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CERTIFICATE
This is to certify that project work report titled “ A Project Report on
Comparative Study of Accounting Standard Issued by ICAI with
Internationa Accounting Standard! submitted by "r# $$$ is a benefited
student of this college .
The work of project is a partial fulfillment of the requirement for the
Master Degree in Commerce affiliated to Uniersity of !une" during the
#cademic $ear %&'&(%&''.
To the best of my knowledge this is original work.
!lace) (
Date) (
Project %uide
Principe
&'ame(&'ame(
Interna E)aminer
*ate+,
'
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Ac-nowedgement
Through this acknowledgment" * take the opportunity to
e+press my sincere thanks to arious teachers" friends and
colleagues for their guidance and assistance through which this
project work is completed.
#t first * e+press my gratitude towards ,,, - principle of
,,, and ice(principle - hri. ,,, for their teaching and
guidance of this subject research Methodology and !roject /ork
and inspiring all students in our class for this project work.
* also e+press my sincere thanks to hri. ,,, for proiding
guidance for this particular project work.
* also thanks to my friends for making me aware from time to
time and guiding me for completing this project in time.
* am also thankful to administratie staff members in college
office for their co(operation.
'ame+ , $$$
&"#Com II(
0esearch Candidate
%
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TA./E 0F C0'TE'T
A Project Report on Comparative Study of Accounting Standard Issued
by ICAI with Internationa Accounting Standard
0. 1o. T2!*C !#34 12.
1
I'TR0*2CTI0' 0F I'*IA' ACC02'TI'%
STA'*AR*S
• Introduction
• 3hat are Accounting Standards
• 3ho Issues Accounting Standards in
India
• About ICAI
• Process of formuating Accounting
Standards in India
1 to 4
5
I'*IA' ACC02'TI'% STA'*AR*S
• Introduction
• /ist of Indian Accounting Standards
6 to 15
4
I'TER'ATI0'A/ ACC02'TI'%
STA'*AR*S
• Introduction
• About Internationa Accounting
Standard .oard
14 to 16
6
I'TER'ATI0'A/ ACC02'TI'%
STA'*AR*S 17 to 18
7
Comparative Study In Indian Accounting
Standards and Internationa Accounting
Standards 9 Concusion
5: to 56
;.aance Sheet of Infosys Technoogy Systems
and Comments#56 to 5;
<.ibiography
5<
5
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A
Project Report on
=A Project Report on Comparative Study of AccountingStandard Issued by ICAI with Internationa Accounting
Standard!
Indian Accounting Standard+ AS,8> 1:> 15> 1?#
Internationa Accounting Standard+ IAS, 1?> 1;> 5:> 56#
Submitted To
2'I@ERSIT 0F P2'E
A Report Submitted in Partia Fufiment of the ReBuirement of
"#Com part II
2'*ER TDE %2I*A'CE 0F
Prof# $$$
S2."ITTE* .
"r# $$$
Ro 'o# $$$ "o 'o# $$$
TDR02%D
$$$ C0//E%E 0F C0""ERCE> P2'E
&5:1:,5:11(
6
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Introduction+,
#ccounting tandards establish rules relating to recognition"
measurement and disclosures thereby ensuring that all enterprises that
follow them are comparable and that their financial statements are true" fair and transparent. 7igh(quality accounting standards are a necessary and
important element of a sound capital market system. *n public capital
markets such as those in the United tates. 7igh(quality accounting
standards reduce uncertainty and increase oerall efficiency and inestor8s
confidence by requiring that financial report proide decision useful
information that is releant" reliable" comparable and transparent once
confined by national borders transactions in today8s capital market often are
drien by a demand for and supply of capital that transcends national
boundaries. /ith the increase in cross(border capital rising and inestment
transactions comes an increasing demand for a set of high(qualityinternational accounting standards that could be used as a basis for financial
reporting worldwide.
“#ccounting tandards are written policy documents issues by the
e+pert accounting body or by goernment or other regulatory body coering
the aspects of recognition" measurement" presentation and disclosure of
accounting transactions in financial statement.9
3hat are Accounting Standards+,
#ccounting tandards are the statements of code of practice of the
regulatory accounting bodies that are to be obsered in the preparation of
financial statements. *n layman terms accounting standards are the written
documents issued by the e+pert8s institutes or other regulatory bodies
coering arious aspects of measurement treatment" presentation and
disclosure of accounting transactions.
