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Published by Worldex India Exhibition & Promotion Pvt. Ltd., 2021-03-30 00:46:43

1-Accounting and Auditing temp regular size Arial 12

1-Accounting and Auditing temp regular size Arial 12

Accounting Standards

Accounting Standards

What are Generally Accepted Accounting Principles in India?
Generally Accepted Accounting Principles (GAAP) are basic accounting principles and guidelines which
provide the framework for more detailed and comprehensive accounting rules, standards and other
industry-specific accounting practices.

In India, the GAAP includes Accounting Standards issued by the Institute of Chartered Accountants of
India (ICAI) / Ministry of Corporate Affairs (MCA) and the law laid down in the respective applicable
acts (for example, Schedule III to Companies Act, 2013, which should be compulsorily followed by all
companies). The ICAI also releases Guidance Notes from time to time on various topics to help in the
accounting process and provide clarity. Indian GAAP also includes opinions issued by Expert Advisory
Committee (EAC) and Ind AS Technical Facilitation Group (ITFG) of ICAI.

Applicability of Various Accounting Standards
Under Indian GAAP, there are three different sets of Accounting Standards applicable to different kinds

of entities which is summarised as follows:

Accounting Standards Applicable to

Indian Accounting Standards (Ind-AS) notified Companies including NBFCs but excluding Banks

under Companies Act, 2013 and Insurance Companies:

[converged in line with IFRS subject to certain (i) Listed Companies

exemptions/exceptions] (ii) Companies having net worth in excess of

250 crore

(iii) Subsidiaries, Associates and Joint Ventures
of Companies covered in (i) & (ii) above.

(iv) Companies voluntarily adopting Ind-AS

Accounting Standards notified under Companies All the Companies other than those Companies

Act, 2013 to whom Ind-AS is applicable. [For detailed

applicability refer table below].

Accounting Standards issued by ICAI Non-Corporate Entities. [For detailed applicability
refer table below].

Applicability of Accounting Standards to Various Entities

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
SMCs (SMEs) (SMEs)

AS 1 Disclosure of   
AS 2 Accounting
Policies   

Valuation of
Inventories
(Refer Note 4)

BCAS 1.1
Referencer
2021-2022

Accounting and Auditing

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
SMCs (SMEs) (SMEs)

AS 3 Cash Flow  Not Applicable A Not Not
Statements in entirety, i.e., Applicable Applicable
Optional in entirety, in entirety,
i.e., i.e.,
Optional Optional

AS 4 Contingencies   
and Events
AS 5 Occurring After   
the Balance
AS 6 Sheet Date Withdrawn
AS 7 (Refer Note 4)
AS 9   
AS 10 Net Profit or
AS 11 Loss for the   
Period, Prior   
AS 12 Period Items
and Changes   
in Accounting
Policies   

Depreciation
Accounting

Construction
Contracts
(revised 2002)

Revenue
Recognition

Property, Plant
and Equipment
(Refer Note 4)

The Effects
of Changes
in Foreign
Exchange
Rates (Revised
2003) (Refer
Note 5)

Accounting for
Government
Grants

1.2 BCAS
Referencer
2021-2022

Accounting Standards

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
SMCs (SMEs) (SMEs)

AS 13 Accounting for  
AS 14 Investments
AS 15 (Refer Note 4)   

Accounting for  Relaxations  Relaxations from certain
Amalgamations from certain requirements have been
(Refer Note 4) requirements given to Non-corporate
have been Entities falling in Level
Employees II and Level III (SMEs)
Benefits given to SMCs (Refer Note 2)
(Revised 2005) (Refer Note 2)
 
AS 16 Borrowing 
AS 17 Costs  Not Not
 Not Applicable Applicable Applicable
Segment in entirety, i.e., in entirety, in entirety,
Reporting Optional i.e. i.e.,
Optional Optional
AS 18 Related Party 
Disclosures   Not
Applicable
AS 19 Leases  Relaxations in entirety,
from certain i.e.
requirements Optional
have been
 Relaxations from certain
given to SMCs requirements have been
(Refer Note 2) given to Non-corporate
Entities falling in Level
 II and Level III (SMEs)
(Refer Note 2)

AS 20 Earnings Per  Same as Same as
Share
above above

BCAS 1.3
Referencer
2021-2022

Accounting and Auditing

Accounting Title of AS Companies Non Corporates
Standard
AS 21 Consolidated Non SMCs Level I Level II Level III
Financial SMCs  (SMEs) (SMEs)
AS 22 Statements Not applicable
AS 23 (Refer Note 4)  to SMCs Not applicable to all
Non-corporate Entities
AS 24 Accounting since relevant
AS 25 for Taxes on Regulators since the relevant
Income require Regulators require
AS 26 Accounting for compliance compliance with them
Investments in only by certain Level I
Associates in with them only
Consolidated by certain entities
Financial Non-SMCs (Refer Note 1)
Statements
(Refer Note 1)
Discontinuing
Operations   

 Not applicable  Not applicable to all
to SMCs since Non-corporate Entities
the relevant since the relevant
Regulators Regulators require
require compliance with them
compliance only by certain Level I
with them only entities
by certain Non- (Refer Note 1)
SMCs
(Refer Note 1)  Applicable Not

 Applicable
to some
Applicable
non-SMCs
where in entirety,

regulators i.e.
require to
present Optional

I n t e r i m  (Refer Note 3) interim (Refer Note 3)
financial
F i n a n c i a l Applicable statements
Reporting
to some

non-SMCs

where

regulators

require to

present

interim

financial

statements

Intangible    

Assets

1.4 BCAS
Referencer
2021-2022

Accounting Standards

Accounting Title of AS Companies Non Corporates
Standard
Non SMCs Level I Level II Level III
AS 27 Financial SMCs  (SMEs) (SMEs)
Reporting of Not applicable
Interests in  to SMCs since Not applicable to all
Joint Ventures Non-corporate Entities
 the relevant
 Regulators since the relevant
Regulators require
require compliance with them
compliance only by certain Level I
with them only
by certain entities
Non-SMCs (Refer Note 1)
(Refer Note 1)
AS 28 Impairment of Relaxations  Relaxations from certain
AS 29 Assets from certain requirements have been
Provisions, requirements
Contingent have been  given to Non-corporate
Liabilities and given to SMCs Entities falling in Level
Contingent (Refer Note 2) II and Level III (SMEs)
Assets (Refer (Refer Note 2)
Note 4)

Notes:

1. AS 21, AS 23 and AS 27 (relating to consolidated financial statements) are required to be
complied with by a company/non-corporate entity if the company / non-corporate entity, pursuant
to the requirements of a statute/regulator or voluntarily, prepares and presents consolidated
financial statements.

2. Relaxations from certain requirements have been given to SMCs and Non-Corporate Entities
falling in Level II and Level III (SMEs) as follows:

Accounting Details of relaxations
Standard

AS 15 SMCs and Level II and Level III Non-Corporate entities are exempted from the
applicability of the following paragraphs:

Particulars - All SMCs - Level Level II and Level III
II and Level III Non- Non-Corporate
Corporate entities entities where
average no. of
where average
no. of persons persons employed
employed during the during the year is <

year is >=50 50

Recognition and measurement of Exempted
short-term accumulated compensating
absences which are non-vesting
contained in paras 11 to 16

BCAS 1.5
Referencer
2021-2022

Accounting and Auditing

Accounting Details of relaxations
Standard

Discounting of amounts that fall due Exempted
more than 12 months after balance
sheet date under para 46 (Defined
Contribution Plans) or para 139
(Termination Benefits)

Recognition and measurement Exempted Exempted

principles under paras 50 to 116 However, such entities However, such entities
and presentation and disclosure should –
requirements under paras 117 to may –
123 for accounting of defined benefit
a. A c t u a r i a l l y Calculate and account

plans determine and accrued liability by

provide for reference to some

accrued liability other rational method,

using PUCM e.g. a method based

b. D e t e r m i n e on assumption

discount rate that such benefits
by reference to are payable to all
market yields on employees at end of
Govt. bonds at accounting year

balance sheet

date

c. Disclose actuarial
assumptions as
per para 120(l)

Recognition and measurement of Exempted However, such entities

other long-term employee benefits However such entities may –
contained in paras 129 to 131
should – Calculate and account

a. A c t u a r i a l l y accrued liability by
determine and reference to some
for other rational method,
provide
accrued liability e.g. a method based
on assumption
using PUCM.
that such benefits
b. Determine discount are payable to all
rate by reference employees at end of
to market yields accounting year
on Govt. bonds at

balance sheet date

1.6 BCAS
Referencer
2021-2022

Accounting Standards

Accounting Details of relaxations
Standard

AS 19 Paras 22 (c), (e) and (f); 25 (a), (b) and (e); 37 (a) and (f); and 46 (b) and (d) relating
to disclosures are not applicable to SMCs/non-corporate entities falling in Level II.

Paras 22 (c), (e) and (f); 25 (a), (b) and (e); 37 (a), (f) and (g); and 46 (b), (d) and (e)
relating to disclosures are not applicable to Level III entities.

AS 20 Diluted earnings per share (both including and excluding extraordinary items) is not
required to be disclosed by SMCs/ non-corporate entities falling in Level II and Level
III and information required by para 48(ii) of AS 20 is not required to be disclosed by
Level III entities if this standard is applicable to these entities.

AS 28 SMCs / non-corporate entities falling in Level II and Level III are allowed to measure
the ‘value in use’ on the basis of reasonable estimate thereof instead of computing
the value in use by present value technique.

Consequently, if a SMC / non-corporate entity falling in Level II or Level III chooses
to measure the ‘value in use’ by not using the present value technique, the relevant
provisions of AS 28, such as discount rate etc., would not be applicable to such an
SMC / entity.

Further, such an SMC / entity need not disclose the information required by para
121(g).

AS 29 Paras 66 and 67 relating to disclosures are not applicable to SMCs / non-corporate
entities falling in Level II and Level III.

3. AS 25, Interim Financial Reporting, does not require a company / non-corporate entity to present
interim financial report. It is applicable only if a company /non-corporate entity is required by
a statute or a regulator or elects to prepare and present an interim financial report. Thus, the
recognition and measurement requirements contained in this Standard are applicable only to the
entities for preparation of interim financial results. For example, presently, SEBI requires listed
entities to present interim financial results, e.g., quarterly financial results, those entities will apply
this Standard.

Components of Financial Statements

Following are the components of Financial Statements under Ind-AS and IGAAP:

Components of Financial Statements Under Ind Under IGAAP
AS?
Balance Sheet as at end of the period Yes
Statement of Profit and Loss for the period Yes Yes
Statement of Changes in Equity for the period Yes No
Statement of Cash Flow for the period Yes If applicable
Statement of Significant Accounting Policies Yes Yes
Notes to accounts and other explanatory notes Yes Yes
Yes

BCAS 1.7
Referencer
2021-2022

Accounting and Auditing

Synopsis of Material Differences to Key Ind- and the entity has enforceable right for
ASs vis-à-vis corresponding IGAAP performance completed to date.
(Note: It is to be noted that the material
presented below is a mere summary of the An entity shall recognise the amount of allocated
Standards and gives a broad overview of the transaction price as revenue once a performance
same and does not cover all the Standards. obligation is satisfied. Transaction price which
The actual Standards are much more detailed can be a fixed or variable amount is determined
in the nature and readers are advised to refer based on the terms of contract and the entity’s
the same for a comprehensive understanding) customary practices.

I. INCOME AND EXPENSES Variable Consideration
If the consideration includes a variable
REVENUE RECOGNITION amount, an entity should estimate the amount
of consideration to which it will be entitled in
Ind-AS-115 Revenue from Contracts with exchange for transferring the promised goods or
Customers services to a customer.
(Significantly different from the corresponding
AS-9 on Revenue Recognition and AS-7 on The existence of a significant financing
Construction Contracts) component
In determining the transaction price, an
Ind-AS-115 recommends a five step model to entity should adjust the promised amount of
recognise revenue: consideration for the time value of money if
significant financing components exist.
– Identify the contract with a customer
Non-Cash Consideration
– Identify the performance obligations in the When customer promises to pay consideration
contract other than in cash form, an entity should measure
it at fair value. If fair value cannot be reasonably
– Determine the transaction price measured, then entity should measure the
consideration indirectly by reference to the stand-
– Allocate the transaction price to the alone selling price of the goods or service in
performance obligations in the contract exchange for consideration.

