Short Questions & Answers on Accounting Standard 29 1.

Question: The turnover of RK & Sons, a registered partnership firm for the FY 2010-11 is Rs. 45 lacs and it has borrowing of Rs. 95 lakhs. What is the disclosure required to be made by RK & Sons in its financials under AS 29? Options: (a) AS 29 Not applicable (b) Disclosure under Para 67 not required (c) Full disclosure required (d) Disclosure under Para 66 & 67 not required Answer: (b) Disclosure under para 67 not required as it is a level II enterprise. In case RK & Sons, would have been a company, the answer would have been (d) Disclosure under para 66 & 67 not required as it would have been an SME as per Companies Accounting Standard Rules 2006. 2. Question: Where are contingent assets disclosed? Options: (a) Fixed Asset Schedule (b) Notes to accounts (c) Auditors Report (d) None of the above Answer: (d) None of the above. Contingent assets are to be disclosed in the approving authorities report (in case of companies contingent assets are disclosed in Directors Report) 3. Question: Out of the following which is a provision as per AS 29? Options: (a) Provision for Taxation (b) Amortisation (c) Cost of after sale free services (d) Provision for Incentive Answer: (c) Cost of after sales free services. 4. Question: Out of the following which is a contingent liability as per AS 29? Options: (a) Warranty cost (b) Guarantee given for loan taken by associate (c) Provision for Gratuity (d) Future operating cost Answer: (b) Guarantee given for loan taken by associate. 5. Question: Provision created for legal expenses of ongoing court case (sales tax) can be used for: Options: (a) Outstanding liabilities for staff reimbursements (b) Lawyers fees foe sales tax case (c) Sales tax payable on settlement of ongoing case (d) Income tax Answer: (b) Lawyers fees for sales tax case. 6. Question: Out of the following for which expenditure on restructuring a provision can be created as per AS 29? Options: (a) Loss on sale of asset under restructuring (b) Investment in new system

(c) Direct expenses pursuant to restructuring (d) Marketing Cost Answer: (d) Direct expenses pursuant to restructuring 7. Question: What will be the treatment of a present obligation (which can be reliably estimated) that arises from past events, for which there is a probability of 40% that the settlement will result in outflow of resources? Options: (a) Disclose a Contingent Liability (b) Create a Provision (c) Disclose a Contingent Asset (d) Do nothing Answer: (a) Disclose a contingent liability 8. Question: An enterprise is required to do a major refurbishment of its plant & machinery at regular interval of 5 years. What will be the treatment of such refurbishment cost as per AS 29? Options: (a) Provision to be created (b) Contingent Liability to be disclosed (c) Debit to repairs & maintenance (d) Do nothing Answer: (d) Do nothing (Such expenses are either part of future operating cost or are covered in depreciation) 9. Question: An electronic equipment company offers two years product warranty. As per the trend, 4% of the annual sales is spent on the subsequent two years towards repair expenditure of product covered under warranty. During FY 2010-11 the turnover of the company was Rs. 50 crores. What is the company required to do as per AS 29 in its financials of 2010-11? Options: (a) Create a provision for Rs. 4 crores (b) Disclose contingent liability (c) Create a provision for Rs. 2 crores (d) Do nothing Answer: (c) Create a provision for Rs. 2 crores 10. A company has given a counter guarantee of Rs. 20 crores to its banker in respect of guarantee given by the banker to Indian Railways towards performance of obligations by the company. What is the disclosure requirement of such counter guarantee? Options: (a) Create provision for Rs. 20 crores (b) Disclose contingent liability of Rs. 20 coroes (c) Disclose contingent liability of 10 crores (d) Do nothing Answer: (d) Do nothing