34

Chapter IV

Disclosure Requirements of IAS & AS

35

For better understanding I have divided this chapter into two part first part compare

International Accounting Standard with India Accounting Standard, and second part

compare rule & regulation issued in Yemen with rule & regulation issued in India.

First part (International Accounting Standard & India Accounting Standard)

I am going to start this part by comparative study made by The Institute of Chartered

Accountant of India in which they have compare the International Accounting Standard

with India Accounting Standard which I think it will give better idea about this study as it

is fuscous in the manner. And than I will give brief summary of those accounting

standard and their disclosure requirement followed by my observation about them in the

line of the Institute of Chartered Accounting standard of India.

Table (1)

I. Indian Accounting Standards already issued by the Institute of Chartered

Accountants of India (ICAI) corresponding to the International Accounting

Standards/International Financial Reporting Standards

Sl. No

International Accounting Standards

(IASs)/International Financial

Reporting Standards (IFRSs)

Indian Accounting Standards (ASs)

IAS/

IFRS

No.

Title of the Standard AS

No. Title of the Standard

1 IAS 1 Presentation of Financial

Statements

AS

1

Disclosure of Accounting

Policies

2 IAS 2 Inventories AS

2

Valuation of Inventories

3

Corresponding IAS has been

withdrawn since the matter is

now covered by IAS 16 and

IAS 38

AS

6

Depreciation Accounting

4 IAS 7 Cash Flow Statements AS

3

Cash Flow Statements

5 IAS 8 Accounting Policies, Changes AS Net Profit or Loss for the

36

in Accounting Estimates and

Errors

5 Period, Prior Period Items and

Changes in Accounting Policies

6 IAS

10

Events After the Balance

Sheet Date AS

4

Contingencies and Events

Occurring after the Balance

Sheet Date

7 IAS

11

Construction Contracts AS

7

Construction Contracts

8 IAS

12

Income Taxes AS

22

Accounting for Taxes on

Income

9 IAS

14

Segment Reporting AS

17

Segment Reporting

10 IAS

16

Property, Plant and Equipment AS

10

Accounting for Fixed Assets

11 IAS

17

Leases AS

19

Leases

12 IAS

18

Revenue AS

9

Revenue Recognition

13 IAS

19

Employee Benefits

AS

15

Accounting for Retirement

Benefits in the Financial

Statements of Employers

(recently revised and titled as

'Employee Benefits')

14 IAS

20

Accounting for Government

Grants and Disclosure of

Government Assistance

AS

12

Accounting for Government

Grants

15 IAS

21

The Effects of Changes in

Foreign Exchange Rates

AS

11

The Effects of Changes in

Foreign Exchange Rates

16 IAS

23

Borrowing Costs AS

16

Borrowing Costs

17 IAS Related Party Disclosures AS Related Party Disclosures

37

24 18

18 IAS

27

Consolidated and Separate

Financial Statements

AS

21

Consolidated Financial

Statements

19 IAS

28

Investments in Associates AS

23

Accounting for Investments in

Associates in Consolidated

Financial Statements

20 IAS

31

Interests in Joint Ventures AS

27

Financial Reporting of Interests

in Joint Ventures

21 IAS

33

Earnings Per Share AS

20

Earnings Per Share

22 IAS

34

Interim Financial Reporting AS

25

Interim Financial Reporting

23 IAS

36

Impairment of Assets AS

28

Impairment of Assets

24 IAS

37

Provisions, Contingent

Liabilities and Contingent

Assets

AS

29

Provisions, Contingent

Liabilities and Contingent

Assets

25 IAS

38

Intangible Assets AS

26

Intangible Assets

26

Corresponding IAS has been

withdrawn since the matter is

now covered by IAS 32, 39

and 40

AS

13

Accounting for Investments

27 IAS

40

Investment Property -

Dealt with by Accounting

Standard 13

28 IFRS

3

Business Combinations AS

14

Accounting for Amalgamations

29 IFRS

5

Non-current Assets Held for

Sale and Discontinued

Operations

AS

24

Discontinuing Operations

Further, As 10 deals with

accounting for fixed assets

38

retired from active use.

Table (2)

II. International Accounting Standard/International Financial Reporting Standard

not considered relevant for issuance of either Accounting Standards or the

Guidance Notes by the ICAI for the reasons indicated.

Sl.

No.

