As (Recovered)

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  • 8/18/2019 As (Recovered)



    Research is a systematic purposive investigation looking for the facts through verifiable methods

    in order to establish a relationship between them and to conclude from them broad principles or 

    laws. There are various types of research based on the intent:

    1. Pure and Applied Research

    2. !ploratory Research

    ". #escriptive Research

    $. #iagnostic %tudy

    &. valuation %tudies

    '. Action Research

    This pro(ect report is based on !ploratory Research) that is) * have conducted a preliminary

    study of an unfamiliar problem. * have done it to generate new ideas or increase my familiarity

    with the problem. +enerally the methods used are literature survey) e!perience survey) case

    studies etc.

    Data Collection Method

    There are two categories of data collection methods: Primary and %econdary. * have used both

    sources of data. The sources include websites) te!t book and reference books. #etails of these

    sources are available in ,ibliography and -ebliography.


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    The ob(ective of this %tandard is to prescribe the accounting treatment for borrowing costs.


    1. This %tandard should be applied in accounting for borrowing costs.

    2. This %tandard does not deal with the actual or imputed cost of owners e/uity) including

     preference share capital not classified as a liability..


     The following terms are used in this %tandard with the meanings specified:

    1 ,orrowing costs are interest and other costs incurred by an enterprise in connection with the

     borrowing of funds.

    2 A /ualifying asset is an asset that necessarily takes a substantial period of time to get ready for

    its intended use or sale. 0onditions of A% 1'

    ,orrowing costs may include:

    a3 *nterest and commitment charges on bank borrowings and other short4term and long4term


    b3 Amorti6ation of discounts or premiums relating to borrowings5

    c3 Amorti6ation of ancillary costs incurred in connection with the arrangement of borrowings5

    d3 7inance charges in respect of assets ac/uired under finance leases or under other similar

    arrangements5 and

    e3 !change differences arising from foreign currency borrowings to the e!tent that they are

    regarded as an ad(ustment to interest costs.

    !cess of the 0arrying Amount of the 8ualifying Asset over Recoverable Amount


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    -hen the carrying amount or the e!pected ultimate cost of the /ualifying asset e!ceeds its

    recoverable amount or net reali6able value) the carrying amount is written down or written off in

    accordance with the re/uirements of other Accounting %tandards. *n certain circumstances) the

    amount of the write4down or write4off is written back in accordance with those other Accounting


    0ommencement of 0apitali6ation

    The capitali6ation of borrowing costs as part of the cost of a /ualifying asset should commence

    when all the following conditions are satisfied:

    a3 !penditure for the ac/uisition) construction or production of /ualifying asset is being


    b3 ,orrowing costs are being incurred5 and

    c3 activities that are necessary to prepare the asset for its intended use or sale are in progress.

     !penditure on a /ualifying asset includes only such e!penditure that has resulted in payments

    of cash) transfers of other assets or the assumption of interest4bearing liabilities. !penditure is

    reduced by any progress payments received and grants received in connection with the asset see

    Accounting %tandard 12) Accounting for +overnment +rants3. The average carrying amount of

    the asset during a period) including borrowing costs previously capitali6ed) is normally a

    reasonable appro!imation of the e!penditure to which the capitali6ation rate is applied in that



     9ote: This illustration does not form part of the Accounting %tandard. *ts purpose is to assist in

    clarifying the meaning of paragraph $e3 of the %tandard.


    ;< =td. has taken a loan of >%# 1?)??? on April 1) 2?") for a specific pro(ect at an interest

    rate of &@ p.a.) payable annually. n April 1) 2?") the e!change rate between the currencies

    was Rs. $& per >%#. The e!change rate) as at Barch "1) 2?$) is Rs. $C per >%#. The


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    corresponding amount could have been borrowed by ;< =td. in local currency at an interest

    rate of 11 per cent annum as on April 1) 2?".

    The following computation would be made to determine the amount of borrowing costs for the

     purposes of paragraph $e3 of A% 1':

    i3 *nterest for the period D >%# 1?)??? E &@ E Rs. $CF>%# DRs. 2$)???.

    ii3 *ncrease in the liability towards the principal amount D >%#1?)??? E $C$&3 D Rs. "?)???.

    iii3 *nterest that would have resulted if the loan was taken in *ndian currency D >%# 1?)??? E

    $& E 11@ D Rs. $G)&??.

    iv3 #ifference between interest on local currency borrowing and foreign currency borrowing D

    Rs. $G)&?? Rs. 2$)??? D Rs.2&)&??.

    Therefore) out of Rs. "?)??? increase in the liability towards principal amount) only Rs. 2&)&??

    will be considered as the borrowing cost. Thus) total borrowing cost would be Rs. $G)&?? being

    the aggregate of interest of Rs. 2$)??? on foreign currency borrowings Hcovered by paragraph

    $a3 of A% 1'I plus the e!change difference to the e!tent of difference between interest on local

    currency borrowing and interest on foreign currency borrowing of Rs. 2&)&??. Thus) Rs. $G)&??

    would be considered as the borrowing cost to be accounted for as per A% 1' and the remainings.

    $)&?? would be considered as the e!change difference to be accounted for as per Accounting

    %tandard A%3 11) The ffects of 0hanges in 7oreign !change Rates.

    *n the above e!ample) if the interest rate on local currency borrowings is assumed to be 1"@

    instead of 11@) the entire e!change difference of Rs."?)??? would be considered as borrowing

    costs) since in that case the difference between the interest on local currency borrowings and

    foreign currency borrowings Hi.e. Rs. "$)&?? Rs. &C)&?? Rs. 2$)???3I is more than the

    e!change difference of Rs. "?)???. Therefore) in such a case) the total borrowing cost would be

    Rs. &$)??? Rs. 2$)??? J Rs. "?)???3 which would be accounted for under A% 1' and there

    would be no e!change difference to be accounted for under A% 11) The ffects of 0hanges in

    7oreign !change Rates.



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    Accounting %tandard A%3 1K) L%egment Reporting) issued by the 0ouncil of the *nstitute of

    0hartered Accountants of *ndia) comes into effect in respect of accounting periods commencing

    on or after 1.$.2??1.

    ,usiness segment

    M 9ormally referred to as %,>s %trategic business units3

    M #istinguishable component of enterprise that is engaged in providing individual product or

    service or group of related products and services sub(ect to risks and returns that are different

    from other business segments.

    +eographical segment

    M A distinguishable component of an enterprise engaged in providing products or services within

    a particular environment sub(ect to risks and returns different from those components operating

    in other economic environments.

    M 7actors to consider:

      %imilarity of economic and political conditions

      Relationship between operations in different geographical regions

      Pro!imity of operations

      %pecial risks associated with operations in a particular area

      !change control regulations and

      The underlying currency risks

    M +eographical location is one where:

      =ocation of production or service facilities and other assets


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      =ocation of its markets and customers

    M +rouping of countries could be continent wise

    M 9o splitting of *ndia into further segments normally re/uired unless there are specific risks

    applicable to a region which are significant.

    Risk and reward

    M Nigher the risk) higher the rewards and losses and vice versa

    M -hat one should look for is Lsignificantly different risks and rewards

    M *f ma(ority of following are common it would be same segment:

      9ature of product or service

      9ature of production process

      Type and class of customers

      Bethods of distribution

      9ature of regulatory environment

    Primary and secondary segments

    M Primary high intensity of disclosures

    M %econdary4 low intensity of disclosures

    M *f risks and rewards are primarily affected by differences in products or services) primary

    segment should be business

    M *f risks and rewards are primarily affected by the operations in different countries) then primary

    segment should be geographical

    M %egments reportable in standalone financial statements may not be reportable in 07%.


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    #etermination of primary segment

    M *nternal organi6ation and management structure of an enterprise and system of financial

    reporting to board should normally the basis of identifying the primary segment e!cept when:

      *f risks and returns are affected by both business and geography and matri! approach is

    followed) then primary segment is business and secondary) geography

      *f in organi6ation and reporting neither business nor geography is followed) directors should

    take the decision

    M -ith globali6ation risks are mainly seen as coming mainly from business rather than location5

    in most cases business will be primary segment.

    %eparate segments

    M Reportable segment if 

      %ales 1?@ or more of total revenue

      Profit or loss is 1?@ or more

    M Of combined result of all segments in profit or 

    M Combined result of all segments in loss, whichever is greater in absolute amounts

      Assets are 1?@ or more of total assets

    M *f e!ternal revenue applicable to reportable segments constitutes less than K&@ of the total

    enterprise revenue) additional segments to be identified even if less than 1?@3 till

    K&@ is reached.

    %egment e!penses

    M !cludes


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      !tra ordinary items


    M Finance charge part of finance lease rental to be also excluded 

    M Interest included in inventories under AS 16 to be included being part of operating expense

      =oss on sale of investments and on e!tinguishment of debt

      *ncome ta!

