acquisitions through business combinations; ( iii ) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with Ind AS 105 and other disposals; ( iv ) depreciation; ( v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been included in Ind AS 40 since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 3. IAS 40 requires disclosure of fair values of investment property when cost model is used. Since this requirement is retained in Ind AS 40, paragraphs 53, 53A, 53B, 54 and 55 and certain other paragraph of IAS 40 have been modified. The modifications include substitution of fair value measurement with fair value determination/disclosure and deletion of reference to use of cost model when fair value determination is unreliable. 4. IAS 40 permits treatment of property interest held in an operating lease as investment property, if the definition of investment property is otherwise met and fair value model is applied. In such cases, the operating lease would be accounted as if it were a finance lease. Since Ind AS 40 prohibits the use of fair value model, this treatment is prohibited in Ind AS 40. As a result, paragraph 6 of IAS 40 has been deleted in Ind AS 40 ( see point 1( i ) ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dard as well as the parent's separate financial statements, segment information is required only in the consolidated financial statements. Operating segments 5. An operating segment is a component of an entity: ( a ) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), ( b ) whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and ( c ) for which discrete financial information is available. An operating segment may engage in business activities for which it has yet to earn revenues, for example, start-up operations may be operating segments before earning revenues. 6. Not every part of an entity is necessarily an operating segment or part of an operating segment. For example, a corporate headquarters or some functional departments may not earn revenues or may earn revenues that are only incidental to the activities of the entity and would not be operating segments. For the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f components, and financial information is available for both. In that situation, the entity shall determine which set of components constitutes the operating segments by reference to the core principle. Reportable segments 11. An entity shall report separately information about each operating segment that: ( a ) has been identified in accordance with paragraphs 5-10 or results from aggregating two or more of those segments in accordance with paragraph 12, and ( b ) exceeds the quantitative thresholds in paragraph 13. Paragraphs 14-19 specify other situations in which separate information about an operating segment shall be reported. Aggregation criteria 12. Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics. For example, similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar. Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of this Indian Accounting Standard, the segments have similar economic characteristics, and the segm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the reconciliations required by paragraph 28. The sources of the revenue included in the 'all other segments' category shall be described. 17. If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability in paragraph 13. 18. If an operating segment is identified as a reportable segment in the current period in accordance with the quantitative thresholds, segment data for a prior period presented for comparative purposes shall be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisfy the criteria for reportability in paragraph 13 in the prior period, unless the necessary information is not available and the cost to develop it would be excessive. 19. There may be a practical limit to the number of reportable segments that an entity separately discloses beyond which segment information may become too detailed. Although no precise limit has been determined, as the numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egment profit or loss reviewed by the chief operating decision maker, or are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss: ( a ) revenues from external customers; ( b ) revenues from transactions with other operating segments of the same entity; ( c ) interest revenue; ( d ) interest expense; ( e ) depreciation and amortisation; ( f ) material items of income and expense disclosed in accordance with paragraph 97 of Ind AS 1 Presentation of Financial Statements; ( g ) the entity's interest in the profit or loss of associates and joint ventures accounted for by the equity method; ( h ) income-tax expense or income; and ( i ) material non-cash items other than depreciation and amortisation. An entity shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment's revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent with those used in measuring the corresponding amounts in the entity's financial statements. 27. An entity shall provide an explanation of the measurements of segment profit or loss, segment assets and segment liabilities for each reportable segment. At a minimum, an entity shall disclose the following: ( a ) the basis of accounting for any transactions between reportable segments. ( b ) the nature of any differences between the measurements of the reportable segments' profits or losses and the entity's profit or loss before income-tax expense or income and discontinued operations (if not apparent from the reconciliations described in paragraph 28). Those differences could include accounting policies and policies for allocation of centrally incurred costs that are necessary for an understanding of the reported segment information. ( c ) the nature of any differences between the measurements of the reportable segments' assets and the entity's assets (if not apparent from the reconciliations described in paragraph 28). Those differences could include accounting policies and policies for allocation of jointly used assets that are necessary f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table segments to change, the corresponding information for earlier periods, including interim periods, shall be restated unless the information is not available and the cost to develop it would be excessive. The determination of whether the information is not available and the cost to develop it would be excessive shall be made for each individual item of disclosure. Following a change in the composition of its reportable segments, an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods. 30. If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods, including interim periods, is not restated to reflect the change, the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation, unless the necessary information is not available and the cost to develop it would be excessive. Entity-wide disclosures 31. Paragraphs 32-34 apply to all entities subject to this Indian Accounting Stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be disclosed separately. The amounts reported shall be based on the financial information that is used to produce the entity's financial statements. If the necessary information is not available and the cost to develop it would be excessive, that fact shall be disclosed. An entity may provide, in addition to the information required by this paragraph, sub-totals of geographical information about groups of countries. Information about major customers 34. An entity shall provide information about the extent of its reliance on its major customers. If revenues from transactions with a single external customer amount to 10 per cent or more of an entity's revenues, the entity shall disclose that fact, the total amount of revenues from each such customer, and the identity of the segment or segments reporting the revenues. The entity need not disclose the identity of a major customer or the amount of revenues that each segment reports from that customer. For the purposes of this Indian Accounting Standard, a group of entities known to a reporting entity to be under common control shall be considered a single customer. However, judgment is required to assess whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108. Introduction IG1 This implementation guidance provides examples that illustrate the disclosures required by Ind AS 108 and a diagram to assist in identifying reportable segments. The formats in the illustrations are not requirements. A format that provides the information in the most understandable manner in the specific circumstances is encouraged. The following illustrations are for a single hypothetical entity referred to as Diversified Company. Descriptive information about an entity's reportable segments IG2 The following illustrates the disclosure of descriptive information about an entity's reportable segments (the paragraph references are to the relevant requirements in the Indian Accounting Standard). Description of the types of products and services from which each reportable segment derives its revenues (paragraph 22( b )) Diversified Company has five reportable segments: car parts, motor vessels, software, electronics and finance. The car parts segment produces replacement parts for sale to car parts retailers. The motor vessels segment produces small motor vessels to serve the offshore oil industry and similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Car parts Motor vessels Software Electronics Finance All other Totals Rs. Rs. Rs. Rs. Rs. Rs. Rs. Revenues from external customers 3,000 5,000 9,500 12,000 5,000 1,000 ( a ) 35,500 Intersegment revenues 3,000 1,500 