initial pages and syllabus of CA Final

8/9/2019 initial pages and syllabus of CA Final

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FINALCOURSESTUDYMATERIAL

PAPER 1

Financial Reporting

Volume I

BOARD OF STUDIESTHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

The Institute of Chartered Accountants of India


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This study material has been prepared by the faculty of the Board of Studies. The

objective of the study material is to provide teaching material to the students to enable

them to obtain knowledge and skills in the subject. Students should also supplement their

study by reference to the recommended text books. In case students need any

clarifications or have any suggestions to make for further improvement of the material

contained herein, they may write to the Director of Studies.

All care has been taken to provide interpretations and discussions in a manner useful for

the students. However, the study material has not been specifically discussed by the

Council of the Institute or any of its Committees and the views expressed herein may not

be taken to necessarily represent the views of the Council or any of its Committees.

Permission of the Institute is essential for reproduction of any portion of this material.

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this book may be reproduced, stored in retrieval system, or

transmitted, in any form, or by any means, Electronic, Mechanical, photocopying, recording, or

otherwise, without prior permission in writing from the publisher.

Revised Edition : January, 2013

Website : www.icai.org

Department/ : Board of Studies

Committee

E-mail :

ISBN No. :

Price : `

Published by : The Publication Department on behalf of The Institute of Chartered

Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha

Marg, New Delhi-110 002, India.

Typeset and designed at Board of Studies.

Printed by : Sahitya Bhawan Publications, Hospital Road, Agra- 282 003



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AWORDABOUT STUDYMATERIAL

The paper of Financial Reporting in the Final Course concentrates on aspects of preparing and

analyzing financial statements. Students are expected to acquire advanced knowledge in this

paper. The importance of the subject of financial reporting is growing over the years due to various

factors like liberalization, flow of cross-border capital, emergence of global corporations and

movement towards better corporate governance practices. Standardization of accounting policies

and financial reporting norms are significant aspects that make the subject more interesting in the

recent years. Various new Accounting Standards and Guidance Notes have been formulated by

the Institute of Chartered Accountants of India keeping in mind the growing importance of financialreporting in the corporate scenario.

The students are required to develop understanding of the Accounting Standards and the relevant

Guidance notes and gain ability to apply the provisions contained therein to practical situations.

The last decade has witnessed a sea change in the global economic scenario. The emergence of

transnational corporations in search of money, not only for fuelling growth, but to sustain ongoing

activities has necessitated raising of capital from all parts of the world. When an enterprise decides

to raise capital from the foreign markets, the rules and regulations of that country will apply and the

enterprise should be able to understand the differences between the rules governing financial

reporting in the foreign country as compared to that of its own country. Thus translations and re-

instatements of financial statements are of great significance. Therefore, chapter based onoverview of Indian Accounting Standards, International Accounting Standards/International

Financial Reporting Standard and US GAAPs has also been included in the Final Course

curriculum.

The Study Material is divided into three volumes for ease of handling by the students. Volume I

contains Chapters 1 7 and Volume 2 contains Chapters 8 10. Appendices containing text of

Accounting Standards, Guidance Notes, Framework for Preparation and Presentation of Financial

Statements, Applicability of Accounting Standards to various entities and Revised Schedule VI

have been included in Volume II. Volume III of the Study Material comprises of Practice Manual.

Care has been taken to present the chapters in the same sequence as prescribed in the syllabus to

facilitate easy understanding by the students. Small illustrations have been incorporated in eachchapter/unit to explain the concepts/principles covered in the chapter/unit.

Students are also advised to update themselves with the latest changes in the area of financial

reporting. For this they may refer to academic updates in the monthly journal The Chartered

Accountant and the Students Journal The Chartered Accountant Student (published by the Board

of Studies), financial newspapers, SEBI and Corporate Law Journal, published financial statements

of companies etc. Latest relevant amendments in SEBI Regulations and RBI notifications for

NBFCs have been incorporated in this revised edition.