– Recognise revenue when (or as) the entity Consideration payable to Customer
satisfies the performance obligation by Consideration payable to the customer includes
transferring a promised goods or services to cash amounts, credits or other items (voucher
a customer. or coupon) and the entity accounts for it as a
reduction of the transaction price (revenue). An
For each performance obligation, the entity should entity should recognise the reduction of revenue
determine whether performance obligation is when (or as) either of the following events occurs:
satisfied at a point of time or over time. If any
of the conditions specified below are satisfied, – Recognises revenue for the transfer of
performance obligation is satisfied over time (and related goods or service to the customer
revenue is recognized over time):
– Pays or promises to pay the consideration
– Customer Simultaneously receives and
consumes benefits provided by the entity’s Allocation of Transaction Price to Performance
performance as the entity performs; Obligation
Entity should allocate the transaction price to
– Entity’s performance creates or enhance an each performance obligation identified in a
asset that the customer controls as the asset
is created or enhanced;

– Entity’s performance does not create an
asset with alternative use to the entity

1.8 BCAS
Referencer
2021-2022

Accounting Standards

contract on a relative stand-alone selling price • Expected cost plus margin approach
basis (It is the price at which an entity would • Residual approach
sell a promised good or service separately to a
customer). If this price is directly not available, it Disclosures
should be estimated using methods such as: Entity should disclose qualitative and quantitative
information as indicated below:
• The adjusted market assessment approach

Customer Contracts Significant Judgments Any assets
and changes made in recognized from the
applying this standard
cost to obtain or
to those contracts fulfill a contract with

customers

Revenue recognized to be disclosed separately Explain the judgments Closing balance of

from its other sources of revenue used for determining asset recognized from

timing for satisfaction of cost

Any impairment loss recognized on any performance obligation Amount of amortization
and transaction price and and any impairment
receivable or contract assets amount allocated

loss recognized

A reconciliation of the contract price with the
revenue recognised

AS-9- Revenue Recognition Interest is recognised on time basis, royalties on
accrual basis and dividend when owner’s right to
Scope receive payment is established.
AS-9 does not deal with the following:
Disclosures
– Revenue arising from construction contracts, Disclose circumstances in which revenue
hire-purchase and lease agreements; recognition has been postponed pending
significant uncertainties.
– Revenue relating to government grants and
other similar subsidies; and AS 7 - Construction Contracts

– Revenue of insurance companies from Scope
insurance contracts. The AS is applicable in accounting of contracts in
the books of contractor. It is to be noted that this
Recognition Principles standard is not applicable for construction projects
Revenue from sale of goods and services should undertaken by the entity on behalf of its own. It is
be recognised at the time of sale of goods or also not applicable to service contracts which are
rendering of services if collection is reasonably not related to construction of assets.
certain; i.e., when risks and rewards of ownership
are transferred to the buyer and when effective • Construction contract may be for construction
control of the seller as the owner is lost. of a single/combination of interrelated or
interdependent assets.
In case of rendering of services, revenue must be
recognised either on completed service method • A fixed price contract is a contract where
or proportionate completion method by relating contract price is fixed or per unit rate is fixed
the revenue with work accomplished and certainty and in some cases subject to escalation
of consideration receivable. clause.

BCAS 1.9
Referencer
2021-2022

Accounting and Auditing

• A cost plus contract is a contract in which customer under the terms of contracts.

contractor is reimbursed for allowable or • Contract Revenue and Expenses to be
defined cost plus percentage of these cost recognised, when outcome can be estimated
or a fixed fee. reliably up to stage of completion on

• In a contract covering a number of assets, reporting date.

each asset is treated as a separate • In Fixed Price Contract outcome can be
construction contract when there are:
estimated reliably when:

– separate proposals; – total contract revenue can be measured

– subject to separate negotiations and reliably

the contractor and customer is able to – it is probable that economic benefits will
accept/reject that part of the contract; flow to the enterprise;

– identifiable cost and revenues of each – contract cost and stage of completion
asset can be measured reliably at the

• A group of contracts to be treated as a single reporting date; and

construction contract when: – contract costs are clearly identified and

– they are negotiated as a single measured reliably for comparing actual

package; costs with prior estimates.

– contracts are closely interrelated with • In cost plus contract outcome is estimated

an overall profit margin; and reliably when:

– contracts are performed concurrently or – it is probable that economic benefits will
in a continuous sequence. flow to the enterprise; and

• Additional asset construction to be treated as – contract cost, whether reimbursable

separate construction contract when: or not, can be clearly identified and

– assets differs significantly in design/ measured reliably.

technology/function from original • When outcome of a contract cannot be

contract assets. estimated reliably:

– a price negotiated without regard to – revenue to the extent of which recovery

original contract price of contract cost is probable should be

Contract Revenue and Contract Costs recognised;
• Contract revenue comprises of:
– contract cost should be recognised as
– initial amount and an expense in the period in which they
are incurred; and

– variations in contract work, claims and – all foreseeable losses must be fully

incentive payments that will probably provided for.

result in revenue and are capable of • When uncertainties no longer exist,
being reliably measured. revenue and expenses to be recognised as

• Contract cost comprises of: mentioned above when outcomes can be

– costs directly relating to specific estimated reliably.

contract • When it is probable that contract costs will

– costs attributable and allocable to exceed total contract revenue, the expected

contract activity loss should be recognised as an expense

– other costs specifically chargeable to immediately.

1.10 BCAS
Referencer
2021-2022

Accounting Standards

• Any changes in estimate to be accounted for – Gross amount due to customers for contract
as per AS 5. – work as a liability.

Disclosures For contracts in progress:
– Contract revenue recognised in the period;
• the aggregate amount of costs incurred
– Method used to determine recognised and recognised profits (less recognised
contract revenue; losses) up to the reporting date;

– Methods used to determine the stage of • amount of advances received; and
completion of contracts in progress;
• amount of retention.
– Gross amount due from customers for
contract work as an asset; and

Taxes on Income: Significant Differences between AS 22 and Ind AS 12

Topic AS 22, Accounting for Taxes on Ind AS 12, Income Taxes
Income

Deferred Entities are required to calculate the Entities are required to calculate the
tax assets/
liabilities deferred tax assets/ liabilities using the deferred tax assets/ liabilities using

profit and loss account the balance sheet method, focusing

approach, requiring recognition of tax on temporary differences in the
effects of differences between taxable accounting for the expected future tax
consequences of events.
income and accounting income.

For this purpose, differences between For this purpose, temporary differences
taxable income and accounting income are differences between the carrying
amount of an asset or
are classified into:

• Timing differences being the liability in the balance sheet and its tax
differences between taxable income base.

and accounting income for a period Temporary differences may be either:

that originate in one period and are • Taxable temporary differences,
capable of reversal in one or more which are temporary differences
subsequent periods.
that will result in taxable amounts

• Permanent differences which are in future periods when the carrying

the differences between taxable amount of the asset or liability is

income and accounting income for recovered or settled.

a period that originate in one period • Deductible temporary
and do not reverse subsequently.
differences, which are temporary

differences that will result in

amounts that are deductible in

determining taxable profit (tax

loss) of future periods when the

carrying amount of the asset or

liability is recovered or settled

BCAS 1.11
Referencer
2021-2022

Accounting and Auditing

Topic AS 22, Accounting for Taxes on Ind AS 12, Income Taxes
Income
Recognition of
deferred taxes Deferred taxes are generally recognized Deferred tax is recognized for all

for all timing differences arising on taxable temporary differences between

differences in accounting and taxable accounting and tax base of an asset

income. or liability except to the extent of those

which arise from:

a. initial recognition of goodwill or

b. asset or liability in a transaction
which:

i. is not a business
combination; and

Probable as ii. at the time of the transaction,
against virtual affects neither the accounting
certainty nor the tax profit (tax loss).

With respect to unabsorbed depreciation With respect to carry forward of
or carry forward of losses under tax unused tax losses and unused tax
laws, deferred tax assets should be credits, a deferred tax asset shall
recognized only to the extent that there is be recognized to the extent that it is
virtual certainty supported by convincing probable that future taxable profit will
evidence that sufficient future taxable be available against which the unused
income will be available against which tax losses and unused tax credits can
such deferred tax assets can be realized. be utilized.

However, deferred tax asset for all

other unused credits is recognized to
the extent that there is a reasonable
certainty that sufficient future taxable
income will be available against which

such deferred tax assets can be realized.

Revaluation of No deferred tax is to be recognized if In some jurisdictions, the revaluation
assets
assets (property, plant and equipment) or the restatement of an asset to fair

are revalued since it is considered as a value affects taxable profit (tax loss) for

permanent difference. the current period. As a result, the tax

base of the asset is adjusted, and no

temporary difference arises.

In other jurisdictions, the revaluation
or restatement of an asset does not
affect taxable profit in the period of
the revaluation or restatement and
consequently, the tax base of the asset
is not adjusted. Nevertheless, the future
recovery of the carrying amount will
result in a taxable flow of economic
benefits to the entity and the amount
that will be deductible for

1.12 BCAS
Referencer
2021-2022

Accounting Standards

Topic AS 22, Accounting for Taxes on Ind AS 12, Income Taxes
Income
Investment in
subsidiaries, the tax purposes will differ from the
branches and amount of those economic benefits.
associates and The difference between the carrying
interest in joint amount of a revalued asset and its tax
ventures base is a temporary difference and give
rise to a deferred tax liability or asset.
Tax benefits
related to No deferred tax required to be recognized With respect to all taxable temporary
share-based
payments. in respect thereof. differences, deferred tax liability is

Deferred tax expense is an aggregate recognized on unrealised / accumulated
total from separate financials statements profits, except to the extent that both of
of each entity of the group with no the following conditions are satisfied:

adjustment on consolidation. • The parent, the investor, the

venture or joint operator is able to

control timing of the reversal of the

temporary difference, and

• It is probable that the temporary
difference will not reverse in the
foreseeable future.

No equivalent guidance. With respect to share based payments,
deferred tax benefit is calculated based
on the tax deduction for the share-based
payment under the applicable tax law.

Changes in No equivalent guidance. Current tax and deferred tax
tax status of consequences are required to be
an entity or its included in the statement of profit or loss
shareholders. of the period of change unless those
consequences relate to transactions
and events recognized outside the
statement pf profit or loss either in other
comprehensive income or directly in
equity in the same or a different period.

Recognition of No equivalent guidance. Current tax and deferred tax shall
taxes on items
recognized However, ICAI has issued an be recognized outside profit or loss
in other announcement in this regard. This if the tax relates to items that are
comprehensive announcement requires any expense recognized, in the same or a different
income or charged directly to reserve and/or period, outside profit or loss. Therefore,
directly in securities premium account to be net of the tax on items recognized in the
equity benefits that arise from the admissibility comprehensive income or in equity, is
also recorded in other comprehensive
of such expense for tax purpose.
Similarly, any income credited directly to income or in equity as appropriate.

a reserve account should be net of its tax

effect.

BCAS 1.13
Referencer
2021-2022

Accounting and Auditing

Topic AS 22, Accounting for Taxes on Ind AS 12, Income Taxes
Income

Deferred tax No equivalent guidance. • Acquired deferred tax benefits
in respect recognized within the measurement
of business period that result from new
combination information about facts and
circumstances that existed at the
acquisition date shall be applied to
reduce the carrying amount of any
goodwill related to that acquisition.
If the carrying amount of that
goodwill is zero, any remaining
deferred tax benefits shall be
recognized in other comprehensive
income and accumulated in equity
as capital reserve or recognized
directly in capital reserve.

• All other acquired deferred
tax benefits realized shall be
recognized in profit or loss (or,
if Ind AS 12 so requires, outside
profit or loss).

• An entity does not recognize
deferred tax liabilities arising from
the initial recognition of goodwill.

Tax holiday The deferred tax in respect of timing No equivalent guidance.
period differences which reverse during the tax
holiday period is not recognized to the
extent the enterprise’s gross total income
is subject to certain deduction during the
tax holiday period as per the Income Tax,
Act, 1961. In certain cases, the deferred
tax in respect of timing differences which
reverse during the tax holiday period is
not recognized to the extent deduction
from the total income of an enterprise is
allowed during the tax holiday period.

Deferred tax in respect of timing
differences which reverse after the tax
holiday period is recognized in the year
in which the timing differences originate.

However, recognition of deferred tax

assets is subject to the consideration of

prudence. For the above purposes, the

timing differences which originate first are

considered to reverse first.

1.14 BCAS
Referencer
2021-2022

Accounting Standards

Topic AS 22, Accounting for Taxes on Ind AS 12, Income Taxes
Disclosures Income

These additional disclosures are not a) A reconciliation between the

required. income tax expense reported and

the product of accounting profit

multiplied by the applicable tax rate.

b) Unrecognized deferred tax liability
on undistributed earnings of
subsidiaries, branches, associates
& joint venture.

c) Details of tax holidays and the
expiry date thereof.

Borrowing Cost: Significant Differences between AS 16 and Ind AS 23

Topic AS 16, Borrowing Cost Ind AS 23, Borrowing Cost

Components of Borrowing costs include: Borrowing costs include:
borrowing costs
a. interest and commitment charges a. interest expense calculated using

on bank borrowings; and other the effective interest method as

short-term and long-term described in Ind AS 109, Financial

borrowings; Instruments;

b. amortization of discounts or b. finance charges in respect of finance

premiums relating to borrowings; leases recognized in accordance

c. amortization of ancillary with Ind AS 116, Leases; and

costs incurred in connection with c. exchange differences arising from
foreign currency borrowings to the
the arrangement of borrowings;
extent that they are regarded as an
d. finance charges in respect of adjustment to interest costs.
assets acquired under finance

leases or under other similar

arrangements; and

e. exchange differences arising from
foreign currency borrowings to the
extent that they are regarded as
an adjustment to interest costs.