      +eneral Admin e!penses) N e!penses and other enterprise level e!penses.


    This illustration does not form part of the Accounting %tandard. *ts purpose is to illustrate the

    application of the Accounting %tandard.

    An enterprise operates through eight segments) namely) A) ,) 0) #) ) 7) + and N. The relevant

    information about these segments is given in the following table amounts in Rs.???3:

    A , 0 # 7 + N Total%eg




    1. %+B9T


    a3 !ternal


    4 22& 1& 1? 1& &? 2? "& $??


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    b3 *nter4segment

    %ales1?? '? "? & 4 4 & 4 2??

    c3 Total

    Revenue1?? "1& $& 1& 1& &? 2& "& '?? $??

    23 Total revenue

    of each segment

    as a percentage

    of total revenue

    of all segments

    1'.K &2.


    K.& 2.& 2.& C." $.2 &.C

    ". %egment


    =ossI& G?3 1& &3 C &3 & K


    Result of all

    %egments in


    & 1& C & K $?

    &. 0ombined

    Result of all

    %egments in loss

    G?3 &3 &3 1??


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    '. %egment

    Result as a

     percentage of the

    greater of the

    totals arrived at $

    and & above in

    absolute amount

    i.e.) 1??3

    & G? 1& & C & & K

    K. %+B9T


    1& $K & 11 " & & G 1??

    C. %egment assets

    as a percentage

    of total assets of

    all segments

    1& $K & 11 " & & G


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    arnings per %hare

    This Accounting %tandard is mandatory for all companies. Nowever) disclosure of diluted

    earnings per share both including and e!cluding e!tra4 ordinary items3 is not mandatory for

    %mall and Bedium %i6ed 0ompanies) as defined in the 9otification. %uch companies are

    however encouraged to make these disclosures.


    The ob(ective of this %tandard is to prescribe principles for the determination and presentation of

    earnings per share which will improve comparison of performance among different enterprises

    for the same period and among different accounting periods for the same enterprise. The focus of 

    this %tandard is on the denominator of the earnings per share calculation. ven though earnings

     per share data has limitations because of different accounting policies used for determining

    Learnings) a consistently determined denominator enhances the /uality of financial reporting.


    1. This %tandard should be applied by all companies. Nowever) a %mall and Bedium %i6ed

    0ompany) as defined in the 9otification) may not disclose diluted earnings per share both

    including and e!cluding e!traordinary items3.

    2. *n consolidated financial statements) the information re/uired by this %tatement should be

     presented on the basis of consolidated information.


    7or the purpose of this %tandard) the following terms are used with the meanings specified:

    1 An e/uity share is a share other than a preference share.

    2 A preference share is a share carrying preferential rights to dividends and repayment of capital.

    " A financial instruments is any contract that gives rise to both a financial asset of one enterprise

    and a financial liability or e/uity shares of another enterprise.


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    $ A potential e/uity share is a financial instrument or other contract that entitles) or may entitle)

    its holder to e/uity shares.

    & %hare warrants or options are financial instruments that give the holder the right to ac/uire

    e/uity shares.

     ' 7air values is the amount for which an asset could be e!changed) or liability settled) between

    knowledgeable) willing parties in an arms length transaction.


    !ample 4 -eighted Average 9umber of %hares

    Accounting year ?14?142?1 to "141242?13

     9o. of share


     9o. of share

     bought back 

     9o. of share






     beginning of year 

    1C?? 4 1C??




    *ssue of

    share for


    '?? 4 2$??

    1st 9ov.)



    ,ack of


    4 "?? 21??

    "1st ,alance 2$?? "?? 21??


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    at end of


    0omputation of -eighted Average:

    1)C?? ! &F123 J 2)$?? ! &F123 J 2)1?? ! 2F123 D 2)1?? shares.

    The weighted average number of shares can alternatively be computed as follows:

    1)C?? !12F123 J '?? ! KF123 4 "?? ! 2F123 D 2)1?? shares



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    The ob(ective of this %tandard is to prescribe accounting treatment for ta!es on income. Ta!es on

    income are one of the significant items in the statement of profit and loss of an enterprise. *n

    accordance with the matching concept) ta!es on income are accrued in the same period as the

    revenue and e!penses to which they relate. Batching of such ta!es against revenue for a period

     poses special problems arising from the fact that in a number of cases) ta!able income may be

    significantly different from the accounting income. This divergence between ta!able income and

    accounting income arises due to two main reasons. 7irstly) there are differences between items of 

    revenue and e!penses as appearing in the statement of profit and loss and the items which are

    considered as revenue) e!penses or deductions for ta! purposes. %econdly) there are differences

     between the amount in respect of a particular item of revenue or e!pense as recogni6ed in the

    statement of profit and loss and the corresponding amount which is recogni6ed for the

    computation of ta!able income.


    1. This %tandard should be applied in accounting for ta!es on income. This includes the

    determination of the amount of the e!pense or saving related to ta!es on income in respect of an

    accounting period and the disclosure of such an amount in the financial statements.

    2. 7or the purposes of this %tandard) ta!es on income include all domestic and foreign ta!es

    which are based on ta!able income.

    ". This %tandard does not specify when) or how) an enterprise should account for ta!es that are

     payable on distribution of dividends and other distributions made by the enterprise.


    7or the purpose of this %tandard) the following terms are used with the meanings specified:

    1 .Accounting income loss3 is the net profit or loss for a period) as reported in the statement of

     profit and loss) before deducting income ta! e!pense or adding income ta! saving.

    2. Ta!able incomes ta! loss3 is the amount of the income loss3 for a period) determined in

    accordance with the ta! laws) based upon which income ta! payable recoverable3 is determined.


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    ". Ta! e!pense ta! saving3 is the aggregate of current ta! and deferred ta! charged or credited to

    the statement of profit and loss for the period.

    $. 0urrent ta! is the amount of income ta! determined to be payable recoverable3 in respect of

    the ta!able income ta! loss3 for a period.

    &. #eferred ta!es is the ta! effect of timing differences.

    '. Timing differences are the differences between ta!able income and accounting income for a

     period that originate in one period and are capable of reversal in one or more subse/uent periods.

    K. Permanent differences are the differences between ta!able income and accounting income for

    a period that originates in one period and do not reverse subse/uently.


    Ta! e!pense for the period) comprising current ta! and deferred ta!) should be included in the

    determination of the net profit or loss for the period.

    Ta!es on income are considered to be an e!pense incurred by the enterprise in earning income

    and are accrued in the same period as the revenue and e!penses to which they relate. %uch

    matching may result into timing differences. The ta! effects of timing differences are included in

    the ta! e!pense in the statement of profit and loss and as deferred ta! assets sub(ect to the

    consideration of prudence as set out in paragraphs 1&41C3 or as deferred ta! liabilities) in the

     balance sheet.

    Permanent differences do not result in deferred ta! assets or deferred ta! liabilities.

    Re4assessment of >nrecogni6ed #eferred Ta! Assets

    At each balance sheet date) an enterprise re4assesses unrecogni6ed deferred ta! assets. The

    enterprise recogni6es previously unrecogni6ed deferred ta! assets to the e!tent that it has become

    reasonably certain or virtually certain) as the case may be) that sufficient future ta!able income

    will be available against which such deferred ta! assets can be reali6ed. 7or e!ample) an

    improvement in trading conditions may make it reasonably certain that the enterprise will be able

    to generate sufficient ta!able income in the future.


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    Review of #eferred Ta! Assets

    The carrying amount of deferred ta! assets should be reviewed at each balance sheet date. An

    enterprise should write4down the carrying amount of a deferred ta! asset to the e!tent that it is no

    longer reasonably certain or virtually certain) as the case may be) that sufficient future ta!able

    income will be available against which deferred ta! asset can be reali6ed. Any such write4down

    may be reversed to the e!tent that it becomes reasonably certain or virtually certain) as the case

    may be) that sufficient future ta!able income will be available.

    *llustration !amples of Timing #ifferences

     9ote: This illustration does not form part of the Accounting %tandard. The purpose of this

    illustration is to assist in clarifying the meaning of the Accounting %tandard. The sections

    mentioned hereunder are references to sections in the *ncome4ta! Act) 1G'1) as amended by the

    7inance Act) 2??1.

    1. !penses debited in the statement of profit and loss for accounting purposes but allowed for

    ta! purposes in subse/uent years) e.g.

    a3 !penditure of the nature mentioned in section $", e.g. ta!es) duty) cess) fees) etc.3 accrued

    in the statement of profit and loss on mercantile basis but allowed for ta! purposes in subse/uent

    years on payment basis.

     b3 Payments to non4residents accrued in the statement of profit and A% 22 issued 2??13loss on

    mercantile basis) but disallowed for ta! purposes under section $?a3i3 and allowed for ta!

     purposes in subse/uent years when relevant ta! is deducted or paid.

    c3 Provisions made in the statement of profit and loss in anticipation of liabilities where the

    relevant liabilities are allowed in subse/uent years when they crystalli6e.

