Indian Accounting Standards Accounting Standards are used as one of the main compulsory regulatory mechanisms for preparation

of general-purpose financial reports and subsequent audit of the same, in almost all countries of the world. Accounting standards are concerned with the system of measurement and disclosure rules for preparation and presentation of financials statements. They appear with a set of authoritative statements of how particular types of transactions, events and other costs should be recognized and reported in the financial statements. Accounting standards are devised to furnish useful information to different users of the financial statements, to such as shareholders, creditors, lenders, management, investors, suppliers, competitors, researchers, regulatory bodies and society at large and so on. In fact, such statements are designed and prescribed so as to improve & benchmark the quality of financial reporting. (AS 1) Disclosure of Accounting Policies The Standard deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements. (AS 2) Revised Valuation of Inventories - A primary issue in accounting for inventories is the determination of the value at which inventories are carried in the financial statements until the related revenues are recognised. This Statement deals with the determination of such value, including the ascertainment of cost of inventories and any write-down thereof to net realisable value. (AS 3) Revised Cash Flow Statements - Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilise those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation. The Statement deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a cash flow statement which classifies cash flows during the period from operating, investing and financing activities (AS 4) Revised Contingencies and Events Occurring After the Balance Sheet Date This Statement deals with the treatment in financial statements of (a) contingencies, and (b) events occurring after the balance sheet date. The following subjects, which may result in contingencies, are excluded from the scope of this Statement in view of special considerations applicable to them: (a) liabilities of life assurance and general insurance enterprises arising from policies issued; (b) obligations under retirement benefit plans; and (c) commitments arising from long-term lease contracts

(AS 5) Revised Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies - The objective of this Statement is to prescribe the classification and disclosure of certain items in the statement of profit and loss so that all enterprises prepare and present such a statement on a uniform basis. This enhances the comparability of the financial statements of an enterprise over time and with the financial statements of other enterprises. Accordingly, this Statement requires the classification and disclosure of extraordinary and prior period items, and the disclosure of certain items within profit or loss from ordinary activities. It also specifies the accounting treatment for changes in accounting estimates and the disclosures to be made in the financial statements regarding changes in accounting policies. (AS 6) Revised Depreciation Accounting - This Statement deals with depreciation accounting and applies to all depreciable assets, except the following items to which special considerations apply: (i) forests, plantations and similar regenerative natural resources; (ii) wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar non-regenerative resources; (iii) expenditure on research and development; (iv) goodwill; (v) live stock. Different accounting policies for depreciation are adopted by different enterprises. Disclosure of accounting policies for depreciation followed by an enterprise is necessary to appreciate the view presented in the financial statements of the enterprise. (AS 7) Accounting for Construction Contracts (AS 8) Accounting for Research and Development - Research is original and planned investigation undertaken with the hope of gaining new scientific or technical knowledge and understanding. Development is the translation of research findings or other knowledge into a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production. (AS 9) Revenue Recognition - Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends. Revenue is measured by the charges made to customers or clients for goods supplied and services rendered to them and by the charges and rewards arising from the use of resources by them

(AS 10) Accounting for Fixed Assets - The following terms are used in this Statement with the meanings specified: 6.1 Fixed asset is an asset held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business 6.2 Fair market value is the price that would be agreed to in an open and unrestricted market between knowledgeable and willing parties dealing at arm's length who are fully informed and are not under any compulsion to transact. 6.3 Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account of financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value (AS 11) Accounting for the Effects of Changes in Foreign Exchange Rates An enterprise may have transactions in foreign currencies or it may have foreign branches. Foreign currency transactions should be expressed in the enterprise's reporting currency and the financial statements of foreign branches should be translated into the enterprise's reporting currency in order to include them in the financial statements of the enterprise. The principal issues in accounting for foreign currency transactions and foreign branches are to decide which exchange rate to use and how to recognise in the financial statements the financial effect of changes in exchange rates. (AS 12) Accounting for Government Grants - The receipt of government grants by an enterprise is significant for preparation of the financial statements for two reasons. Firstly, if a government grant has been received, an appropriate method of accounting therefore is necessary. Secondly, it is desirable to give an indication of the extent to which the enterprise has benefited from such grant during the reporting period. This facilitates comparison of an enterprise's financial statements with those of prior periods and with those of other enterprises. (AS 13) Accounting for Investments - Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not 'investments'. A current investment is an investment that is by its nature readily realisable and is intended to be held for not more than one year from the date on which such investment is made. A long term investment is an investment other than a current investment. An investment property is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise.

Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's length transaction. Under appropriate circumstances, market value or net realisable value provides an evidence of fair value. Market value is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal. (AS 14) Accounting for Amalgamations - The following terms are used in this statement with the meanings specified: (a) Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies. (b) Transferor company means the company which is amalgamated into another company. (c) Transferee company means the company into which a transferor company is amalgamated. (d) Reserve means the portion of earnings, receipts or other surplus of an enterprise (whether capital or revenue) appropriated by the management for a general or a specific purpose other than a provision for depreciation or diminution in the value of assets or for a known liability. (e) Amalgamation in the nature of merger is an amalgamation which satisfies all the following conditions. (i) All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company. (ii) Shareholders holding not less than 90% of the face value of the equity shares of the transferor company (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation. (iii) The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company,

except that cash may be paid in respect of any fractional shares. (iv) The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company. (v) No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the transferee company except to ensure uniformity of accounting policies. (f) Amalgamation in the nature of purchase is an amalgamation which does not satisfy any one or more of the conditions specified in subparagraph (e) above. (g) Consideration for the amalgamation means the aggregate of the shares and other securities issued and the payment made in the form of cash or other assets by the transferee company to the shareholders of the transferor company. (h) Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's length transaction. (i) Pooling of interests is a method of accounting for amalgamations the object of which is to account for the amalgamation as if the separate businesses of the amalgamating companies were intended to be continued by the transferee company. Accordingly, only minimal changes are made in aggregating the individual financial statements of the amalgamating companies (AS 15) Accounting for Retirement Benefits in the Financial Statements of Employers -This Statement applies to retirement benefits in the form of provident fund, superannuation/pension and gratuity provided by an employer to employees, whether in pursuance of requirements of any law or otherwise. It also applies to retirement benefits in the form of leave encashment benefit, health and welfare schemes and other retirement benefits, if the predominant characteristics of these benefits are the same as those of provident fund, superannuation/pension or gratuity benefit, i.e. if such a retirement benefit is in the nature of either a defined contribution scheme or a defined benefit scheme as described in this Statement. This Statement does not apply to those retirement benefits for which the employer's obligation cannot be reasonably estimated, e.g., ad hoc ex-gratia payments made to employees on retirement.

(AS16) BORROWING COSTS- Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. Borrowing cost means interest and other cost in connection with borrowing. The accounting policy for calculation of such cost should be disclosed in financial statements. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. (AS17) Segment Reporting - The objective of this Statement is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. Such information helps users of financial statements: (a) better understand the performance of the enterprise; (b) better assess the risks and returns of the enterprise; and (c) make more informed judgements about the enterprise as a whole. Many enterprises provide groups of products and services or operate in geographical areas that are subject to differing rates of profitability, opportunities for growth, future prospects, and risks. Information about different types of products and services of an enterprise and its operations in different geographical areas - often called segment information - is relevant to assessing the risks and returns of a diversified or multilocational enterprise but may not be determinable from the aggregated data. Therefore, reporting of segment information is widely regarded as necessary for meeting the needs of users of financial statements. (AS-18) Related Party Disclosures- Objective The objective of this Statement is to establish requirements for disclosure of: (a) related party relationships; and (b) transactions between a reporting enterprise and its related parties. (AS-19) Leases The objective of this Statement is to prescribe, for lessees and lessors, the appropriate accounting policies and disclosures in relation to finance leases and operating leases. (AS 20) Earning Per Share- An enterprise should present on the face of P&L Account. Basic EPS Diluted EPS . For each class of equity shares that has a different right to share in net profit. In the case of nominal value of shares being different, no. of equity shares should be calculated after conversion into same nominal value.