International Accounting Standards

(IASs)/International Financial

Reporting Standards (IFRSs) Reasons

IAS/

IFRS

No.

Title of the Standard

1 IAS

29

Financial Reporting in Hyper-

inflationary Economies

The Institute notes that the hyper-

inflationary conditions do not prevail

in India. Accordingly, the subject is

not considered relevant in the Indian

context.

2 IFRS1

First-time Adoption of

International Financial

Reporting Standards

In India, Indian ASs are being adopted

since last many years and IFRSs are

not being adopted for the first time.

Therefore, the IFRS 1 is not relevant to

India at present.

Table (3)

III. Accounting Standards presently under preparation corresponding to the

International Accounting Standards/International Financial Reporting Standards

Sl.

No.

International Accounting Standards

(IASs)/International Financial

Reporting Standards (IFRSs) Status

IAS/

IFRS

No.

Title of the Standard

39

1 IAS

26

Accounting and Reporting by

Retirement Benefit Plans

Under Preparation

2 IAS

30

Disclosure in Financial

Statements of Banks and

Similar Financial Institutions

Under preparation. At present,

Covered by the Banking regulation

Act, 1949; also certain disclosure

norms have been prescribed by the

Reserve Bank of India.

3 IAS

32

Financial Instruments:

Disclosure and Presentation

Under Preparation

4 IAS

39

Financial Instruments:

Recognition and Measurement

Under Preparation

5 IAS

41

Agriculture Under preparation

6 IFRS

2

Share-based Payment Under preparation. At present,

Employee-share based Payments, are

covered by a Guidance Note issued by

the Institute. Further, some other

pronouncements deal with other share-

based payments, e.g., AS 10,

Accounting for Fixed Assets

7 IFRS

4

Insurance Contracts Under preparation

Table (4)

IV. Reconciliation of Indian Accounting Standards with the International

Accounting Standards/International Financial Reporting Standards

A) International Financial Reporting Standards issued by the International

Accounting Standards Board

Number of International Accounting Standards (IASs) issued by the

International Accounting Standards Committee (IASC) (now

International Accounting Standards Board)

41

40

Number of International Financial Reporting Standards issued by IASB 6

Less: Number of IASs since withdrawn (10)

Add: IAS 4 which has been withdrawn, however, included here for

reconciliation purposes because corresponding Accounting Standards of

the ICAI (i.e. AS 6) is still in force

1

38

B) Accounting Standards (ASs) and other documents issued by the Institute of

Chartered Accountants of India

1 Number of Indian Accounting Standards issued (except AS 8 which is

withdrawn pursuant to AS 26 becoming mandatory)

28

2 IAS/IFRS not relevant in the Indian context 2

3 Guidance Note issued by the ICAI 1

4 Number of Accounting Standards under preparation 7

38

It may be noted that International Accounting Standards nos. 3, 4, 5, 6, 9, 13, 15, 22, 25,

and 35 have already been withdrawn by the International Accounting Standards Board

(IASB). IASB recently issued IFRS 5 and withdrew IAS 35, Discontinuing Operations,

on which AS 24 is based. An Indian Accounting Standard corresponding to IFRS 5 is

under preparation. After the issuance of this Indian AS, AS 24 is proposed to be

withdrawn. Pending the issuance of a comprehensive Accounting Standard on Financial

Instruments, the following pronouncements deal with the accounting for certain types of

financial instruments: (1) AS 13, Accounting for Investments (2) Guidance Note on

Equity Index and Equity Stock Futures and Options (3) Guidance Note on Investments by

Mutual Funds. (4) Guidance Note on Securitization Corresponding to IFRS 6 (effective

2006), Exploration for and Evaluation of Mineral Resources, Guidance Note of the ICAI

titled Accounting for Oil and Gas Producing Activities, has been issued. (An official

pronouncement by the Institute of Chartered Accountants of India)

4.1 IAS 1 Presentation of Financial Statements & AS 1 Disclosure of Accounting

Policies

41

4.1.1 IAS 1 Presentation of Financial Statements (Revised 1997)

This revised International Accounting Standard supersedes IAS 1, Disclosure of

Accounting Policies, IAS 5, Information to be Disclosed in Financial Statements, and

IAS 13, Presentation of Current Assets and Current Liabilities, which were approved by

the Board in reformatted versions in 1994. IAS 1 (revised 1997) was approved by the

IASC Board in July 1997 and became effective for financial statements covering periods

beginning on or after 1 July 1998.