    2. !penses amorti6ed in the books over a period of years but are allowed for ta! purposes

    wholly in the first year e.g. substantial advertisement e!penses to introduce a product) etc.

    treated as deferred revenue e!penditure in the books3 or if amorti6ation for ta! purposes is over a

    longer or shorter period e.g. preliminary e!penses under section ") e!penses incurred for

    amalgamation under section "#) prospecting e!penses under section "&3.


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    ". -here book and ta! depreciation differ. This could arise due to:

    a3 #ifferences in depreciation rates.

     b3 #ifferences in method of depreciation e.g. %=B or -#O.

    c3 #ifferences in method of calculation e.g. calculation of depreciation with reference to

    individual assets in the books but on block basis for ta! purposes and calculation with reference

    to time in the books but on the basis of full or half depreciation under the block basis for ta!


    d3 #ifferences in composition of actual cost of assets.

    $. -here a deduction is allowed in one year for ta! purposes on the basis of a deposit made

    under a permitted deposit scheme e.g. tea development account scheme under section ""A, or

    site restoration fund scheme under section ""A,A3 and e!penditure out of withdrawal from such

    deposit is debited in the statement of profit and loss in subse/uent years.

    &. *ncome credited to the statement of profit and loss but ta!ed only in subse/uent years e.g.

    conversion of capital assets into stock in trade.

    '. *f for any reason the recognition of income is spread over a number of years in the accounts

     but the income is fully ta!ed in the year of receipt.



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    *nternational 7inancial Reporting %tandards *7R%3 is a set of accounting standards developed by

    an independent) not4for4profit organi6ation called the *nternational Accounting %tandards ,oard

    *A%,3. The goal of *7R% is to provide a global framework for how public companies prepare

    and disclose their financial statements. *7R% provides general guidance for the preparation of

    financial statements) rather than setting rules for industry4specific reporting.

    Naving an international standard is especially important for large companies that have

    subsidiaries in different countries. Adopting a single set of world4wide standards will simplify

    accounting procedures by allowing a company to use one reporting language throughout. A

    single standard will also provide investors and auditors with a cohesive view of finances.

    0urrently) over 1?? countries permit or re/uire *7R% for public companies) with more countries

    e!pected to transition to *7R% by 2?1&. Proponents of *7R% as an international standard maintain

    that the cost of implementing *7R% could be offset by the potential for compliance to improve

    credit ratings. *7R% is sometimes confused with *A% *nternational Accounting %tandards3)

    which are older standards that *7R% has replaced.

    Obecti!e o$ *inancial State0ent%

    7inancial statements are a structured representation of the financial positions and financial

     performance of an entity. The ob(ective of financial statements is to provide information about

    the financial position) financial performance and cash flows of an entity that is useful to a wide

    range of users in making economic decisions. 7inancial statements also show the results of the

    managementQs stewardship of the resources entrusted to it.

    To meet this ob(ective) financial statements provide information about an entityQs: a3 assets5 b3

    liabilities5 c3 e/uity5 d3 income and e!penses) including gains and losses5 e3 contributions by

    and distributions to owners in their capacity as owners5 and f3 cash flows. This information)along with other information in the notes) assists users of financial statements in predicting the

    entityQs future cash flows and) in particular) their timing and certainty.

    The following are the general features in *7R%:

    1.7air presentation and compliance with *7R%:


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    7air presentation re/uires the faithful representation of the effects of the transactions) other

    events and conditions in accordance with the definitions and recognition criteria for assets)

    liabilities) income and e!penses set out in the 7ramework of *7R%.

    2. +oing concern:

    7inancial statements are present on a going concern basis unless management either intends to

    li/uidate the entity or to cease trading) or has no realistic alternative but to do so.

    ". Accrual basis of accounting:

    An entity shall recogni6e items as assets) liabilities) e/uity) income and e!penses when they

    satisfy the definition and recognition criteria for those elements in the 7ramework of *7R%.

    $. Bateriality and aggregation:

    very material class of similar items has to be presented separately. *tems that are of a dissimilar

    nature or function shall be presented separately unless they are immaterial.

    &. ffsetting

    ffsetting is generally forbidden in *7R%. Nowever certain standards re/uire offsetting when

    specific conditions are satisfied such as in case of the accounting for defined benefit liabilities in

    *A% 1G and the net presentation of deferred ta! liabilities and deferred ta! assets in *A% 123.

    '. 7re/uency of reporting:

    *7R% re/uires that at least annually a complete set of financial statements is presented. Nowever

    listed companies generally also publish interim financial statements for which the accounting is

    fully *7R% compliant3 for which the presentation is in accordance with *A% "$ Interim

     Financing eporting .

    K. 0omparative information:

    *7R% re/uires entities to present comparative information in respect of the preceding period for

    all amounts reported in the current periodQs financial statements. *n addition comparative

    information shall also be provided for narrative and descriptive information if it is relevant to


  • 8/18/2019 As (Recovered)


    understanding the current periodQs financial statements. The standard *A% 1 also re/uires an

    additional statement of financial position also called a third balance sheet3 when an entity

    applies an accounting policy retrospectively or makes a retrospective restatement of items in its

    financial statements) or when it reclassifies items in its financial statements. This for e!ample

    occurred with the adoption of the revised standard *A% 1G as of 1 anuary 2?1"3 or when the

    new consolidation standards *7R% 1?411412 were adopted as of 1 anuary 2?1" or 2?1$ for

    companies in the uropean >nion3

    2alitati!e Cha3acte3i%tic% o$ *inancial State0ent%

    8ualitative characteristics of financial statements include:

    Relevance Bateriality3

    7aithful representation

    nhancing /ualitative characteristics include:





    The elements directly related to the measurement of the %tate0ent o$ $inancial #o%ition include:

    A%%et: An asset is a resource controlled by the entity as a result of past events and from which

    future economic benefits are e!pected to flow to the entity.

    iabilit4: A liability is a present obligation of the entity arising from the past events) the

    settlement of which is e!pected to result in an outflow from the entity of resources embodying

    economic benefits) i.e. assets.

    E52it4: 9ominal e/uity is the nominal residual interest in the nominal assets of the entity after

    deducting all its liabilities in nominal value.


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    The financial performance of an entity is presented in the %tate0ent o$ co0#3ehen%i!e inco0e)

    which consists of the income statement and the statement of other comprehensive income

    usually presented in two separate statements3. 7inancial performance includes the following

    elements which are recognised in the income statement or other comprehensive income as

    re/uired by the applicable *7R% standard3:

    Re!en2e%: increases in economic benefit during an accounting period in the form of inflows or

    enhancements of assets) or decrease of liabilities that result in increases in e/uity. Nowever) it

    does not include the contributions made by the e/uity participants for e!ample owners) partners

    or shareholders3.

    E#en%e%: decreases in economic benefits during an accounting period in the form of outflows)

    or depletions of assets or incurrences of liabilities that result in decreases in e/uity. Nowever)

    these donQt include the distributions made to the e/uity participants

    Reco,nition o$ Ele0ent% o$ *inancial State0ent%

    An item is recogni6ed in the financial statements when:

    it is probable future economic benefit will flow to or from an entity.

    the resource can be reliably measured

    *n some cases specific standards add additional conditions before recognition is possible or

     prohibit recognition altogether.

    An e!ample is the recognition of internally generated brands) mastheads) publishing titles)

    customer lists and items similar in substance) for which recognition is prohibited by *A% "C. *n

    addition research and development e!penses can only be recognised as an intangible asset if they

    cross the threshold of being classified as Qdevelopment costQ.

    -hilst the standard on provisions) *A% "K) prohibits the recognition of a provision for contingent

    liabilities) this prohibition is not applicable to the accounting for contingent liabilities in a

     business combination. *n that case the ac/uirer shall recognise a contingent liability even if it is

    not probable that an outflow of resources embodying economic benefits will be re/uired.