3ho issues Accounting Standards in India+,
The institute of chartered #ccountants of *ndia :*C#*; reorgani<ing
the need to harmonies the dierse accounting policies and practices at
present in use in *ndia constituted accounting standard board :#=; on #pril
>
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%'" '?@@. The main role of #= is to formulate accounting standards from
time to time.
About ICAI+,
The *nstitute of Chartered #ccountants of *ndia :*C#*; is a statutory
body established under the Chartered #ccountants act '?6?.:#ct
1o.,,,,A*** of '?6?; for the regulation of the profession of Chartered
#ccountants in *ndia. During its B' years of e+istence" *C#* has achieed
recognition as a premier accounting body not only in the country but also
globally" for its contribution in the fields of education" professional
deelopment maintenance of high accounting" auditing and ethical
standards. *C#* now is the second largest accounting body in the whole
world.
Procedure of formuating Accounting Standards in India+,
The institute of Chartered #ccountant of *ndia :*C#*; recogni<ing the
need to harmoni<e the dierse accounting policies and practices" constituted
an accounting standards boards :#=; on #pril %'" '?@@. The main faction
of #= so that such standards may be mandated by the council of *C#*.
/hile formulating the standards in *ndia" #= will take into consideration
the applicable laws custom usages and business enironment. *C#* is one of
the members of *nternational #ccounting tandards Committee :*#C; andhas agreed to support the objecties of *#C. #= will gie due
consideration to *# and try to integrate them to the e+tent possible in light
of the considerations and practices pre(ailing in *ndia.
The accounting standards issued will apply to 3eneral !urpose
inancial tatement8 this would include balance(sheet" !rofit E Foss #Gc and
other statement and e+planatory notes which form part thereof issued for the
use of shareholders or members" Creditors" 4mployees and public at large.
The #ccounting tandards are intended to apply only to items which are
material. The standards are generally e+pected to apply prospectiely unless
otherwise stated.
B
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.roady the foowing procedure wi be adopted for
formuating Accounting Standards+,
• #= shall determine the board areas in which accounting standards
need to be formulated and the priority in regards to the selection
thereof.
• *n the preparation of the accounting standards #= will be assisted by
study groups constituted to consider specific subjects. *n the formation
of the study groups proision will be made for wide participation by
the members of *C#* and others.
• #= will also hold a dialogue with the representatie of the
3oernment" !ublic sector" *ndustry and other organi<ations for
ascertaining their iews.
• =ased on the aboe an e+posure draft of the proposed standard will be
prepared and issued for comments by members of *C#* and the public
at large.
• #fter taking into consideration the comments receied the e+posure
draft will be finali<ed by the #= and submitted to the council of
*C#*.
• The council of *C#* will consider the final draft and if found
necessary modify the same in consultation with #=. The accounting
standard on the releant subject will then be issued under the authority
of the council.
@
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Indian Accounting Standards+,
Introduction+,
The council of the institute of chartered accountant of *ndia as so far
issue 5% :thirty two; accounting standard. /hoeer accounting standards
Hth on “#ccounting for research and deelopment9 has been withdraw on
consequent to the issuance of accounting standard %Bth “*ntangible
#ssets9 thus effectiely there are 5'st accounting standard at present the
accounting standard issued by the #=C establish which hae to be
complied so that the financial statement are prepared in accordance with
generally accepted accounting principles.
/ist of Indian Accounting Standards+,
AS 1Disclosure of Accounting Principles
AS 2Valuation of Inventories
AS 3Cash Flow Statements
AS 4Contingencies and Events Occurring After the Balance
Sheet Date
AS 5et Profit or !oss for the Period" Prior Period Items
and Changes in Accounting Policies
AS 6Depreciation Accounting
AS 7
(Revised)
Construction Contracts
AS 8Accounting for #esearch and Development
AS 9#evenue #ecognition
AS 10Accounting for Fi$ed Assets
H
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AS 11
(Revised
2003)
%he Effects Of Changes In Foreign E$change #ates
AS 12
Accounting for &overnment &rants
AS 13Accounting for Investments
AS 14Accounting for Amalgamations
AS 15
(Revised
2005)
Emplo'ee Benefits (clic) here for related
announcement*
AS 16Borrowing Costs
AS 17
Segment #eporting
AS 18#elated Part' Disclosures
AS 19!eases
AS 20Earnings Per Share
AS 21Consolidated Financial Statements
AS 22
Accounting for ta$es on income
AS 23Accounting for Investments in Associates in
Consolidated Financial Statements
AS 24 Discontinuing Operations
AS 25 Interim Financial #eporting
AS 26 Intangi+le Assets
AS 27 Financial #eporting of Interests in ,oint Ventures
AS 28 Impairment of Assets
AS 29 Provisions" Contingent !ia+ilities and Contingent
AssetsAS 30 Financial Instruments- #ecognition and .easurement
AS 31 Financial Instruments- Presentation
AS 32 Financial Instruments- Disclosures
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Indian Accounting Standards+,
AS 8+ Revenue Recognition+,
Introduction
This statement was issued by *C#* in the year '?H> E the *nitial years
it was recommendatory for only leel * enterprises E but was mademandatory for enterprise in *ndia from april &'" '??5.