The objective of IAS 1 (revised 1997) is to prescribe the basis for presentation of general

purpose financial statements, to ensure comparability both with the entity's financial

statements of previous periods and with the financial statements of other entities. IAS 1

sets out the overall framework and responsibilities for the presentation of financial

statements, guidelines for their structure and minimum requirements for the content of

the financial statements. Standards for recognizing, measuring, and disclosing specific

transactions are addressed in other Standards and Interpretations.

The objective of general purpose financial statements is to provide information about the

financial position, financial performance, and cash flows of an entity that is useful to a

wide range of users in making economic decisions. To meet that objective, financial

statements provide information about an entity's:

Assets.

Liabilities.

Equity.

Income and expenses, including gains and losses.

Other changes in equity.

Cash flows.

That information, along with other information in the notes, assists users of financial

statements in predicting the entity's future cash flows and, in particular, their timing and

certainty.

A complete set of financial statements should include:

- a balance sheet,

- income statement,

- a statement of changes in equity showing either:

42

all changes in equity, or

changes in equity other than those arising from transactions with equity

holders acting in their capacity as equity holders;

- cash flow statement, and

- notes, comprising a summary of accounting policies and other explanatory

notes.

Reports that are presented outside of the financial statements -- including financial

reviews by management, environmental reports, and value added statements -- are

outside the scope of IFRSs.

4.1.1.1 Information to be presented on the Face of the Balance Sheet

As a minimum, the face of the balance sheet should include line items which present the

following amounts:

(a) Property, plant and equipment;

(b) Intangible assets;

(c) Financial assets (excluding amounts shown under (d), (f) and (g));

(d) Investments accounted for using the equity method;

(e) Inventories;

(f) Trade and other receivables;

(g) Cash and cash equivalents;

(h) Trade and other payables;

(i) tax liabilities and assets as required by IAS 12, Income Taxes;

(j) Provisions;

(k) Non-current interest-bearing liabilities;

(l) Minority interest; and

(m) Issued capital and reserves.

Additional line items, headings and sub-totals should be presented on the face of the

balance sheet when an International Accounting Standard requires it, or when such

presentation is necessary to present fairly the enterprises financial position.

An enterprise should disclose the following, either on the face of the balance sheet or in

the notes:

(a) For each class of share capital:

43

(i) The number of shares authorized;

(ii) The number of shares issued and fully paid, and issued but not fully paid;

(iii) par value per share, or that the shares have no par value;

(iv) a reconciliation of the number of shares outstanding at the beginning and at the end

of the year;

(v) The rights, preferences and restrictions attaching to that class including restrictions on

the distribution of dividends and the repayment of capital;

(vi) Shares in the enterprise held by the enterprise itself or by subsidiaries or associates of

the enterprise; and

(vii) Shares reserved for issuance under options and sales contracts, including the terms

and amounts;

(b) A description of the nature and purpose of each reserve within owners equity;

(c) The amount of dividends that were proposed or declared after the balance sheet date

but before the financial statements were authorized for issue; and

(d) the amount of any cumulative preference dividends not recognized.

An enterprise without share capital, such as a partnership, should disclose information

equivalent to that required above, showing movements during the period in each category

of equity interest and the rights, preferences and restrictions attaching to each category of

equity interest.

4.1.1.2 Information to be Presented on the Face of the Income Statement

As a minimum, the face of the income statement should include line items which present

the following amounts:

(a) Revenue;

(b) The results of operating activities;

(c) Finance costs;

(d) Share of profits and losses of associates and joint ventures accounted for using the

equity method;

(e) Tax expense;

(f) Profit or loss from ordinary activities;

(g) Extraordinary items;

(h) Minority interest; and

44

(i) Net profit or loss for the period.

Additional line items, headings and sub-totals should be presented on the face of the

income statement when required by an International Accounting Standard, or when such

presentation is necessary to present fairly the enterprises financial performance.

An enterprise should present, either on the face of the income statement or in the notes to

the income statement, an analysis of expenses using a classification based on either the

nature of expenses or their function within the enterprise.

Enterprises classifying expenses by function should disclose additional information on

the nature of expenses, including depreciation and amortization expense and staff costs.

An enterprise should disclose, either on the face of the income statement or in the notes,

the amount of dividends per share, declared or proposed, for the period covered by the

financial statements.