4,500 Interest revenue 450 800 1,000 1,500 3,750 Interest expense 350 600 700 1,100 2,750 Net interest revenue ( b ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iliations also are required to be shown for every other material item of information disclosed (paragraph 28( e )). The entity's financial statements are assumed not to include discontinued operations. As discussed in paragraph IG2, the entity recognises and measures pension expense of its reportable segments on the basis of cash payments to the pension plan, and it does not allocate certain items to its reportable segments. Revenues Rs. Total revenues for reportable segments 39,000 Other revenues 1,000 Elimination of intersegment revenues (4,500) Entity's revenues 35,500 Profit or loss Rs. Total profit or loss for reportable segments 3,970 Other profit or loss 100 Elimination of intersegment profits (500) Unallocated amounts: Litigation settlement received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue information about products and services are required (paragraph 32).) Geographical information Revenues (a) Non-current assets Rs. Rs. United States 19,000 11,000 Canada 4,200 China 3,400 6,500 Japan 2,900 3,500 Other countries 6,000 3,000 Total 35,500 24,000 ( a ) Revenues are attributed to countries on the basis of the customer's location Information about major customers IG6 The following illustrates the information about major customers required by paragraph 34. Neither the identity of the customer nor the amount of revenues for each operating segment is required. Revenues from one customer of Diversified Company's software and electronics segments represent approximately ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recognition, measurement and disclosure requirements for specific transactions and other events. 4. This Standard does not apply to the structure and content of condensed interim financial statements prepared in accordance with Ind AS 34 Interim Financial Reporting. However, paragraphs 15-35 apply to such financial statements. This Standard applies equally to all entities, including those that present consolidated financial statements and those that present separate financial statements as defined in Ind AS 27 Consolidated and Separate Financial Statements. 5. This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves. 6. Similarly, entities whose share capital is not equity may need to adapt the financial statement presentation of members' interests. Definitions 7. The following terms are used in this Standard with the meanings specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and losses on defined benefit plans recognised in accordance with paragraphs 92 and 129A of Ind AS 19 Employee Benefits; ( c ) gains and losses arising from translating the financial statements of a foreign operation ( see Ind AS 21 The Effects of Changes in Foreign Exchange Rates); ( d ) gains and losses on remeasuring available-for-sale financial assets ( see Ind AS 39 Financial Instruments: Recognition and Measurement); ( e ) the effective portion of gains and losses on hedging instruments in a cash flow hedge ( see Ind AS 39). Owners are holders of instruments classified as equity. Profit or loss is the total of income less expenses, excluding the components of other comprehensive income. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income comprises all components of profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, or when it reclassifies items in its financial statements. 11 . An entity shall present with equal prominence all of the financial statements in a complete set of financial statements. 12 . As per paragraph 81. an entity shall present the components of profit or loss and components of other comprehensive income as part of a single statement of profit and loss. 13 . Many entities present, outside the financial statements, a financial review by management that describes and explains the main features of the entity's financial performance and financial position, and the principal uncertainties it faces. Such a report may include a review of: ( a ) the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity's response to those changes and their effect, and the entity's policy for investment to maintain and enhance financial performance, including its dividend policy; ( b ) the entity's sources of funding and its targeted ratio of liabilities to equity; and ( c ) the entity's resources not recognised in the balance sheet in accordance with Ind ASs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the extremely rare circumstances in which management concludes that compliance with a requirement in an Ind AS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the entity shall depart from that requirement in the manner set out in paragraph 20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure. 20. When an entity departs from a requirement of an Ind AS in accordance with paragraph 19, it shall disclose: ( a ) that management has concluded that the financial statements present a true and fair view of the entity's financial position, financial performance and cash flows; ( b ) that it has complied with applicable Ind ASs, except that it has departed from a particular requirement to present a true and fair view; ( c ) the title of the Ind AS from which the entity has departed, the nature of the departure, including the treatment that the Ind AS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity's circumstances differ from those of other entities that comply with the requirement. If other entities in similar circumstances comply with the requirement, there is a rebuttable presumption that the entity's compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework. Going concern 25. When preparing financial statements, management shall make an assessment of an entity's ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n entity reports separately both assets and liabilities, and income and expenses. Offsetting in the statements of profit and loss or balance sheet, except when offsetting reflects the substance of the transaction or other event, detracts from the ability of users both to understand the transactions, other events and conditions that have occurred and to assess the entity's future cash flows. Measuring assets net of valuation allowances-for example, obsolescence allowances on inventories and doubtful debts allowances on receivables-is not offsetting. 34. Ind A3 18 Revenue defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. An entity presents the results of such transactions, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. For example: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the current period, ( b ) the end of the previous period (which is the same as the beginning of the current period), and ( c ) the beginning of the earliest comparative period. 40. In some cases, narrative information provided in the financial statements for the previous period(s) continues to be relevant in the current period. For example, an entity discloses in the current period details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved. Users benefit from information that the uncertainty existed at the end of the immediately preceding reporting period, and about the steps that have been taken during the period to resolve the uncertainty. 41. When the entity changes the presentation or classification of items in its financial statements, the entity shall reclassify comparative amounts unless reclassification is impracticable. When the entity reclassifies comparative amounts, the entity shall disclose: ( a ) the nature of the reclassification; ( b ) the amount of each item or class of items that is reclassified; and ( c ) the reason for the reclassification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements or in the notes, Ind AS 7 Statement of Cash Flows sets out requirements for the presentation of cash flow information. 48. This Standard sometimes uses the term 'disclosure' in a broad sense, encompassing items presented in the financial statements. Disclosures are also required by other Ind ASs. Unless specified to the contrary elsewhere in this Standard or in another Ind AS, such disclosures may be made in the financial statements. Identification of the financial statements 49. An entity shall clearly identify the financial statements and distinguish them from other information in the same published document. 50. Ind ASs apply only to financial statements, and not necessary to other information presented in an annual report, a regulatory filing, or another document. Therefore, it is important that users can distinguish information that is prepared using Ind ASs from other information that may be useful to users but is not the subject of those requirements. 51. An entity shall clearly identify each financial statement and the notes. In addition, an entity shall display the following information prominently, and repeat it when necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred tax assets, as defined in Ind AS 12; ( p ) liabilities included in disposal groups classified as held for sale in accordance with Ind AS 105: ( q ) non-controlling interests, presented within equity; and ( r ) issued capital and reserves attributable to owners of the patent. 55. An entity shall present additional line items, headings and sub-totals in the balance sheet when such presentation is relevant to an understanding of the entity's financial position. 56. When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its balance sheet, it shall not classify deferred tax assets (liabilities) as current assets (liabilities). 