  • 8/18/2019 As (Recovered)




    Indian Acco2ntin, Standa3d   IAS8I*RS



     !ame of Standard 





     !ame of Standard 

    1 #isclosures of Accounting Policies 1 Presentation of financial statements

    2 Oaluation of *nventories 2 *nventories

    " 0ash 7low %tatements K %tatements of 0ash 7lows

    $ 0ontingencies and vents ccurring

    after the ,alance %heet #ate 

    1? vents after the Reporting Period

    & 9et Profit or =oss for the Period)

    Prior Period *tems and 0hanges in

    Accounting Policies


    C Accounting Policies) 0hanges in

    Accounting stimates and rrors

    ' #epreciation 

     9o e/uivalent standard. *ncluded in *A%


    K 0onstructions 0ontracts 11 0onstructions 0ontracts

    G Revenue Recognition 1C Revenue

    1? Accounting for 7i!ed Assets 1' Property) Plant and /uipment

    11 The ffects of 0hanges in 7oreign

    !changes Rates 

    21 The ffects of 0hanges in 7oreign

    !changes Rates

    12 Accounting for +overnment +rants


    2? Accounting for +overnment +rants and

    #isclosure of +overnment Assistance

    1" Accounting for *nvestments Bainly dealt with in *A% "G

    1$ Accounting for Amalgamations *7R% " ,usiness 0ombinations

    1& mployee ,enefits 1G mployee ,enefits


  • 8/18/2019 As (Recovered)


    1' ,orrowing 0osts 2" ,orrowings 0osts

    1K %egment Reporting *7R% C perating %egments

    1C Related Party #isclosures 2$ Related Party #isclosures

    1G =eases 1K =eases

    2? arnings Per %hare "" arnings Per %hare

    21 0onsolidated 7inancial %tatements 

    2K 0onsolidated and %eparate 7inancial


    22 Accounting for Ta!es for *ncome 12 *ncome Ta!es

    2" Accounting for *nvestment in

    Associates in 0onsolidated 7inancial



    2C *nvestments in Associates

    2$ #iscontinuing perations 

    *7R% & 9on4current Assets Neld for %ale and

    #iscontinued perations

    2& *nterim 7inancial Reporting "$ *nterim 7inancial Reporting

    2' *ntangible Assets "C *ntangible Assets

    2K 7inancial Reporting of *nterest in

    oint Oentures 

    "1 *nterest in oint Oentures

    2C *mpairment of Assets "' *mpairment of Assets

    2G Provisions) 0ontingent =iabilities and

    0ontingent Assets 

    "K Provisions) 0ontingent =iabilities and

    0ontingent Assets

    "? 7inancial *nstruments: Recognitionand Beasurement

      "2 7inancial *nstruments: Recognition andBeasurement

    "1 7inancial *nstruments: Presentation "G 7inancial *nstruments: Presentation

    "2 7inancial *nstruments: #isclosures *7R% K 7inancial *nstruments: #isclosures

    ,enefits of Adopting *7R% for *ndian 0ompany


  • 8/18/2019 As (Recovered)


    Ado#tion o$ I*RS b4 Indian Co0#an4

    *ndia today has become an international economic force. *ndian companies has surpassed in

    several sectors of the industry that includes) *T%) software) pharmaceutical) auto spare part to

    name a few. And to stay as a leader in the international market *ndia opted the changes it need to

    interface *ndian stakeholdersQ) the international stakeholdersQ and comply with the financial

    reporting in a language that is understandable to all of them. *n response to the need several

    *ndian companies have already been providing their financial statements as per >% +AAP andFor 

    *7R% on voluntary basis. ,ut) however this is becoming more of a necessity then (ust being a

     best practice.

    *n the coming years) critical decisions will need to be made regarding the use of global

    accounting standards in *ndia. Barket participants will be called upon to determine whether

    achieving a uniform set of high4/uality global accounting standards is feasible) what sort of

    investments would be re/uired to achieve that outcome) and whether it is a desirable goal in the

    first place. This dialogue will be critical to the future of financial reporting and of fundamental

    importance to the long4term strength and stability of the global capital markets.

    Performance measures) based on *ndian +AAP may need revisiting as it may change in *7R%

    adoption by fair amount on account of valuation aspect. !pectation of investor and market will

    also be re/uired to be of paramount importance to manage in the adoption of process.


    The *ndian +AAP is influenced by several standard setters and influenced by %tatute) namely

    0ompanies Act) *ncome Ta! Act) ,anking Regulation Act) *nsurance Act etc and directions from

    regulatory bodies like R,*) %,*) *R#A.

    The legal or regulatory re/uirement will prevail over the *7R% re/uirement) in case of conflicts.

    Therefore) pre4conditions for *7R% adoption by *ndia to be effective need amendments in

    re/uired legislation and clarity on impact of *7R% adoption on #irect and *ndirect ta!es)

    especially transactions recorded at fair values.


  • 8/18/2019 As (Recovered)


    *nstitute of 0hartered Accountants of *ndia is actively promoting the *A%,Qs pronouncements in

    the country with a view to facilitating global harmoni6ation of Accounting %tandards and *0A*

    has pronounced that *ndian +AAP will converge into *7R% with effect from April 1) 2?11.

    According to the above press release) there will be two separate sets of Accounting %tandards

    under %ection 211"03 of the 0ompanies Act) 1G&'. The two sets would be as described below:

    *i3%t %et would comprise of the *ndian Accounting %tandards which are converged with the *7R%

    *7R% converged standards3. *t shall be applicable to specified class of companies5

    Second %et would comprise of the e!isting *ndian Accounting %tandards !isting Accounting

    %tandards3 and would be applicable to other companies including small and medium companies



    The convergence with *7R% entails benefit to the following:

    The Investors:- The investor will be benefited in as the way accounting information made

    available to them will be more reliable) relevant) timely and most importantly the information

    will be comparable across different legal framework. *t will develop better understanding and

    confidence among the investors.

    The Professional:- The professional) both in practice and in employment will get benefits as

    they will be able to provide their services in various part of the world) as few years after

    everybody will follow the same reporting standards.

    The Corporate world:- The *ndian corporate reputation and relationship with international

    finance community will elevate because of achievement of higher level of consistency between

    reporting structure and re/uirements5 better access to international markets5 improving

    confidence among the international investors. The international comparability will also get

    improve strengthening the industrial and capital markets in the country.



  • 8/18/2019 As (Recovered)


    #espite several benefits as may be looked out by the different people) there will be several

    challenges that will be faced on the way of *7R% convergence.

    The first and far most would be from the differences between *ndian +AAP and *7R%. The

    differences are wide and very deep routed) to say a few 4Plant Property and /uipment PP3

    accounting) 7inancial *nstruments accounting) *nvestment accounting) ,usiness combination)

    %hare based payment) current and non4current classification of asset and liabilities) presentation

    of financial statements) all are not dealt under *ndian +AAP.

    0onvergence is not (ust one time technical steps but will impose practical challenges of

    significant business and regulatory matters like structuring of %P schemes) training of

    employees) ta! planning) modification of *T system) compliance with debt covenants.

    B3ie$ abo2t

    I*RS 1 : *i3%t-ti0e Ado#tion o$ Inte3national *inancial Re#o3tin, Standa3d%

    Inte3national *inancial Re#o3tin, Standa3d 1" *i3%t-ti0e Ado#tion o$ Inte3national

    *inancial Re#o3tin, Standa3d% or I*RS 1 is an international financial reporting

    standard issued by the *nternational Accounting %tandards ,oard *A%,3. *t sets out

    re/uirements on the preparation and presentation of financial statements and interim financial

    reports by entities that are adopting the *7R% for the first time) to ensure that they contain high4

    /uality information.

    *7R% 1 has been cited by Association of 0hartered 0ertified Accountants A00A3 as having

    great practical significance in (urisdictions that are adopting the *7R%s. The standard has been

    endorsed by the uropean 0ommission for use in the uropean >nion) with the 0ommission

    %ervices finding in 2??G that the latest version of *7R% 1 has benefits that outweigh the costs of



    *7R% 1 applies to an entityQs first *7R% financial statements and to interim financial reports for

     parts of the period covered by the first *7R% financial statements.


  • 8/18/2019 As (Recovered)


    The standard defines an entityQs first financial statement as the first annual financial statements

    in which the entity adopts *7R%s) by an e!plicit and unreserved statement in those financial

    statements of compliance with *7R%s. %pecific cases include financial statements of firms

    whose most recent financial statements were prepared in accordance with national re/uirements

    not consistent with *7R% or that did not present financial statements in previous periods.

    Reco,nition and Mea%23e0ent

    *n the first financial statement) *7R% 1 re/uires entities to present an opening *7R% statement of

    financial position using accounting policies in compliance with each *7R% effective as of the end

    of its first *7R% reporting period. Nowever) accounting estimates at the date of transition to

    *7R%s are to be consistent with estimates made in accordance with the previously4used +AAP.

    Any ad(ustments due to the previous use of a different +AAP are to be recogni6ed directly in

    retained earnings or another category of e/uity if appropriate.

    '3e%entation and Di%clo%23e

    *7R% 1 re/uires entities to e!plain the effect of the transition to *7R% on their financial position)

    financial performance) and cash flows. 7or e!ample) it re/uires entities to present certain

    reconciliations between accounting amounts under the previous +AAP and that under *7R%.