S u b s t a n t i a l A qualifying asset is an asset that A qualifying asset is an asset that

period of time necessarily takes a substantial period necessarily takes a substantial period

of time to get ready for its intended use of time to get ready for its intended use

or sale. AS 16 provides that ordinarily, or sale. However, Ind AS 23 does not

a period of 12 months is considered provide any guidance on this term

as substantial period of time unless a unlike AS 16.

shorter or longer period can be justified

on the basis of facts and circumstances

of the case. In estimating the said

period, time which an asset takes,

technologically and commercially, to

be ready for its intended use or sale is

considered. BCAS 1.15
Referencer
2021-2022

Accounting and Auditing

Topic AS 16, Borrowing Cost Ind AS 23, Borrowing Cost

W e i g h t e d No equivalent guidance In some circumstances, it is appropriate
average to include all borrowings of the parent
borrowing cost and its subsidiaries when computing a
weighted average of the borrowing costs;
in other circumstances, it is appropriate
for each subsidiary to use a weighted
average of the borrowing costs applicable
to its own borrowings.

Disclosure The financial statements should An entity shall disclose:

disclose: a. the amount of borrowing costs

a. the accounting policy adopted for capitalized during the period; and

borrowing costs; and b. the capitalization rate used

b. the amount of borrowing costs to determine the amount of

capitalized during the period. borrowing costs eligible for

capitalization.

Employee Benefit Expenses: Significant Differences between AS 15 and Ind AS 19

Topic AS 15, Employee Benefits Ind AS 19, Employee Benefits

Definition of Employees includes only whole-time Employees include directors.
Employee directors.

A c t u a r i a l The detailed actuarial valuation of Detailed actuarial valuation needs to be

valuation the present value of defined benefit undertaken determine the present value

obligations may be made at intervals of the net defined benefit liability (asset)

not exceeding three years. However, is performed with sufficient regularity

with a view that the amounts so that the amounts recognized in

recognized in the financial statements the financial statements do not differ

do not differ materially from the materially from the amounts that would

amounts that would be determined at have been determined at the end of the

the balance sheet date, the most recent reporting period. It however does not

valuation is reviewed at the balance specify what constitutes sufficient

sheet date and updated to reflect any regularity.

material transactions and other material

changes in circumstances (including

changes in interest rates) between the

date of valuation and the balance sheet

date.

The fair value of any plan assets is
determined at each balance sheet date.

1.16 BCAS
Referencer
2021-2022

Accounting Standards

Topic AS 15, Employee Benefits Ind AS 19, Employee Benefits
Actuarial gains
and losses All actuarial gains and losses should Actuarial gains and losses representing

Discount rate be recognized immediately in the changes in the present value of the

Defined benefit statement of profit and loss. defined benefit obligation resulting from
plans
experience adjustment and effects of
Past service
cost and changes in actuarial assumptions are
curtailments
recognized in other comprehensive

income and not reclassified to profit or

loss in a subsequent period.

Discount rate to be used for The rate used to discount post-

determining defined benefit obligation employment benefit obligations shall

is by reference to market yields at the be determined by reference to market

balance sheet date on government yields at the end of the reporting

bonds of a currency and terms period on government bonds. However,

consistent with the currency and requirements given in IAS 19 in this

term of the post-employment benefit regard have been retained with

obligations. appropriate modifications for currencies

other than Indian rupee.

The changes in defined benefit liability The change in the defined benefit liability

(surplus) has the following components: (asset) has the following components:

a. Service cost- recognized in profit a. Service cost - recognized in profit or

or loss loss;

b. Interest cost- recognized in profit b. Net interest cost (i.e. time value) on

or loss the net defined benefit deficit/(asset)-

c. The expected return on any plan recognized in profit or loss;

assets -recognized in profit or loss; c. Re-measurement including:

d. Net actuarial gains and losses i. changes in fair value of plan

recognized in profit or loss. assets that arise from factors

other than time value; and

ii. actuarial gains and losses on

obligations - recognized in

other comprehensive income.

Past service cost is recognized as Past service cost (including curtailments)

under: is recognized as an expense at the earlier

a. As an expense on a straight-line of the following dates:

basis over the average period until a. when the plan amendment or

the benefits become vested. curtailment occurs; and

b. If benefits already vested b. when the entity recognizes related

recognized as an expense restructuring costs or termination

immediately entities recognize benefits.

a curtailment when it occurs.

However, when a curtailment

is linked with restructuring it is

accounted for at the same time as

the related restructuring.

BCAS 1.17
Referencer
2021-2022

Accounting and Auditing

Topic AS 15, Employee Benefits Ind AS 19, Employee Benefits

Termination An enterprise should recognize An entity shall recognize a liability and
benefits
termination benefits as a liability and expense for termination benefits at the

an expense when, and only when: earlier of the following dates:

a. the enterprise has a present a. when the entity can no longer

obligation as a result of a past withdraw the offer of those benefits;

event; and

b. it is probable that an outflow of b. when the entity recognises costs

resources embodying economic for a restructuring that is within the

benefits will be required to settle scope of Ind AS 37 and involves the

the obligation; and payment of termination benefits.

c. a reliable estimate can be made of

the amount of the obligation.

Effects of Changes in Foreign Exchange Rates: Significant Difference between AS 11 and Ind
AS 21

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in

Foreign Exchange Rates Foreign Exchange Rates

Functional and There is no concept of functional Functional currency is the currency of the

p r e s e n t a t i o n currency. AS-11 does not specify primary economic environment in which

currency the currency in which an enterprise the entity operates.

presents its financial statements. Foreign currency is a currency other than

However, an enterprise normally uses the functional currency.

the currency of the country in which it Presentation currency is the currency
is domiciled.
in which the financial statements are

AS-11 defines the term ‘Foreign presented. ·

Currency’ as a currency other than

the reporting currency which is the

currency in which financial statements

are presented

1.18 BCAS
Referencer
2021-2022

Accounting Standards

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in

Foreign Exchange Rates Foreign Exchange Rates

E x c h a n g e In general, exchange differences In general, exchange differences arising

differences arising both on: both on:

a) Transactions settled during the a) Transactions settled during the

period; and period; and

b) Upon re-translation of the b) Upon retranslation of the monetary

monetary items at the balance items at the balance sheet date

sheet date are recorded in the profit and loss for the

are recorded in the profit and loss for period.

the period. Long-term foreign currency monetary

Long-term foreign currency items:

monetary items: With respect to exchange differences

Exchange differences arising on reporting arising on reporting of long-term foreign

of long-term foreign currency monetary currency monetary items, similar to

items at rates different from those Indian GAAP. an entity may continue the

at which they were initially recorded policy adopted for exchange differences

during the period or reported in previous arising from long term foreign currency

financial statements, in so far as they monetary items recognised in the

relate to the acquisition of a depreciable financial statements for the period ending

capital asset, can be added to or immediately before the beginning of the

deducted from the cost of the asset and first Ind AS financial reporting period as

shall be depreciated over the balance per the previous GAAP, However, this

life of the asset and in other cases, can option is only available in respect

be accumulated in a “Foreign Currency of those long term foreign currency

Monetary Item. Translation Difference monetary items which are acquired on

Account” in the financial statements or before the date of convergence with

and amortized over the balance period Ind AS.

of such long-term asset/liability, by

recognition as income or expense in

each of such periods. There is no time

limit for availing this option.

Net investment in a non-integral
foreign operation:

Exchange differences on monetary
financial items that in substance, form
part of net investment non-integral
foreign operation is recognised in the
‘Foreign Currency Translation Reserve
‘in the separate financial statements
and recognised as income or expense
at the time of disposal of operation.

BCAS 1.19
Referencer
2021-2022

Accounting and Auditing

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in

Foreign Exchange Rates Foreign Exchange Rates

Translation in Translation of financial statement Assets and liabilities should be translated

the consolidated of foreign operation to the reporting from functional currency to presentation

f i n a n c i a l currency of the parent/investor is currency at the closing rate at the date of

statements dependent upon the classification of the statement of financial position.

the said operation as integral or non-

integral.

Integral foreign operation: Income and expenses should be

a) Monetary assets are translated at translated at actual/average rates for the
period.
closing rate.

b) Non-monetary items are translated Exchange differences are recognised
at historical rate if they are valued in other comprehensive income and
accumulated in a separate component of
at cost.
c) Non-monetary items which are equity.
carried at fair value or other These are reclassified from equity to profit
valuation basis are reported using or loss (as a reclassification adjustment)
when the gain or loss on disposal is
closing rate.
d) Income and expense items are recognised.
translated at historical/average Loss of control:

rate. Treatment of disposal depends

e) Exchange differences are taken to on whether control is lost or not.
the statement of profit and loss. Thus, if control is lost, the exchange
difference attributable to the parent is
Non-integral foreign operations reclassified to profit or loss from foreign

a) All assets and liabilities are to be currency translation reserve in other

translated at closing rate. comprehensive income.

b) Profit and loss account items are
translated at actual/average rates).

The resulting exchange difference

is taken to Foreign Currency
Translation Reserve and is transferred
to profit and loss on the disposal of the

non-integral foreign operation.

Loss of control:

Treatment for disposal does not depend
on whether control over a foreign
subsidiary is lost or not. Even if control
is lost, only proportionate amount of
exchange difference in the foreign
currency translation reserve is recycled
to statement of profit and loss.

1.20 BCAS
Referencer
2021-2022

Accounting Standards

Topic AS 11, The Effects Changes in the Ind AS 21, The Effects of Changes in
Derivatives
Foreign Exchange Rates Foreign Exchange Rates

AS 11 applies to exchange differences Ind AS 21 includes within its scope the
on all forward exchange contracts foreign currency derivatives that are not
including those entered into to hedge within the scope of Ind AS 109 (e.g.
the foreign ‘currency risk of assets some foreign currency derivatives that are
and liabilities. However, AS 11 is not embedded in other contracts)
applicable to the exchange difference Further, Ind AS 21 is applicable when
arising on forward exchange contracts amounts relating to derivatives are
entered into to hedge the foreign translated from its functional currency to
currency risks of future transactions its presentation currency
covered by firm commitments or which
are highly probable forecast transactions.

F o r w a r d Contracts not intended for trading or Forward exchange contracts and other

e x c h a n g e speculation purposes: similar financial instruments which are

contracts a) Any premium or discount arising covered under Ind AS 109, are excluded

at the inception of a forward

exchange contract is amortized as

expense or income over the life of

the contract.

b) Exchange differences on such

a contract are recognized in the

statement of profit and loss in

the reporting period in which the

exchange rates change.

Exchange difference on such forward

exchange contracts is the difference

between:

(a) the foreign currency amount

of contract translated at the

exchange rate at the reporting

date or the settlement date where

the transaction is settled during

the reporting period, and

(b) the same foreign currency amount
translated at the later of the
date of inception of the forward
exchange contract and the last
reporting date.

Contracts intended for trading or
speculation purposes:
The premium or the discount on the
contract is ignored at each balance sheet
date. The value of the contract is marked
to its current market value and the gain
or loss on the contract is recognized

BCAS 1.21
Referencer
2021-2022

Accounting and Auditing

II. ASSETS AND LIABILITIES

Property Plant and Equipment: Significant Difference between AS 10 and Ind AS 16

TOPIC AS 10 Property, Plant and IND AS 16 Property, Plant and
Equipment Equipment

Review of Estimates with respect to residual value The residual value should be reviewed
residual value
are not required to be reviewed and at least at each financial year-end and,

updated. the change(s) shall be accounted for as

a change in an accounting estimate in

accordance with Ind AS 8.

Reassessment Needs to be reviewed periodically. Reviewed at least at each financial year-

of useful life However, the timelines are not end or more frequently if circumstances

specified warrant.

Frequency of No equivalent guidance Revaluations are required to be made
revaluation with sufficient regularity to ensure that the
carrying value does not differ materially
from the fair value at the end of the
previous reporting period.

Government AS 12 provides an option of reducing Ind AS 20 does not allow the same.
grant received the grant received from the gross value
for PPE of the asset concerned.

Cost of major Costs of major inspections are Cost of major inspections is recognized in
Inspections generally expensed when incurred. the carrying amount of PPE, if recognition

criteria are satisfied and any remaining
carrying amount of the cost of previous
inspection is derecognized.

Intangible Assets: Significant Differences between AS 26 and Ind AS 38

TOPIC AS 26 IND AS 38

Separately No such provision In the case of separately acquired
acquired intangibles, the criterion of probable inflow
Intangible of expected future economic benefits is
assets always considered satisfied, even if there
is uncertainty about the timing or the
amount of the inflow.