57. This Standard does not prescribe the order or format in which an entity presents items. Paragraph 54 simply lists items that are sufficiently different in natures function to warrant separate presentation in the balance sheet. In addition: ( a ) line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity's financial po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod. 63. For some entities, such as financial institutions, a presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current/non-current presentation because the entity does not supply goods or services within a clearly identifiable operating cycle. 64. In applying paragraph 60, an entity is permitted to present some of its assets and liabilities using a current/non-current classification and others in order of liquidity when this provides information that is reliable and more relevant. The need for a mixed basis of presentation might arise when an entity has diverse operations. 65. Information about expected dates of realisation of assets and liabilities is useful in assessing the liquidity and solvency of an entity. Ind AS 107 Financial Instruments: Disclosures requires disclosure of the maturity dates of financial assets and financial liabilities. Financial assets include trade and other receivables, and financial liabilities include trade and other payables. Information on the expected date of recovery of non-monetary assets such as inventories and expected date of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. An entity shall classify all other liabilities as non-current 70. Some current liabilities, such as trade payables and some accruals for employee and other operating costs, are part of the working capital used in the entity's normal operating cycle. An entity classifies such operating items as current liabilities even if they are due to be settled more than twelve months after the reporting period. The same normal operating cycle applies to the classification of an entity's assets and liabilities. When the entity's normal operating cycle is not clearly identifiable, it is assumed to be twelve months. 71 . Other current liabilities are not settled as part of the normal operating cycle, but are due for settlement within twelve months after the reporting period or held primarily for the purpose of trading. Examples are some financial liabilities classified as held for trading in accordance with Ind AS 39, bank overdrafts, and the current portion of non-current financial liabilities, dividends payable, income-taxes and other no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those events are disclosed as non-adjusting events in accordance with Ind AS 10 Events after the Reporting Period: ( a ) refinancing on a long-term basis; ( b ) rectification of a breach of a long-term loan arrangement; and ( c ) the granting by the lender of a period of grade to rectify a breach of a long-term loan arrangement ending at least twelve months after the reporting period. Information to be presented either in the balance sheet or in the notes 77 . An entity shall disclose, either in the balance sheet or in the notes, further sub-classifications of the line items presented, classified in a manner appropriate to the entity's operations. 78. The detail provided in sub-classifications depends on the requirements of Ind ASs and on the size, nature and function of the amounts involved. An entity also uses the factors set out in paragraph 58 to decide the basis of sub-classification. The disclosures vary for each item, for example: ( a ) items of property, plant and equipment are disaggregated into classes in accordance with Ind AS 16; ( b ) receivables are disaggregated into amounts receivable from trade customers, receivables fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of income and expense including components of other comprehensive income recognised in a period in a single statement of profit and loss. Information to be presented in the statement of profit and loss 82 . As a minimum, the statement of profit and loss shall include line items that present the following amounts for the period: ( a ) revenue; ( b ) finance costs; ( c ) share of the profit or loss of associates and joint ventures accounted for using the equity method; ( d ) tax expense; ( e ) a single amount comprising the total of: ( i ) the post-tax profit or loss of discontinued operations and ( ii ) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation; ( f ) profit or loss; ( g ) each component of other comprehensive income classified by nature (excluding amounts in ( h )); ( h ) share of the other comprehensive income of associates and joint ventures accounted for using the equity method; and ( i ) total comprehensive income. 83 . An entity shall disclose the following items in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent of other comprehensive income, including reclassification adjustments, either in the statement of profit and loss or in the notes. 91. An entity may present components of other comprehensive income either: ( a ) net of related tax effects, or ( b ) before related tax effects with one amount shown for the aggregate amount of income-tax relating to those components. 92. An entity shall disclose reclassification adjustments relating to components of other comprehensive income. 93. Other Ind ASs specify whether and when amounts previously recognised in other comprehensive income are reclassified to profit or loss. Such reclassifications are referred to in this Standard as reclassification adjustments. A reclassification adjustment is included with the related component of other comprehensive income in the period that the adjustment is reclassified to profit or loss. For example, gains realised on the disposal of available-for-sale financial assets are included in profit or loss of the current period. These amounts may have been recognised in other comprehensive income as unrealised gains in the current or previous periods. Those unrealised gains must be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication based on the nature of expense method. 100. Entities are encouraged to present the analysis in paragraph 99 in the statement of profit and loss. 101. Expenses are subclassified to highlight components of financial performance that may differ in terms of frequency, potential for gain or loss and predictability. This analysis is provided in the form as described in paragraph 102. 102. In the analysis based on the 'nature of expense' method, an entity aggregates expenses within profit or loss according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits and advertising costs), and does not reallocate them among functions within the entity. This method is simple to apply because no allocations of expenses to functional classifications are necessary. An example of a classification using the nature of expense method is as follows: Revenue X Other income X Changes in inventories of finished goods and work-in-progress X Raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty include, for example, each class of contributed equity, the accumulated balance of each class of other comprehensive income and retained earnings. 109. Changes in an entity's equity between the beginning and the end of the reporting period reflect the increase or decrease in its net assets during the period. Except for changes resulting from transactions with owners in their capacity as owners (such as equity contributions, reacquisitions of the entity's own equity instruments and dividends) and transaction costs directly related to such transactions, the overall change in equity during a period represents the total amount of income and expense, including gains and losses, generated by the entity's activities during that period. 110. Ind AS 8 requires retrospective adjustments to effect changes in accounting policies, to the extent practicable, except when the transition provisions in another Ind AS require otherwise. Ind AS 8 also requires restatements to correct errors to be made retrospectively, to the extent practicable. Retrospective adjustments and retrospective restatements are not changes in equity but they are adjustments to the opening balance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement objectives and policies ( see Ind AS 107). 115. In some circumstances, it may be necessary or desirable to vary the order of specific items within the notes. For example, an entity may combine information on changes in fair value recognised in profit or loss with information on maturities of financial instruments, although the former disclosures relate to the statement of profit and loss and the latter relate to the balance sheet. Nevertheless, an entity retains a systematic structure for the notes as far as practicable. 116. An entity may present notes providing information about the basis of preparation of the financial statements and specific accounting policies as a separate section of the financial statements. Disclosure of accounting policies 117. An entity shall disclose in the summary of significant accounting policies: ( a ) the measurement basis (or bases) used in preparing the financial statements, and ( b ) the other accounting policies used that are relevant to an understanding of the financial statements. 118. It is important for an entity to inform users of the measurement basis or bases used in the financial statements (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments, apart from those involving estimations ( see paragraph 125), that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements. 