Pantaloons Accounting Standard Flashcard
The Accounting Standards as per their 2011-12 Annual Report are- 1. AS 1: Disclosure of Accounting Policies- * It deals with disclosure of Accounting Principles and policies used for preparation of financial statements of the companies. 2. AS 2: Valuation of Inventories- * It deals with determination of amount of inventory to be shown in financial statements.
It is not applicable to shares, debentures, stock etc. The cost formulae prescribed are FIFO, weighted average. 3. AS 3: Cash Flow Statements- * It standard requires companies to report cash generation and utilization.
Cash flow is presented in three main segments: operating, investing and financing. Transactions arising from foreign currency should be recorded by applying exchange rate at the date of transaction. 4. AS 5: Net Profit/Loss for the period, Prior Period Items and Changes in Accounting Policies- * It states that all items of income and expenses occurring activities are to be included in the profit and loss account. Those items of incomes and expenses which arise due to the errors or omissions of previous years but it does not include correction of accounting estimates made in earlier years.
. AS 6: Depreciation Accounting- * It states the amount of depreciation of some assets to be charged. It is calculated using the Straight Line Method, Written down Value or any other method carefully selected. When the method of calculating depreciation is changed it must be applied to all previous years and deficiency or surplus due to change must be adjusted in the profit and loss account.
6. AS 9: Revenue Recognition- * The standard deals with timing and amount of revenue to be recognized in the profit and loss account. This standard is not applicable to construction contracts. * The flow of revenue from the following sources is recognized from the following sources – sale of goods, services and use of resources by others.
*In case of goods, the revenue is recognized when the property in the goods is transferred to the buyer. * The amount of turnover less excise duty is disclosed on the face of profit and loss account. 7. AS 10: Accounting for Fixed Assets- * The cost of fixed assets includes purchase price, delivery and handling, installation charges and interest before commissioning. Assets which have been acquired under barter should be recorded at fair market value of assets acquired or net book value of the assets given up.
* Repair expenses on the purchase of a second hand asset should be capitalised, but the regular maintenance expenses should be charged to profit and loss account. * The losses and gains on disposal are transferred to profit and loss account. * In the case of revaluation of the assets the entire class of assets should be revalued rather than only a particular asset. The information regarding the gross and net value of assets at the beginning and at the end and the expenses incurred on acquisition should be disclosed. 8. AS 11: The Effects of Changes in Foreign Exchange Rates (revised 2003)- * The standard applies to accounting for transactions in foreign currency and translating the financial statements of foreign branches.
* The gain or loss resulting from net exchange difference should be transferred to profit and loss account. * The amount of exchange difference accounted in profit and loss account and adjustment in fixed assets should be disclosed. 9.AS 13: Accounting for Investments- * The Accounting standard deals with the classification of investment, cost of investment, carrying amount/valuation of investments, disposal of investments, reclassification of investments, and disclosure of investment in the financial statements. * However, it does not apply to operating or finance leases, investment of retirement benefit plans and life insurance enterprises.
It also does not apply to mutual funds and related asset management companies, banks and public financial institutions. * The investment according to the standard is classified as long term and current investment. For calculating the cost of the investment, it would include the price and acquisition charges such as brokerage, fees and duties etc. * The standard does not deal with bases for recognition of interest and dividends. 10. AS 14: Accounting for Amalgamations * The standard deals with accounting to be made in the books of the Transferee Company in case of amalgamation.
* The standard is not applicable when one company acquires/purchases the share of another company and the acquired company is not dissolved and its separate entity continues to exist. There are two types of amalgamation- Amalgamation in the nature of merger and amalgamation in the nature of purchase. * The accounting method used for amalgamation in case of merger is – pooling interest method and in case of amalgamation in case of purchase is – purchase method. * The goodwill arising on amalgamation is to be treated as an asset to be amortised to income on a systematic basis over its useful life as it is a payment made in anticipation of future income. 11. AS 15: Employee Benefits (revised 2005)- * It applies to defined contributions schemes and defined benefit schemes.
The Provident Fund and other defined contribution schemes should be charged to profit and loss on accrual basis. * The method used for calculation of retirement benefit, date of actuarial valuation and method of actuarial valuation should be disclosed. 12. AS 16: Borrowing Costs- * The borrowing cost which is directly related to the acquisition, construction or production of qualifying assets should be capitalized.
* The standard is not applicable to actual or implied cost of owner’s equity including preference share capital. It includes interest and commitment charges on bank or other borrowings. * There should be a disclosure of the accounting policy adopted and the amount of borrowing cost capitalized during the period. 13.
AS 17: Segment Reporting- * The procedure and manner of reporting of financial performance of various products and services and geographical performance should be reported instead of a company as a whole. * It is applicable to enterprises whose equity or debt capital are listed and commercial, industrial and business enterprises whose annual turnover exceeds Rs 50 crore. The business entities are required to report segment information in two formats- primary reporting and secondary reporting. 14. AS 18: Related Party Disclosures- * A related party is essential any party that controls or can significantly influence the management or operating policies of the company.
