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Property, Plant and Equipment

Ind AS - 016 - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - Ind AS - 016 - Indian Accounting Standard (Ind AS) 16 (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 prescribe the accounting treatment for so that users of the financial statements can discern information abou .....

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Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations. (b) biological assets related to agricultural activity other than bearer plants (See Ind AS 41, Agriculture). This Standard applies to bearer plants but it does not apply to the produce on bearer plants. (c) the recognition and measurement of exploration and evaluation assets (see Ind AS 106, Exploration for and Evaluation of Mineral Resources). (d) mineral rights and mineral reserves such as oil, natural gas and similar .....

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depreciation, are prescribed by this Standard. 5 An entity accounting for investment property in accordance with Ind AS 40, Investment Property, shall use the cost model in this Standard. Definitions 6 The following terms are used in this Standard with the meanings specified: A bearer plant is a living plant that: (a) is used in the production or supply of agricultural produce; (b) is expected to bear produce for more than one period; and (c) has a remote likelihood of being sold as agricultural .....

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n Accounting Standards, eg 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 val .....

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ing more than one period. Recoverable amount is the higher of an asset s fair value less costs to sell and its value in use. The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Useful life is: (a) the period over which an asset is expected to be available for use by an entity; or (b) .....

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, such items are classified as inventory. 9 This Standard does not prescribe the unit of measure for recognition, ie what constitutes an item of . Thus, judgement is required in applying the recognition criteria to an entity s specific circumstances. It may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies, and to apply the criteria to the aggregate value. 10 An entity evaluates under this recognition principle all its costs at the time they are incurre .....

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ts 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 a .....

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rpose of these expenditures is often described as for the repairs and maintenance of the item of . 13 Parts of some items of may require replacement at regular intervals. For example, a furnace may require relining after a specified number of hours of use, or aircraft interiors such as seats and galleys may require replacement several times during the life of the airframe. Items of may also be acquired to make a less frequently recurring replacement, such as replacing the interior walls of a bui .....

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e performing regular major inspections for faults regardless of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised. This occurs regardless of whether the cost of the previous inspection was identified in the transaction in which t .....

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rade discounts and rebates. (b) any costs directly 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 .....

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ocation and condition (such as samples produced when testing equipment); and (f) professional fees. 18 An entity applies Ind AS 2, Inventories, to the costs of obligations for dismantling, removing and restoring the site on which an item is located that are incurred during a particular period as a consequence of having used the item to produce inventories during that period. The obligations for costs accounted for in accordance with Ind AS 2 or Ind AS 16 are recognised and measured in accordance .....

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mount of an item of ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Therefore, costs incurred in using or redeploying an item are not included in the carrying amount of that item. For example, the following costs are not included in the carrying amount of an item of : (a) costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at les .....

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ng the construction or development activities. For example, income may be earned through using a building site as a car park until construction starts. Because incidental operations are not necessary to bring an item to the location and condition necessary for it to be capable of operating in the manner intended by management, the income and related expenses of incidental operations are recognised in profit or loss and included in their respective classifications of income and expense. 22 The co .....

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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 . 22A Bearer plants are accounted for in the same way as self-constructed items of before they are in the location and condition necessary to be capable of operating in the manner intended by management. Consequently, references to construction in this Standard should be read as covering activities that are necessary to cultivat .....

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s of may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and nonmonetary assets. The following discussion refers simply to an exchange of one non-monetary asset for another, but it also applies to all exchanges described in the preceding sentence. The cost of such an item of is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measura .....

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on (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or (b) the entity-specific value of the portion of the entity s operations affected by the transaction changes as a result of the exchange; and (c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged. For the purpose of determining whether an exchange transaction has commercial substance, the entity-specific val .....

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If an entity is able to measure reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident. 27 The cost of an item of held by a lessee under a finance lease is determined in accordance with Ind AS 17. 13[28 The carrying amount of an item of may be reduced by Government grants in accordance with Ind AS 20, Accounting for G .....

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ir 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 determined using fair value at the end of the reporting period. 32 [Refer Appendix 1]. 33 [Refer Appendix 1]. 34 The frequency of revaluations .....

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tem of is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the following ways: (a) the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated depreciati .....

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ed, the entire class of to which that asset belongs shall be revalued. 37 A class of is a grouping of assets of a similar nature and use in an entity s operations. The following are examples of separate classes: (a) land; (b) land and buildings; (c) machinery; (d) ships; (e) aircraft; (f) motor vehicles; (g) furniture and fixtures; (h) office equipment; and (i) bearer plants. 38 The items within a class of are revalued simultaneously to avoid selective revaluation of assets and the reporting of .....

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ever, 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 revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other .....

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the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset s original cost. Transfers from revaluation surplus to retained earnings are not made through profit or loss. 42 The effects of taxes on income, if any, resulting from the revaluation of are recognised and disclosed in accordance with Ind AS 12, Income Taxes. Depreciation 43 Each part of an item of with a cost that is significant in relation to the total cost of the item sha .....