123. In the process of applying the entity's accounting policies, management makes various judgments, apart from those involving estimations, that can significantly affect the amounts it recognises in the financial statements. For example, management makes judgments in determining: ( a ) whether financial assets are held-to-maturity investments; ( b ) when substantially all the significant risks and rewards of ownership of financial assets and lease assets are transferred to other entities; ( c ) whether, in substance, particular sales of goods are financing arrangements and therefore do not give rise to revenue; and ( d ) whether the substance of the relationship between the entity and a special purpose entity indicates that the entity controls the special purpose entity. 124. Some of the disclosures made in accordance with paragraph 122 are required by other Ind ASs. For example, Ind AS 27 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 128. The disclosures in paragraph 125 are not required for assets and liabilities with a significant risk that their carrying amounts might change materially within the next financial year if, at the end of the reporting period, they are measured at fair value based on recently observed market prices. Such fair values might change materially within the next financial year but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting period. 129. An entity presents the disclosures in paragraph 125 in a manner that helps users of financial statements to understand the judgments that management makes about the future and about other sources of estimation uncertainty. The nature and extent of the information provided vary according to the nature of the assumption and other circumstances. Examples of the types of disclosures an entity makes are: ( a ) the nature of the assumption or other estimation uncertainty; ( b ) the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their calculation, including the reasons for the sensitivity; ( c ) the expected resolution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( ii ) when an entity is subject to externally imposed capital requirements, the nature of those requirements and how those requirements are incorporated into the management of capital; and ( iii ) how it is meeting its objectives for managing capital. ( b ) summary quantitative data about what it manages as capital. Some entities regard some financial liabilities ( e.g. some forms of subordinated debt) as part of capital. Other entities regard capital as excluding some components of equity ( e.g. components arising from cash flow hedges). ( c ) any changes in ( a ) and ( b ) from the previous period. ( d ) whether during the period it complied with any externally imposed capital requirements to which it is subject. ( e ) when the entity has not complied with such externally imposed capital requirements, the consequences of such non-compliance. The entity bases these disclosures on the information provided internally to key management personnel. 136. An entity may manage capital in a number of ways and be subject to a number of different capital requirements. For example, a conglomerate may include entities that undertake insurance activities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutions of Non-cash Assets to Owners contained in Ind AS 10 Events after the Reporting Period 2. Appendix A Changes in Existing Decommissioning, Restoration and Similar Liabilities contained in Ind AS 16, Property, Plant and Equipment 3. Appendix A IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction contained in Ind AS 19 Employee Benefits 4. Appendix A Intangible Assets- Web Site Costs contained in Ind AS 38, Intangible Assets 5. Appendix E Extinguishing Financial Liabilities with Equity Instruments contained in Ind AS 39 Financial Instruments: Recognition and Measurement. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 1 and the corresponding International Accounting Standard (IAS) 1, Presentation of Financial Statements. Comparison with IAS 1, Presentation of Financial Statements 1. With regard to preparation of Statement of profit and loss, International Accounting Standard (IAS) 1, Presentation of Financial Statements, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Paragraph 99 of IAS 1 requires an entity to present an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the equity. Ind AS 1 requires only nature-wise classification of expenses. In IAS 1 the following paragraphs are with reference to function-wise classification of expense. In order to maintain consistency with paragraph numbers of IAS 1, the paragraph numbers are retained in Ind AS 1 : ( i ) Paragraph 103 ( ii ) Paragraph 104 ( iii ) Paragraph 105 7. IAS 1 contains Implementation Guidance. Ind AS 1 does not include the same because various enactments have prescribed formats, e.g., Schedule VI to the Companies Act, 1956. 8. Paragraph number 106( c ) appears as 'Deleted' in IAS 1. In order to maintain consistency with paragraph numbers of IAS 1, the paragraph number is retained in Ind AS 1. 9. Cross-reference to paragraph 93A of IAS 19 has been modified as cross reference to paragraphs 92 and 129A of Ind AS 19 as a result of certain changes in Ind AS 19 as compared to IAS 19. Indian Accounting Standard (Ind AS) 16 Property, Plant and Equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter deducting any accumulated depreciation and accumulated impairment losses. Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Indian Accounting Standards, e.g. Ind AS 102 Share-based Payment. Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. Entity-specific value is the present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. Property, plant and equipment ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting item of property, plant and equipment, may be necessary for an entity to obtain the future economic benefits from its other assets. Such items of property, plant and equipment qualify for recognition as assets because they enable an entity to derive future economic benefits from related assets in excess of what could be derived had those items not been acquired. For example, a chemical manufacturer may install new chemical handling processes to comply with environmental requirements for the production and storage of dangerous chemicals; related plant enhancements are recognised as an asset because without them the entity is unable to manufacture and sell chemicals. However, the resulting carrying amount of such an asset and related assets is reviewed for impairment in accordance with Ind AS 36 Impairment of Assets. Subsequent costs 12. Under the recognition principle in paragraph 7, an entity does not recognise in the carrying amount of an item of property, plant and equipment the costs of the day-to-day servicing of the item. Rather, these costs are recognised in profit or loss as incurred. Costs of day-to-day servicing are primarily the costs of labour and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. ( c ) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. 17. Examples of directly attributable costs are: ( a ) costs of employee benefits (as defined in Ind AS 19 Employee Benefits) arising directly from the construction or acquisition of the item of property, plant and equipment; ( b ) costs of site preparation; ( c ) initial delivery and handling costs; ( d ) installation and assembly costs; ( e ) costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment); and ( f ) professional fees. 18. An entity applies Ind AS 2 Inventories to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of incidental operations are recognised in profit or loss and included in their respective classifications of income and expense. 22. The cost of a self-constructed asset is determined using the same principles as for an acquired asset. If an entity makes similar assets for sale in the normal course of business, the cost of the asset is usually the same as the cost of constructing an asset for sale ( see Ind AS 2). Therefore, any internal profits are eliminated in arriving at such costs. Similarly, the cost of abnormal amounts of wasted material, labour, or other resources incurred in self-constructing an asset is not included in the cost of the asset. Ind AS 23 Borrowing Costs establishes criteria for the recognition of interest as a component of the carrying amount of a self-constructed item of property, plant and equipment. Measurement of cost 23. The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognised as interest over the period of credit unless such interest is capitalised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the asset received unless the fair value of the asset received is more clearly evident. 27. The cost of an item of property, plant and equipment held by a lessee under a finance lease is determined in accordance with Ind AS 17. 28. [Refer to Appendix 1]. Measurement after recognition 29. An entity shall choose either the cost model in paragraph 30 or the revaluation model in paragraph 31 as its accounting policy and shall apply that policy to an entire class of property, plant and equipment. Cost model 30. After recognition as an asset, an item of property, plant and equipment shall be carried at its cost less any accumulated depreciation and any accumulated impairment losses. Revaluation model 31. After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an entity's operations. The following are examples of separate classes: ( i ) land; ( ii ) land and buildings; ( iii ) machinery; ( iv ) ships; ( v ) aircraft; ( vi ) motor vehicles; ( vii ) furniture and fixtures; and ( viii ) office equipment. 