4.1.1.3 Presentation of Cash Flow Statement

Cash flow information is useful in providing users of financial statements with a basis to

assess the ability of the enterprise to generate cash and cash equivalents and the needs of

the enterprise to utilize those cash flows.

4.1.1.4 Presentation of Statement of Change in Equity

An enterprise should present, as a separate component of its financial statements, a

statement showing:

(a) The net profit or loss for the period;

(b) Each item of income and expense, gain or loss which, as required by other Standards,

is recognized directly in equity, and the total of these items; and

(c) The cumulative effect of changes in accounting policy and the correction of

fundamental errors dealt with under the Benchmark treatments in IAS 8.

In addition, an enterprise should present, either within this statement or in the notes:

(d) Capital transactions with owners and distributions to owners;

(e) The balance of accumulated profit or loss at the beginning of the period and at the

balance sheet date, and the movements for the period; and

(f) A reconciliation between the carrying amount of each class of equity capital, share

premium and each reserve at the beginning and the end of the period, separately

disclosing each movement.

45

4.1.1.5 Notes to the Financial Statements

The notes to the financial statements of an enterprise should:

(a) Present information about the basis of preparation of the financial statements and the

specific accounting policies selected and applied for significant transactions and events;

(b) Disclose the information required by International Accounting Standards that is not

presented elsewhere in the financial statements; and

(c) Provide additional information which is not presented on the face of the financial

statements but that is necessary for a fair presentation.

Notes to the financial statements should be presented in a systematic manner. Each item

on the face of the balance sheet, income statement and cash flow statement should be

cross-referenced to any related information in the notes.

4.1.1.6 Presentation of Accounting Policies

The accounting policies section of the notes to the financial statements should describe

the following:

(a) The measurement basis (or bases) used in preparing the financial statements;

(b) Each specific accounting policy that is necessary for a proper understanding of the

financial statements.

4.1.1.7 Other Disclosures

An enterprise should disclose the following if not disclosed elsewhere in information

published with the financial statements:

(a) The domicile and legal form of the enterprise, its country of incorporation and the

address of the registered office (or principal place of business, if different from the

registered office);

(b) A description of the nature of the enterprises operations and its principal activities;

(c) The name of the parent enterprise and the ultimate parent enterprise of the group; and

(d) Either the number of employees at the end of the period or the average for the period.

4.1.2 AS 1 Disclosure of Accounting Policies

This standard deals with the disclosure of significant accounting policies followed in

preparing and presenting financial statements. The accounting policies refer to the

specific accounting principles and the methods of applying those principles adopted by

the enterprise in the preparation and presentation of financial statements. There is no

46

single list of accounting policies which are applicable to all circumstances. The differing

circumstances in which enterprises operate in a situation of diverse and complex

economic activity make alternative accounting principles and methods of applying those

principles acceptable. The view presented in the financial statements of an enterprise of

its state of affairs and of the profit or loss can be significantly affected by the accounting

policies followed in the preparation and presentation of the financial statements. The

accounting policies followed vary from enterprise to enterprise. Disclosure of significant

accounting policies followed is necessary if the view presented is to be properly

appreciated.

4.1.2.1 Disclosure of All significant accounting policies

All significant accounting policies adopted in the preparation and presentation of

financial statements should be disclosed.

4.1.2.2 Disclose accounting policies in one place

The disclosure of the significant accounting policies as such should form part of the

financial statements and the significant accounting policies should normally be disclosed

in one place.

4.1.2.3 Disclosure of change in the accounting policies

Any change in the accounting policies which has a material effect in the current period or

which is reasonably expected to have a material effect in later periods should be

disclosed. In the case of a change in accounting policies which has a material effect in the

current period, the amount by which any item in the financial statements is affected by

such change should also be disclosed to the extent ascertainable. Where such amount is

not ascertainable, wholly or in part, the fact should be indicated.

4.1.2.4 Disclosure If a fundamental accounting assumption is not followed

If the fundamental accounting assumptions, viz. Going Concern, Consistency and

Accrual are followed in financial statements, specific disclosure is not required. If a

fundamental accounting assumption is not followed, the fact should be disclosed.

4.1.3 Observation

First we have to know that in respect of International Accounting Standard this standard

supersedes IAS 1, Disclosure of Accounting Policies, IAS 5, Information to be Disclosed

in Financial Statements, and IAS 13, Presentation of Current Assets and Current

47

Liabilities, but in respect of India Accounting Standard there were no change which mean

that this IAS will have more requirement than India AS which is covered by an other

India AS. So the different or less disclosure requirement of India AS because of this

reason.