Revenue based Does not specifically deal with revenue There is a rebuttable presumption that
amortization
method based amortization method an amortization method that is based on

the revenue generated by an activity that

includes the use of an intangible asset

is inappropriate. Ind AS 38 allows use of

revenue based method of amortization of

intangible asset, in a limited way

1.22 BCAS
Referencer
2021-2022

Accounting Standards

TOPIC AS 26 IND AS 38

Payment No such provision If payment for an intangible asset is
deferred deferred beyond normal credit terms, the
beyond normal difference between this amount and the
credit terms total payments is recognized as interest
expense over the period of credit unless
it is capitalized as per Ind AS 23

Acquired in Refers only to intangible assets Ind AS 38 deals in detail in respect of
Business acquired in an amalgamation in the intangible assets acquired in a business
combination nature of purchase and does not refer combination.
to business combinations as a whole

Intangible When an asset is acquired in exchange Requires that if an intangible asset is
assets acquired for another asset, its cost is usually acquired in exchange of a non- monetary
in exchange determined by reference to the fair asset, it should be recognized at the fair
market value of the consideration value of the asset given up unless (a) the
given. It may be appropriate to consider exchange transaction lacks commercial
also the fair market value of the asset substance or (b) the fair value of neither
acquired if this is more clearly evident. the asset received nor the asset given up
An alternative accounting treatment to is reliably measurable.
record the asset acquired at the net
book value of the asset given up; in
each case an adjustment is made for
any balancing receipt or payment of
cash or other consideration also.

Intangible Intangible assets acquired free of When intangible assets are acquired free

Assets acquired charge or for nominal consideration by of charge or for nominal consideration

Free of Charge way of government grant is recognized by way of government grant, an entity

or for a Nominal at nominal value or at acquisition cost, should, in accordance with Ind AS 20,

Consideration as appropriate plus any expenditure record both the grant and the intangible

by way of that is attributable to making the asset asset at fair value.

Government ready for intended use.

Grant

Useful life of an Assumption that the useful life of an Recognizes that the useful life of an
intangible asset intangible asset is always finite, and intangible asset could even be indefinite
includes a rebuttable presumption that subject to fulfillment of certain conditions,
the useful life cannot exceed ten years in which case it should not be amortized
from the date the asset is available for but should be tested for impairment.
use.

Valuation model Revaluation model is not permitted Permits an entity to choose either the

model as its accounting policy cost model or the revaluation

Change in Change in the method of amortization This would be a change in accounting
method of
amortization is a change in accounting policy estimate.

BCAS 1.23
Referencer
2021-2022

Accounting and Auditing

IND AS 40 : Investment Property (No Disclosures
corresponding standard under IGAAP, except – The accounting policy for measurement of
that AS-13 provides for the cost model to be
adopted on similar lines as for Property, Plant investment property.
and Equipment)
– The criteria it uses to distinguish investment
Definition of Investment Property property from owner occupied property and
Investment property is property (land or building from property held for sale in the ordinary
or part of a building or both) held by the owner or course of business.
by the lessee as a right to use the asset) to earn
rentals or for capital appreciation or both rather – The revenue and expenses incurred on the
than for: investment property

– Use in the production or supply of goods or – Contractual obligations associated with the
service or for administrative purpose or investment property.

– Sale in the ordinary course of business – Reconciliation of investment property at
carrying amounts at the beginning and end
of reporting period.

Recognition Ind AS 116 : Leases (applicable w.e.f. April 1,
– Probable that future economic benefits that 2019) (Significantly different from AS 19)

are associated with the investment property Scope
will flow to entity. An entity shall apply this Standard to all leases,
including leases of right-of-use assets in a
– The cost of investment property can be sublease
measured reliably.

Measurement at Recognition Recognition exemptions
An owned investment property shall be A lessee may elect not to apply the Standard to
measured initially at cost. Transaction costs are the following leases:
included in the initial investment. (a) Short-term leases (a lease at the

Deferred payments:- If payment for an commencement date has a lease term of
investment property is deferred, its cost is the 12 months or less and does not contain a
cash price equivalent. purchase option); and
(b) Leases for which the underlying asset is of
Investment property acquired through low value.
exchange of another asset:- The cost of
Investment property is measured at fair value of If a lessee elects not to apply the recognition
Investment property unless: requirements to the above, it shall recognise the
lease payments associated with those leases as
– The exchange transaction lacks commercial an expense on either a straight-line basis over the
substance lease term or another systematic basis.

– The fair value of neither the asset Identifying a lease
received nor the asset given up is reliably At inception of a contract, an entity shall assess
measurable. whether the contract is, or contains, a lease. A
contract is, or contains, a lease if the contract
Derecognition conveys the right to control the use of an
An investment property shall be derecognised identified asset for a period of time in exchange
on disposal or when the investment property is for consideration.
withdrawn permanently from use and no further
economic benefits are expected from its disposal.

1.24 BCAS
Referencer
2021-2022

Accounting Standards

Lease term be readily determined, the lessee shall use the
An entity shall determine the lease term as the lessee’s incremental borrowing rate.)
non-cancellable period of a lease, together with
both: Presentation
A lessee shall either present in the balance sheet,
(a) Periods covered by an option to extend the or disclose in the notes:
lease if the lessee is reasonably certain to
exercise that option; and (a) Right-of-use assets separately from other
assets.
(b) Periods covered by an option to terminate
the lease if the lessee is reasonably certain (b) Lease liabilities separately from other
not to exercise that option. liabilities.

I. LESSEE In the statement of cash flows, a lessee shall
classify:
Recognition
At the commencement date, a lessee shall (a) Cash payments for the principal portion of
recognise a right-of-use asset and a lease the lease liability within financing activities;
liability.
(b) Cash payments for the interest portion of
Measurement the lease liability within financing activities
Initial measurement of the right-of-use asset: applying the requirements in Ind AS 7,
Statement of Cash Flows, for interest paid;
At the commencement date, a lessee shall and
measure the right-of-use asset at cost.
(c) Short-term lease payments, payments
The cost of the right-of-use asset shall comprise: for leases of low-value assets and
variable lease payments not included in the
(a) The amount of the initial measurement of the measurement of the lease liability within
lease liability (as stated below) operating activities.

(b) any lease payments made at or before Disclosures
the commencement date, less any lease A lessee shall disclose (In Tabular Format) the
incentives received; following amounts for the reporting period:

(c) any initial direct costs incurred by the lessee; (a) Depreciation charge for right-of-use assets
and by class of underlying asset;

(d) an estimate of costs to be incurred by the (b) Interest expense on lease liabilities;
lessee in dismantling and removing the
underlying asset, restoring the site on which (c) The expense relating to short-term leases;
it is located or restoring the underlying asset
to the condition required by the terms and (d) The expense relating to leases of low-value
conditions of the lease, unless those costs assets.;
are incurred to produce inventories.
(e) The expense relating to variable lease
Initial measurement of the lease liability: payments not included in the measurement
of lease liabilities;
At the commencement date, a lessee shall
measure the lease liability at the present value of (f) Income from subleasing right-of-use assets;
the lease payments that are not paid at that date.
(g) Total cash outflow for leases;
(The lease payments shall be discounted using
the interest rate implicit in the lease, if that rate (h) Additions to right-of-use assets;
can be readily determined. If that rate cannot
(i) Gains or losses arising from sale and
leaseback transactions; and

BCAS 1.25
Referencer
2021-2022

Accounting and Auditing

(j) The carrying amount of right-of-use assets Practical expedient: As a practical expedient,
at the end of the reporting period by class of the amendments permit lessees, not to assess
underlying asset. whether rent concessions that meet specified
conditions are lease modifications. Hence, the
II. LESSOR lessee can account for those rent concessions as
A lessor shall classify each of its leases as either if they were not lease modifications.
an operating lease or a finance lease.
Conditions to be complied for applying the
Finance Lease practical expedient are as follows:
A lease is classified as a finance lease if it
transfers substantially all the risks and • Rent concession should be direct
rewards incidental to ownership of an underlying consequence of COVID-19 pandemic.
asset and if not then it is operating lease.
• Revise consideration for the lease shall
Recognition and Measurement be substantially the same as, or less than
At the commencement date, a lessor shall the consideration for the lease immediately
recognise assets held under a finance lease preceding changes.
in its balance sheet and present them as a
receivable at an amount equal to the net • Rent consideration should affect only the
investment in the lease. lease payments originally due on or before
30th June 2021
Operating Leases
• There should be no substantive changes to
Recognition and Measurement the terms and conditions of the lease.
A lessor shall recognise lease payments from
operating leases as income on either a straight- The amendment does not affect lessors. Lessors
line basis or another systematic basis. are required to continue to assess if the lease
concessions are lease modifications and account
Presentation for them accordingly.
A lessor shall present underlying assets subject to
operating leases in its balance sheet according to Disclosures
the nature of the underlying asset. A lessor shall disclose (Tabular Format) the
following amounts for the reporting period:
Recent Amendment in Ind AS 116
Ind AS 116 defines a lease modification as a (a) For finance leases:
change in scope of lease, or the consideration (i) Selling profit or loss;
of lease, that was not a part of the original terms
and conditions of the lease. If a change in lease (ii) Finance income on the net investment
payments results from a lease modification, then in the lease; and
unless the change meets particular criteria to
be accounted for as a separate lease, a lessee (iii) Income relating to variable lease
is required to remeasure the lease liability by payments not included in the
discounting the revised lease payments using a measurement of the net investment in
revised discount rate. the lease.

The following amendments have been made (b) For operating leases:
with respect to COVID-19 related to rent (iv) Lease income, separately disclosing
concessions such as rent holidays and income relating to variable lease
temporary rent reductions: payments that do not depend on an
index or a rate.

1.26 BCAS
Referencer
2021-2022

Accounting Standards

Inventories: Significant differences between AS 2 and Ind AS 2

Topic AS 2, Inventories Ind AS 2, Inventories

Inventory No specific guidance Requires that inventory of service provider may be
of Service described as “work- in-progress”.
Provider

Inventory held No specific guidance Does not apply to measurement of inventories held
by Commodity by commodity broker-traders, who measure their
Broker- trader inventories at fair value less costs to sell.

Reversal of No specific guidance Write-down of inventory is reversed if the circumstance
write-down of of write-down no longer exists or when there is clear
inventory evidence of increase in NRV because of change in
circumstances.

The amount of reversal in such cases is limited to
amount of original write-down.

Inventories No specific guidance When an entity purchases inventories on deferred
acquired on
Deferred settlement terms, it effectively contains a financing
Settlement
basis element, being the difference between the purchase

Disclosures price for normal credit terms and the amount paid

which is recognised as interest expense over the

period of the financing.

Provides lesser disclosures Additional disclosures:

like accounting policies, – The carrying amount of inventory at NRV.
total carrying amount and
classification of inventory. – Amount of inventory recognized as expense
during the period.

– The amount of inventory write-down and reversal
thereof.

– Carrying amount of inventory pledged.

Impairment of Assets: Significant Differences between AS 28 and Ind AS 36

Topic AS 28 : Impairment of Assets IND AS 36 : Impairment of Assets

B i o l o g i c a l Does not exclude biological assets Ind AS 36 specifically excludes biological
assets assets related to agricultural activity

I m p a i r m e n t AS 28 does not require the annual Ind AS 36 requires annual impairment

Testing impairment testing for the goodwill testing for an intangible asset with an

unless there is an indication of indefinite useful life or not yet available

impairment for use and goodwill acquired in a

business combination

Reversal of Impairment loss recognised for Ind AS 36 prohibits the recognition of

impairment loss goodwill should be reversed in a reversals of impairment loss for goodwill.

for Goodwill subsequent period when it was caused

by a specific external event of an

exceptional nature that is not expected

to recur and subsequent external

events that have occurred that reverse

the effect of that event. BCAS
Referencer
2021-2022 1.27

Accounting and Auditing

Provisions, Contingent Liabilities and Contingent Assets: Significant difference between AS 29
and Ind AS 37

Topic AS 29 : Provisions, Contingent Ind AS 37 : Provisions, Contingent
Liabilities and Contingent Assets Liabilities and Contingent Assets

Discounting AS 29 prohibits discounting of Ind AS 37 requires discounting the
provisions except in case of amounts of provision, if the effect of
decommissioning, restoration and other time value of money is material.
similar liabilities, that are considered as
a part of cost of PPE.

Recognition of AS 29 requires creation of provision as Ind AS 37 also requires creation of
Provisions
a result of: provision in respect of constructive

a) Normal Business Practices obligation.

b) Customs Consequently, the terms “legal

c) Desire to maintain good business obligation” and “constructive obligation”
relationships have been inserted and defined in Ind
AS 37.
d) To act in equitable manner.

Decommissioning, No specific guidance Ind AS 37 provides guidance on:
Restoration and
similar Liabilities a) Rights to Interests arising from
Decommissioning, Restoration
and Environmental Rehabilitation
Funds

b) Liabilities arising from participating
in Specific Market – Waste
Electrical and Electronic
Equipment and

c) Levies (Imposed by Government)

Future Operating AS 29 states that no provision is to be Ind AS 37 states that no provision is to

Losses made for identifiable future operating be made for identifiable future operating

losses up to the date of restructuring. losses up to the date of restructuring,

except losses related to onerous

contract.

Contingent Assets Contingent Assets are neither Contingent Assets are not recognized
recognized nor disclosed in the but disclosed in financial statements
financial statements. They are usually when an inflow of economic benefits is
disclosed as a part of the report of probable.
approving authority.