0eenue
0eenue is the gross inflow of cash" receiables or other consideration
arising in the course of the ordinary actiities of an enterprise from the sale
of the goods" from the rendering of the serices" E from the use by others of
enterprises resources yielding interest" royalties E diidend. 0eenue is
measured by the charges made to customers or clients for goods supplied E
serices rendered to them E by the charges E rewards arising from the use
of resources by them. *n an agency relationship" the reenue is the amount of
commission E not the gross inflow of cash" receiable or other
consideration.
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This statement dose not deals with the following aspects of reenue
recognition to which special consideration apply)
*. 0eenue arising from construction contractsI
**. 0eenue arising from hire(purchase" lease agreementsI
***. 0eenue arising from goernment grants E other similar subsidiesI
*A. 0eenue of insurance companies arising from insurance contracts.
4+amples of items not included within definition of “reenue9 for the
purpose of this statement are)
*. 0eali<ed gains resulting from the disposal of" E unreali<ed gains
resulting from the holding of" non(current assets. 4.g. appreciation in
the alue of fi+ed assets.
**. Unreali<ed holding gain resulting from the change in alue of current
assets" E the natural increases in herds E agricultural E forest
productsI
***. 0eali<ed or unreali<ed gains resulting from changes in foreign
e+change rates E adjustments arising on the translation of foreign
currency financial statementsI
*A. 0eali<ed gain resulting from the discharged of an obligation at less
than its carrying amountI
A. Unreali<ed gains resulting from the restatement of the carrying
amount of an obligationI
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AS 1:+ Accounting for Fi)ed Assets+,
Introduction
The standard deals with the disclosure of the status of the fi+ed assets in
terms of alue. The standard dose not takes consideration the speciali<ed
aspects of accounting for fi+ed assets reflected with the effects of priceescalations but applies to financial statements on historical cost basis. *t is
important to note that after introduction of # 'BI '? E %B" proision
relating to respectie # are held withdrawn E the rest in mandatory from
the accounting year &'G&6G%&&&. an entity should disclose :i; the gross E net
book alues of fi+ed assets at beginning and end of an accounting period
showing additions" disposals" acquisitions E other moement" :ii;
e+penditure incurred on account of fi+ed assets in the course of construction
or acquisition" :iii; realued amounts substituted for historical cost of fi+ed
assets with the method applied in computing realued amount.
This statement dose not deal with the accounting for the following item to
which special considerations apply)
*. orests" plantations E similar regeneratie natural resources.
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**. /asting assets including mineral rights" e+penditure of the e+ploration
for an e+traction of minerals" oil" natural gas E similar non(
regeneratie resources.
***. 4+penditure on real estate deelopment and
*A. Fie stock.
*dentification of fi+ed assets)
i+ed assets are assets held with the intention of being used for the purpose
for the producing or proiding goods or serices E is not held for sale in the
normal course of business. tand(by equipment E sericing equipment are
normally capitali<ed. Machinery spares are change to the profit E loss
statement as and when consumed. 7oweer" if such spare can be used only
in connection with an item of fi+ed assets" it may be appropriate to allocate
the total cost on a systematic basic oer a period not e+ceeding the usefullife of principal item.