4.2 IAS 2 Inventories & AS 2 Valuation of Inventories

4.2.1 IAS 2 Inventories (Revised 1993)

This Standard prescribes the accounting treatment for inventories under the historical cost

system. A primary issue in accounting for inventories is the amount of cost to be

recognized as an asset and carried forward until the related revenues are recognized. This

Standard provides practical guidance on the determination of cost and its subsequent

recognition as an expense, including any write-down to net realizable value. It also

provides guidance on the cost formulas that are used to assign costs to inventories.

This Standard should be applied in financial statements prepared in the context of the

historical cost system in accounting for inventories other than:

(a) Work in progress arising under construction contracts, including directly related

service contracts (see IAS 11, Construction Contracts);

(b) Financial instruments; and

(c) Producers' inventories of livestock, agricultural and forest products, and mineral ores,

and agricultural produce to the extent that they are measured at net realizable value in

accordance with well established practices in certain industries.

(d) Biological assets related to agricultural activity (see IAS 41, Agriculture).

Inventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the

rendering of services.

Net realizable value is the estimated selling price in the ordinary course of business less

the estimated costs of completion and the estimated costs necessary to make the sale.

Inventories should be measured at the lower of cost and net realizable value.

The cost of inventories should comprise all costs of purchase, costs of conversion and

other costs incurred in bringing the inventories to their present location and condition.

48

4.2.1.1 Disclose the accounting policies adopted in measuring inventories

The accounting policies adopted in measuring inventories, including the cost formula

used

4.2.1.2 Disclose the total carrying amount of inventories

The financial statements should disclose:

(a) The total carrying amount of inventories and the carrying amount in classifications

appropriate to the enterprise;

(b) The carrying amount of inventories carried at net realizable value;

(c) The amount of any reversal of any write-down that is recognized as income in the

period;

(d) The circumstances or events that led to the reversal of a write-down of inventories.

4.2.1.3 Disclose the carrying amount of inventories pledged as security for liabilities

The carrying amount of inventories pledged as security for liabilities should be disclosed.

4.2.1.4 Other disclosure

i- When the cost of inventories is determined using the LIFO formula in accordance with

the allowed alternative treatment, the financial statements should disclose the difference

between the amount of inventories as shown in the balance sheet and either:

(a) The lower of the amount arrived at and net realizable value; or

(b) The lower of current cost at the balance sheet date and net realizable value.

ii- The financial statements should disclose either:

(a) The cost of inventories recognized as an expense during the period; or

(b) The operating costs, applicable to revenues, recognized as an expense during the

period, classified by their nature.

4.2.2 AS 2 Valuation of Inventories

A primary issue in accounting for inventories is the determination of the value at which

inventories are carried in the financial statements until the related revenues are

recognized. This Statement deals with the determination of such value, including the

ascertainment of cost of inventories and any write-down thereof to net realizable value.

This standard not deals with shares, debentures and other financial instruments held as

stock-in-trade.

49

4.2.2.1 Disclosure of accounting policies

The accounting policies adopted in measuring inventories, including the cost formula

used.

4.2.2.2 Disclosure of carrying amount of inventories

The total carrying amount of inventories and its classification appropriate to the

enterprise.

4.2.2.3 Disclosure of Information about different classifications of inventories

Information about the carrying amounts held in different classifications of inventories

and the extent of the changes in these assets is useful to financial statement users.

Common classifications of inventories are raw materials and components, work in

progress, finished goods, stores and spares, and loose tools.

4.2.3 Observation

In this accounting standard I have noted that it is mostly the same except that IAS has

require Disclose the carrying amount of inventories pledged as security for liabilities

which India AS did not required but I think this is because it is covered by other AS even

in my opinion it should be like IAS.

4.3 AS 6 Depreciation Accounting & Corresponding IAS

4.3.1 Corresponding IAS has been withdrawn since the matter is now covered by

IAS 16 and IAS 38

4.3.2 AS 6 Depreciation Accounting

This Standard deals with depreciation accounting and applies to all depreciable assets,

except the following items to which special considerations apply:-

i- Forests, plantations and similar regenerative natural resources;

ii- wasting assets including expenditure on the exploration for and extraction of minerals,

oils, natural gas and similar non-regenerative resources;

iii- expenditure on research and development;

iv- goodwill;

v- Live Stock.