    An entity is permitted to use the fair value of an item of property) plant and e/uipment at the date

    of transition to *7R%s as its deemed cost at that date. *f it does so) the entity is re/uired to

    disclose the aggregate of these fair values and aggregate ad(ustments from the previous +AAP.

    Additionally) interim financial reports covering part of the period of the first *7R% financial

    statement are also re/uired include reconciliations from the previous +AAP) among other


    I*RS & : *inancial In%t320ent%" Di%clo%23e%



  • 8/18/2019 As (Recovered)


    *7R% K Financial Instruments$ %isclosures re/uires disclosure of information about the

    significance of financial instruments to an entity) and the nature and e!tent of risks arising from

    those financial instruments) both in /ualitative and /uantitative terms. %pecific disclosures are

    re/uired in relation to transferred financial assets and a number of other matters.

    *7R% K was originally issued in August 2??& and applies to annual periods beginning on or after

    1 anuary 2??K.

    verview of *7R% K

    *7R% K: adds certain new disclosures about financial instruments to those previously re/uired

     by *A% "2  Financial Instruments$ %isclosure and  Presentation as it was then cited3 replaces the

    disclosures previously re/uired by *A% "?  %isclosures in the Financial Statements of &an's and

    Similar Financial Institutions Puts all of those financial instruments disclosures together in a

    new standard on Financial Instruments$ %isclosures. The remaining parts of *A% "2 deal only

    with financial instruments presentation matters.

    Di%clo%23e 3e52i3e0ent% o$ I*RS &

    *7R% re/uires certain disclosures to be presented by category of instrument based on the *A% "G

    measurement categories. 0ertain other disclosures are re/uired by class of financial instrument.

    7or those disclosures an entity must group its financial instruments into classes of similar

    instruments as appropriate to the nature of the information presented. H*7R% K.'I

    The two main categories of disclosures re/uired by *7R% K are:

    • *nformation about the significance of financial instruments.

    • *nformation about the nature and e!tent of risks arising from financial instruments.


  • 8/18/2019 As (Recovered)


    I*RS 1) : Con%olidated *inancial State0ent%


    *7R% 1? Consolidated Financial Statements outlines the re/uirements for the preparation and

     presentation of consolidated financial statements) re/uiring entities to consolidate entities it

    controls. 0ontrol re/uires e!posure or rights to variable returns and the ability to affect those

    returns through power over an investee.

    *7R% 1? was issued in Bay 2?11 and applies to annual periods beginning on or after 1 anuary



    The ob(ective of *7R% 1? is to establish principles for the presentation and preparation of

    consolidated financial statements when an entity controls one or more other entities. H*7R% 1?:1I

    The Standa3d"

  • 8/18/2019 As (Recovered)


    it is a wholly4owned subsidiary or is a partially4owned subsidiary of another entity and its other

    owners) including those not otherwise entitled to vote) have been informed about) and do not

    ob(ect to) the parent not presenting consolidated financial statements its debt or e/uity

    instruments are not traded in a public market a domestic or foreign stock e!change or an over4

    the4counter market) including local and regional markets3 it did not file) nor is it in the process of 

    filing) its financial statements with a securities commission or other regulatory organisation for

    the purpose of issuing any class of instruments in a public market) and its ultimate or any

    intermediate parent of the parent produces financial statements available for public use that

    comply with *7R%s) in which subsidiaries are consolidated or are measured at fair value through

     profit or loss in accordance with *7R% 1?.S

    S 7air value measurement clause added by Investment (ntities$ Appl)ing the Consolidation

     (xception *Amendments to IFS 1+, IFS 1 and IAS -. amendments) effective 1 anuary


    *nvestment entities are prohibited from consolidating particular subsidiaries see further

    information below3.

    7urthermore) post4employment benefit plans or other long4term employee benefit plans to

    which *A% 1G  (mplo)ee &enefits applies are not re/uired to apply the re/uirements of *7R% 1?.

    H*7R% 1?:$,I

    Con%olidation #3oced23e%

    0onsolidated financial statements: H*7R% 1?:,C'I

    0ombine like items of assets) liabilities) e/uity) income) e!penses and cash flows of the parent

    with those of its subsidiaries offset eliminate3 the carrying amount of the parentQs investment in

    each subsidiary and the parentQs portion of e/uity of each subsidiary *7R% "  &usiness

    Combinations e!plains how to account for any related goodwill3

     liminate in full intragroup assets and liabilities) e/uity) income) e!penses and cash flows

    relating to transactions between entities of the group profits or losses resulting from intragroup


  • 8/18/2019 As (Recovered)


    transactions that are recognised in assets) such as inventory and fi!ed assets) are eliminated in


    A reporting entity includes the income and e!penses of a subsidiary in the consolidated financial

    statements from the date it gains control until the date when the reporting entity ceases to control

    the subsidiary. *ncome and e!penses of the subsidiary are based on the amounts of the assets and

    liabilities recognised in the consolidated financial statements at the ac/uisition date. H*7R%


    The parent and subsidiaries are re/uired to have the same reporting dates) or consolidation based

    on additional financial information prepared by subsidiary) unless impracticable. -here

    impracticable) the most recent financial statements of the subsidiary are used) ad(usted for the

    effects of significant transactions or events between the reporting dates of the subsidiary and

    consolidated financial statements. The difference between the date of the subsidiaryQs financial

    statements and that of the consolidated financial statements shall be no more than three months

    H*7R% 1?:,G2) *7R% 1?:,G"I


    There are no disclosures specified in *7R% 1?. *nstead) *7R% 12  %isclosure of Interests in Other

     (ntities outlines the disclosures re/uired.

    I*RS 1> : Re,2lato34 De$e33al Acco2nt%


    The ob(ective of *7R% 1$ is to specify the financial reporting re/uirements for Qregulatory

    deferral account balancesQ that arise when an entity provides good or services to customers at a

     price or rate that is sub(ect to rate regulation. H*7R% 1$:1I


    *7R% 1$ is permitted) but not re/uired) to be applied where an entity conducts rate4regulated

    activities and has recognised amounts in its previous +AAP financial statements that meet the

    definition of Qregulatory deferral account balancesQ sometimes referred to Qregulatory assetsQ and

    Qregulatory liabilitiesQ3. H*7R% 1$.&I


  • 8/18/2019 As (Recovered)


    Accounting policies for regulatory deferral account balances

    *7R% 1$ provides an e!emption from paragraph 11 of  *A% C  Accounting /olicies, Changes in

     Accounting (stimates and (rrors when an entity determines its accounting policies for

    regulatory deferral account balances. H*7R% 1$.GI Paragraph 11 of *A% C re/uires an entity to

    consider the re/uirements of *7R%s dealing with similar matters and the re/uirements of

    the Conceptual Framewor'  when setting its accounting policies.

    The effect of the e!emption is that eligible entities can continue to apply the accounting policies

    used for regulatory deferral account balances under the basis of accounting used immediately

     before adopting *7R% Qprevious +AAPQ3 when applying *7R%s) sub(ect to the presentation

    re/uirements of *7R% 1$ H*7R% 1$.11I.

    ntities are permitted to change their accounting policies for regulatory deferral account balances

    in accordance with *A% C) but only if the change makes the financial statements more relevant

    and no less reliable) or more reliable and not less relevant) to the economic decision4making

    needs of users of the entityQs financial statements. Nowever) an entity is not permitted to change

    accounting policies to start to recogni6e regulatory deferral account balances. H*7R% 1$.1"I

    '3e%entation in $inancial %tate0ent%

    The impact of regulatory deferral account balances are separately presented in an entityQs

    financial statements. This re/uirement applies regardless of the entityQs previous presentation

     policies in respect of regulatory deferral balance accounts under its previous +AAP.


    %eparate line items are presented in the statement of financial position for the total of all

    regulatory deferral account debit balances) and all regulatory deferral account credit balances

    H*7R% 1$.2?I

    Regulatory deferral account balances are not classified between current and non4current) but are

    separately disclosed using subtotals H*7R% 1$.21I

    The net movement in regulatory deferral account balances are separately presented in the

    statement of profit or loss and other comprehensive income using subtotals H*7R% 1$.2242"I


  • 8/18/2019 As (Recovered)



    *7R% 1$ sets out disclosure ob(ectives to allow users to assess: H*7R% 1$.2KI

    the nature of) and risks associated with) the rate regulation that establishes the prices3 the entity

    can charge customers for the goods or services it provides 4 including information about the

    entityQs rate4regulated activities and the rate4setting process) the identity of the rate regulators3)

    and the impacts of risks and uncertainties on the recovery or reversal of regulatory deferral

     balance accounts.