38. The items within a class of property, plant and equipment are revalued simultaneously to avoid selective revaluation of assets and the reporting of amounts in the financial statements that are a mixture of costs and values as at different dates. However, a class of assets may be revalued on a rolling basis provided revaluation of the class of assets is completed within a short period and provided the revaluations are kept up to date. 39. If an asset's carrying amount is increased as a result of a revaluation, the increase shall be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. 40. If an asset's carrying amount is decreased as a result of a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly some parts of an item of property, plant and equipment, it also depreciates separately the remainder of the item. The remainder consists of the parts of the item that are individually not significant. If an entity has varying expectations for these parts, approximation techniques may be necessary to depreciate the remainder in a manner that faithfully represents the consumption pattern and/or useful life of its parts. 47. An entity may choose to depreciate separately the parts of an item that do not have a cost that is significant in relation to the total cost of the item. 48. The depreciation charge for each period shall be recognised in profit or loss unless it is included in the carrying amount of another asset. 49. The depreciation charge for a period is usually recognised in profit or loss. However, sometimes, the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the depreciation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories ( see Ind AS 2). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, often result in the diminution of the economic benefits that might have been obtained from the asset. Consequently, all the following factors are considered in determining the useful life of an asset: ( a ) expected usage of the asset. Usage is assessed by reference to the asset's expected capacity or physical output. ( b ) expected physical wear and tear, which depends on operational factors such as the number of shifts for which the asset is to be used and the repair and maintenance programme, and the care and maintenance of the asset while idle. ( c ) technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output of the asset. ( d ) legal or similar limits on the use of the asset, such as the expiry dates of related leases. 57. The useful life of an asset is defined in terms of the asset's expected utility to the entity. The asset management policy of the entity may involve the disposal of assets after a specified time or after consumption of a specified proportion of the future economic benefits embodied in the asset. Therefore, the useful life o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expected pattern of consumption of those future economic benefits. Impairment 63. To determine whether an item of property, plant and equipment is impaired, an entity applies Ind AS 36 Impairment of Assets. That Standard explains how an entity reviews the carrying amount of its assets, how it determines the recoverable amount of an asset, and when it recognises, or reverses the recognition of, an impairment loss. 64. [Refer Appendix 1] Compensation for impairment 65. Compensation from third parties for items of property, plant and equipment that were impaired, lost or given up shall be included in profit or loss when the compensation becomes receivable. 66. Impairments or losses of items of property, plant and equipment, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately as follows: ( a ) impairments of items of property, plant and equipment are recognised in accordance with Ind AS 36; ( b ) derecognition of items of property, plant and equipment retired or disposed of is determined in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 72. The consideration receivable on disposal of an item of property, plant and equipment is recognised initially at its fair value. If payment for the item is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the receivable. Disclosure 73. The financial statements shall disclose, for each class of property, plant and equipment: ( a ) the measurement bases used for determining the gross carrying amount; ( b ) the depreciation methods used; ( c ) the useful lives or the depreciation rates used; ( d ) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; and ( e ) a reconciliation of the carrying amount at the beginning and end of the period showing: ( i ) additions; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is expected to have an effect in subsequent periods. For property, plant and equipment, such disclosure may arise from changes in estimates with respect to: ( a ) residual values; ( b ) the estimated costs of dismantling, removing or restoring items of property, plant and equipment; ( c ) useful lives; and ( d ) depreciation methods. 77. If items of property, plant and equipment are stated at revalued amounts, the following shall be disclosed: ( a ) the effective date of the revaluation; ( b ) whether an independent valuer was involved; ( c ) the methods and significant assumptions applied in estimating the items' fair values; ( d ) the extent to which the items' fair values were determined directly by reference to observable prices in an active market or recent market transactions on arm's length terms or were estimated using other Valuation techniques; ( e ) for each revalued class of property, plant and equipment, the carrying amount that would have been recognised had the assets been carried under the cost model; and ( f ) the revaluation surplus, indicating the change for the period and any restrictions on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioning a plant, rehabilitating environmental damage in extractive industries, or removing equipment. Issue 3. This Appendix addresses how the effect of the following events that change the measurement of an existing decommissioning, restoration or similar liability should be accounted for: ( a ) a change in the estimated outflow of resources embodying economic benefits ( e.g., cash flows) required to settle the obligation; ( b ) a change in the current market-based discount rate as defined in paragraph 47 of Ind AS 37 (this includes changes in the time value of money and the risks specific to the liability); and ( c ) an increase that reflects the passage of time (also referred to as the unwinding of the discount). Accounting Principles 4. Changes in the measurement of an existing decommissioning, restoration and similar liability that result from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, or a change in the discount rate, shall be accounted for in accordance with paragraphs 5-7 below. 5. If the related asset is measured using the cost model: ( a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive income or expense. In complying with this requirement, the change in the revaluation surplus arising from a change in the liability shall be separately identified and disclosed as such. 7. The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability shall be recognised in profit or loss as they occur. This applies under both the cost model and the revaluation model. 8. The periodic unwinding of the discount shall be recognised in profit or loss as a finance cost as it occurs. Capitalisation under Ind AS 23 is not permitted. Illustrative examples of Changes in Existing Decommissioning, Restoration and Similar Liabilities ( These examples accompany, but are not part of, Appendix A. ) Common facts IE1 . An entity has a nuclear power plant and a related decommissioning liability. The nuclear power plant started operating on 1 January, 2000. The plant has a useful life of 40 years. Its initial cost was ₹ 120,000; this included an amount for decommissioning costs of ₹ 10,000, which represented ₹ 70,40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low basis, some valuers may value the asset without deducting any allowance for decommissioning costs (a 'gross' valuation), whereas others may value the asset after deducting an allowance for decommissioning costs (a 'net' valuation), because an entity acquiring the asset will generally also assume the decommissioning obligation. For financial reporting purposes, the decommissioning obligation is recognised as a separate liability, and is not deducted from the asset. Accordingly, if the asset is valued on a net basis, it is necessary to adjust the valuation obtained by adding back the allowance for the liability, so that the liability is not counted twice. 16 ( b ) if an asset is valued on a depreciated replacement cost basis, the valuation obtained may not include an amount for the decommissioning component of the asset. If it does not, an appropriate amount will need to be added to the valuation to reflect the depreciated replacement cost of that component. IE8. Assume that a market-based discounted cash flow valuation of ₹ 115,000 is obtained at 31 December, 2002. It includes an allowance of ₹ 11,600 for decommissioning costs, which repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IE11. The entity decides that a full valuation of the asset is needed at 31 December, 2003, in order to ensure that the carrying amount does not differ materially from fair value. Suppose that the asset is now valued at ₹ 107,000, which is net of an allowance of ₹ 7,200 for the reduced decommissioning obligation that should be recognised as a separate liability. The valuation of the asset for financial reporting purposes, before deducting this allowance, is therefore ₹ 114,200. The following additional journal entry is needed : Rs. Rs. Dr. accumulated depreciation (1) 3,420 Cr. asset at valuation 3,420 Dr. revaluation surplus (2) 8,980 Cr. asset at valuation (3) 8,980 Notes: (1) Eliminating accumulated depreciation of ₹ 3,420 in accordance with the entity's accounting policy. (2) The debit is to revaluation surplus because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Accounting Standard ( IAS ) 16, Property, Plant and Equipment and IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities. Comparison with IAS 16, Property, Plant and Equipment and IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities. 