R e s t r u c t u r i n g Requires recognition based on general Provision is also required to be made

costs recognition criteria for provisions on basis of constructive obligations.

i.e. when the entity has a present A constructive obligation to restructure

obligation as a result of past event and arises only when an entity has a

liability is considered probable and can detailed formal plan for the restructuring

be reliably estimated. and has raised a valid expectation for

the same.

1.28 BCAS
Referencer
2021-2022

Accounting Standards

Financial Instruments financial asset expire; or

Ind AS 109, 107 and 32 : Financial Instruments – Entity transfers the financial asset and the
(No corresponding Standards under IGAAP, transfer qualifies for derecognition
except AS-13 which provides for classification
of Investments into Long Term and Current with Derecognition of Financial Liabilities (Defined
the valuation of the former being at cost less under Ind-AS 32 below)
provision for diminution other than temporary and – An entity shall derecognise financial liability
at cost or market / fair value, whichever is less
for the latter) when it is extinguished (obligation discharged
or cancelled or expired).
Ind AS 109 : Financial Instruments
– In case of changes or substantial modifications
Scope in terms between the borrower and lender
Ind-AS 109 is applicable to all entities and to all for existing financial liabilities, the old liability
types of Financial Instruments, except as under: should be derecognised and new liability shall
be recognised. Any difference between the
– Entity’s interest in subsidiaries/associates/JV, amount of old and new liability is recognised in
if the entity has opted for disclosure of those profit and loss.
interests at cost
Initial Measurement
– Rights and obligations under leases to which At initial recognition, Financial Assets or Financial
Ind AS 116 applies Liabilities shall be accounted at Fair Value.

– Employers’ rights and obligations under For subsequent measurement, Financial Assets
employee benefit plans, to which Ind AS 19 and Liabilities shall be classified as follows:
applies
Classification of Financial Assets
– Financial Instruments issued by the entity For subsequent measurement, Financial Assets
which meet the definition of an equity are classified as measured at:
instruments as per Ind AS 32 (holder of
those instruments will continue to apply Ind – Amortised Cost; or
AS 109)
– Fair Value through OCI (FVTOCI); or
– Rights and obligations arising under
insurance contracts – Fair Value through P&L (FVTPL).

– Financial Instruments, contracts & obligations The above classification is based on Business
under share based payments to which Ind Model test and SPPI test for characteristics of
AS-102 applies. the asset.

– Rights and obligations within the scope of Amortised Cost
Ind AS 115, except for those that Ind AS 115 Financial Assets to be measured at amortised
specifies that they should be accounted for cost if both the following conditions are satisfied:
in accordance with Ind AS 109
– Business model for the asset is to hold
Initial Recognition financial assets in order to collect contractual
Financial Assets and liabilities to be recognised, cash flows
when and only when, it becomes party to the
contractual provisions of the instruments. – Cash flow from Financial Assets give rise
solely to receipt of principal and interest
(SPPI)

Derecognition of Financial Assets (Defined FVTOCI
under Ind-AS 32 below)
– Contractual rights to the cash flows from the Financial Assets to be measured at FVTOCI if

both the following conditions are satisfied:

BCAS 1.29
Referencer
2021-2022

Accounting and Auditing

– Business model for the asset is to hold Interest revenue shall be calculated by using
financial assets in order to collect contractual Effective Interest Rate (EIR) method. That EIR is
cash flows/selling financial assets. applied to the gross carrying value of Financial
Assets to arrive at interest income.
– Cash flow from Financial Assets give rise to
receipt of principal interest Not applicable in case of credit impaired financial
assets.
FVTPL
– Residual Financial Assets EIR is a rate that exactly discounts estimated
future cash flows through life of financial assets or
Notes liabilities to the gross carrying amount of Financial
– For particular investment in equity Assets or liabilities.

instruments, an entity has irrevocable Impairment
election at initial recognition to recognise the An entity shall recognise Expected Credit Loss
same at FVTPL or FVTOCI. (ECL) allowance on a financial assets measured
in accordance with Ind AS 109. The ECL shall be
– In order to remove accounting mismatch, the measured in a way that reflects:
entity may, at initial recognition, irrevocably
designate a financial asset as measured at – an unbiased and probability weighted amount
FVTPL. that is determined by evaluation of a range
of possible outcomes.
Business Model Test
The entity’s business model refers to how an – Time value of money should be considered
entity manages its financial assets in order to
generate cash flows. Cash flow can be generated – Supported by reasonable information
through collecting contractual cash flows, selling available at undue costs.
financial assets or both. This test should not be
performed on the basis of “worst case scenarios”. Derivatives
A Derivative is a financial instrument or other
SPPI Test contract within the scope of Ind AS 109 with all
SPPI Test refers to Financial Assets held solely three of the following characteristics:
for receipt of principal and interest on the principal
outstanding. – Its value changes in response to the change
in underlying variable.
Classification of Financial Liabilities
At subsequent measurement, Financial Liabilities – It requires no initial net investment /
are measured at amortised cost except mainly investment smaller than underlying amount.
for Financial Liabilities measured at FVTPL
(such liabilities mainly comprise of Derivative – It is settled at future date.
instruments classified as liability) and contingent
consideration liabilities which are also recorded Measurement of Derivatives
at FVTPL. Derivatives instruments are measured at
FVTPL (other than derivative used as hedging
In order to remove accounting mismatch, the instruments).
entity has an option to designate Financial
Liability at FVTPL. Hedge Accounting
Hedge instrument is a financial instrument,
Amortised Cost Measurement whose fair value or cash flow is expected to
EIR Method offset changes in the fair value or cash flow of a
designated hedge items.

There are three types of hedging relationships:

1.30 BCAS
Referencer
2021-2022

Accounting Standards

(i) Fair Value Hedge: hedge against changes Situation Treatment
in Fair Value of a recognised asset/liability or
unrecognised firm commitment. H e d g i n g Remove amount from
item is Non- Cash Flow Hedge
Accounting of FV Hedge: F i n a n c i a l Reserve and adjust the
Asset/Liability same to carrying value
– Gain/Loss on the hedge instruments
shall be recognised in profit and loss of Non-Financial Asset/
(if hedged item is equity instruments Liability.
measured at FVTOCI, gain/loss to be
recognised in OCI). No impact on OCI

– The hedging gain/loss on the hedged Other than R e c l a s s i f i c a t i o n
item shall adjust the carrying value of above adjustment. Amount
the hedged items & shall be recognised should be reclassified to
in profit and loss (OCI in case of equity Cash flow Hedge Reserve
instruments measured at FVTOCI) to Profit or Loss.

(ii) Unrecognised Firm Commitment- changes In case of Reclassify amount
in FV of hedged item shall be recognised in
profit and loss. loss and it is expected not to be

(iii) Cash Flow Hedge: A hedge of exposure to expected that recovered in P&L
a variability in cash flows of highly probable
forecast transaction. at least part

Accounting of CF Hedge: loss will not be
– A separate component of equity
associated with the hedged item (Cash recovered
Flow Hedge Reserve) is created.
(iv) Hedge of a net investment in a foreign
– Cumulative gain or loss on the hedging operations as defined in Ind AS 21.
instrument from inception of the hedge
or cumulative change in FV of hedged Accounting of Net Investment Hedge:
item from inception of the hedge,
whichever is lower is transferred to – Gain/Loss on Effective hedge portion to
Cash Flow Hedge Reserve be recognised in OCI.

– Gain or loss on the hedging instrument – Remaining shall be recognised in P&L
to the extent of effective hedge (high
degree of co-relation between the Ind AS 32: Financial Instruments Presentation
hedge instrument and the hedge
items reflected through an hedge Scope
ratio of one) is recognised in OCI. Ind-AS 32 is applicable to all entities and to all
types of Financial Instruments, except for the
– Remaining gain/loss on hedging following:
instrument is recognised in profit and
loss. – Entity’s interest in subsidiaries/associates/
JV, if the entity has opted for disclose those
– Treatment of amount accumulated in interests at cost.
Cash Flow Hedge:
– Employers’ rights and obligations under
employee benefit plans, to which Ind AS 19
applies

– Rights and obligations & financial instruments
under insurance contracts

– Financial Instruments, contracts & obligations
under share based payments to which Ind
AS-102 applies.

BCAS 1.31
Referencer
2021-2022

Accounting and Auditing

Definitions asset for a fixed number of the entity’s
Financial Instrument is any contract that gives own equity instruments.
rise to a financial asset of one entity or financial
liability or equity instrument of another entity. Equity Instrument is any contract that evidences
a residual interest in the asset of an entity after
Financial Liability is any liability that is: deducting all its liabilities.

(a) a contractual obligation : Puttable instrument is a financial instrument that
gives the holder the right to put the instrument
(i) to deliver cash or another financial back to the issuer for cash or another financial
asset to another entity; or asset or is automatically put back to the issuer
on the occurrence of an uncertain future event or
(ii) to exchange financial assets or the death or retirement of the instrument holder.
financial liabilities with another entity
under conditions that are potentially Compound Financial Instrument
unfavourable to the entity; or It is a non-derivative financial instrument which
contains characteristics of financial liability and
(b) a contract that will or may be settled in the equity. Such components shall be classified
entity’s own equity instruments and is: separately as Financial Liabilities, asset or equity.

(i) a non-derivative for which the entity is Treasury Shares
or may be obliged to deliver a variable If an entity reacquires its own equity instruments,
number of the entity’s own equity those instruments shall be deducted from equity.
instruments; No gain/loss to be recognised on purchase,
sale, issue or cancellation of entity’s own equity
or instruments.

(ii) a derivative that will or may be settled Offsetting Financial Asset and Liabilities
other than by the exchange of a fixed Offsetting to be done when and only when the
amount of cash or another financial entity has current, legally enforceable right to set
asset for a fixed number of the entity’s off the recognised amounts and it intends to do
own equity instruments. so.

Financial Asset is any liability that is: Right of set-off must be not contingent on future
events and must be legally enforceable in all of
– Cash the following conditions:

– Equity instrument of another entity – the normal course of business

– Contractual right to receive cash or another – the event of default
financial asset from another entity
– the event of insolvency or bankruptcy of the
– Contractual right to exchange financial asset entity and all the counterparties.
or financial liability with another entity under
condition which are favourable to the entity Ind AS 107: Financial Instruments- Disclosures

– Contract that will be or may be settled in the Balance Sheet Disclosures
entity’s own equity instruments and is:
Categories of Financial Assets and Liabilities
• a non-derivative for which the entity is – Financial assets measured at fair value
or may be obliged to deliver a variable
number of the entity’s own equity through profit or loss, showing separately:
instruments; (i) those designated as such upon initial
recognition or subsequently in accordance
• or

• a derivative that will or may be settled
other than by the exchange of a fixed
amount of cash or another financial

1.32 BCAS
Referencer
2021-2022

Accounting Standards

with Ind AS 109 and (ii) those mandatorily include changes in an observed
measured at fair value through profit or loss (benchmark) interest rate,
in accordance with Ind AS 109. commodity price, foreign exchange
rate or index of prices or rates.
– Financial liabilities at fair value through
profit or loss, showing separately: (i) – the amount of the change in the
those designated as such upon initial fair value of any related credit
recognition or subsequently in accordance derivatives or similar instruments
with Ind AS 109 and (ii) those that meet the that has occurred during the
definition of held for trading in Ind AS 109. period and cumulatively since the
financial asset was designated.
– Financial Assets and Liabilities at
amortised cost. In respect of Financial Liabilities at FVTPL, the
following specific disclosures are required to be
– Financial assets measured at fair given:
value through OCI, showing separately
(i) financial assets that are so measured – the amount of change, cumulatively, in the
in accordance with Ind AS 109; and (ii) fair value of the financial liability that is
investments in equity instruments attributable to changes in the credit risk of
designated as such upon initial recognition that liability.
in accordance with Ind AS 109.
– the difference between the financial liability’s
Financial Assets or Liabilities at FVTPL carrying amount and the amount the entity
In respect of Financial Assets or groups would be contractually required to pay at
thereon not mandatorily required to be maturity to the holder of the obligation.
classified at FVTPL, the following specific
disclosures are required to be given: – any transfers of the cumulative gain or loss
within equity during the period including the
– the maximum exposure to credit risk at the reason for such transfers.
end of the reporting period.
– if a liability is derecognised during the period,
– the amount by which any related credit the amount (if any) presented in OCI.
derivatives or similar instruments mitigate
that maximum exposure to credit risk Equity Investments designated at FVTOCI
– The specific investments in equity
– the amount of change, during the period and
cumulatively, in the fair value of the financial instruments have been designated to be
asset (or group thereon) that is attributable measured at FVTOCI and the reasons for
to changes in the credit risk of the financial using this presentation alternative.
asset determined either:
– The fair value of each such investment at the
a) as the amount of change in its fair end of the reporting period.
value that is not attributable to changes
in market conditions that give rise to – Dividends recognised during the period,
market risk ; or showing separately those related to
investments derecognised during the
b) using an alternative method the entity reporting period and those related to
believes more faithfully represents the investments held at the end of the reporting
amount of change in its fair value that period.
is attributable to changes in the credit
risk of the asset. – Any transfers of the cumulative gain or loss
within equity during the period including the
– Changes in market conditions reason for such transfers
that give rise to market risk
– In case of de recognition / disposal:

BCAS 1.33
Referencer
2021-2022

Accounting and Auditing

a) Reasons for disposal b) the amounts that are set-off in accordance
with the criteria in Ind AS 32 when
b) Fair value on date of disposal determining the net amounts presented in
the statement of financial position;
c) Cumulative gain or loss on disposal
c) the net amounts presented in the balance
d) Reclassification of Financial Assets sheet;

Reclassification of Financial Assets and d) the amounts subject to an enforceable
Liabilities master netting arrangement or similar
agreement that are not otherwise included in
– the date of reclassification. paragraph (b) above, including: (i) amounts
related to recognised financial instruments
– a detailed explanation of the change in that do not meet some or all of the offsetting
business model and a qualitative description criteria in Ind AS 32; and (ii) amounts
of its effect on the entity’s financial related to financial collateral (including cash
statements. collateral); and

– the amount reclassified into and out of each e) the net amount after deducting the amounts
category. in (d) from the amounts in (c) above

– For each reporting period following Collateral
reclassification until derecognition, an entity – the carrying amount of financial assets it
shall disclose for assets reclassified out of
the FVTPL so that they are measured at has pledged as collateral for liabilities or
amortised cost or FVTOCI: contingent liabilities, including amounts that
have been reclassified; and
a) The effective interest rate determined
on the date of reclassification; and – the terms and conditions relating to its
pledge.
b) The interest revenue recognised.
– When an entity holds collateral (of financial
– If, since its last annual reporting date, an or non-financial assets) and is permitted to
entity has reclassified financial assets out sell or repledge the collateral in the absence
of FVTOCI so that they are measured at of default by the owner of the collateral, it
amortised cost or out of FVTPL, it shall shall disclose:
disclose:
a) the fair value of the collateral held;
a) the fair value of the financial assets at
the end of the reporting period; and b) the fair value of any such collateral sold
or repledged, and whether the entity
b) the fair value gain or loss that would has an obligation to return it; and
have been recognised in profit or loss
or other comprehensive income during c) the terms and conditions associated
the reporting period if the financial with its use of the collateral.
assets had not been reclassified.
Allowance for Credit Losses
Off Setting of Financial Assets and Liabilities – The carrying amount of financial assets
An entity shall disclose, at the end of the reporting
period, the following quantitative information measured at FVTOCI is not reduced by
separately for recognised financial assets and a loss allowance and an entity shall not
recognised financial liabilities which are subject present the loss allowance separately in the
to off-setting: balance sheet as a reduction of the carrying
amount of the financial asset.
a) the gross amounts of those recognised
financial assets and recognised financial
liabilities;

1.34 BCAS
Referencer
2021-2022

Accounting Standards

– However, an entity shall disclose the loss – For financial liabilities designated as at fair
allowance in the notes to the financial value through profit or loss, an entity shall
statements. show separately the amount of gain or loss
recognised in other comprehensive income
Compound Financial Instruments with Multiple and the amount recognised in profit or loss.
Embedded Derivatives
If an entity has issued an instrument that contains – Net gains or losses on financial liabilities and
both a liability and an equity component and has financial assets measured at amortised cost.
multiple embedded derivatives whose values are
interdependent (such as a callable convertible – Net gains or losses on investments in equity
debt instrument), it shall disclose the existence of instruments designated at FVTOCI.
those features.
– Net gains or losses on financial assets
Defaults and Breaches measured at FVTOCI showing separately
– For loans payable recognised at the end of the amount of gain or loss recognised in OCI
during the period and the amount reclassified
the reporting period, an entity shall disclose: upon derecognition from accumulated OCI to
profit or loss for the period.
a) details of any defaults during the period
of principal, interest, sinking fund, – Total interest revenue and total interest
or redemption terms of those loans expense (calculated using the effective interest
payable; method) for financial assets that are measured
at amortised cost or that are measured at
b) the carrying amount of the loans FVTOCI (showing these amounts separately);
payable in default at the end of the or financial liabilities that are not measured at
reporting period; and fair value through profit or loss

c) whether the default was remedied, or – Fee income and expense (other than
the terms of the loans payable were amounts included in determining the effective
renegotiated, before the financial interest rate) arising from:
statements were approved for issue.
a) financial assets and financial liabilities
– If, during the period, there were breaches that are not FVTPL; and
of loan agreement terms other than those
described above (i.e. various covenants), an b) trust ansd other fiduciary activities that
entity shall disclose the same information as result in the holding or investing of
required above, if those breaches permitted assets on behalf of individuals, trusts,
the lender to demand accelerated repayment retirement benefit plans, and other
(unless the breaches were remedied, or the institutions.
terms of the loan were renegotiated, on or
before the end of the reporting period). Other Disclosures

Profit and Loss Statement Disclosures Hedge Accounting
– Net gains or losses on financial assets These disclosures can broadly be categorised as
under:
or financial liabilities measured at FVTPL
showing separately those on financial assets – The entity’s risk management strategy
or financial liabilities designated as such and how it is applied to manage the risk
upon initial recognition or subsequently, for each category of risk exposure together
and those on financial assets or financial with the hedging instruments that are
liabilities that are mandatorily measured at used, including the manner of use thereof,
FVTPL the economic relationship between the
hedged item and the hedging instrument

BCAS 1.35
Referencer
2021-2022

Accounting and Auditing

for assessing hedge effectiveness and the of fair value hedge adjustments

manner of establishment of the hedge ratio on the hedged item included in the

and the sources of hedge ineffectiveness. carrying amount of the hedged item

– An entity shall disclose by risk category recognised in the balance sheet
quantitative information to allow users of (presenting assets separately from
its financial statements to evaluate the terms liabilities); (iii) the line item in the
and conditions of hedging instruments balance sheet that includes the hedged
and how they affect the amount, timing item; (iv) the change in value of the
and uncertainty of future cash flows of hedged item used as the basis for
the entity. For this purpose, the entity shall recognising hedge ineffectiveness for
provide a breakdown that discloses: the period; and (v) the accumulated
amount of fair value hedge adjustments
a) a profile of the timing of the nominal remaining in the balance sheet for any
amount of the hedging instrument; and hedged items that have ceased to be

b) if applicable, the average price or rate adjusted for hedging gains and losses .

(for example strike or forward prices b) for cash flow hedges and hedges
etc.) of the hedging instrument. of a net investment in a foreign

– An entity shall disclose, in a tabular operation: (i) the change in value

format, the following amounts related to of the hedged item used as

items designated as hedging instruments the basis for recognising hedge

separately by risk category for each type ineffectiveness for the period (i.e.

of hedge (fair value hedge, cash flow hedge for cash flow hedges the change in

or hedge of a net investment in a foreign value used to determine the recognised

operation): hedge ineffectiveness; (ii) the balances

a) the carrying amount of the hedging in the cash flow hedge reserve and

instruments (financial assets the foreign currency translation

separately from financial liabilities); reserve for continuing hedges; and

b) the line item in the balance sheet that (iii) the balances remaining in the cash
includes the hedging instrument; flow hedge reserve and the foreign
currency translation reserve from any
c) the change in fair value of the
hedging relationships for which hedge
hedging instrument used as the basis
accounting is no longer applied.
for recognising hedge ineffectiveness
for the period; and – An entity shall disclose, in a tabular format,
the following amounts separately by risk
d) the nominal amounts (including
category for the types of hedges as follows:
quantities such as tonnes or cubic
metres) of the hedging instruments. a) for fair value hedges: (i) hedge
ineffectiveness—i.e. the difference
– An entity shall disclose, in a tabular format,
between the hedging gains or losses
the following amounts related to hedged
of the hedging instrument and the
items separately by risk category for the
hedged item—recognised in profit or
types of hedges as follows:
loss (or other comprehensive income

a) for fair value hedges: (i) the for hedges of an equity instrument

carrying amount of the hedged for which an entity has elected to

item recognised in the balance sheet present changes in fair value in other

(presenting assets separately from comprehensive income; and (ii) the line

liabilities); (ii) the accumulated amount item in the statement of profit and loss

1.36 BCAS
Referencer
2021-2022

Accounting Standards

that includes the recognised hedge – objectives, policies and processes for
ineffectiveness. managing the risk and the methods used to
measure the risk; and
b) for cash flow hedges and hedges
of a net investment in a foreign – any changes in the above from the previous
operation: (i) hedging gains or period.
losses of the reporting period that were
recognised in other comprehensive Common Quantitative Disclosures (for each
income; (ii) hedge ineffectiveness type of risk)
recognised in profit or loss; (iii) the
line item in the statement of profit – Summary quantitative data about its
and loss that includes the recognised exposure to that risk at the end of the
hedge ineffectiveness; (iv) the reporting period. This disclosure shall be
amount reclassified from the cash based on the information provided internally
flow hedge reserve or the foreign to key management personnel of the entity
currency translation reserve into (as defined in Ind AS 24, Related Party
profit or loss as a reclassification Disclosures).
adjustment; (v) the line item in the
statement of profit and loss that – the disclosures on Credit Risk, Liquidity Risk
includes the reclassification adjustment and Market Risk (discussed later).
; and (vi) for hedges of net positions,
the hedging gains or losses – Concentrations of risk if not apparent from
recognised in a separate line item in the disclosures made above.
the statement of profit and loss
Credit Risk
Fair Value Disclosures (In addition to those – Maximum amount of exposure before
covered in Ind AS-113)
These disclosures can broadly be categorised as deducting value of collateral.
under:
– Description of the collateral.
– For each class of financial assets and
financial liabilities an entity shall disclose the – Information about the credit quality of
fair value of that class of assets and liabilities financial assets that are neither past due or
in a way that permits it to be compared with impaired.
its carrying amount.
– Information about the credit quality of
– In disclosing fair values, an entity shall group financial assets whose terms have been
financial assets and financial liabilities into renegotiated.
classes, but shall offset them only to the
extent that their carrying amounts are offset – Analytical disclosures about financial assets
in the balance sheet. which are past due or impaired.

– Description of how the fair value was Liquidity Risk
determined. – Maturity analysis for non-derivative financial

– Details / reasons if the fair value cannot be liabilities (including issued financial
determined. guarantee contracts) that shows the
remaining contractual maturities.
Risk Disclosures
– Maturity analysis for derivative financial
Qualitative Disclosures (for each type of risk) liabilities. The maturity analysis shall include
– the exposures to risk and how they arise; the remaining contractual maturities for
those derivative financial liabilities for which
contractual maturities are essential for an
understanding of the timing of the cash
flows.

BCAS 1.37
Referencer
2021-2022

Accounting and Auditing

– Description of how the entity manages the involvement, the total carrying amount of
liquidity risk as determined above. the original assets before the transfer, the
carrying amount of the assets that the entity
Market Risk continues to recognise, and the carrying
– A sensitivity analysis for each type of market amount of the associated liabilities.

risk to which the entity is exposed at the end In case of assets which are derecognised in
of the reporting period, showing how profit entirety, the following disclosures are required to
or loss and equity would have been affected be given:
by changes in the relevant risk variable that
were reasonably possible at that date; – Carrying amount of the assets and liabilities
that are recognised in the entity’s balance
– The methods and assumptions used in sheet and represent the entity’s continuing
preparing the sensitivity analysis; and involvement in the derecognised financial
assets, and the line items in which the
– Changes from the previous period in the carrying amount of those assets and
methods and assumptions used, and the liabilities are recognised.
reasons for such changes.
– Fair value of the assets and liabilities that
Transfers of Financial Assets represent the entity’s continuing involvement
The disclosures which need to be given depend in the derecognised financial assets.
upon whether the assets are derecognised or not
in entirety. – Amount that best represents the entity’s
maximum exposure to loss from its
In case of assets which are not derecognised in continuing involvement in the derecognised
entirety, the following disclosures are required to financial assets, and information showing
be given: how the maximum exposure to loss is
determined.
– Nature of the transferred assets.
– Undiscounted cash outflows that would or
– Nature of the risks and rewards of ownership may be required to repurchase derecognised
to which the entity is exposed. financial assets or other amounts payable to
the transferee in respect of the transferred
– Description of the nature of the relationship assets. If the cash outflow is variable then
between the transferred assets and the the amount disclosed should be based on
associated liabilities, including restrictions the conditions that exist at each reporting
arising from the transfer on the reporting date.
entity’s use of the transferred assets.
– Maturity analysis of the undiscounted cash
– When the counterparty (counterparties) to outflows that would or may be required to
the associated liabilities has (have) recourse repurchase the derecognised financial assets
only to the transferred assets, a schedule or other amounts payable to the transferee
that sets out the fair value of the transferred in respect of the transferred assets, showing
assets, the fair value of the associated the remaining contractual maturities of the
liabilities and the net position (the difference entity’s continuing involvement.
between the fair value of the transferred
assets and the associated liabilities). – Qualitative information that explains and
supports the above quantitative disclosures
– When the entity continues to recognise all of
the transferred assets, the carrying amounts – Gain or loss recognised at the date of
of the transferred assets and the associated transfer of the assets.
liabilities.
– Income and Expenses recognised, both in
– When the entity continues to recognise the reporting period and cumulatively, from
the assets to the extent of its continuing