AS 15+ Accounting For %overnment %rants
Introduction
The standard comes in to effect in respect of accounting periodscommencing on or after &'G&6G'??% E will be recommendatory in nature for
an initial period of % years. #ccounting standard '% deals with accounting
for goernment8s grants for specifies that the goernment grants should not
be recogni<ed until there reasonable assurance that the enterprise will
company comply with the conditions attached to them" and the grant will be
receied. The standard also describes the treatment of non(monetary
goernment grantsI presentation of grants related to specific fi+ed assets"
related to reenue" related to promoters" contributionsI treatment for refund
of goernments grants etc. the enterprises are required to disclose :i; the
accounting policy adopted for goernment grants including the methods of presentation in the financial statementsI :ii; the nature E e+tent of
goernment grants recogni<ed in the financial statement including non(
monetary grants of assets gien either at a concessional rate or free of cost.
This statement does not deal with)
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*. The special problem arising in accounting for goernment grants in
financial statements reflection the effects of changing prices or in
supplementary information of a similar nature.
**. 3oernment assistance other than in the form of goernment grants
***. 3oernment participation in the ownership of the enterprises.
The receipt of the goernment grant by an enterprise is significant for
preparation of the financial statement for % reasons. irstly" if a
goernment grant has been receied an appropriate method of
accounting therefore is necessary. econdly" it is desirable to gie an
indication of the e+tent to which the enterprises has benefited from such
grants during the reporting period. This facilitates comparison on an
enterprises financial statement with those prior periods E with those of
other enterprise.
#ccounting treatment of goernment grants
To broad approaches may be followed for the accounting treatment
2f goernment grants) the capital approach under which grand is
treated as part of share holder funds" and income approach under which
a grand is taken to incomes oer one or more period.
Those in support of capital approach argue as follows)
*. Many goernments8 grants are in the nature of promoter8s
contribution that is they are gien by way of contribution towards
its total capital outlay ordinarily e+pected in the case of such a
grants.
**. They are not earned but represent an incentie proided by
goernment without related costs.
#rguments in support of the income approaches are as follows)
*. #s a income ta+ E other ta+es are charges against income" it is logical
to deal also with goernment grants" which are an e+tension of fiscal
polices" in the profit E loss statement.
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**. *n case grants are credited to share holder8s fund" no correlation is
done between the accounting treatment of the grants E the accounting
treatment of the e+penditure to which grant relates.
AS 1?+ Reated Party *iscosures
Introduction
This standard comes into effect in respect of accounting period commencingon a after &'G&6G%&&' E is mandatory in nature. The standard prescribes the
requirement for disclosure of related party relationship E transaction
between the reporting enterprise E its related party. The requirements of the
standard apply to the statement of each reporting enterprises as also to
consolidate financial statement presented by a holding company. ince the
standers is more subjectie" particularly with respect to identification of
related parties Jthrough proision related to related party concept are gien
under section %?@G%??G5&' of the companies act '?>B and section 6&# :%;:b;
of the income ta+ act '?B'K" obtaining corroboratie eidence becomes ery
difficult for the auditors. Thus successful implementation of # 'H is dependupon how transparent the management is an how igilant the auditors are.
2bjectie
The objectie of this statement is to established requirement for disclosure
of)
*. 0elated party relationship E
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**. Transaction between reporting enterprise E it related parties.
cope
This statement should be applied in reporting related party relationship E
transaction between reporting enterprises E its related parties. The
requirement of this statement applied to the financial statement of each
reporting enterprises as also to consolidate financial statement presented by
a holding company.
This statement deals only with related party relationship describe :a;
to :e; below)
a. 4nterprises that directly" or indirectly through one or more
intermediaries" control" or are controlled by" or are under common control with the reporting enterprise :this include
holding company" subsidiaries E fellow subsidiaries;.
b. #ssociated E joint enture reporting enterprise E the inesting
party or enture in respect of which the reporting enterprise is
an associate or a joint enture.
c. *ndiidual owning" directly or indirectly" an interest in the
oting power of the reporting enterprises that gie them control
or significant influence oer the enterprises" and relaties of
any such indiidual.
d. Ley management personnel E relatie of such personnel E
e. 4nterprise oer which any person describes in c or d is able to
e+ercise significant influence. This includes enterprises owned
by director or major shareholders of the reporting shareholder
of the reporting enterprises E enterprises that hae a member of
key management" with reporting enterprise.
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Internationa Accounting Standards+,
Introduction+,
#ccounting is a language of business communicates the financial
result of an enterprise to the arious interested parties by means of financialstatements e+hibiting true and fair iew of its state of affairs as also of
working result. Fike any of other language" accounting has its own set of
rules" which hae been deeloped by accounting bodies. These rules cannot
be absolutely rigid. These rules" accordingly" do proide a reasonable
fle+ibility in line with the economic enironment" social needs" legal
requirements and technological deelopment. These how eer" do not emply
that accounting principles and parties can be applied arbitrarily.