1. The transitional provisions given in IAS 16 and IFRIC 1 have not been given in Ind AS 16, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 2. Different terminology is used in this standard, e.g. , the term 'balance sheet' is used instead of 'Statement of financial position' and 'Statement of profit' and loss is used instead of 'Statement of comprehensive income'. 3. Paragraph 28 has been deleted .since Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance does not permit the option of reducing the carrying amount of an item of property, plant and equipment by the amount of Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a price index; and ( e ) the cumulative inflation rate over three years is approaching, or exceeds, 100%. 4. It is preferable that all entities that report in the currency of the same hyperinflationary economy apply this Standard from the same date. Nevertheless, this Standard applies to the financial statements of any entity from the beginning of the reporting period in which it identifies the existence of hyperinflation in the country in whose currency it reports. The restatement of financial statements 5. Prices change over time as the result of various specific or general political, economic and social forces. Specific forces such as changes in supply and demand and technological changes may cause individual prices to increase or decrease significantly and independently of each other. In addition, general forces may result in changes in the general level of prices and therefore in the general purchasing power of money. 6. Entities that prepare financial statements on the historical cost basis of accounting do so without regard either to changes in the general level of prices or to increases in specific prices of recognised assets or liabilities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent at the end of the reporting period are restated by applying a general price index. 12. Monetary items are not restated because they are already expressed in terms of the monetary unit current at the end of the reporting period. Monetary items are money held and items to be received or paid in money. 13. Assets and liabilities linked by agreement to changes in prices, such as index linked bonds and loans, are adjusted in accordance with the agreement in order to ascertain the amount outstanding at the end of the reporting period. These items are carried at this adjusted amount in the restated balance sheet. 14. All other assets and liabilities are non-monetary. Some non-monetary items are carried at amounts current at the end of the reporting period, such as net realisable value and fair value, so they are not restated. All other non-monetary assets and liabilities are restated. 15. Most non-monetary items are carried at cost or cost less depreciation; hence they are expressed at amounts current at their date of acquisition. The restated cost, or cost less depreciation, of each item is determined by applying to its historical cost and accumulated depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re financed by borrowing and to capitalise that part of the borrowing costs that compensates for the inflation during the same period. This part of the borrowing costs is recognised as an expense in the period in which the costs are incurred. 22. An entity may acquire assets under an arrangement that permits it to defer payment without incurring an explicit interest charge. Where it is impracticable to impute the amount of interest, such assets are restated from the payment date and not the date of purchase. 23. [Refer to Appendix 1] 24. At the beginning of the first period of application of this Standard, the components of owners' equity, except retained earnings and any revaluation surplus, are restated by applying a general price index from the dates the components were contributed or otherwise arose. Any revaluation surplus that arose in previous periods is eliminated. Restated retained earnings are derived from all the other amounts in the restated balance sheet. 25. At the end of the first period and in subsequent periods, all components of owners' equity are restated by applying a general price index from the beginning of the period or the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent at the time at which the underlying transactions or events occurred. Cost of sales and depreciation are recorded at current costs at the time of consumption; sales and other expenses are recorded at their money amounts when they occurred. Therefore all amounts need to be restated into the measuring unit current at the end of the reporting period by applying a general price index. Gain or loss on net monetary position 31. The gain or loss on the net monetary position is accounted for in accordance with paragraphs 27 and 28. Taxes 32. The restatement of financial statements in accordance with this Standard may give rise to differences between the carrying amount of individual assets and liabilities in the balance sheet and their tax bases. These differences are accounted for in accordance with Ind AS 12, Income Taxes. Statement of cash flows 33. This Standard requires that all items in the statement of cash flows are expressed in terms of the measuring unit current at the end of the reporting period. Corresponding figures 34. Corresponding figures for the previous reporting period, whether they were based on a historical cost approach o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the changes in the general purchasing power of the functional currency and, as a result, are stated in terms of the measuring unit current at the end of the reporting period; ( b ) whether the financial statements are based on a historical cost approach or a current cost approach; and ( c ) the identity and level of the price index at the end of the reporting period and the movement in the index during the current and the previous reporting period. ( d ) the duration of the hyperinflationary situation existing in the economy. 40. The disclosures required by this Standard are needed to make clear the basis of dealing with the effects of inflation in the financial statements. They are also intended to provide other information necessary to understand that basis and the resulting amounts. Appendix A Applying the Restatement Approach under Ind AS 29 Financial Reporting in Hyperinflationary Economies This Appendix is an integral part of the Indian Accounting Standard ( Ind AS ) 29, Financial Reporting in Hyperinflationary Economies Background 1. This Appendix provides guidance on how to apply the requirements of Ind AS 29 in a reporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach in ( a ) and ( b ) in restating the deferred tax items in the opening balance sheet of any comparative periods presented in the restated financial statements for the reporting period in which the entity applies Ind AS 29. 5. After an entity has restated its financial statements, all corresponding figures in the financial statements for a subsequent reporting period, including deferred tax items, are restated by applying the change in the measuring unit for that subsequent reporting period only to the restated financial statements for the previous reporting period. Illustrative example This example accompanies, but is not part of, Appendix A. IE1. This example illustrates the restatement of deferred tax items when an entity restates for the effects of inflation under Ind AS 29 Financial Reporting in Hyperinflationary Economies. As the example is intended only to illustrate the mechanics of the restatement approach in Ind AS 29 for deferred tax items, it does not illustrate an entity's complete financial statements. Facts IE2 . An entity's balance sheet at 31 December, 20X2(before restatement) is as follows: Note Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 333. IE3. Assume that the entity identifies the existence of hyperinflation in, for example, April 20X2 and therefore applies Ind AS 29 from the beginning of 20X2. The entity restates its financial statements on the basis of the following general price indices and conversion factors. General price indices Conversion factors at 31 Dec. 20X2 December 20X0 ( a ) 95 2.347 December 20X1 135 1.652 December 20X2 223 1.000 ( a ) For example, the conversion factor for December 20X0 is 2.347=223/95 Restatement IE4. The restatement of the entity's 20X2 financial statements is based on the following requirements: l Property, plant and equipment are restated by applying the change in a general price index from the date of acquisition to the end of the reporting period to their historical cost and accumulated depreciation. l Deferred taxes should be accounted for in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Historical Rs. million Restated Rs. million Cost of property, plant and equipment 500 1,174 Depreciation 20X1 (100) (235) Carrying amount 31 December 20X1 400 939 Depreciation 20X2 (100) (235) Carrying amount 31 December 20X2 300 704 2. Deferred tax liability The nominal deferred tax liability at 31 December 20X2 of ₹ 30 million is measured as the taxable temporary difference between the carrying amount of property, plant and equipment of ₹ 300 and their tax base