1.38 BCAS
Referencer
2021-2022

Accounting Standards

the entity’s continuing involvement in the Definition of Business (amended w.e.f. 01-04-
derecognised financial assets (e.g. fair value 2020)
changes in derivative instruments).
An integrated set of activities and assets that is
Disclosures pertaining to interest rate capable of being conducted and managed for
benchmark reforms the purpose of providing goods or services to
The amendments introduced following disclosures customers, generating investment income (such
to be made by an entity in respect of hedging as dividends or interest) or generating other
relationships to which it applies the exceptions income from ordinary activities.
provided under Ind AS 109 (interest rate
benchmark reform) (Applicable w.e.f. 01-04-2020): Recognition Principles
Business Combinations need to be recognised
a. Significant interest rate benchmarks to which based on the acquisition method which requires
entity’s hedging relationships are exposed. the following steps:

b. Extent of risk exposure the entity manages – Identifying the acquirer
that is directly affected by the interest rate
benchmark reform. – Determining the acquisition date

c. How the entity is managing the process to – Recognising and measuring the identifiable
transition to alternative benchmark rates. assets acquired, liabilities assumed
(including any contingent liabilities) and non-
d. A description of significant assumptions are controlling interest in acquiree
judgements the entity made (for example,
assumptions of judgements about when – Recognising and measuring goodwill.
the uncertainty arising from interest rate
benchmark reform is no longer present with The acquirer should measure the identifiable
respect to the timing and the amount of assets acquired and liabilities assumed at their
interest rate benchmark-based cash flows) acquisition date fair values.
and
After initial recognition and until the liabilities is
e. The nominal amount of the hedging settled, cancelled or expires, the acquirer shall
instruments and those hedging relationships. measure a contingent liabilities recognised in
business combination at the higher of:
III. Group Accounts
– Amount that should be recognised as per Ind
Ind AS 103: Business Combination AS 37; and
(Significantly different from AS-14 which
provides for adoption of the Purchase Method – Amount initially recognised less the
or Pooling of Interest Method and the use of cumulative amount of income recognised in
fair value is optional in case of the former) accordance with Ind AS 115.

Scope Acquisition Date
It applies to transactions or other events that It is the date on which the acquirer obtains control
meets the definition of a business. It does not of the acquired entity.
apply:
Business Combination acquired in stages
– Accounting for formation of Joint If the business combination is achieved in stages,
Arrangement in the Financial Statements or the acquirer has obtain control over the acquire
the Joint Arrangement itself. by increasing the existing equity, in such a case,
the previously held equity interest is remeasured
– The acquisition of an asset or a group of at the acquisition date fair value and resulting
asset that does not constitute a business. gain or losses are recognised as profit or loss.

BCAS 1.39
Referencer
2021-2022

Accounting and Auditing

Accounting for Acquisition related Costs had occurred from the beginning of the
Acquisition costs are accounted for as expenses preceding period.
in the period in which those costs are incurred
and services are rendered. – Consideration measurement:

Measuring Non-Controlling Interest (NCI) a) Securities: At nominal value
NCI can be measured either:
b) Assets other than cash: At fair value
– At fair value on acquisition date
– Identity of the reserves shall be preserved in
– On the basis of proportionate share of the merged financial statement
acquired company’s identifiable net assets.
Any difference whether positive or negative
Goodwill/Capital Reserve or Bargain Purchase shall be adjusted against the capital reserve or
Gain “Amalgamation Adjustment Deficit Account” under
The goodwill is measured as difference between some cases. No goodwill to be recognized.
“A” and “B”, where “A” and “B” are:
The extent of non-controlling interests in each
A. The aggregate of: of the combining entities before and after
the business combination is not relevant in
– The acquisition date fair value of the determining whether the combination under
consideration transferred (including fair Common Control.
value of any contingent consideration)
Amendments in Ind-AS 103 w.e.f. 01-04-2020
– The amount of any NCI in the acquiree; In order to ascertain whether acquired sets
and of assets or activities constitute a ‘business’,
definition of business is important. The definition
– In Business Combination achieved in of business has been changed w.e.f. 01-04-2020
stages, acquisition date fair value of as follows:
the acquirer’s previously held equity
interest in the entity. Old Definition New Definition

B. Net of the acquisition date fair value of Business as ‘an Business is ‘an
identifiable assets acquired and liabilities
assumed. integrated set of integrated set of

In case, A-B is negative, the resulting gain is activities and assets activities and assets
recognised in the OCI and accumulated in equity
as Capital Reserve. that is capable of that is capable of

being conducted being conducted

and managed for the and managed for the

purpose of providing purpose of providing

Subsequent Measurement of Goodwill a return in form of goods or services to
Goodwill is not amortised but tested for
dividends, lower costs customers, generating
impairment on an annual basis or more frequently.
or other economic investment income

benefits directly to (such as dividends or

Accounting for Business Combination under investors or other interests) or generating
Common Control (Appendix C of Ind AS 103)
– The assets and liabilities of the combining owners, members or other income from

entities are reflected at their carrying participants’ ordinary activities’
amounts.
New amendments also provide “Optional
– No adjustments for fair value except to Concentration Test”. That test is met if
harmonise accounting policies. substantially all of the fair value of the group
of assets acquired is concentrated in a single
– Financial Information of prior periods should identifiable asset. If entity conducts that test and
be restated as if the business combination that test is met, the acquisition is to be classified
as acquisition of assets. In other case, i.e. the

1.40 BCAS
Referencer
2021-2022

Accounting Standards

entity does not conduct that test or that test is not – Measures and evaluates the performance

met, it is to be ascertained whether acquisition substantially on investment on fair value

meets the definition of Business as above. basis.

The amendments also prescribe how to assess Uniform accounting Policies
whether an acquired process is substantive in A parent shall prepare consolidated financial
the situations when a set of activities and assets statements using uniform accounting policies
do not have outputs at the acquisition date and for like transactions and other events in similar
a set of activities and assets have output at the circumstances.
acquisition date.
Non-Controlling Interest
Ind AS 110: Consolidated Financial Statements The parent shall present non-controlling interest
(Significantly different from AS-21 on the in the consolidated balance sheet within equity,
assessment of control which is primarily separately from the equity of the owners of the
driven by the legal form as against substance parents.
of the arrangement / relationship under
IndAS-110 and in respect of certain other An entity shall attribute the profit or loss at each
matters as highlighted below) component of OCI to the owners and to the NCI.

Assessment of Control The entity shall also attribute total comprehensive
For an investor to control an investee, the investor income to the owners and to the NCI even if this
must possess all of the following elements: results in NCI having deficit balance.

– Power over investee which is described as Reporting Dates
having existing rights and the current ability The difference between the reporting date of
to direct the activities of the investee that subsidiary and that of the parent should not be
significantly affect the investee’s returns more than 3 months.

– Exposures or rights to variable returns from Disposals
its involvement with investee Changes in parent’s ownership interest in a
subsidiary without a loss of control are accounted
– Ability to use power over investee to affect for as equity transactions.
the investor’s return.
If a parent loses control of a subsidiary, it shall:
For assessment of control over an investee,
potential voting rights are considered only if rights – Derecognise the assets and liabilities of
are substantive and holder has practical ability to the former subsidiary from the consolidated
exercise the same. balance sheet.

Exclusion from Consolidation – Recognise any investment retained in the
Only an investment entity which meets all former subsidiary at its fair value when
the following criteria is to be excluded from control is lost and subsequently account
consolidation: for it and for any amounts owed by or to
the former subsidiary in accordance with
– Obtains funds from one or more investors relevant Ind AS. That fair value should be
for the purposes of providing those investors regarded as fair value on initial recognition
with investment management services of Financial Asset in accordance with Ind AS
109 or when appropriate, the cost of initial
– It commits to its investors that its business recognition of investment in Associate / JV.
purpose is to invest funds solely for returns
from capital appreciation, investment income – Recognise gain/loss associated with loss of
or both. control from former controlling interest.

BCAS 1.41
Referencer
2021-2022

Accounting and Auditing

Significant Differences between AS 23, 27 and Ind AS 28

Topic AS 23 Accounting for Investments Ind AS 28 - Investments in Joint
in Associates in Consolidated Ventures and Associates
Financial Statements & AS-27

Financial Reporting of Interests in
Joint Ventures

Scope There is no exemption for Investments Investments by venture capital

made by venture capital organisations, organizations, mutual funds, unit

mutual funds, unit trusts and similar trusts and similar entities including

entities. investment-linked Insurance funds are

exempted from applying equity method,

if an election is made to measure such

investments at FVTPL in accordance

with Ind AS 109.

Significant Defined as ‘power to participate in Defined as ‘power to participate in the
influence
the financial and/or operating policy financial and operating policy decisions

decisions of investee but is not control of investee but is not control or joint

over those policies control over those policies. IND AS

defines joint control also in line with the

definition of control as per Ind AS-110

above

Potential equity For considering share ownership for Existence and effect of potential voting
shares the purpose of significant influence, rights that are currently exercisable
potential equity shares of investee held or convertible are considered when
by investor are not taken into account. assessing whether an entity has

significant influence or not

Equity method Requires application of equity method Requires application of equity method in

only for investment in associates case of investment in associates as well

as Jointly controlled entities.

Exemption One of the exemptions from applying No such exemption in IND AS 28
equity method is where the associate
operates under severe long-term
restrictions that significantly impair its
ability to transfer funds to investee.

Difference in Permits use of financial statements of Length of difference in reporting dates
Reporting dates associate drawn up to a date different of associate or joint venture should not
from date of financial statements of be more than three months.
investor when it is impracticable to draw
the financial statements of the associate
up to the date of financial statements
of investor. There is no limit on the
length of difference in reporting dates of
investor and associate.

1.42 BCAS
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Accounting Standards

Topic AS 23 Accounting for Investments Ind AS 28 - Investments in Joint
in Associates in Consolidated Ventures and Associates
Accounting Financial Statements & AS-27
policies
Financial Reporting of Interests in
Share in losses Joint Ventures

Provides exemption that if it is not Provides that entity’s financial

possible to make adjustments to statements shall be prepared using

accounting policies of associate, the uniform accounting policies for like

fact shall be disclosed along with a brief transactions and events in similar

description of differences between the circumstances unless, in case of an

accounting policies. associate, it is impracticable to do so.

Investor’s share of losses in the Carrying amount of investment in

associate is recognized to the extent associate or JV determined using

of carrying amount of investment in the equity method together with any long

associate. term interests that in substance form

part of entity’s net investment in the

associate or JV shall be considered for

recognizing entity’s share of losses in

associate or JV

IV. Presentation and Disclosure A fair value measurement of a non-financial asset
takes into account a market participant’s ability to
Ind AS 113: Fair Value Measurement generate economic benefits by using the asset in
its highest and best use or by selling it to another
Meaning of Fair Value market participant that would use the asset in its
Fair value is the price that would be received to highest and best use.
sell an asset or paid to transfer a liability in an
orderly transaction between market participants Hierarchy of Fair Value Measurement
at the measurement date. The fair value All assets and liabilities for which fair value is
measurement is based on the presumption that measured or disclosed in the financial statements
the transaction to sell the asset or transfer the are categorised within the fair value hierarchy,
liability takes place either: described as follows, based on the lowest
level input that is significant to the fair value
– In the principal market for the asset or measurement as a whole:
liability, or
– Level 1 — Quoted (unadjusted) market
– In the absence of a principal market, in the prices in active markets for identical assets
most advantageous market for the asset or or liabilities.
liability
– Level 2 — Valuation techniques for which the
The principal or the most advantageous market lowest level input that is significant to the fair
must be accessible by the entity. value measurement is directly or indirectly
observable.
The fair value of an asset or a liability is
measured using the assumptions that market – Level 3 — Valuation techniques for which the
participants would use when pricing the asset or lowest level input that is significant to the fair
liability, assuming that market participants act in value measurement is unobservable.
their economic best interest.