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The students are expected to cover the entire syllabus and practice on their own while goingthrough the Volume III ie. Practice Manual. The main aim of this Practice Manual is to provide

guidance as to the manner of writing answers in the examination. The Practice Manual will serve

as a useful and handy reference guide while preparing for Final Examination. Further, it will

enhance the understanding about the pattern of questions set and the manner of answering such

questions. It will enable solving the problems in the best possible manner and guide the students to

improve their performance in the examinations. It will also help them to work upon their grey areas

and plan a strategy to tackle theoretical as well as practical problems.

An effort has been made to arrange the questions in more logical manner i.e. sub-topic wise or on

the basis of accounting standards to will help the students in preparing for the Final Course

Examination.

Any theoretical additions made in the chapters have been highlighted in bold and italics while

practical illustrations have been highlighted with grey shading in the study material for easy

identification and quick reference.

We thank CA. Ajay Lunawat for his valuable contribution in Chapter-4 Accounting for Corporate

Restructuring and Chapter-5 Consolidated Financial Statements of Group Companies.

Happy Reading and Best Wishes!



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Signif icant Changes in the Revised Edition

ChapterNo.

Name of theChapter

UnitNo.

Name of theUnit

Section/Sub-Sections

Changes

1 AccountingStandards andGuidance Notes

1 Introduction toAccountingStandards

1.5 Applicability ofAccountingStandards

Para amended

1.6 List ofAccountingStandards

List amended

1.7 Accounting

StandardInterpretations

Para deleted

9 AS 9: RevenueRecognition

Illustration 7Newly added

11 AS 11: TheEffects ofChanges inForeignExchange Rates

11.6 Recognition ofExchangeDifferences Para amended

12 AS 12:Accounting for

Govt. Grants

12.5 Presentation ofGrants related

to SpecificFixed Assets

Para amended

15 AS 15:EmployeeBenefits

15.2 ApplicabilityPara amended

16 AS 16:Borrowing Costs

16.6 ExchangeDifferences onForeignCurrencyBorrowings

Para added

19 AS 19: Leases 19.7 Sale andLeaseback

Transactions

Illustrationadded

33 Guidance Notes 33.3 GuidanceNotes onaccountingaspects

List amended

33.4 An Overviewof GuidanceNotes

Para amended

Illustrations no.5,6,7 added



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2 InternationalAccountingStandards,InternationalFinancialReportingStandards, TheirInterpretationsand US GAAPs-An Overview

8.9 IFRS 9:FinancialInstruments

Para amended

8.10 IFRS 10:ConsolidatedFinancialStatements

Para amended

8.12 IFRS 12:Disclosure ofInterests inother Entities

Para amended

8.13 IFRS 13: FairValueMeasurement

Para amended

12 StandingInterpretationsCommittee An Overview

Para amended

3 CorporateFinancialReporting

4.3 BusinessResponsibilityReport

Newly added

4 Accounting forCorporate

Restructuring

3 Asset basedrestructuring Para amended

6 Amalgamation:AccountingAspects

Para amended



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SYLLABUS

PAPER 1 : FINANCIAL REPORTING

(One paper Three hours 100 marks)

Level of Knowledge:Advanced knowledge

Objectives:(a) To gain ability to analyze financial statements including consolidated financial statements

of group companies and financial reports of various types of entities,

(b) To gain ability to apply valuation principles,

(c) To familiarise with recent developments in the area of financial reporting,

(d) To gain ability to solve financial reporting and valuation cases.

Contents:

1. Accounting Standards and Guidance Notes on various accounting aspects issued by the

ICAI and their applications.

2. Overview of International Accounting Standards (IAS) / International Financial Reporting

Standards (IFRS), Interpretations by International Financial Reporting Interpretation

Committee (IFRIC), Significant difference vis-a-vis Indian Accounting Standards.

Understanding of US GAAP, Applications of IFRS and US GAAP.

3. Corporate Financial Reporting - Issues and problems with special reference to published

financial statements.

4. Accounting for Corporate Restructuring (including inter-company holdings).

5. Consolidated Financial Statements of Group Companies

Concept of a Group, purposes of consolidated financial statements, minority interest ,Goodwill , Consolidation procedures Minority interests, Goodwill, Treatment of pre-

acquisition and post-acquisition profit .

Consolidation with two or more subsidiaries, consolidation with foreign subsidiaries.

Consolidated profit and loss account, balance sheet and cash flow statement.