This information is to be presented even if the amount disclosed is negative (a loss per share). (AS 21) Consolidated Financial statements- Should be applied in the preparation and presentation of consolidated financial statements for a group of enterprises under the control of a parent. Should also be applied in accounting for investments in subsidiaries in a separate financial statements of a parent. Does not deal with methods of accounting for amalgamations, accounting for investments in associates and joint ventures. (AS22) Accounting for Taxes on Income- This Statement prescribes the method of determination of the amount of expense or saving relating to taxes on income in respect of an accounting period. This Statement prescribes the disclosure of such an amount in the financial statements. Does not deal with taxes payable on distribution of dividends. Taxes on income includes all domestic & foreign taxes on taxable income (AS23)- Accounting for Investments in Associates in Consolidated Financial statements. Should be applied in the presentation and preparation of consolidated financial statements by an investor .Does not deal with separate financial statements prepared by an investor Definitions An Associate is an enterprise in which the investor has significant influence & which is neither a subsidiary nor a joint venture of the investor. Significant Influence is the power to participate in the financial and/or operating policy decisions of the investee but not control over those policies. Such significant influence is usually evidenced in the following ways:

Representation on the Board of Directors or corresponding governing body of the investee Participation in policy making processes Material transactions between the investor & the investee Interchange of managerial personnel Provision of essential technical information

(AS24)- Discontinuing Operation Discontinuing operation is a component of an enterprise a. that the enterprise,pursuant to a single plan,is: 1. disposing substantially in its entirety,such as by selling the component in a single transaction or by demerger or spin-off of ownership of the component to the enterprise's shareholders;or

2. disposing of piecemeal,such as by selling off the component's assets and settling its liabilities individually;or 3. terminating through abandonment;and b. that represents a separate major line of business or geographical area of operations;and c. that can be distinguished operationally and for financial reporting purposes

(AS25)- Interim financial reporting- If any enterprise is required or elects to prepare and present an interim financial report,it should comply with this Standard Interim period: A financial reporting period shorter than a full financial year. Interim financial report : Financial report containing either a complete set of financial statements or a set of condensed financial statements(as described in this standard) for an interim period. (AS26)- Intangible Assets- To prescribe the accounting treatment for intangible assets that are not dealt with specifically in another accounting standard.This standard requires an enterprise to recognise an intangible asset if,and if only if,certain criteria are met. Intangible Asset An intangible asset is an identifiable non-monetary asset, without physical substance,held for use in the production or supply of goods or services,for rental to others,or for administrative purposes (AS27)- Financial reporting of Interests in Joint ventures- Joint Venture: A contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control. A Venturer: A party to a joint venture and has joint control over that joint venture. Proportionate Consolidation: A method of accounting and reporting whereby a venturer's share of each of the assets,liabilities,income and expenses of a jointly controlled entity is reported as separate line items in the venturer's financial statements. (AS28)- Impairment of Assets- This standard does not apply to inventories, assets arising from construction contracts, deferred tax assets or investments as these are covered by separate accounting standards. The objective is to prescribe the procedure that assets are shown at no more than recoverable amount. An asset is called impaired if its carrying amount exceeds the amount to be recovered through use or sale of the asset. (AS29)- Provisions, Contingencies Liability and Contingent assets: to ensure that appropriate recognition criteria and measurement bases are applied to the provisions and

contingent liabilities and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. AS: 30, 31,32: Financial Instruments: Recognition & Measurement, Presentation , Disclosures: The objective is to establish the principles for recognizing, measuring the financial assets and liabilities. Also the AS 31 establishes the principals for presentation of financial instruments as liabilities or equity. AS32 require the entities to provide disclosures in their financial statements that enables the users to evaluate the significance of financial instruments.