BCAS 1.43
Referencer
2021-2022

Accounting and Auditing

Disclosures in a position to require an entity to prepare reports
– The extent of usage of fair value in the tailored to their particular information needs.

valuation of assets and liabilities. In general, the financial statements of an entity
provide the following information about:
– The valuation techniques, inputs and
assumptions used in measuring fair value. – assets

– The impact of level 3 fair value – liabilities
measurements on the profit and loss account
or other comprehensive income. – equity

– Reasons for non-recurring fair value – income and expenses, including gain and
measurements. losses

– The fair value hierarchy adopted. – contributions by and distributions to owners
in their capacity as owners
– The reasons for transfer between the
hierarchical levels for recurring fair value – cash flows
measurements.
Components of Financial Statements
– The valuation techniques adopted, including – Balance Sheet as at end of the period
any changes therein, for both recurring and
non-recurring fair value measurements. – Statement of Profit and Loss for the period

– Quantitative information about significant – Statement of Changes in Equity for the
unobservable inputs for recurring level 3 fair period
value measurements.
– Statement of Cash Flow for the period
– The amount of total gains and losses
recognised in profit and loss and OCI, – Notes comprising of Significant Accounting
together with line items in which these Policies and Other explanatory information
are recognised, for recurring fair value
measurements categorised within level 3 of – Comparative information in respect of the
the fair value hierarchy. preceding period

– Sensitivity analysis, both narrative and with – Balance sheet at the beginning of the
quantitative disclosures about the significant preceding period when an entity
unobservable inputs.
o Applies an accounting policy
Ind AS 1: Presentation of Financial Statements retrospectively
(Significantly different from AS-1 which
primarily deals with Disclosure of Accounting o Makes a retrospective restatement of
Policies) items in its financial statements
Ind AS 1 sets out overall requirements for the
presentation of financial statements, guidelines for o When it reclassifies items in its financial
their structure and minimum requirements for their statements
content and ensure comparability.
Departure from Compliance with Ind AS
Ind AS 1 applies while preparing General Purpose In the extremely rare circumstances in which
Financial Statements, both standalone as well as management concludes that compliance with a
consolidated financial statements. This Ind AS is requirement in an Ind AS would be so misleading
not applicable to interim financial statements. that it would conflict with the objective of financial
statements set out in the Framework, the entity
General Purpose Financial Statements are those shall, depart from that requirement of Ind AS and
intended to meet the needs of users who are not inter-alia disclose the following:

– Management’s conclusion that financial
statements give true and fair view

1.44 BCAS
Referencer
2021-2022

Accounting Standards

– It has complied with applicable Ind AS except Consistency of Presentation
particulars of Ind AS requirement(s) not An entity shall retain the presentation and
followed classification of items in the Financial Statements
from one period to the next unless:
– Title of relevant Ind AS
– It is apparent, following a significant change
– Nature of departure in the nature of entity’s operations or a
review of its financial statements, that
– Treatment required by Ind AS and treatment another presentation or classification would
adopted be more appropriate having regard to the
criteria for Ind AS 8.
– Reason for departure
– Ind AS requires change in presentation.
– Financial impact on account of departure
Current/Non-Current Distinction
Going Concern An entity shall present current and non-current
An entity shall prepare financial statements on assets and liabilities separately in its balance
a going concern basis unless the management sheet.
intends to liquidate the entity or to cease trading,
or has no realistic alternative but to do so. An entity shall classify an asset as current
when:
Accrual Basis of accounting
An entity shall prepare its financial statements, – It expects to realise the asset, or intends to
except for cash flow information, using the accrual sell or consume it, in its normal operating
basis of accounting. cycle

Materiality and aggregation – It holds the asset primarily for the purpose of
Definition of Materiality has been changed. As per trading
new definition, information is material if omitting,
misstating or obscuring it could reasonably be – It expects to realise the asset within 12
expected to influence decisions that the primary months after the reporting period
users of general purpose financial statements
make on the basis of those financial statements, – The asset is cash and cash equivalent
which provide financial information about a unless it is restricted
specific reporting entity.
An entity shall classify a liability as current
Omissions or misstatements of items are material when:
if they could, individually or collectively, influence
the economic decision that users make on the – It expects to settle the liability in its normal
basis of the financial statements. operating cycle

An entity shall present separately each material – It holds the liability primarily for the purpose
class of similar items. of trading

An entity need not provide a specific disclosure – The liability is due to be settled within 12
required by an Ind AS if the information is not months after reporting period
material except when required by law.
– It does not have an unconditional right to
Offsetting defer settlement of the liability for at least 12
Offsetting is not permitted unless required or months after the reporting period.
permitted by other Ind AS.
Disclosure of Judgments
An entity is required to disclose in the significant
accounting policies or other notes, the judgments
apart from those involving estimates that the
Management has made in the process of applying

BCAS 1.45
Referencer
2021-2022

Accounting and Auditing

the entity’s accounting policies that have the most Revised Conceptual Framework For IND-AS
significant impact on the amounts recognised in
the financial statements. • What is Framework – A briefIntroduction
A conceptual framework is a statement of
Disclosure of Estimation Uncertainty generally accepted theoretical principles which
An entity is required to disclose information form the frame of reference for a particular field
about the assumptions it makes about the of enquiry. and is not a Standard. It describes
future and other major sources of estimation the objective of, and the concepts for, general
uncertainty at the end of the reporting period, that purpose financial statements and other financial
have a significant risk of resulting in a material reporting. The purpose of the Conceptual
adjustment of the carrying amounts of the assets Framework is to:
and liabilities within the next financial year.
(a) assist to develop Standards that are based
Capital Management Disclosures on consistent concepts;
An entity is required to disclose information
that enables users of the financial statements (b) assist preparers to develop consistent
to evaluate the entity’s objectives, policies and accounting policies when no Standard
processes for managing capital. applies to a particular transaction or other
event, or when a Standard allows a choice
of accounting policies; and

(c) assist all parties to understand and interpret
the Standards.

Framework serves different purpose for different kinds of users as follows:

Users of the Purpose of the Framework
Framework
• Assist in the development of future Ind-AS and review of existing Ind-
Standard setters AS

• Promoting harmonisation and ensuring that the Ind AS are based on
consistent concepts.

Preparers of the Assist in applying existing Ind-AS and help in dealing with topics on which
Financial Statements Ind-ASs are not yet there.

Auditors of the Assist in forming an opinion as to whether financial statements conform with
Financial Statements Indian Accounting Standards

Users of the Financial Assist users of financial statements in interpreting the information contained

Statements in financial statements.

General Public at large Guide on how Ind-AS are formulated

In limited cases where there is conflict between the Framework and Ind-AS, the requirement of Ind-AS
prevails over the Framework.

1.46 BCAS
Referencer
2021-2022

Accounting Standards

Objective Provide useful information to existing and future investors,
lenders and other creditors

Fundamental Relevance Faithful representation
characteristics

• Predictive Value • Completeness
• Confirmatory value • Neutrality
• Entity-specific materiality • Free from error

Enhancing Comparability Verifiability Timeless Understandability
characteristics

Pervasive Cost
constraint

Qualitative Brief Explanation
Characteristics

Fundamental Qualitative Characteristics

Relevance • Relevant financial information is capable of making a difference in the
decisions made by users.

• Financial information is capable of making a difference in decisions if it
has predictive value, confirmatory value or both.

• Predictive value refers to the usefulness of financial information being
used as “Input” to predict future outcome.

• Confirmatory value refers to the usefulness of financial information being
used as feedback about previous evaluations.

F a i t h f u l Financial reports must faithfully represent the substance of the phenomena

representation that it purports to represent. In many circumstances, the substance of an

economic phenomenon and its legal form are the same. If they are not the

same, providing information only about the legal form would not faithfully

represent the economic phenomenon.

faithful representation should be:

1. complete,

2. neutral, and

3. free from error.

Enhancing Qualitative Characteristics

Comparability Users of the Financial Statements should be able to compare FS of the same

entities across periods of times and FS of different entities for same period of

time so as to enable the user to take relevant economic decisions like selling

or holding an investment, or investing in one reporting entity or another.

Comparability is not uniformity. For information to be comparable, like things
must look alike and different things must look different.

BCAS 1.47
Referencer
2021-2022

Accounting and Auditing

Qualitative Brief Explanation
Characteristics
Verifiability Verifiability helps assure users that information faithfully represents the
economic phenomena it purports to represent so that different knowledgeable
Timeliness and independent observers could reach consensus, although not necessarily
complete agreement, that a particular depiction is a faithful representation.
Understandability
Timeliness means having information available to decision-makers in time to
be capable of influencing their decisions. Generally, the older the information
is the less useful it is. However, some information may continue to be timely
long after the end of a reporting period because, for example, some users may
need to identify and assess trends.

Financial Statements should be understandable by the users having
reasonable knowledge of business, economic activities, accounting and
applying reasonable diligence. However, some economic phenomena are
complex and cannot be made easy to understand. Omitting such information
does not enhance qualitative characteristics of the Financial Statements

• Concept of Reporting Entity
A reporting entity is an entity that is required, or chooses, to prepare financial statements. A reporting
entity can be a single entity or a portion of an entity or can comprise more than one entity. A reporting
entity is not necessarily a legal entity.

Determining the appropriate boundary of a reporting entity can be difficult if the reporting entity:

(a) is not a legal entity; and

(b) does not comprise only legal entities linked by a parent-subsidiary relationship.

In such cases, determining the boundary of the reporting entity is driven by the information needs of
the primary users of the financial statements. Those users need relevant information that faithfully
represents what it purports to represent and accordingly:

(a) the boundary of the reporting entity should not contain an arbitrary or incomplete set of economic
activities;

(b) including that set of economic activities within the boundary of the reporting entity results in neutral
information; and

(c) a description should be provided of how the boundary of the reporting entity was determined and
of what constitutes the reporting entity.

• Changes in the Definition of Assets and Liabilities

Existing definition New definition Supporting concept

Asset (of an A resource controlled A present economic
entity) by the entity as a result resource controlled by the
of past events and from entity as a result of past
which future economic events.
benefits are expected to
flow to the entity.

1.48 BCAS
Referencer
2021-2022

Accounting Standards

Existing definition New definition Supporting concept

Economic A right that has the
resource
Liability (of an potential to produce
entity) economic benefits

Obligation A present obligation of the A present obligation of An entity’s obligation to

entity arising from past the entity to transfer an transfer and economic

events, the settlement economic resource as a resource must have the

of which is expected to result of past events. potential to require

result in an outflow from the entity to transfer an

the entity of resources economic resource to

embodying economic another party.

benefits.

A duty of responsibility
that an entity has no
practical ability to avoid.

• Other Key definitions

Fundamental Items Name of the Definition or description
Elements in
the Financial A present obligation of the entity to transfer an economic
Statements resource as a result of past events.
The residual interest in the assets of the entity after
Claim Liability deducting all its liabilities.
Increases in assets, or decreases in liabilities, that
Equity result in increases in equity, other than those relating to
contributions from holders of equity claims.
Changes in economic Income
resources and claims, Decreases in assets, or increases in liabilities, that
reflecting financial result in decreases in equity, other than those relating to
performance distributions to holders of equity claims.
Contributions from holders of equity claims, and
Expenses distributions to them.
Exchanges of assets or liabilities that do not result in
Other changes in – increases or decreases in equity.
economic When the entity loses control of all or part of the
recognised asset.
Derecognition of When the entity no longer has a present obligation for all
Assets of or part of the recognised liability

Derecognition
Liabilities

BCAS 1.49
Referencer
2021-2022

Accounting and Auditing

• Concept of Unit of Account • Concept of Substance of Contracts
The unit of account is the right or the group of To represent contractual rights and obligations
rights, the obligation or the group of obligations, faithfully, financial statements must report their
or the group of rights and obligations, to which substance. In some cases, the substance of such
recognition criteria and measurement concepts rights and obligations is clear from a contract’s
are applied. legal form. But, in other cases, the terms of the
contract, or of a group or series of contracts, may
A unit of account is selected for an asset or require analysis to identify the substance of the
liability when considering how recognition criteria rights and obligations.
and measurement concepts will apply to that
asset or liability and to the related income and All terms in a contract, whether explicit or implicit,
expenses. In some circumstances, it may be are considered unless they have no substance.
appropriate to select one unit of account for Implicit terms could include, for example,
recognition and a different unit of account for obligations imposed by statute, such as statutory
measurement. For example, contracts may warranty obligations imposed on entities that enter
sometimes be recognised individually but into contracts to sell goods to customers.
measured as part of a portfolio of contracts. For
presentation and disclosure, assets, liabilities, Terms that have no substance are disregarded.
income and expenses may need to be aggregated A term has no substance if it has no discernible
or separated into components. effect on the economics of the contract. Terms
that have no substance could include, for
A unit of account is selected to provide useful example:
information, which implies that:
• terms that bind neither party; or
(a) the information provided about the asset or
liability and about any related income and • rights, including options, that the holder will
expenses must be relevant. not have the practical ability to exercise in
any circumstances.
(i) cannot be or are unlikely to be the
subject of separate transactions; • Recognition Guidance included in the
Framework
(ii) cannot or are unlikely to expire in
different patterns; The framework has proposed a new approach to
recognition, which requires decisions to be made
(iii) have similar economic characteristics by reference to the qualitative characteristics of
and risks and hence are likely to have financial information. An entity should recognise
similar implications for the prospects for an asset or a liability (and any related income,
future net cash inflows to the entity or expense or changes in equity) if such recognition
net cash outflows from the entity; or provides users of financial statements with:

(iv) are used together in the business • relevant information about the asset or the
activities conducted by an entity to liability and about any income, expense or
produce cash flows and are measured changes in equity
by reference to estimates of their
interdependent future cash flows. • a faithful representation of the asset or
liability and of any income, expenses or
(b) the information provided about the asset changes in equity, and
or liability and about any related income
and expenses must faithfully represent the • information that results in benefits exceeding
substance of the transaction or other event the cost of providing that information.
from which they have arisen.
A key change to this is the removal of a
‘probability criterion’. This has been removed
as different financial reporting standards apply

1.50 BCAS
Referencer
2021-2022


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