#ccounting principles hae to operate with in the bonds of rationality. This
could" perhaps" be considered as a genesis for setting the accounting
standards.
#ccounting tandards are written policy document issued e+pert
accounting body or by goernment or other regulatory body coering the
aspects recognition" measurement" presentation and disclosure of accounting
transaction in financial statement. The ostensible purpose of the standard
setting bodies is to promote the dissemination of timely and useful financial
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information to inestors and certain other parties haing an interest in the
company8s economic performance. The accounting standard reduces the
accounting alternatie in the preparation of financial statement within the
bond of rationality" thereby ensuring comparability of financial statement of
different enterprises.
The accounting standards deals with the issue of
i. 0ecognition of eents and transactions in the financial statements"
ii. Measurement these transaction and eents"
iii. !resentation of these transactions and eents in the financial
statement in a manner that is meaningful and understandable to the
reader" and
i. The disclosure requirements which should be there enable the public
at large and the potentational inestors in particular" to get an insight
in to what these financial statement are trying to reflect and there bythe facilitating them to take prudent and informed business decisions.
Internationa Accounting Standard .oard+,
/ith a iew of achieing this objectie" the Fondon based group
mainly the international committee :*#C;" responsible for deeloping
international accounting standard was established in une '?@5. it is presently known as international accounting standard board" the *#C
comprises the professional accounting bodies of oer @> countries:including
the *C#*;. !rimarily" the *#C was established" in the public interest to
formulate and publish" international standard to be followed in the
presentation of audited financial statement. The member of *#C hae
undertaken responsibility to support the standards promulgated by *#C and
to promulgate those standard in there respectie countries.
=etween '?@5 E %&&'" the *#C released international accounting
standard. =etween '??@ E '???" the *#C restructured there organi<ation"
which resulted in formation of *#=. These changes came in to effect on ' st
#pril %&&' subsequently" *#= issued statement about current and future
standards) *#= publishes standards in a series of pronouncements" called
international financial" reporting standards :*0;. 7oweer" *#= has not
rejected the standards issued by the *#C those pronouncements continue to
be designated as an “international #ccounting standard9 :*#;. The *#=
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approed *#= resolution on *#C standards and there in #pril %&&'" in
which it8s conform the status of all *#C standards and *C interpretations
in effect as on 'st #pril %&&'.
IAS,1?+ Revenue
*# 'H on 0eenue is applicable for periods beginning on or after ' st
an '??>
*# 'H prescribes accounting treatment for reenue arising from)
•
The sale of goods)• The rendering of sericesI E
• The use by others of entity assets yielding interest royalties E
diidend
*t e+cludes the treatment of reenue arising from transaction coered by
other standards or amount collected on behalf of third parties :e.g. Aat;.
ummary
0eenue is measured at the fare alue of the consideration receied or
receiable. The consideration usually in cash. *f the inflow of cash is
significant deferred" E there is below(market rate of interest or no interest"
the fare alue of consideration is determined by discounting e+pected future
receipts. *f dissimilar goods or serices are e+changed :as in barter
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transaction; reenue is fare alue of the goods or serices or receied or" if
this is not reliably measurable" the fare alue of goods or serices gien up.
0eenue should measure at the fair alue of the consideration receied)
•
Trade discount E alue rebates are deducted to determine fair alue.7ow eer" payment discounts non(deductible.
• The amount of reenue can be measured reliablyI
• The costs of transaction can be measured reliablyI
• ignificant risks E rewards of ownership are transferred to the buyerI
• The seller has no continuing managerial inolement or control oer
the goodsI
• *t is probable that economic benefits will flow to the sellerI and
*nterest reenue should be recogni<ed on time proportion basis using theeffectie interest. 0oyalties should be recogni<ed on an accruals basis in
accordance with the substance of the releant agreement. Diidend reenue
should be recogni<ed when the share holder right to receied the diidend is
established.
IAS,1;+ Property> Pant and EBuipment+,
*# 'B on property" plant E equipment was issued in December %&&5 E is
applicable to annual accounting period beginning on or after 'st an %&&>.