Treatment of investment in associates in consolidated financial statements.

Treatment of investments in joint ventures in consolidated financial statements.



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6. Accounting and reporting of financial instruments

Meaning, recognition, derecognition and offset, compound financial instruments

Measurement of financial instruments

Hedge accounting

Disclosures

7. Share based payments

Meaning, Equity settled transactions, Transaction with employees and non- employees

Determination of fair value of equity instruments

Vesting conditions

Modification, cancellation and settlement

Disclosures

8. Financial Reporting by Mutual funds, Non-banking finance companies, Merchant

bankers, Stock and commodity market intermediaries.

9. Valuation

(a) Concept of Valuation

(b) Valuation of Tangible Fixed Assets

(c) Valuation of Intangibles including brand valuation and valuation of goodwill

(d) Valuation of liabilities

(e) Valuation of Shares

(f) Valuation of Business

10. Developments in Financial Reporting

(a) Value Added Statement

(b) Economic Value Added, Market Value Added, Shareholders Value Added

(c) Human Resource Reporting

Note If either old Accounting Standards (ASs), Guidance Notes (GNs), Announcements

and Limited Revisions to ASs are withdrawn or new ASs, GNs, Announcements and LimitedRevisions to AS are issued by the Institute of Chartered Accountants of India in place ofexisting ASs, GNs, Announcements and Limited Revisions to AS, the syllabus will accordingly

exclude / include such new developments in the place of the existing ones with effect from thedate to be notified by the Institute.



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VOLUME 1

CONTENTS

CHAPTER 1 ACCOUNTING STANDARDS AND GUIDANCE NOTES

Unit 1: Introduction to Accounti ng Standards

1.1 Objectives of Accounting Standards ............................................................ 1.1

1.2 Benefits and Limitations .............................................................................. 1.2

1.3 Standard-Setting Process ........................................................................... 1.3

1.4 How Many Accounting Standards? ............................................................. 1.3

1.5 Applicability of Accounting Standards .......................................................... 1.4

1.6 List of Accounting Standards ..................................................................... 1.13

Unit 2: AS 1 Disclosure of Account ing Policies

2.1 Introduction .............................................................................................. 1.15

2.2 Accounting Policies .................................................................................. 1.15

2.3 Applicability.............................................................................................. 1.17

2.4 Fundamental Accounting Assumptions ..................................................... 1.172.5 Considerations in the Selection of Accounting Policies ............................... 1.18

2.6 Disclosure of Accounting Policies ............................................................. 1.19

2.7 Disclosure of Changes in Accounting Policies ........................................... 1.19

2.8 Disclosure of Deviations from Fundamental Accounting Assumptions ......... 1.19

2.9 Illustrations .............................................................................................. 1.19

Unit 3: AS 2 Valuation of Inventor ies

3.1 Introduction .............................................................................................. 1.22

3.2 Scope ..................................................................................................... 1.22

3.3 Measurement of Inventories ...................................................................... 1.23

3.4 Cost Formulas .......................................................................................... 1.27

3.5 Net Realisable Value (NRV) ...................................................................... 1.28

3.6 Disclosure ................................................................................................ 1.30

3.7 Illustrations .............................................................................................. 1.31

Unit 4: AS 3 Cash Flow Statements

4.1 Introduction ............................................................................................. 1.33



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4.2 Objective ................................................................................................. 1.33

4.3 Presentation of a Cash Flow Statement ..................................................... 1.34

Unit 5: AS 4 Contin gencies and Events occurri ng after the Balance Sheet Date

5.1 Introduction .............................................................................................. 1.47

5.2 Contingencies .......................................................................................... 1.47

5.3 Events Occurring after the Balance Sheet Date .......................................... 1.47

5.4 Disclosure ................................................................................................ 1.48

5.5 Illustrations .............................................................................................. 1.48

Unit 6: AS 5 Net profit or Loss for the Period, Prior Period Items andChanges in Accounti ng Policies