4.3.2.1 Disclosure of historical cost or revalued cost

The historical cost or other amount substituted for historical cost of each class of

depreciable assets should be disclosed.

50

4.3.2.2 Disclosure in respect of the amount of depreciation

Total depreciation for the period for each class of assets; and the related accumulated

depreciation should be disclosed.

4.3.2.3 Disclose the depreciation accounting policies

The following information should also be disclosed in the financial statements along with

the disclosure of other accounting policies:

i- depreciation methods used; and

ii- depreciation rates or the useful lives of the assets, if they are different from the

principal rates specified in the statute governing the enterprise.

4.3.2.4 Disclosure where the depreciable assets are revalued

In case the revaluation has a material effect on the amount of depreciation, the same

should be disclosed separately in the year in which revaluation is carried out.

4.3.3 Observation

In respect of this standard IAS has been withdrawn since the matter is now covered by

IAS 16 and IAS 38 and even this standard withdrawn but the disclosure requirement of

IAS and India AS mostly the same.

4.4 IAS 7 Cash Flow Statements & AS 3 Cash Flow Statements

4.4.1 IAS 7 Cash Flow Statements (Revised 1992)

This revised International Accounting Standard supersedes IAS 7, Statement of Changes

in Financial Position, approved by the Board in October 1977. The revised Standard

became effective for financial statements covering periods beginning on or after 1

January 1994.

The objective of IAS 7 is to require the presentation of information about the historical

changes in cash and cash equivalents of an enterprise by means of a cash flow statement

which classifies cash flows during the period according to operating, investing and

financing activities.

All enterprises that prepare financial statements in conformity with IAS are required to

present a cash flow statement.

The cash flow statement analyses changes in cash and cash equivalents during a period.

Cash and cash equivalents comprise cash on hand and demand deposits, together with

short-term, highly liquid investments that are readily convertible to a known amount of

51

cash and that are subject to an insignificant risk of changes in value. Guidance notes

indicate that an investment normally meets the definition of a cash equivalent when it has

a maturity of three months or less from the date of acquisition. Equity investments are

normally excluded, unless they are in substance a cash equivalent (e.g. preferred shares

acquired within three months of their specified redemption date). Bank overdrafts which

are repayable on demand and which form an integral part of an enterprise's cash

management are also included as a component of cash and cash equivalents.

Cash flows must be analyzed between operating, investing and financing activities.

operating activities are the main revenue-producing activities of the enterprise that are not

investing or financing activities, so operating cash flows include cash received from

customers and cash paid to suppliers and employees.

Investing activities are the acquisition and disposal of long-term assets and other

investments that are not considered to be cash equivalents.

Financing activities are activities that alter the equity capital and borrowing structure of

the enterprise.

Interest and dividends received and paid may be classified as operating, investing, or

financing cash flows, provided that they are classified consistently from period to period.

Cash flows arising from taxes on income are normally classified as operating, unless they

can be specifically identified with financing or investing activities. For operating cash

flows, the direct method of presentation is encouraged, but the indirect method is

acceptable.

4.4.1.1 Present Cash Flow Statements

An enterprise should prepare a cash flow statement in accordance with the requirements

of this Standard and should present it as an integral part of its financial statements for

each period for which financial statements are presented.

4.4.1.2 Present cash flow arising from each operating, investing and financing

activities separately

The cash flow statement should report cash flows during the period classified by

operating, investing and financing activities.

52

4.4.1.3 Cash flows arising from activities of a financial institution reported on a net

basis

Cash flows arising from the following operating, investing or financing activities may be

reported on a net basis:

a- cash receipts and payments on behalf of customers when the cash flows reflect the

activities of the customer rather than those of the enterprise; and

b- cash receipts and payments for items in which the turnover is quick, the amounts are

large, and the maturities are short.

4.4.1.4 Disclose the method used to report cash flows from operating activities

An enterprise should report cash flows from operating activities using either:

a- the direct method, whereby major classes of gross cash receipts and gross cash

payments are disclosed; or

b- the indirect method, whereby net profit or loss is adjusted for the effects of

transactions of a non-cash nature, any deferrals or accruals of past or future operating

cash receipts or payments, and items of income or expense associated with investing or

financing cash flows.