* The relationship normally exists between- Parent and subsidiary company, Joint venture, Investor and investee, Associates, Key management personnel of reporting enterprises. * The related party relationship and the transactions between a reporting enterprise and its related parties should be disclosed. 5. AS 19: Accounting for Leases * Accounting for Finance Lease – In the book of Lessee: * Legally the ownership of leased asset remains with lessor but risk and reward of leased asset is transferred to lessee. So, lessee becomes the owner. * Leased asset as well as liability for lease is recognised as the lower of: * Fair value of leased asset at the inception of lease, or * Present value of minimum lease payment from the lessee point of view.
* The lessee in its books should charge depreciation on finance lease asset as per AS-6. Initial direct cost for financial lease is included in asset under lease. * Accounting for finance lease- In the books of Lessor: * Lessor should recognise asset given under finance lease as receivable at an amount equal to net investment in the lease and corresponding credit to sale of asset. * Interest/finance income will be recognised in proportion to outstanding balance receivable from lease period.
* Accounting for operating lease: * Record leased out asset as the fixed asset in balance sheet. * Charge depreciation as per AS-6. Recognise lease income in profit & loss account using straight line method. * Initial direct cost may be expensed immediately or deferred. 16. AS 20: Earnings Per Share * It brings consistency in computation of EPS to facilitate inter-firm and intra-firm comparison.
* It applies to every company which gives information under part IV of Schedule VI, whether listed in Stock exchange. * EPS must be calculated and disclosed separately for different classes of equity shares. * Shares having dividend, voting rights etc. are treated as separate classes of shares.Partly paid shares are to be taken at equivalent units.
* Diluted EPS of number of shares to be taken into account for shareholders info. 17. AS 21: Consolidated Financial Statements * Lays principles and procedures for preparation and presentation of consolidated financial statements and accounting for investment in subsidiaries. * It comprise of balance sheet, profit and loss account, notes to account, and cash flow statement.
* Doesn’t apply for accounting to amalgamation, investment in associates, investment in joint ventures, subsidiary where control is temporary. Disclosure requirement requires a list of all subsidiaries including name, country and proportion of ownership etc. 18. AS 22: Accounting for Taxes on Income. * Prescribe for taxes on Income with the principle of Matching Concept. * Applicable to all listed companies, existing and proposed.
* Taxes include domestic and foreign taxes and not corporate dividend tax or wealth tax. * Accounting income means net profit before deducting Income Tax expense or adding Income Tax saving. * Taxable income means amount of income determined in accordance with tax Laws. Tax Expense means aggregate of current tax and deferred tax charged. * Tax effect of timing difference are included in tax expense in profit and loss account as Deferred tax asset and as Deferred tax liability in Balance Sheet.
* Disclosure of Deferred Tax should be in separate heading in Balance Sheet. 19. AS 23: Accounting for Investments in Associates in Consolidated Financial Statements * Sets principle and procedures for recognizing the effect of investment in associated in CFS. Associate is an enterprise other than subsidiary, where investing company has significant influence and is linked with control of 20% or more voting power.
* Investment in associates should be accounted for under equity method only, except for where investment is required for temporary period and where constraint is there to transfer of fund in Investor Company. * Disclosure includes investment in associates, which are not accounted for under equity method, component of goodwill or capital reserve, extent of holding in associates etc. 20. AS 26: Intangible Assets This accounting standard gives us the guidelines to accounting of the intangible assets that are not dealt with in other accounting standards. It also specifies the method to calculate the carrying amount of intangible assets and requires certain disclosures about intangible assets. 21.
AS 27: Financial Reporting of Interests in Joint Ventures * This accounting standard prescribes how to do accounting for interests in joint ventures and reporting of joint venture assets, liabilities, income and expenses in the financial statements of ventures and investors 22.AS 28: Impairment of Assets * The main purpose of this accounting standard is to set out guidelines how to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. Such asset is called an impaired asset and the accounting standard says that the firm recognizes a loss in this case.
23. AS 29: Provisions, Contingent` Liabilities and Contingent Assets * The essence of this Standard is to do accounting for contingent assets.The enterprise is needed to provide proper disclosure and also create provisions for contingent liabilities by providing information in financial statements. 24.
AS 30: Financial Instruments: Recognition and Measurement * The main purpose of this Standard is to highlight how to recognize and measure financial assets, financial liabilities and some contracts to buy or sell non-financial items. 25. AS 31: Financial Instruments: Presentation- * It states that the company should classify it or its component parts on initial recognition as a financial liability, a financial asset or an equity instrument.In the case of compound financial instruments, the company should evaluate the terms of the instruments to determine whether it contains both a liability and an equity component. 26.
AS 32: Financial Instruments: Disclosures- * It states that the entity should disclose the carrying amounts of each of the categories of financial assets, such as financial assets at fair value through profit or loss, held to maturity investments, loans and receivables, and available for sale. Entity should disclose the financial liabilities through profit and loss accounts.