6.1 Introduction .............................................................................................. 1.51

6.2 Net Profit or Loss for the Period ................................................................ 1.51

6.3 Prior Period Items .................................................................................... 1.52

6.4 Changes in Accounting Estimates ............................................................ 1.53

6.5 Changes in Accounting Policies ................................................................ 1.53

6.6 Miscellaneous Illustrations ........................................................................ 1.54

Unit 7: AS 6 Depreciation Account ing

7.1 Introduction .............................................................................................. 1.58

7.2 Depreciation ............................................................................................. 1.58

7.3 Depreciable Assets .................................................................................. 1.58

7.4 Depreciable Amount ................................................................................ 1.58

7.5 Historical Cost ......................................................................................... 1.59

7.6 Useful Life .............................................................................................. 1.59

7.7 Additions to Existing Assets ...................................................................... 1.60

7.8 Amount of Depreciation ............................................................................ 1.60

7.9 Methods of Depreciation ........................................................................... 1.60

7.10 Basis for Computation of Depreciation ....................................................... 1.62

7.11 Disposal of Assets .................................................................................... 1.63

7.12 Change in Method of Depreciation ............................................................. 1.63

7.13 Disclosure ................................................................................................ 1.64

Unit 8: AS 7 Construction contracts

8.1 Introduction .............................................................................................. 1.65



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8.2 Definitions of the Terms used in the Standard ............................................ 1.65

8.3 Combining and Segmenting Construction Contracts ................................... 1.65

8.4 Contract Revenue ..................................................................................... 1.66

8.5 Contract Costs ......................................................................................... 1.66

8.6 Recognition of Contract Revenue and Expenses ........................................ 1.67

8.7 Disclosure ................................................................................................ 1.68

8.8 Illustrations .............................................................................................. 1.69

Unit 9: AS 9 Revenue Recognit ion

9.1 Introduction .............................................................................................. 1.719.2 Revenue .................................................................................................. 1.71

9.3 Sale of Goods .......................................................................................... 1.72

9.4 Rendering of Services .............................................................................. 1.72

9.5 Interest, Royalties and Dividends .............................................................. 1.72

9.6 Effect of Uncertainties on Revenue Recognition ......................................... 1.73

9.7 Disclosure ................................................................................................ 1.73

9.8 Illustrations .............................................................................................. 1.74

Unit 10: AS 10 Accounti ng for Fixed Assets

10.1 Introduction .............................................................................................. 1.77

10.2 Identification of Fixed Assets .................................................................... 1.77

10.3 Machinery Spares ..................................................................................... 1.77

10.4 Components of Cost ................................................................................. 1.78

10.5 Self-constructed Fixed Assets ................................................................... 1.78

10.6 Non-monetary Consideration ..................................................................... 1.79

10.7 Improvements and Repairs ....................................................................... 1.80

10.8 Amount Substituted for Historical Cost (Revaluation) ................................. 1.80

10.9 Retirements and Disposals (derecognition) ................................................ 1.8110.10 Hire Purchases ......................................................................................... 1.81

10.11 Joint Ownership ....................................................................................... 1.81

10.12 Goodwill ................................................................................................... 1.81

10.13 Disclosure ................................................................................................ 1.82

10.14 Illustrations .............................................................................................. 1.82

Unit 11: AS 11 The Effects of Changes in Foreign Exchange Rate

11.1 Introduction .............................................................................................. 1.86



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11.2 Scope ...................................................................................................... 1.86

11.3 Definitions of the terms used in the Standard ............................................. 1.87

11.4 Initial Recognition ..................................................................................... 1.87

11.5 Reporting at each balance sheet date ....................................................... 1.88

11.6 Recognition of Exchange Differences ........................................................ 1.88

11.7 Classification of Foreign Operations as Integral or Non-integral .................. 1.89

11.8 Translation of Foreign Integral Operations ................................................. 1.90

11.9 Translation of Non-Integral Foreign Integral Operations ............................. 1.90

11.10 Change in the Classification of a Foreign Operation ................................... 1.9211.11 Tax Effects of Exchange Differences ......................................................... 1.92