    In%23ance Act 1@ Gene3al In%23ance Co0#an4

    *2nction% o$ the Eec2ti!e Co00ittee o$ Gene3al In%23ance Co2ncil

    6> 13 the functions of the !ecutive 0ommittee of the +eneral *nsurance 0ouncil shall be 4

     a3 to aid and advise insurers) carrying on general insurance business ? in the matter of setting up

    standards of conduct and sound practice and in the matter of rendering efficient service to

    holders of policies of general insurance5


  • 8/18/2019 As (Recovered)


     b3 To render advice to the Authority in the matter of controlling the e!penses of such insurers

    carrying on business in *ndia in the matter of commission and other e!penses5

     c3 To bring to the notice of the Authority the case of any such insurrecting in a manner

     pre(udicial the interests of holders of general insurance po1icies5

     d3 To act in any matter incidental or ancillary to any of the matters specified in 0lauses a3 to

    c3 as with the approval of the Authority may be notified by the +eneral *nsurance 0ouncil in the

    +a6ette of *ndia.

     23 7or the purpose of enabling it effectively to discharge its functions) the !ecutive 0ommittee

    of the +eneral *nsurance 0ouncil may collect such fees as may be prescribed from all insurers

    carrying on general insurance business:

     Provided that if the +eneral *nsurance 0ouncil thinks fit) it may by a resolution passed by it)

    waive the collection of the prescribed fees for any year and where any such resolution has been

    approved by the Authority) the !ecutive 0ommittee of the +eneral *nsurance 0ouncil shall not

    collect any fees in relation to that year.

    Eec2ti!e Co00ittee o$ the Gene3al In%23ance Co2ncil 0a4 ad!i%e in cont3ollin, e#en%e%

     6>M 13 *t shall be the duty of the !ecutive 0ommittee of the +eneral *nsurance 0ouncil to

    meet at least once before the "1st day of Barch every year to advise the Authority in fi!ing under 

    the proviso to subsection 13 of %ection $?40 the limits by which the actual e!penses of

    management incurred by an insurer carrying on general insurance business in respect of such

     business in the preceding year may e!ceed the limits prescribed under that sub4section) and in the

    fi!ing any such limits the Authority shall have due regard to the conditions obtaining in general

    insurance business in the preceding year) and he may fi! different limits for different groups of


     23 -here an insurer is guilty of contravening the provisions of %ection $?0 with respect to the

    e!penses of management the Authority may) after giving the insurer an opportunity of being

    heard) administer a warning to the insurer.


  • 8/18/2019 As (Recovered)


     "3 -here in any case two warnings given to an insurer under sub4section 23 have been

    disregarded by him) the Authority may take such action against the insurer as may be prescribed.


    'o;e3% o$ Eec2ti!e Co00ittee% to act to,ethe3 in ce3tain ca%e%

     '$9. The 0entral +overnment may prescribe the circumstances in which) the manner in which)

    and the conditions sub(ect to which) the !ecutive committee of the =ife *nsurance 0ouncil and

    the !ecutive 0ommittee of the +eneral *nsurance 0ouncil may hold (oint meetings for the

     purpose of doing with any matter of common interest to both 0ommittee) and it shall be lawful

    for the two 0ommittees at any such (oint meeting to delegate any matter under consideration for

    the determination of a subcommittee appointed for this purpose from amongst the members of

    the two 0ommittees.


    Gene3al #o;e3% o$ i$e In%23ance Co2ncil and Gene3al In%23ance Co2ncil

     6>R .13 7or the efficient performance of its duties) the =ife *nsurance 0ouncil or the +eneral

    *nsurance 0ouncil) as the case may be) may

     a3 Appoint such officers and servants as may be necessary and fi! the conditions of their


     b3 #etermine the manner in which any prescribed fee may be collected5

     c3 eep and maintain up to date a copy of the list of all insurers who are members or

    associate members of the *nsurance Association of *ndia5

     d3 -ith the previous approval of the Authority) make regulations for 

     i3 The holding of elections other than the first elections5

     ii3 The summoning and holding of meetings) the conduct of business thereat and the number

    of persons necessary to form a /uorum5


  • 8/18/2019 As (Recovered)


     iii3 The submission by insurers to the !ecutive 0ommittee of the =ife *nsurance 0ouncil) or

    the +eneral *nsurance 0ouncil of such statements or information as may be re/uired of them

    and the submission of copies thereof by the insurers to the Authority5

     iv3 The levy and collection of any fees5

     v3 The regulation of any other matter which may be necessary for the purpose of enabling it to

    carry out its duties under this Act.

     23 The =ife *nsurance 0ouncil or the +eneral *nsurance 0ouncil may authori6e the !ecutive

    0ommittee concerned to e!ercise any of the powers conferred on the =ife *nsurance 0ouncil or

    the +eneral *nsurance 0ouncil) as the case may be) under 01ause a3) 01ause b3 or 01ause c3

    of sub4section 13.


    'o;e3 o$ Cent3al Go!e3n0ent to 3e0o!e di$$ic2ltie%

     6>S The 0entral +overnment may e!ercise such powers as may be necessary for bringing the

    =ife *nsurance 0ouncil) the +eneral *nsurance 0ouncil or the !ecutive 0ommittee of any of the

    said 0ouncils) as the case may be) into effective e!istence for the purposes of this Part) and any

    such powers shall include

     a3 the power to hold) in such manner as may be directed by the 0entral +overnment) the first

    elections to the !ecutive 0ommittees of the =ife *nsurance 0ouncil and the +eneral *nsurance


     b3 where a notification under sub4section 13 of %ection '$A has been issued declaring

     provident societies to be members of the *nsurance Association of *ndia) the powers to associate

     provident societies effectively in the e!ercise of all powers and the discharge of all functions of

    the =ife *nsurance 0ouncil and the !ecutive 0ommittee thereof5

     c3 The power to make the provisions of %ection $?, applicable to the provident societies

    specified in 0lause b3 in the same manner as they apply to insurers

     'o;e3 to ee0#t


  • 8/18/2019 As (Recovered)


     6>T The 0entral +overnment may) sub(ect to such conditions and restrictions as it may think fit

    to impose) e!empt any insurer specified in sub-clausec3 of 01ause G3 of %ection 2 from the

    operation of all or any of the provisions of this Part.



    'ART I

     Accounting principles for preparation of financial statements

    1. Applicability of Accounting %tandards444very ,alance %heet) Receipts and Payments

    Account H0ash 7low statementI and Profit and =oss Account H%hareholders AccountI of the

    insurer shall be in conformity with the Accounting %tandards A%3 issued by the *0A*) to the

    e!tent applicable to the insurers carrying on general insurance business) e!cept that:


  • 8/18/2019 As (Recovered)


     i3 Accounting %tandard " A% "3 0ash 7low %tatements 0ash 7low %tatement shall be

     prepared only under the #irect Bethod.

    ii3 Accounting %tandard 1" A% 1"3 Accounting for *nvestments) shall not be applicable.

     iii3 Accounting %tandard 1K A% 1K3 4 %egment Reporting shall apply irrespective of

    whether the securities of the insurer are traded publicly or not.

      2. Premium44Premium shall be recognised as income over the contract period or the period of

    risk) whichever is appropriate. >nearned premium as well as premium received in advance) both

    of which represent premium income not relating to the current accounting period) shall be

    disclosed separately in the financial statements.

     ". Premium #eficiency44Premium deficiency shall be recognised if the sum of e!pected claim

    costs) related e!penses and maintenance costs e!ceeds related unearned premiums.

     7or contracts e!ceeding four years) once a premium deficiency has occurred) future changes to

    the liability shall be based on actuarialFtechnical evaluation.

     $. Ac/uisition 0osts444Ac/uisition costs) if any) shall be e!pensed in the period in which they

    are incurred.

    Ac/uisition costs are those costs that vary with) and are primarily related to) the ac/uisition of

    new and renewal insurance contracts. The most essential test is the obligatory relationship

     between costs and the e!ecution of insurance contracts i.e. commencement of risk3.

     &. 0laims44The components of the ultimate cost of claims to an insurer comprise the claims

    under policies and claims settlement costs. 0laims under policies comprise the claims made for

    losses incurred) and those estimated or anticipated under the policies.

    '. Procedure to determine the value of investments.444An insurer shall determine the values of

    investments in the following manner:4

     a3 Real state *nvestment Property44 *nvestment Property shall be measured at historical cost

    less accumulated depreciation and impairment loss) residual value being considered 6ero and no

    revaluation being permissible.


  • 8/18/2019 As (Recovered)


     The *nsurer shall assess at each balance sheet date whether any impairment of the investment

     property has occurred.