4.4.1.5 Other disclosure requirements

Cash flows from following transactions should also be disclosed separately either paid or

received: Foreign Currency Cash Flows, Extraordinary Items, Interest and Dividends,

Taxes on Income, Investments in Subsidiaries, Associates and Joint Ventures,

Components of Cash and Cash Equivalents, and the amount of significant cash and cash

equivalent balances held by the enterprise that are not available for use by it.

4.4.2 AS 3 Cash Flow Statements

The Standard deals with the provision of information about the historical changes in cash

and cash equivalents of an enterprise by means of a cash flow statement which classifies

cash flows during the period from operating, investing and financing activities.

4.4.2.1 Present Cash Flow Statements

An enterprise should prepare a cash flow statement in accordance with the requirements

of this Standard and should present it as an integral part of its financial statements for

each period for which financial statements are presented.

53

4.4.2.2 Present cash flow arising from each operating, investing and financing

activities separately

The cash flow statement should report cash flows during the period classified by

operating, investing and financing activities.

4.4.2.3 Cash flows arising from activities of a financial institution reported on a net

basis

Cash flows arising from the following operating, investing or financing activities may be

reported on a net basis:

a- cash receipts and payments on behalf of customers when the cash flows reflect the

activities of the customer rather than those of the enterprise; and

b- cash receipts and payments for items in which the turnover is quick, the amounts are

large, and the maturities are short.

4.4.2.4 Disclose the method used to report cash flows from operating activities

An enterprise should report cash flows from operating activities using either:

a- the direct method, whereby major classes of gross cash receipts and gross cash

payments are disclosed; or

b- the indirect method, whereby net profit or loss is adjusted for the effects of

transactions of a non-cash nature, any deferrals or accruals of past or future operating

cash receipts or payments, and items of income or expense associated with investing or

financing cash flows.

4.4.2.5 Other disclosure requirements

Cash flows from following transactions should also be disclosed separately either paid or

received: Foreign Currency Cash Flows, Extraordinary Items, Interest and Dividends,

Taxes on Income, Investments in Subsidiaries, Associates and Joint Ventures,

Components of Cash and Cash Equivalents, and the amount of significant cash and cash

equivalent balances held by the enterprise that are not available for use by it.

4.4.3 Observation

I have observed the same disclosure requirements by both IAS & India AS.

4.5 IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in

Accounting Policies & AS 5 Net Profit or Loss for the Period, Prior Period Items

and Changes in Accounting Policies

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4.5.1 IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in

Accounting Policies (Revised 1993)

The objective of this Standard is to prescribe the classification, disclosure and accounting

treatment of certain items in the income statement so that all enterprises prepare and

present an income statement on a consistent basis. This enhances comparability both with

the enterprise's financial statements of previous periods and with the financial statements

of other enterprises.

Accordingly, this Standard requires the classification and disclosure of extraordinary

items and the disclosure of certain items within profit or loss from ordinary activities. It

also specifies the accounting treatment for changes in accounting estimates, changes in

accounting policies and the correction of fundamental errors.

This Standard should be applied in presenting profit or loss from ordinary activities and

extraordinary items in the income statement and in accounting for changes in accounting

estimates, fundamental errors and changes in accounting policies.

Extraordinary items are income or expenses that arise from events or transactions that are

clearly distinct from the ordinary activities of the enterprise and therefore are not

expected to recur frequently or regularly.

Ordinary activities are any activities which are undertaken by an enterprise as part of its

business and such related activities in which the enterprise engages in furtherance of,

incidental to, or arising from these activities.

Fundamental errors are errors discovered in the current period that are of such

significance that the financial statements of one or more prior periods can no longer be

considered to have been reliable at the date of their issue.

Accounting policies are the specific principles, bases, conventions, rules and practices

adopted by an enterprise in preparing and presenting financial statements.

4.5.1.1 Disclosure related to: Net Profit or Loss for the Period

The net profit or loss for the period comprises the following components, each of which

should be disclosed on the face of the income statement:

(a) profit or loss from ordinary activities; and

(b) extraordinary items.

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When items of income and expense within profit or loss from ordinary activities are of

such size, nature or incidence that their disclosure is relevant to explain the performance

of the enterprise for the period, the nature and amount of such items should be disclosed

separately.

4.5.1.2 Disclosure of Extraordinary Items

The nature and the amount of each extraordinary item should be separately disclosed.

4.5.1.3 Disclosure related to: Changes in Accounting Estimates

The effect of a change in an accounting estimate should be included in the determination

of net profit or loss in:

(a) the period of the change, if the change affects the period only; or

(b) the period of the change and future periods, if the change affects both.