11.12 Forward exchange contract ....................................................................... 1.92

11.13 Disclosure ................................................................................................ 1.93


Unit 12: AS 12 Accounti ng for Government Grants

12.1 Introduction .............................................................................................. 1.96

12.2 Accounting Treatment of Government Grants ............................................. 1.96

12.3 Recognition of Government Grants ............................................................ 1.97

12.4 Non-monetary Government Grants ............................................................ 1.97

12.5 Presentation of Grants Related to Specific Fixed Assets ............................ 1.97

12.6 Presentation of Grants Related to Revenue ............................................... 1.98

12.7 Presentation of Grants of the nature of Promoters contribution .................. 1.98

12.8 Refund of Government Grants ................................................................... 1.98

12.9 Disclosure ................................................................................................ 1.99


Unit 13: AS 13 Account ing for Investments

13.1 Introduction ............................................................................................ 1.101

13.2 Definition of the terms used in the Standard ............................................. 1.101

13.3 Forms of Investments .............................................................................. 1.101

13.4 Classification of Investments .................................................................... 1.102

13.5 Cost of Investments ................................................................................. 1.102

13.6 Carrying Amount of Investments............................................................... 1.102

13.7 Investment Properties .............................................................................. 1.102



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13.8 Disposal of Investments ........................................................................... 1.103

13.9 Reclassification of Investments ................................................................ 1.103

13.10 Disclosure ............................................................................................... 1.103

Unit 14: AS 14 Accounti ng for Amalgamations

14.1 Introduction ............................................................................................. 1.105

14.2 Definition of the terms used in the Standard ............................................. 1.105

14.3 Types of Amalgamations .......................................................................... 1.105

14.4 Amalgamation in the Nature of Merger ..................................................... 1.105

14.5 Amalgamation in the Nature of Purchase ................................................. 1.10614.6 Methods of Accounting for Amalgamations................................................ 1.106

14.7 Treatment of Reserves of the Transferor Company on Amalgamation ........ 1.107

14.8 Treatment of Goodwill Arising on Amalgamation ....................................... 1.108

14.9 Disclosures ............................................................................................. 1.108

14.10 Miscellaneous Illustrations ....................................................................... 1.109

Unit 15: AS 15 Employ ee Benefits

15.1 Introduction ............................................................................................. 1.116

15.2 Applicability............................................................................................. 1.116

15.3 Meaning of the term Employee Benefits ................................................. 1.117

15.4 Short-term Employee Benefits .................................................................. 1.117

15.5 Post Employment Benefits: Defined Contribution vs Defined Benefits ............. 1.118

15.6 Is the gratuity scheme a defined contribution or defined benefit scheme? ....... 1.119

15.7 Other Long Term Employee Benefits ........................................................ 1.119

15.8 Termination Benefits ................................................................................ 1.119

15.9 Accounting Treatment .............................................................................. 1.120

15.10 Disclosures ............................................................................................. 1.121

15.11 Actuarial Assumptions ............................................................................. 1.121

15.12 Actuarial Gains and Losses ..................................................................... 1.122

Unit 16: AS 16 Borrowing Costs

16.1 Introduction ............................................................................................. 1.124

16.2 Borrowing Costs ..................................................................................... 1.124

16.3 Qualifying Asset ..................................................................................... 1.124

16.4 Substantial Period ................................................................................... 1.125



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16.5 Borrowing Costs Eligible for Capitalisation ................................................ 1.125

16.6 Exchange Differences on Foreign Currency Borrowings ............................ 1.126

16.7 Excess of the Carrying Amount of the Qualifying Asset over RecoverableAmount ................................................................................................... 1.127