     An impairment loss shall be recognised as an e!pense in the RevenueFProfit and =oss Account


     7air value as at the balance sheet date and the basis of its determination shall be disclosed in the

    financial statements as additional information.

     b3 #ebt %ecurities44#ebt securities including government securities and redeemable preference

    shares shall be considered as Uheld to maturityV securities and shall be measured at historical cost

    sub(ect to amortisation.

     c3 /uity %ecurities and #erivative *nstruments that are traded in active markets444=isted

    e/uity securities and derivative instruments that are traded in active markets shall be measured at

    fair value as at the balance sheet date. 7or the purpose of calculation of fair value) the lowest of

    the last /uoted closing price of the stock e!changes where the securities are listed shall be taken.

    K. =oans44=oans shall be measured at historical cost sub(ect to impairment provisions.

    The insurer shall assess the /uality of its loan assets and shall provide for impairment. The

    impairment provision shall not be less than the aggregate amount of loans which are sub(ect to

    defaults of the nature mentioned below:4

     i3 *nterest remaining unpaid for over a period of si! months5 and

    ii3 *nstallment of loan falling due and remaining unpaid during the last si! months.

     C. 0atastrophe Reserve4440atastrophe reserve shall be created in accordance with norms) if any)

     prescribed by the Authority. *nvestment of funds out of catastrophe reserve shall be made in

    accordance with prescription of the Authority.

    *t is clarified that this reserve is towards meeting losses which might arise due to an entirely

    une!pected set of events and not for any specific known purpose. This reserve is in the nature of

    an amount set aside for the potential future liability against the insurance policies in force.

    'ART II


  • 8/18/2019 As (Recovered)


    #isclosures forming part of 7inancial %tatements

     A. The following shall be disclosed by way of notes to the ,alance %heet:

    1. 0ontingent =iabilities:

    a3 Partly4paid up investments

    b3 >nderwriting commitments outstanding

    c3 0laims) other than those under policies) not acknowledged as debts

    d3 +uarantees given by or on behalf of the company

    e3 %tatutory demandsFliabilities in dispute) not provided for 

    f3 Reinsurance obligations

    g3 thers to be specified3

    2. ncumbrances to assets of the company in and outside *ndia.

    ". 0ommitments made and outstanding for =oans) *nvestments and 7i!ed Assets.

    $. 0laims) less reinsurance) paid to claimants inFoutside *ndia.

    &. Actuarial assumptions for claim liabilities in the case of policies e!ceeding four years.

    '. Ageing of claims distinguishing between claims outstanding for more than si! months and

    other claims.

    K. Premiums) less reinsurance) written from business inFoutside *ndia.

    C. !tent of premium income recognised) based on varying risk pattern) category wise) with

     basis and (ustification therefor) including whether reliance has been placed on e!ternal evidence.

    G. Oalue of contracts in relation to investments) for:

    a3 Purchases where deliveries are pending5

    b3 %ales where payments are overdue.


  • 8/18/2019 As (Recovered)


      1?. perating e!penses relating to insurance business: basis of allocation of e!penditure

    to various classes of business.

      11. Nistorical costs of those investments valued on fair value basis.

      12. 0omputation of managerial remuneration.

      1". ,asis of amortisation of debt securities.

     1$. a3 >nrealised gainFlosses arising due to changes in the fair value of listed e/uity shares and

    derivative instruments are to be taken to e/uity under the head L7air Oalue 0hange Account and

    on realisation reported in profit and loss Account.

     b3 Pending realisation) the credit balance in the L7air Oalue 0hange Account is not available

    for distribution.


    1&. 7air value of investment property and the basis therefor.

    1'. 0laims settled and remaining outstanding for a period of more than si! months on the

     balance sheet date.

     ,. The following accounting policies shall form an integral part of the financial statements:

     1. All significant accounting policies in terms of the accounting standards issued by the *0A*)

    and significant principles and policies given in Part * of Accounting Principles. Any other

    accounting policies followed by the insurer shall be stated in the manner re/uired under

    Accounting %tandard A% 1 issued by *0A*.

    2. Any departure from the accounting policies as aforesaid shall be separately disclosed with

    reasons for such departure.

     0. The following information shall also be disclosed:

     1. *nvestments made in accordance with any statutory re/uirement should be disclosed

    separately together with its amount) nature) security and any special rights in and outside *ndia.


  • 8/18/2019 As (Recovered)


     2. %egregation into performingF non performing investments for purpose of income

    recognition as per the directions) if any) issued by the Authority

    ". Percentage of business sector4wise.

    $. A summary of financial statements for the last five years) in the manner as may be prescribed

     by the Authority.

    &. Accounting Ratios as may be prescribed by the Authority.

    '. ,asis of allocation of *nterest) #ividends and Rent between Revenue Account and Profit and

    =oss Account.

    'ART III

     +9RA= *9%TR>0T*9% 7R PRPARAT*9 7 7*9A90*A= %TATB9T%

     13 The corresponding amounts for the immediately preceding financial year for all items shown

    in the ,alance %heet) Revenue Account and Profit and =oss Account should be given.

    23 The figures in the financial statements may be rounded off to the nearest thousands.

    "3 *nterest) dividends and rentals receivable in connection with an investment should be stated as

    gross value) the amount of income ta! deducted at source being included under Qadvance ta!es


    $3 *ncome from rent shall not include any notional rent.

     7or the purposes of financial statements) unless the conte!t otherwise re/uires 4

    a3 the e!pression Lprovision shall) sub(ect to note ** below mean any amount written off or

    retained by way of providing for depreciation) renewals or diminution in value of assets) or

    retained by way of providing for any known liability or loss of which the amount cannot be

    determined with substantial accuracy5

    b3 the e!pression reserve shall not) sub(ect to as aforesaid) include any amount written off or

    retained by way of providing for depreciation) renewals or diminution in value of assets or

    retained by way of providing for any known liability5


  • 8/18/2019 As (Recovered)


    c3 the e!pression capital reserve shall not include any amount regarded as free for distribution

    through the profit and loss account5 and the e!pression revenue reserve shall mean any reserve

    other than a capital reserve5

    d3 The e!pression liability shall include all liabilities in respect of e!penditure contracted for

    and all disputed or contingent liabilities.

      **3 -here:

    a3 any amount written off or retained by way of providing for depreciation) renewals or

    diminution in value of assets) or 

    b3 any amount retained by way of providing for any known liability is in e!cess of the

    amount which in the opinion of the directors is reasonably necessary for the purpose) the e!cess

    shall be treated for the purposes of these accounts as a reserve and not as a provision.

    '3 The company should make provisions for damages under lawsuits where the management is

    of the opinion that the award may go against the insurer.

    K3 Risks assumed in e!cess of the statutory provisions) if any) shall be separately disclosed

    indicating the amount of premiums involved and the amount of risks covered. The auditor shall)

    however) make an appropriate /ualification in this regard in his report.

    C3 Any debit balance of Profit and =oss Account shall be shown as deduction from uncommitted

    reserves and the balance if any) shall be shown separately.

     '3e#a3ation o$ *inancial State0ent%

    13 An insurer shall prepare the Revenue Account) Profit and =oss Account H%hareholders

    AccountI and the ,alance %heet in 7orm ,4RA) 7orm ,4P=) and 7orm ,4,%) or as near thereto

    as the circumstances permit. Provided that an insurer shall prepare Revenue Account separately

    for fire) marine) and miscellaneous insurance business.

     23 An insurer shall prepare separate Receipts and Payments Account in accordance with the

    #irect Bethod prescribed in A% " U0ash 7low %tatementV issued by the *0A*.


  • 8/18/2019 As (Recovered)


     7RB ,4RA

     9ame of the *nsurer:

    Registration 9o. and #ate of Registration with the *R#A

     RO9> A00>9T 7R TN ;AR 9## "1%T BAR0N) 2?WWW.

     To be prepared separately fire) marine) and miscellaneous insurance3


    Particulars %chedule 0urrent




      Rs.???3 Rs.???3

    1. Premiums earned 9et3 1

    2. thers to be specified3

    ". 0hange in provision for une!pired risk

    $. *nterest) #ividend X Rent +ross

    TTA= A3

    1. 0laims *ncurred 9et3 2

    2. 0ommission "

    ". perating !penses related to *nsurance ,usiness $

    $. thers To be specified


  • 8/18/2019 As (Recovered)


      TTA= ,3

    perating ProfitF=oss3 from

    7ireFBarineFBiscellaneous ,usiness A 4 ,3


    7RB ,4P=

     9ame of the *nsurer:

    Registration 9o. and #ate of Registration with the *R#A


    PR7*T A9# =%% A00>9T 7R TN ;AR 9## "1%T BAR0N) 2?WWW.