*# 'B prescribed the accounting treatment for property" plant E equipment
unless another standard requires or permit a different account treatment. or
e.g. *0" > on non current assets held for sale E discontinued operations
applies to property" plant E equipment classified as held for sale.
ummary
!roperty plant E equipment is initially recogni<ed at historical cost.
ubsequent to initial recognition" property" plant E equipment are carried
either at)
• Cost less accumulated deprecation E any accumulated impairment
loss" or
• 0ealued amount less subsequent accumulated deprecation and any
accumulated impairment loss. The realued amount is the fare alue is
at the date of realuation.
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The choice of measurement is applied consistently to an entire class of
property" plant E equipment. #ny realuation increase in such assets
credited directly to the realuation surplus in equity" unless it reerses a
realuation decrease preiously recogni<ed in profit in loss. #ny realuation
decrease is recogni<ed in profit or loss. 7oweer the subsequent realuation
decrease is debited directly to the realuation surplus in equity to the e+tent
of the credit balance in realuation surplus is respect of that asset.
The gain or loss on derecogni<ing of an item of property" plant E equipment
is the difference between the net disposal proceeds" if any" and the carrying
amount of the item. *t is included in profit or loss.
IAS+ 5:, Accounting for government grants and discosure of
government assistance+,
*# %& on “accounting for goernment grants E disclosure of goernment
assistance9 was issued in #pril '?H5 E was reformatted in the year '??6. it
came in to effect for annual periods beginning or after ' anuary '?H6.The objectie of *# %& is to be prescribing the accounting for" and
disclosure of" grants E other form of goernment assistance. 7ow eer" *#
%& dose not coered goernment assistance that is proided in the form of
benefit helpful in determine ta+able income.
ummary)
# goernment grant is recogni<ed only when enterprise will comply
with any condition attached to the grants receied. The grant is recogni<ed
as a income" oer the period" to match them with the related cost for" which
they are intended compensate" on a systematic basis" E should not be
credited directly to equity.
1on monitory grants are usually accounted for at fair alue. #lthough
recording both the assets E grants at a nominal amount is also permitted.
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# grant receiable as a compensation for cost already incurred or for
immediate financial support" with no future related cost" should be
recogni<ed as a income in the period in which it is receiable.
# grant relating to assets may be presented as deferred income or by
deducting the grant from the assets carrying amount. # grant relating to
income may be reported separately as other income or deducted from the
related e+penses.
*f a grant become repayable it should be deferred income or by
deducting the grant from assets carrying amount. /here the original grants
related to income" the repayment should be applied dealt with as an e+penses
where the original grants related to an assets" the repayment should be
treated as increasing the carrying amount of the assets or reducing the
deferred income balance. The cumulatie deprecation which would hae been charged had the grant not been receied should be charged as an
e+pense. The goernment grants do not include goernment assistance
whose alue can not be reasonably measured" such as technical or marketing
adice.
IAS 56 Reated Party *iscosure+
*# %6 on “0elated !arty Disclosure9 was issued in dec %&&5 E is
applicable for annual periods beginning on or after 'st
jan %&&>.
*# %6 specifies the disclosure necessary to draw attention to the
possibilities that the financial position E financial performance of an entity
may hae been affected by the e+istence of the related party and by
transaction and outstanding balance with such related parties.
Summery+
# party is related to an entity if it)
• 7as joint control oer the entity)
• 7as significant influence oer the entityI
• Directly or indirectly" controls" is control by or is under common
control with" the entityI
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• *s a close member of the family of any indiidual who controls" has
significant influence or joint control oer" the entityI
• *s a member of key management personnel of the entity of its parentI
• *s a joint enture in which the entity is entureI
• *s an associates of entityI• *s an entity that is controlled" jointly controlled or significantly
influenced by" or for which significant oting power in such entity
resides with" any of the key management personnelI
• *s a post(employment benefits plan for the benefit of employees of the
entity" or of any of its related parties.
4+amples of the kinds of transactions that are disclosed if they are with a
related party)
• !urchase or sale of goods.
• 0endering or receiing of serices.
• !urchase or sale of properties or other assets.
• Fease.
• Transfer under license agreements.
• Transfer of research and deelopment.
• Transfer under finance agreements:including loans E equity
contribution in cash or in kind;
• ettlement of liabilities on behalf of the entity or by the entity on
behalf of another party.
• !roision of guarantee of collateral.
# related party transaction is a transfer of resources" serices or obligations
between related parties" regardless whether price is charged.