16.8 Commencement of Capitalisation ............................................................. 1.127

16.9 Suspension of Capitalisation .................................................................... 1.128

16.10 Cessation of Capitalisation ...................................................................... 1.128

16.11 Disclosure ............................................................................................... 1.128

16.12 Illustrations ............................................................................................. 1.128

Unit 17: AS 17 Segment Reportin g

17.1 Introduction ............................................................................................. 1.133

17.2 Objective ................................................................................................ 1.133

17.3 Scope ..................................................................................................... 1.133

17.4 Definition of the terms used in the Accounting Standard ............................ 1.134

17.5 Treatment of Interest for determining Segment Expense ............................ 1.136

17.6 Allocation ................................................................................................ 1.136

17.7 Primary and Secondary Segment Reporting Formats ................................. 1.137

17.8 Matrix Presentation ................................................................................. 1.137

17.9 Business and Geographical Segments ...................................................... 1.138

17.10 Identifying Reportable Segments (Quantitative Thresholds) ...................... 1.138

17.11 Segment Accounting Policies ................................................................... 1.139

17.12 Primary Reporting Format ........................................................................ 1.139

17.13 Secondary Segment Information ............................................................... 1.140

17.14 Disclosures ............................................................................................. 1.141

Unit 18: AS 18 Related Party Disc los ures

18.1 Introduction ............................................................................................. 1.144

18.2 Objective ................................................................................................ 1.144

18.3 Scope ..................................................................................................... 1.144

18.4 Definitions of the Terms used in the Accounting Standard ......................... 1.145

18.5 The Related Party Issue .......................................................................... 1.147

18.6 Disclosure ............................................................................................... 1.148




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Unit 19: AS 19 Leases

19.1 Introduction ............................................................................................ 1.150

19.2 Scope ..................................................................................................... 1.150

19.3 Definition of the Terms used under AS 19 ................................................. 1.151

19.4 Classification of Leases ........................................................................... 1.153

19.5 Leases in the Financial Statements of Lessees ......................................... 1.154

19.6 Leases in the Financial Statements of Lessors .......................................... 1.156

19.7 Sale and Leaseback Transactions ............................................................ 1.163

19.8 Miscellaneous Illustrations ....................................................................... 1.164Unit 20: AS 20 Earnings per Share

20.1 Introduction ............................................................................................. 1.170

20.2 Definition of the terms used in the Accounting Standard ............................ 1.170

20.3 Basic Earnings per Share ........................................................................ 1.171

20.4 Diluted Earnings Per Share ...................................................................... 1.176

20.5 Restatement ............................................................................................ 1.178

20.6 Presentation ............................................................................................ 1.178

20.7 Disclosure ............................................................................................... 1.178

Unit 21: AS 21 Consol idated Financ ial Statements

21.1 Introduction ............................................................................................. 1.186

21.2 Objective ................................................................................................ 1.186

21.3 Scope ..................................................................................................... 1.186

21.4 Definitions of the Terms used in the Accounting Standard ......................... 1.187

21.5 Circumstances under which Preparation of Consolidated FinancialStatements are Prepared ........................................................................ 1.187

21.6 Subsidiaries with Dissimilar Activities ....................................................... 1.188

21.7 Loss of Control ........................................................................................ 1.188

21.8 Existence of Control ............................................................................... 1.188

21.9 Consolidation Procedures ........................................................................ 1.190

21.10 Cost of Control ........................................................................................ 1.190

21.11 Illustrations ............................................................................................. 1.191

21.12 Minority Interest ...................................................................................... 1.193

21.13 Other Points ............................................................................................ 1.195



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21.14 Disposal of Holding ................................................................................. 1.197

21.15 Disclosure ............................................................................................... 1.199

21.16 Transitional Provisions ............................................................................ 1.199

21.17 Accounting for taxes on income in the consolidated FinancialStatements .............................................................................................. 1.199

Unit 22: AS 22 Account ing for Taxes on Income

22.1 Introduction ............................................................................................. 1.200

22.2 Need ....................................................................................................... 1.200

22.3 Definitions ............................................................................................... 1.201

22.4 Recognition ............................................................................................. 1.201

22.5 Re-assessment of Unrecognised Deferred Tax Assets .............................. 1.201

22.6 Measurement .......................................................................................... 1.202

22.7 Review of Deferred Tax Assets ................................................................ 1.202

22.8 Disclosure ............................................................................................... 1.202

22.9 Transitional Provision .............................................................................. 1.203

22.10 Relevant Explanation to AS-22 ................................................................. 1.203


Unit 23: AS 23 Accounting for Investments in Associates in Consolid atedFinancial Statements

23.1 Introduction ............................................................................................. 1.209

23.2 Objective ................................................................................................ 1.209

23.3 Definitions of the terms used in the Accounting Standard .......................... 1.209

23.4 Associates Accounted for using the Equity method ................................... 1.211

23.5 Circumstances under which Equity Method is followed .............................. 1.212

23.6 Application of the Equity Method .............................................................. 1.213

23.7 Contingencies ......................................................................................... 1.217

23.8 Disclosure ............................................................................................... 1.217


23.10 Relevant Explanation to AS 23 ................................................................. 1.218

Unit 24: AS 24 Discontinuing Operations

24.1 Introduction ............................................................................................. 1.223

24.2 Objective ................................................................................................ 1.223

24.3 Discontinuing Operation .......................................................................... 1.223



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26.11 Acquisition by way of a Government Grant ................................................ 1.241