of ₹ 200. Similarly, the deferred tax liability at 31 December 20X1 of ₹ 20 million is measured a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 @ 30 per cent tax rate = Restated deferred tax liability 31 December, 20X1 at the general price level at the end of 20X1 71 Restated deferred tax liability 31 December, 20X1 at the general price level at the end of 20X2(conversion factor1.652 = 223/135) 117 IE6. In this example, the restated deferred tax liability is increased by ₹ 34 to ₹ 151 from 31 December 20X1 to 31 December 20X2. That increase, which is included in profit or loss in 20X2, reflects ( a ) the effect of a change in the taxable temporary difference of property, plant and equipment, and ( b ) a loss of purchasing power on the tax base of property, plant and equipment. The two components can be analysed as follows: Rs. million Effect on deferred tax liability because of a decrease in the taxable temporary difference of property, plant and equipment (Rs. 235 + ₹ 133) 30% 31 Loss on tax base because of inflation in 20X2 (Rs. 333 1.652 - ₹ 333) 30% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and the presentation and disclosure of discontinued operations. In particular, the Indian Accounting Standard requires: ( a ) assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and ( b ) assets that meet the criteria to be classified as held for sale to be presented separately in the balance sheet and the results of discontinued operations to be presented separately in the statement of profit and loss. Scope 2. The classification and presentation requirements of this Indian Accounting Standard apply to all recognised non-current assets 17 and to all disposal groups of an entity. The measurement requirements of this Indian Accounting Standard apply to all recognised non-current assets and disposal groups (as set out in paragraph 4), except for those assets listed in paragraph 5 which shall continue to be measured in accordance with the Standard noted. 3. Assets classified as non-current in accordance with Ind AS 1 Presentation of Financial Statements shall not be reclassified as current assets until they meet the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting in their capacity as owners (held for distribution to owners). 5B. This Indian Accounting Standard specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. Disclosures in other Indian Accounting Standards do not apply to such assets (or disposal groups) unless those Indian Accounting Standards require: ( a ) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations; or ( b ) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of Ind AS 105 and such disclosures are not already provided in the other notes to the financial statements. Additional disclosures about non-current assets (or disposal groups) classified as held for sale or discontinued operations may be necessary to comply with the general requirements of Ind AS 1, in particular paragraphs 15 and 125 of that Standard. Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners 6. An entity shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for other non- current assets when the exchange has commercial substance in accordance with Ind AS 16 Property, Plant and Equipment. 11. When an entity acquires a non-current asset (or disposal group) exclusively with a view to its subsequent disposal, it shall classify the non-current asset (or disposal group) as held for sale at the acquisition date only if the one-year requirement in paragraph 8 is met (except as permitted by paragraph 9) and it is highly probable that any other criteria in paragraphs 7 and 8 that are not met at that date will be met within a short period following the acquisition (usually within three months). 12. If the criteria in paragraphs 7 and 8 are met after the reporting period, an entity shall not classify a non-current asset (or disposal group) as held for sale in those financial statements when issued. However, when those criteria are met after the reporting period but before the approval of the financial statements for issue, the entity shall disclose the information specified in paragraph 41( a ), ( b ) and ( d ) in the notes. 12A. A non-current asset (or disposal group) is classified as held for distribution to owners when the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposal group) being measured on initial recognition at the lower of its carrying amount had it not been so classified (for example, cost) and fair value less costs to sell. Hence, if the asset (or disposal group) is acquired as part of a business combination, it shall be measured at fair value less costs to sell. 17. When the sale is expected to occur beyond one year, the entity shall measure the costs to sell at their present value. Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost. 18. Immediately before the initial classification of the asset (or disposal group) as held for sale, the carrying amounts of the asset (or all the assets and liabilities in the group) shall be measured in accordance with applicable Indian Accounting Standards. 19. On subsequent remeasurement of a disposal group, the carrying amounts of any assets and liabilities that are not within the scope of the measurement requirements of this Indian Accounting Standard, but are included in a disposal group classified as held for sale, shall be remeasured in accordance with applicable Indian Accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sale, but the criteria in paragraphs 7-9 are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale. 27. The entity shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of: ( a ) its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale, and ( b ) its recoverable amount at the date of the subsequent decision not to sell. 22 28. The entity shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale in profit or loss 23 from continuing operations in the period in which the criteria in paragraphs 7-9 are no longer met. The entity shall present that adjustment in the same caption in the statement of profit and loss used to present a gain or loss, if any, recognised in accordance with paragraph 37. 29. If an entity removes an individual a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the disposal of the assets or disposal group(s) constituting the discontinued operation; and ( iv ) the related income tax expense as required by paragraph 81( h ) of Ind AS 12. The analysis may be presented in the notes or in the statement of profit and loss. If it is presented in the statement of profit and loss it shall be presented in a section identified as relating to discontinued operations, i.e., separately from continuing operations. The analysis is not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition ( see paragraph 11). ( c ) the net cash flows attributable to the operating, investing and financing activities of discontinued operations. These disclosures may be presented either in the notes or in the financial statements. These disclosures are not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition ( see paragraph 11). ( d ) the amount of income from continuing operations and from discontinued operations attributable to owners of the parent. These disclosures may be pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the balance sheet. The liabilities of a disposal group classified as held for sale shall be presented separately from other liabilities in the balance sheet. Those assets and liabilities shall not be offset and presented as a single amount. The major classes of assets and liabilities classified as held for sale shall be separately disclosed either in the balance sheet or in the notes, except as permitted by paragraph 39. An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale. 39. If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition ( see paragraph 11), disclosure of the major classes of assets and liabilities is not required. 40. An entity shall not reclassify or re-present amounts presented for non-current assets or for the assets and liabilities of disposal groups classified as held for sale in the balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( c ) it expects to realise the asset within twelve months after the reporting period; or ( d ) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. discontinued operation A component of an entity that either has been disposed of or is classified as held for sale and: ( a ) represents a separate major line of business or geographical area of operations, ( b ) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or ( c ) is a subsidiary acquired exclusively with a view to resale. disposal group A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. The group includes goodwill acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that will extend the period required to complete the sale, and: ( i ) actions necessary to respond to those conditions cannot be initiated until after a firm purchase commitment is obtained, and ( ii ) a firm purchase commitment is highly probable within one year. ( b ) an entity obtains a firm purchase commitment and, as a result, a buyer or others unexpectedly impose conditions on the transfer of a non- current asset (or disposal group) previously classified as held for sale that will extend the period required to complete the sale, and: ( i ) timely actions necessary to respond to the conditions have been taken, and ( ii ) a favourable resolution of the delaying factors is expected. ( c ) during the initial one-year period, circumstances arise that were previously considered unlikely and, as a result, a non-current asset (or disposal group) previously