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tem that are attributable to favourable or unfavourable lease terms relative to market terms. 45 A significant part of an item of may have a useful life and a depreciation method that are the same as the useful life and the depreciation method of another significant part of that same item. Such parts may be grouped in determining the depreciation charge. 46 To the extent that an entity depreciates separately some parts of an item of , it also depreciates separately the remainder of the item. The .....

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riod 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 include .....

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ns differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. 52 Depreciation is recognised even if the fair value of the asset exceeds its carrying amount, as long as the asset s residual value does not exceed its carrying amount. Repair and maintenance of an asset do not negate the need to depreciate it. 53 The depreciable amount of an asset is determine .....

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able for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use unless the as .....

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rs 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 product .....

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ned 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 of an asset may be shorter than its economic life. The estimation of the useful life of the asset is a matter of judgement based on the experience of the entity with similar assets. 58 Land and buildings are sep .....

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t, removal and restoration, that portion of the land asset is depreciated over the period of benefits obtained by incurring those costs. In some cases, the land itself may have a limited useful life, in which case it is depreciated in a manner that reflects the benefits to be derived from it. Depreciation method 60 The depreciation method used shall reflect the pattern in which the asset s future economic benefits are expected to be consumed by the entity. 61 The depreciation method applied to a .....

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fe. These methods include the straight-line method, the diminishing balance method and the units of production method. Straight-line depreciation results in a constant charge over the useful life if the asset s residual value does not change. The diminishing balance method results in a decreasing charge over the useful life. The units of production method results in a charge based on the expected use or output. The entity selects the method that most closely reflects the expected pattern of cons .....

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enefits of the asset. For example, revenue is affected by other inputs and processes, selling activities and changes in sales volumes and prices. The price component of revenue may be affected by inflation, which has no bearing upon the way in which an asset is consumed. Impairment 63 To determine whether an item of 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 amou .....

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ents and are accounted for separately as follows: (a) impairments of items of are recognised in accordance with Ind AS 36; (b) derecognition of items of retired or disposed of is determined in accordance with this Standard; (c) compensation from third parties for items of that were impaired, lost or given up is included in determining profit or loss when it becomes receivable; and (d) the cost of items of restored, purchased or constructed as replacements is determined in accordance with this St .....

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ls items of that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 115, Revenue from Contracts with Customers. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories.] 7[69 The disposal of an item of may occur in a variety o .....

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ognises the carrying amount of the replaced part regardless of whether the replaced part had been depreciated separately. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed. 71 The gain or loss arising from the derecognition of an item of shall be determined as the difference between the net disposal proceeds, if a .....

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financial statements shall disclose, for each class of : (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; (ii) assets classif .....

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t or loss in accordance with Ind AS 36; (vii) depreciation; (viii) the net exchange differences arising on the translation of the financial statements from the functional currency into a different presentation currency, including the translation of a foreign operation into the presentation currency of the reporting entity; and (ix) other changes. 74 The financial statements shall also disclose: (a) the existence and amounts of restrictions on title, and pledged as security for liabilities; (b) t .....

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refore, disclosure of the methods adopted and the estimated useful lives or depreciation rates provides users of financial statements with information that allows them to review the policies selected by management and enables comparisons to be made with other entities. For similar reasons, it is necessary to disclose: (a) depreciation, whether recognised in profit or loss or as a part of the cost of other assets, during a period; and (b) accumulated depreciation at the end of the period. 76 In a .....

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addition to the disclosures required by Ind AS 113: (a) the effective date of the revaluation; (b) whether an independent valuer was involved; (c) [Refer Appendix 1] (d) [Refer Appendix 1] (e) for each revalued class of , 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 the distribution of the balance to shareholders. 78 In accordance with Ind AS 36 .....

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lue of when this is materially different from the carrying amount. Therefore, entities are encouraged to disclose these amounts. 9[Transitional Provisions 80 * 80A * 80B * 80C * Effective Date 81 * 81A * 81B * 81C * 81D * 81E * 81F * 81G * 81H * 81I * 81J As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers, paragraphs 68A, 69, 72 are amended. An entity shall apply those amendments when it applies Ind AS 115.] Appendix A Changes in Existing Decommissioning, Restorati .....

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m 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. Ind AS 37 contains requirements on how to measure decommissioning, restoration and similar liabilities. This Appendix provides guidance on how to account for the effect of changes in the measurement of existing decommissioning, restoration and similar liabilities. Scope 2 This Appendix applies to changes in the measurement of any existing decommi .....

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ng decommissioning, restoration or similar liability should be accounted for: (a) a change in the estimated outflow of resources embodying economic benefits (eg 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) .....

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from, the cost of the related asset in the current period. (b) the amount deducted from the cost of the asset shall not exceed its carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess shall be recognised immediately in profit or loss. (c) if the adjustment results in an addition to the cost of an asset, the entity shall consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If it is such an in .....