26.12 Internally Generated Intangible Assets ..................................................... 1.241

26.13 Research Phase ...................................................................................... 1.241

26.14 Development Phase................................................................................. 1.242

26.15 Cost of an Internally Generated Intangible Asset ....................................... 1.243

26.16 Items to be Recognised as an Expense .................................................... 1.243

26.17 Subsequent Expenditure .......................................................................... 1.244

26.18 Amortisation Period ................................................................................. 1.244

26.19 Amortisation Method ................................................................................ 1.24526.20 Residual Value ........................................................................................ 1.245

26.21 Review of Amortisation Period and Amortisation Method ........................... 1.245

26.22 Recoverability of the Carrying Amount-Impairment Losses ........................ 1.246

26.23 Retirements and Disposals ...................................................................... 1.246

26.24 Disclosure ............................................................................................... 1.246


26.26 Illustrations ............................................................................................. 1.248

Unit 27: AS 27 Financial Reporting of Interests in Joint Ventures

27.1 Introduction ............................................................................................. 1.251

27.2 Scope ..................................................................................................... 1.251

27.3 Definitions ............................................................................................... 1.251

27.4 Contractual Arrangement ......................................................................... 1.252

27.5 Forms of Joint Ventures ........................................................................... 1.253

27.6 Jointly Controlled Operations (JCO) ......................................................... 1.253

27.7 Jointly Controlled Assets (JCA) ................................................................ 1.255

27.8 Jointly Controlled Entities (JCE) ............................................................... 1.260

27.9 Consolidated Financial Statements of A Venturer ...................................... 1.262

27.10 Transactions between a Venturer and Joint Venture .................................. 1.267

27.11 Reporting Interests in Joint Ventures in the Financial Statements of an

Investor .................................................................................................. 1.268

27.12 Operators of Joint Ventures ..................................................................... 1.268

27.13 Disclosures ............................................................................................. 1.268



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Unit 28: AS 28 Impairment of Assets

28.1 Introduction ............................................................................................. 1.269

28.2 Scope ..................................................................................................... 1.269

28.3 Assessment ........................................................................................... 1.270

28.4 Measurement of Recoverable Amount ...................................................... 1.271

28.5 Basis for Estimates of Future Cash Flows ................................................. 1.272

28.6 Composition of Estimates of Future Cash Flows ........................................ 1.272

28.7 Recognition and Measurement of an Impairment Loss ............................... 1.273

28.8 Identification of the Cash-Generating Unit to which an Asset Belongs ........ 1.27328.9 Recoverable Amount and Carrying Amount of a Cash-Generating Unit ....... 1.274

28.10 Goodwill .................................................................................................. 1.274

28.11 Corporate Assets ..................................................................................... 1.274

28.12 Impairment Loss for a Cash-Generating Unit ............................................. 1.275

28.13 Reversal of an Impairment Loss ............................................................... 1.275

28.14 Reversal of an Impairment Loss for an Individual Asset ............................. 1.275

28.15 Reversal of an Impairment Loss for a Cash-Generating Unit ...................... 1.276

28.16 Reversal of an Impairment Loss for Goodwill ............................................ 1.276

28.17 Impairment in case of Discontinuing Operations ........................................ 1.276

28.18 Disclosure ............................................................................................... 1.277


28.20 Illustrations ............................................................................................. 1.278

Unit 29: AS 29 Provisions, Contingent Liabil i t ies and Contingent Assets

29.1 Introduction ............................................................................................. 1.281

29.2 Scope .................................................................................................... 1.282

29.3 Definitions ............................................................................................... 1.283

29.4 Provisions ............................................................................................... 1.284

29.5 Present Obligation ................................................................................... 1.284

29.6 Past Event .............................................................................................. 1.284

29.7 Probable Outflow of Resources Embodying Economic Benefits .................. 1.284

29.8 Reliable Estimate of the Obligation ........................................................... 1.285

29.9 Contingent Liabilities ............................................................................... 1.285

29.10 Contingent Assets ................................................................................... 1.285



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32.5 Disclosures ............................................................................................. 1.314