    Particulars %chedule 0urrent




      Rs.???3 Rs.???3

    1. PRAT*9+ PR7*TF=%%3

    a3 7ire *nsurance

    b3 Barine *nsurance

    c3 Biscellaneous *nsurance


    2. *90B 7RB *9O%TB9T%

    a3 *nterest) #ividend X Rent +ross

    b3 Profit on sale of investments



  • 8/18/2019 As (Recovered)


      =ess: =oss on sale of investments


    ". TNR *90B To be specified3

    TTA= A3

    $. PRO*%*9% ther than ta!ation3

    a3 7or diminution in the value of


    b3 thers to be specified3


    &. TNR P9%%

    a3 !penses other than those related to

    *nsurance ,usiness

    b3 thers To be specified3


    TTA= ,3

    Profit ,efore Ta!

    Provision for Ta!ation

    Profit After Ta!

    =ess: 0atastrophe Reserve S

    Profit available for appropriation


    a3 *nterim dividends paid during the




  • 8/18/2019 As (Recovered)


    b3 Proposed final dividend

    c3 #ividend distribution ta!

    d3 Transfer to any Reserves or ther

    Accounts to be specified3


    ,alance of profitF loss brought forward from last



    ,alance carried forward to ,alance %heet

    7RB ,4,=

     9ame of the *nsurer:

    Registration 9o. and #ate of Registration with the *R#A

    ,A=A90 %NT A% AT "1%T

     BAR0N) 2?WWW.

      %chedule 0urrent




      Rs.???3 Rs.???3

      %>R0% 7 7>9#%



    R%RO% A9# %>RP=>% '


  • 8/18/2019 As (Recovered)


      7A*R OA=> 0NA9+ A00>9T

    ,RR-*9+% K


    APP=*0AT*9 7 7>9#%

    *9O%TB9T% C

    =A9% G

    7*# A%%T% 1?

    0>RR9T A%%T%

    0ash and ,ank ,alances 11

    Advances and ther Assets 12

    %ub4Total A3

    0>RR9T =*A,*=*T*% 1"

    PRO*%*9% 1$

    %ub4Total ,3


  • 8/18/2019 As (Recovered)



     9T 0>RR9T A%%T% 03 D A 4 ,3

    B*%0==A9>% P9#*T>R to the e!tent

    not written off or ad(usted3


    #,*T ,A=A90 *9 PR7*T A9# =%%




    09T*9+9T =*A,*=*T*%

      Particulars 0urrent ;ear Previous ;ear  

      Rs.???3. Rs.???3.

    1. Partly paid4up investments

    2. 0laims) other than against policies) not

    acknowledged as debts by the company


    ". >nderwriting commitments outstanding

    $. +uarantees given by or on behalf of the 0ompany

    &. %tatutory demandsF liabilities in dispute) not

     provided for 


    '. Reinsurance obligations

    K. thers to be specified3




  • 8/18/2019 As (Recovered)


     SCHEDUE 1

     'REMIUM EARNED nearned Premium


    Ad(ustment for changes in premium received in



    Total '3e0i20 Ea3ned .Net/  

    '3e0i20 Inco0e $3o0 b2%ine%% e$$ected "  

    *n *ndia

    utside *ndia

    Total '3e0i20 Ea3ned .Net/  


  • 8/18/2019 As (Recovered)


     SCHEDUE (



  • 8/18/2019 As (Recovered)




    'a3tic2la3% C233ent ea3 '3e!io2% ea3

      Rs.???3 Rs.???3

    0ommission paid  



    Add: Re4insurance Accepted


    =ess: 0ommission on Re4

      *nsurance 0eded


     9et 0ommission  



      'a3tic2la3% C233ent ea3 '3e!io2%


      Rs.???3 Rs.???3

    1. mployees remuneration X welfare benefits


  • 8/18/2019 As (Recovered)


    2. Banagerial remuneration

    ". Travel) conveyance and vehicle running e!penses

    $. Rents) rates X ta!es

    &. Repairs

    '. Printing X stationery

    K. 0ommunication

    C. =egal X professional charges

    G. Bedical fees

    1?. AuditorsQ fees) e!penses etc

    a3 as auditor 

    b3 as adviser or in any other capacity) in respect of 

    i3 Ta!ation matters

    ii3 *nsurance matters

    iii3 Banagement services5 and

    c3 in any other capacity


    11. Advertisement and publicity

    12. *nterest X ,ank 0harges

    1". thers to be specified3

    1$. #epreciation




  • 8/18/2019 As (Recovered)



      'a3tic2la3% C233ent




      Rs.???3. Rs.???3.

    1. Authorised 0apital

    /uity %hares of Rs..... each

    2. *ssued 0apital

    /uity %hares of Rs. .....each

    ". %ubscribed 0apital

    /uity %hares of Rs.......each

    $. 0alled4up 0apital

    /uity %hares of Rs. .....each

    &. =ess : 0alls unpaid

    Add : /uity %hares forfeited Amount originally paid



    =ess : Preliminary !penses

      !penses including commission or brokerage


      >nderwriting or subscription of shares





  • 8/18/2019 As (Recovered)


    Sha3eholde3 C233ent ea3 '3e!io2% ea3


    o$ Sha3e%



    N20be3 o$


    o$ Holdin,


    Y *ndian

    Y 7oreign






      'a3tic2la3% C233ent ea3 '3e!io2% ea3

      Rs.???3 Rs.???3

    1. 0apital Reserve

    2. 0apital Redemption Reserve

    " %hare Premium

    $ +eneral Reserves

    =ess: #ebit balance in Profit and =oss Account

    =ess: Amount utili6ed for ,uy4back 


    & 0atastrophe Reserve

    ' ther Reserves to be specified3

    K ,alance of Profit in Profit X =oss Account



  • 8/18/2019 As (Recovered)


    SCHEDUE - &


      'a3tic2la3% C233ent ea3 '3e!io2% ea3

      Rs.???3. Rs.???3.

    1. #ebenturesF ,onds

    2. 7i!ed #eposits

    ". ,anks

    $. 7inancial *nstitutions

    &. ther entities carrying on insurance business

    '. thers to be specified3





      'a3tic2la3% C233ent ea3 '3e!io2% ea3

      Rs.???3 Rs.???3


    1. +overnment securities and +overnment guaranteed

     bonds including Treasury ,ills


    2. ther Approved %ecurities

    ". ther *nvestments

    a3 %hares

    aa3 /uity




  • 8/18/2019 As (Recovered)


    b3 Butual 7unds

    c3 #erivative *nstruments

    d3 #ebenturesF ,onds

    e3 ther %ecurities to be specified3

    f3 %ubsidiaries

    g3 *nvestment Properties4Real state


    1. +overnment securities and +overnment guaranteed

     bonds including Treasury ,ills


    2. ther Approved %ecurities

    ". ther *nvestments

    a3 %hares

    aa3 /uity


    b3 Butual 7unds

    c3 #erivative *nstruments

    d3 #ebenturesF ,onds

    e3 ther %ecurities to be specified3

    f3 %ubsidiaries

    g3 *nvestment Properties4Real state




    1 *n *ndia


  • 8/18/2019 As (Recovered)


      2 utside *ndia


    SCHEDUE - @


      'a3tic2la3% C233ent ea3 '3e!io2% ea3

      Rs.???3 Rs.???3

    1. %0>R*T;4-*% 0=A%%*7*0AT*9


    a3 n mortgage of property

    aa3 *n *ndia

    bb3utside *ndia


    b3 n %hares) ,onds) +ovt. %ecurities

    c3 thers to be specified3



    2. ,RR-R4-*% 0=A%%*7*0AT*9

    a3 0entral and %tate +overnments

    b3 ,anks and 7inancial *nstitutions

    c3 %ubsidiaries

    d3 *ndustrial >ndertakings

    e3 thers to be specified3


    ". PR7RBA904-*% 0=A%%*7*0AT*9

    a3 =oans classified as standard


  • 8/18/2019 As (Recovered)


    aa3 *n *ndia

    bb3utside *ndia

    b3 9on4performing loans less provisions

    aa3 *n *ndia

    bb3utside *ndia


    $. BAT>R*T;4-*% 0=A%%*7*0AT*9

    a3 %hort Term

    b3 =ong Term


    SCHEDUE - 1)






    Co%t8 G3o%% Bloc 


    Net Bloc 


















    n %alesF
















  • 8/18/2019 As (Recovered)















    X 7ittings























    SCHEDUE- 11


  • 8/18/2019 As (Recovered)




    'a3tic2la3% C233ent




      Rs.???3 Rs.???3

    1. 0ash including che/ues) drafts and stamps3

    2. ,ank ,alances

    a3 #eposit Accounts

      aa3 %hort4term due within 12 months3

      bb3 thers

    b3 0urrent Accounts

    c3 thers to be specified3


    ". Boney at 0all and %hort 9otice

    a3 -ith ,anks

    b3 -ith other *nstitutions


    $. thers to be specified3


    ,alances with non4scheduled banks included in 2 and " above


    1 *n *ndia