%5
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Comparative Study+,
Indian Accounting
Standards
Internationa Accounting
Standards
Presentation
And
*iscosures
There is no separate standard
for disclosure. or
companies" format and
disclosure requirements are
set out under schedule A* of
the companies act.
1o such requirement under
*ndian 3##!.
# > specifically requires
*#(' prescribes minimum
structure of financial
statements and contains
guidance on disclosures.
*#(' requires disclosure
of critical judgments made
by management in applying
accounting policies.
*#(' prohibits any items
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disclosure of certain items as
e+tra(ordinary items.
Under *ndian 3#!!" this is
typically spread oer seeralcaptions such as share
capital" resere E surplus" !
E F debit balance" etc.
to be disclosed as e+tra(
ordinary items.
*#(' requires a “statement
of changes in equity9which comprises all
transactions with equity
holders.
Revenue
Recognition
#(? allows completed
serice contract method or
proportionate completion
method.
#(? requires interest
income to be recogni<ed on a
time proportion basis.
1o guidance on barter
transactions.
#(? permits recognition
when the goods are
manufactured" identified and
ready for deliery in such
cases.
1o specific guidance in the
standards.
*n case of reenue from
rendering of serices" *#(
'H allows only percentage
of completion method.
*#('H requires effectie
interest method to be
followed for interest
income recognition.
Deals with accounting of
barter transactions.
Under *#('H" payments
receied in adance for
goods yet to be
manufactured or third party
sales cannot be recogni<ed
as reenue until such goods
are deliered to the buyer.
or multiple element
contracts" the standard
broadly requires that each
element is fair alued and
recogni<ed when the
underlying serice is
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performed.
Fi)ed Assets
and*epreciation
#('& recommends but does
not force componentaccounting.
Depreciation is based on
higher of useful life or
schedule ,*A rates. *n
practice most companies use
schedule ,*A rates.
Major repair and oerhaul
e+penditure are e+pensed.
#('& proides that only that
e+penditure which increases
the future benefits from the
e+isting assets beyond its
preiously assessed standard
of performance is included inthe gross book alue.
e.g. an increase in capacity.
#(B requires retrospectiely
recomputation of
depreciation and any e+cess
or deficit on such
recomputation is required to
be adjusted in the period in
which such change iseffected. #(B considers this
as change in accounting
policy.
4stimates of residual alue
are not updated.
*#('B mandates
component accounting.
Depreciation is based on
useful life.
Major repairs and oerhaul
e+penditure are capitali<edas if it is a separate
component.
Under *#('B" if
subsequent costs are
incurred for replacement of
a part of an item of fi+ed
asset" such costs are
required to be capitali<edand simultaneously the
replaced part has to be de(
capitali<ed.
*n case of change in
method of depreciation"
*#('B requires effect to be
gien prospectiely.
Change in method of
depreciation is treated aschange in accounting
estimate under *#('B.
4stimates of residual alue
needs to be updated.
%B
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1o need to update
realuation regulatory.
Depreciation on realuation
portion cannot be recouped
out of realuation resere
and will hae to be changed
to the !EF account.
1o guidance in the standard.
7oweer" guidance note on
oil and gas issued by *C#*requires capitali<ation of site
restoration cost.
0ealuation is an allowed
alternatie treatment
howeerI realuation will
hae to be done regularly.
Depreciation on realuation
portion can be recouped out
of realuation resere.
!roision on site(
restoration and dismantling
is mandatory.
%overnment
%rants
#('% requires accounting at
acquisition cost.
#('% requires enterprises tocompute depreciation
prospectiely as a result of
which the reised book alue
is proided oer the residual
useful life.
#('% has no such disclosurerequirement.
*n case of non(monitory
assets acquired at nominal
rate" *#(%& permits
accounting either at fair
alue or at acquisition cost.
*n respect of grant relatedto a specific fi+ed assets
becoming refundable" *#(
%& requires retrospectie
re(computation of
depreciation and prescribes
charging off the deficit in
the period in which such
grant becomes refundable.
*#(%& requires separatedisclosure of unfulfilled
conditions and other
contingencies if grant has
been recogni<ed.
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Reated
Party
*iscosures
#('H does not include this
relationship.
#('H read with #*(%5
requires disclosure of
remuneration paid to key
management persons but
does not mandate category(
wise disclosures.
#('H proides e+emption
from disclosure in such
cases.