32.6 Reclassification ....................................................................................... 1.314

32.7 Derecognition .......................................................................................... 1.315

32.8 Collateral ................................................................................................ 1.315

32.9 Allowance Account for Credit Losses ........................................................ 1.316

32.10 Compound Financial Instruments with Multiple Embedded Derivatives............ 1.316

32.11 Defaults and Breaches ............................................................................. 1.316

32.12 Statement of Profit and Loss and Equity ................................................... 1.317

32.13 Nature and Extent of Risks Arising from Financial Instruments .................. 1.31732.14 Qualitative Disclosures and Quantitative Disclosures ................................ 1.317

32.15 Credit Risk .............................................................................................. 1.318

32.16 Liquidity Risk .......................................................................................... 1.318

32.17 Sensitivity Analysis .................................................................................. 1.318

32.18 Other Market Risk Disclosures ................................................................. 1.319

Unit 33: Guidance Notes

33.1 Introduction ............................................................................................. 1.320

33.2 Status of Guidance Notes ........................................................................ 1.320

33.3 Guidance Notes on Accounting Aspects.................................................... 1.321

33.4 An Overview of Guidance Notes ............................................................... 1.321


CHAPTER 2 INTERNATIONAL FINANCIAL REPORTING STANDARDS, THEIRINTERPRETATIONS AND US GAAPs AN OVERVIEW

1. Introduction .................................................................................................. 2.1

2. Objectives of the IASB ................................................................................... 2.2

3. Scope and Authority of International Financial Reporting Standards ................. 2.2

4. Due Process .................................................................................................. 2.4

5. Timing of Application of International Financial Reporting Standards ................... 2.5

6. Conceptual Framework .................................................................................. 2.6

7. International Financial Reporting Standards. ...................................................... 2.8

8. Overview of International Financial Reporting Standards ................................... 2.11

9. Overview of International Accounting Standards .............................................. 2.36

10. International Financial Reporting Interpretations Committee (IFRIC) ................... 2.89



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4.9 Discontinuance of Proportionate Consolidation Method ................................ 5.105

4.10 Joint Venture-cum-Subsidiary ..................................................................... 5.106

CHAPTER 6 ACCOUNTING AND REPORTING OF FINANCIAL INSTRUMENTS

1. Introduction .................................................................................................. 6.1

2. Classification of Financial Assets...................................................................... 6.1

3. Initial Recognition of Financial Instruments ...................................................... 6.11

4. De-Recognition of Financial Assets and Liabilities ............................................ 6.11

5. Measurement ............................................................................................... 6.13

6. Reclassifications ........................................................................................... 6.15

7. Impairment and Uncollectibility of Financial Assets ....................................... 6.15

8. Gains and Losses ........................................................................................ 6.16

CHAPTER 7 SHARE BASED PAYMENTS

1. Introduction ................................................................................................... 7.1

2. Definitions ..................................................................................................... 7.1

3. Types of Transactions .................................................................................. 7.2

4. Employee Share-Based Payments .................................................................. 7.2

5. Employee Share Based Payment Plans .......................................................... 7.3

6. Equity Settled Employee Share Based Payment Plans .................................... 7.47. Accounting Procedure for ESOP ..................................................................... 7.6

8. Variation in Vesting Period ........................................................................... 7.10

9. Graded Vesting ........................................................................................... 7.14

10. Employees Stock Purchase Plans (ESPP) .................................................... 7.18

11. Modifications ............................................................................................... 7.19

12. Cancellation and Settlements during Vesting Period ...................................... 7.21

13. Dilution of EPS due to ESOP granted ........................................................... 7.22

14. Stock Appreciation Rights (SAR) .................................................................. 7.26

15. Employee Share-Based Payment Plans with Cash Alternatives ...................... 7.28

16. Disclosures ................................................................................................. 7.32

Note: Chapters 8 -10 of Financial Reporting and Appendices I, II, III, IV and V are available inVolume 2.

Documents

initial pages and syllabus of CA Final