classified as held for sale is not sold by the end of that period, and: ( i ) during the initial one-year period the entity took action necessary to respond to the change in circumstances, ( ii ) the non-current asset (or disposal group) is being actively marketed at a price that is rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) to a buyer in its present condition. Examples 1-3 illustrate situations in which the criterion in paragraph 7 would or would not be met. Example 1 An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer. ( a ) The entity intends to transfer the building to a buyer after it vacates the building. The time necessary to vacate the building is usual and customary for sales of such assets. The criterion in paragraph 7 would be met at the plan commitment date. ( b ) The entity will continue to use the building until construction of a new headquarters building is completed. The entity does not intend to transfer the existing building to a buyer until after construction of the new building is completed (and it vacates the existing building). The delay in the timing of the transfer of the existing building imposed by the entity (seller) demonstrates that the building is not available for immediate sale. The criterion in paragraph 7 would not be met until construction of the new building is completed, even if a firm purchase commitment for the future transfer of the existing building is obtained earlier. Example 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. Completion of sale expected within one year (paragraph 8) Example 4 To qualify for classification as held for sale, the sale of a non-current asset (or disposal group) must be highly probable (paragraph 7), and transfer of the asset (or disposal group) must be expected to qualify for recognition as a completed sale within one year (paragraph 8). That criterion would not be met if, for example: ( a ) an entity that is a commercial leasing and finance company is holding for sale or lease equipment that has recently ceased to be leased and the ultimate form of a future transaction (sale or lease) has not yet been determined. ( b ) an entity is committed to a plan to 'sell' a property that is in use, and the transfer of the property will be accounted for as a sale and finance leaseback. Exceptions to the criterion in paragraph 8 An exception to the one-year requirement in paragraph 8 applies in limited situations in which the period required to complete the sale of a non-current asset (or disposal group) will be (or has been) extended by events or circumstances beyond an entity's control and specified conditions are met (paragraphs 9 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he asset is not sold by the end of that period. The entity believes that the market conditions will improve and has not further reduced the price of the asset. The asset continues to be held for sale, but at a price in excess of its current fair value. In that situation, the absence of a price reduction demonstrates that the asset is not available for immediate sale as required by paragraph 7. In addition, paragraph 8 also requires an asset to be marketed at a price that is reasonable in relation to its current fair value. Therefore, the conditions in paragraph B1( c ) for an exception to the one-year requirement in paragraph 8 would not be met. The asset would be reclassified as held and used in accordance with paragraph 26. Determining whether an asset has been abandoned Paragraphs 13 and 14 of the Indian Accounting Standard specify requirements for when assets are to be treated as abandoned. Example 8 illustrates when an asset has not been abandoned. Example 8 An entity ceases to use a manufacturing plant because demand for its product has declined. However, the plant is maintained in workable condition and it is expected that it will be brought back into use if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,200 AFS financial assets 1,800 1,500 Total 16,000 14,900 The entity recognises the loss of ₹ 1,100 (Rs. 16,000 - ₹ 14,900) immediately before classifying the disposal group as held for sale. The entity estimates that fair value less costs to sell of the disposal group amounts to ₹ 13,000. Because an entity measures a disposal group classified as held for sale of the lower of its carrying amount and fair value less costs to sell, the entity recognises an impairment loss of ₹ 1,900 (Rs. 14,900 - ₹ 13,000) when the group is initially classified as held for sale. The impairment loss is allocated to non-current assets to which the measurement requirements of the Indian Accounting Standard are applicable. Therefore, no impairment loss is allocated to inventory and AFS financial assets. The loss is allocated to the other assets in the order of allocation set out in paragraphs 104 and 122 of Ind AS 36. The allocation can be illustrated as follows: Carrying amount as remeasure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (X) Other expenses (X) (X) Finance costs (X) (X) Share of profit of associates X X Profit before tax X X Income tax expense (X) (X) Profit for the period from continuing operations X X Discontinued operations Profit for the period from discontinued operations 24 X X Profit for the period X X Attributable to: Owners of the parent Profit for the period from continui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The presentation in the entity's balance sheet of the disposal groups classified as held for sale can be shown as follows: 20X5 20X4 ASSETS Non-current assets AAA X X BBB X X CCC X X X X Current assets DDD X X EEE X X X X Non-current assets classified as held for sale 8,000 - X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fair value less costs to sell, say at ₹ 130. The liabilities are remeasured in accordance with applicable Indian Accounting Standards, say at ₹ 35. The total assets are measured at ₹ 130 + ₹ 35, i.e., at ₹ 165 l at the end of the reporting period, A presents the assets and liabilities separately from other assets and liabilities in its consolidated financial statements as illustrated in Example 12 Presenting non-current assets or disposal groups classified as held for sale, and l in the statement of profit and loss, A presents the total of the post-tax profit or loss of S2 and the post-tax gain or loss recognised on the subsequent remeasurement of S2, which equals the remeasurement of the disposal group from ₹ 135 to ₹ 130. Further analysis of the assets and liabilities or of the change in value of the disposal group is not required. Appendix 1 Comparison with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular, the Indian Accounting Standard requires: ( a ) limited improvements to existing accounting practices for exploration and evaluation expenditures. ( b ) entities that recognise exploration and evaluation assets to assess such assets for impairment in accordance with this Indian Accounting Standard and measure any impairment in accordance with Ind AS 36 Impairment of Assets. ( c ) disclosures that identify and explain the amounts in the entity's financial statements arising from the exploration for and evaluation of mineral resources and help users of those financial statements understand the amount, timing and certainty of future cash flows from any exploration and evaluation assets recognised. Scope 3. An entity shall apply the Indian Accounting Standard to exploration and evaluation expenditures that it incurs. 4. The Indian Accounting Standard does not address other aspects of accounting by entities engaged in the exploration for and evaluation of mineral resources. 5. An entity shall not apply the Indian Accounting Standard to expenditures incurred: ( a ) before the exploration for and evaluation of mineral resources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment. 11. In accordance with Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets an entity recognises any obligations for removal and restoration that are incurred during a particular period as a consequence of having undertaken the exploration for and evaluation of mineral resources. Measurement after recognition 12. After recognition, an entity shall apply either the cost model or the revaluation model to the exploration and evaluation assets. If the revaluation model is applied (either the model in Ind AS 16 Property, Plant and Equipment or the model in Ind AS 38) it shall be consistent with the classification of the assets ( see paragraph 15). Changes in accounting policies 13. An entity may change its accounting policies for exploration and evaluation expenditures if the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs. An entity shall judge relevance and reliability using the criteria in Ind AS 8. 14. To justify changing its accounting policies for exploration and evaluation expenditures, an entity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specific area has expired during the period or will expire in the near future, and is not expected to be renewed. ( b ) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. ( c ) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. ( d ) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. In any such case, or similar cases, the entity shall perform an impairment test in accordance with Ind AS 36. Any impairment loss is recognised as an expense in accordance with Ind AS 36. Specifying the level at which exploration and evaluation assets are assessed for impairment 21. An entity shall determine an accounting policy for allocating exploration and evaluation assets to cash-generating units or groups o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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