#('H includes control oer
composition of board of
directors in the definition of
“control9.
1o such disclosure
requirement is contained in
#('H.
#('H prescribes a rebuttable
presumption of significant
influence if %&N or more of
the oting power held by any
The definition of related
party under *#(%6
includes post employment
benefit plans of the
enterprise or of any other entity" which is related
party of the enterprises.
*#(%6 requires
compensation to LM!s to
be disclosed category(wise
including share(based
payments.
1o concession is proided
under *#(%6 where
disclosure of information
would conflict with the
duties of confidentiality in
terms of statute or
regulating authority.
The definition of “control9under *#(%6 is restrictie
on the count that it does not
include control oer
composition of board of
directors.
*#(%6 requires disclosure
of terms and conditions of
outstanding items
pertaining to related parties.
*#(%6 does not prescribe a
rebuttable presumption of
significant influence.
%H
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party.
Transactions between state
controlled enterprises are not
required to be disclosedunder #('H.
1o e+emption.
Concusion+
There are significant difference between *ndian #ccounting tandard
and *nternational #ccounting tandard. 7oweer" both the countries are
planning to implement *0 to cope up with these differences.
Comments on .aance Sheet of Infosys Technoogy Systems+
1( I'C0"E STATE"E'T
4ach framework requires prominent presentation of an income statement as
a primary statement.
Format
IFRS+ There is no prescribed format for the income statement. The entity
should select a method of presenting its e+penses by either function or
natureI this can either be" as is encouraged" on the face of the income
statement" or in the notes. #dditional disclosure of e+penses by nature is
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required if functional presentation is used. *0 requires" as a minimum"
presentation of the following items on the face of the income statement)
'. reenueI
%. finance costsI
5. share of post(ta+ results of associates and joint entures accounted for
using the equity
6. methodI
>. ta+ e+penseI
B. post(ta+ gain or loss attributable to the results and to remeasurement
of discontinued operationsI
@. !rofit or loss for the period#
The portion of profit or loss attributable to the minority interest and to the
parent entity is separately disclosed on the face of the income statement asallocations of profit or loss for the period. #n entity that discloses an
operating result should include all items of an operating nature" including
those that occur irregularly or infrequently or are unusual in amount.
Indian %AAP+ Presentation in one of two formats# Either+
'. a single(step format where all e+penses are classified by function and
are deducted from total income to gie income before ta+I
%. a multiple(step format where cost of sales is deducted from sales to
show gross profit" and other income and e+pense are then presented togie income before ta+. 4C regulations require registrants to
categorise e+penses by their function. #mounts attributable to the
minority interest are presented as a component of net income or loss.
IFRS+ The total of income and e+pense recognised in the period comprises
net income. The following income and e+pense items are recognised directly
in equity)
'. fair alue gainsG:losses; on land and buildings" intangible assets"
aailable(for(sale inestments and certain financial instrumentsI
%. foreign e+change translation differencesI
5. the cumulatie effect of changes in accounting policyI
6. changes in fair alues of certain financial instruments if designated as
cash flow hedges" net of ta+" and cash flow hedges reclassified to
income andGor the releant hedged assetGliabilityI and
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>. actuarial gains and losses on defined benefit plans recognised directly
in equity :if the entity elects the option aailable under *# '?"
4mployee =enefits" relating to actuarial gains and losses;.
Indian %AAP+ imilar to *0" e+cept that realuations of land and
buildings and intangible assets are prohibited under U 3##!. #ctuarial
gains and losses :when amortised out of accumulated other comprehensie
income; are recognised through the income statement#
5( Statement of changes in share &stoc-( hoders eBuity
IFRS+ !resented as a primary statement unless a o0*4 is presented as a
primary statement. upplemental equity information is presented in the noteswhen a o0*4 is presented :see discussion under !resentation8 aboe;. *n
addition to the items required to be in a o0*4" it should show capital
transactions with owners" the moement in accumulated profit and a
reconciliation of all other components of equity. Certain items are permitted
to be disclosed in the notes rather than in the primary statement.
Indian %AAP+ imilar to *0" e+cept that U 3##! does not hae a
o0*4" and 4C rules permit the statement to be presented either as a
primary statement or in the notes.
.ibiography
•
Indian Accounting Standards and %AAP ,*ophy *Soua#
• Financia Reporting @oume 1#
,The institute of Chartered Accountants
of India#
5'
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