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xcept that it shall be recognised in profit or loss to the extent that it reverses a revaluation deficit on the asset that was previously recognised in profit or loss; (ii) an increase in the liability shall be recognised in profit or loss, except that it shall be recognised in other comprehensive income and reduce the revaluation surplus within equity to the extent of any credit balance existing in the revaluation surplus in respect of that asset. (b) in the event that a decrease in the liabili .....

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e recognised in profit or loss or in other comprehensive income under (a). If a revaluation is necessary, all assets of that class shall be revalued. (d) Ind AS 1 requires disclosure in the statement of profit and loss of each component of other comprehensive 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 depr .....

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n the Production Phase of a Surface Mine Background 1. In surface mining operations, entities may find it necessary to remove mine waste materials ( overburden ) to gain access to mineral ore deposits. This waste removal activity is known as stripping . 2. During the development phase of the mine (before production begins), stripping costs are usually capitalised as part of the depreciable cost of building, developing and constructing the mine. Those capitalised costs are depreciated or amortise .....

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ore to waste may produce some usable material, which can be used to produce inventory. This removal might also provide access to deeper levels of material that have a higher ratio of ore to waste. There can therefore be two benefits accruing to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. 5. This Appendix considers when and how to account separately for these tw .....

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he stripping activity asset. Accounting Principles Recognition of production stripping costs as an asset 8. To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the entity shall account for the costs of that stripping overburden removal activity in accordance with the principles of Ind AS 2, Inventories. To the extent the benefit is improved access to ore, the entity shall recognise these costs as a non-current asset, say, Stripping Activity A .....

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eliably. 10. The stripping activity asset shall be accounted for as an addition to, or as an enhancement of, an existing asset. In other words, the stripping activity asset will be accounted for as part of an existing asset. 11. The stripping activity asset s classification as a tangible or intangible asset is the same as the existing asset. In other words, the nature of this existing asset will determine whether the entity shall classify the stripping activity asset as tangible or intangible. I .....

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that component of the mine, and the rental costs of any equipment that was hired specifically to perform the stripping activity. Some incidental operations may take place at the same time as the production stripping activity, but which are not necessary for the production stripping activity to continue as planned. The costs associated with these incidental operations shall not be included in the cost of the stripping activity asset. An example of such type of incidental operations would be build .....

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a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. Examples of such measures include: (a) cost of inventory produced compared with expected cost; (b) volume of waste extracted compared with expected volume, for a given volume of ore production; and (c) mineral content of the ore extracted compared with expected mineral content to be extracted, for a given quantity of ore produced. 13A The production measure shall not be calculated us .....

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oth the extracted ore and the identified component, i.e., the current sales price will not change the allocation basis. Applying a future sales price basis involves practical difficulties. Identifying a future sales price for ore that will be mined in the future can be difficult, given the volatility of market prices for many minerals. Further complexities may arise when more than one mineral is present (whether byproducts or joint products) when the ore is extracted. Subsequent measurement of t .....

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. The units of production method shall be applied unless another method is more appropriate. 16. The expected useful life of the identified component of the ore body that is used to depreciate or amortise the stripping activity asset will differ from the expected useful life that is used to depreciate or amortise the mine itself and the related lifeof- mine assets. The exception to this are those limited circumstances when the stripping activity provides improved access to the whole of the remai .....

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Revenue from Contracts with Customers.] 12[2. Appendix E, Service Concession Arrangements: Disclosures contained in Ind AS 115, Revenue from Contracts with Customers.] 3 Appendix C, Determining whether an Arrangement contains a Lease contained in Ind AS 17, Leases. 4 Appendix A, Intangible Assets-Web Site Costs contained in Ind AS 38, Intangible Assets. 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 major diff .....

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nce 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, eg, 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 . 14[*********] 4 The fo .....

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ements contained in the paragraphs 12 and 13. 10[7. Paragraphs 80 to 80C of IAS 16 which deals with the transitional provisions have not been included in Ind AS 16 as all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards. Paragraphs 81 to 81I related to effective date have not been included in Ind AS 16 as these are not relevant in Indian context. However, in order to maintain consisten .....

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ssets shall be recognised as revenue in accordance with Ind AS 115, Revenue from Contracts with Customers. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories. 2. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, 69 The disposal of an item of may occur in a variety of ways (eg by sale, by entering into a finance lease or by donation). The date of disposal of an item of is the date the .....

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graphs 47-72 of Ind AS 115. Subsequent changes to the estimated amount of the consideration included in the gain or loss shall be accounted for in accordance with the requirements for changes in the transaction price in Ind AS 115. 4. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, 1 Appendix C, Service Concession Arrangements contained in Ind AS 115, Revenue from Contracts with Customers. 5. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 b .....

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d and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 18, Revenue. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories.] 7. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, 2[69 The disposal of an item of may occur in a variety of ways (eg by sale, by entering into a finance le .....

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