The nature and amount of a change in an accounting estimate that has a material effect in

the current period or which is expected to have a material effect in subsequent periods

should be disclosed. If it is impracticable to quantify the amount, this fact should be

disclosed.

4.5.1.4 Disclosure related to: Fundamental Errors

An enterprise should disclose the following:

(a) The nature of the fundamental error;

(b) The amount of the correction for the current period and for each prior period

presented;

(c) The amount of the correction relating to periods prior to those included in the

comparative information; and

(d) The fact that comparative information has been restated or that it is impracticable to

do so.

4.5.1.5 Disclosure related to: Changes in Accounting Policies

When a change in accounting policy has a material effect on the current period or any

prior period presented, or may have a material effect in subsequent periods, an enterprise

should disclose the following:

(a) The reasons for the change;

(b) The amount of the adjustment for the current period and for each period presented;

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(c) The amount of the adjustment relating to periods prior to those included in the

comparative information; and

(d) The fact that comparative information has been restated or that it is impracticable to

do so.

4.5.2 AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in

Accounting Policies

This Standard should be applied by an enterprise in presenting profit or loss from

ordinary activities, extraordinary items and prior period items in the statement of profit

and loss, in accounting for changes in accounting estimates, and in disclosure of changes

in accounting policies.

4.5.2.1 Disclosure of net profit or loss for the period

All items of income and expense which are recognized in a period should be included in

the determination of net profit or loss for the period unless an Accounting Standard

requires or permits otherwise.

4.5.2.2 Disclosure of extraordinary Items

Extraordinary items should be disclosed in the statement of profit and loss as a part of net

profit or loss for the period. The nature and the amount of each extraordinary item should

be separately disclosed in the statement of profit and loss in a manner that its impact on

current profit or loss can be perceived.

4.5.2.3 Disclosure of Prior Period Items

The nature and amount of prior period items should be separately disclosed in the

statement of profit and loss in a manner that their impact on the current profit or loss can

be perceived.

3.5.2.4 Disclosure of Changes in Accounting Estimates

The effect of a change in an accounting estimate should be included in the determination

of net profit or loss in: the period of the change, if the change affects the period only; or

the period of the change and future periods, if the change affects both.

4.5.2.5 Disclosure of Changes in Accounting Policies

Any change in an accounting policy which has a material effect should be disclosed. The

impact of, and the adjustments resulting from, such change, if material, should be shown

in the financial statements of the period in which such change is made, to reflect the

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effect of such change. Where the effect of such change is not ascertainable, wholly or in

part, the fact should be indicated.

4.5.3 Observation

In this accounting standard also I noted the same treatments and disclosure requirements

of IAS & India AS.

4.6 IAS 10 Events After the Balance Sheet Date & Contingencies and Events

Occurring After the Balance Sheet Date

4.6.1 IAS 10 Events After the Balance Sheet Date (revised 1999)

The objective of this Standard is to prescribe:

(a) When an enterprise should adjust its financial statements for events after the balance

sheet date; and

(b) The disclosures that an enterprise should give about the date when the financial

statements were authorized for issue and about events after the balance sheet date.

This Standard also requires that an enterprise should not prepare its financial statements

on a going concern basis if events after the balance sheet date indicate that the going

concern assumption is not appropriate.

Events after the balance sheet date are those events, both favorable and unfavorable, that

occur between the balance sheet date and the date when the financial statements are

authorized for issue. Two types of events can be identified:

(a) Those that provide evidence of conditions that existed at the balance sheet date

(adjusting events after the balance sheet date);

(b) Those that is indicative of conditions that arose after the balance sheet date (non-

adjusting events after the balance sheet date).

An enterprise should adjust the amounts recognized in its financial statements to reflect

adjusting events after the balance sheet date.

An enterprise should not adjust the amounts recognized in its financial statements to

reflect non-adjusting events after the balance sheet date.

If dividends to holders of equity instruments (as defined in IAS 32, Financial

Instruments: Disclosure and Presentation) are proposed or declared after the balance

sheet date, an enterprise should not recognize those dividends as a liability at the balance

sheet date.

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An enterprise should not prepare its financial statements on a going concern basis if

management determines after the balance sheet date either that it intends to liquidate the

enterprise or to cease trading, or that it has no realistic alternative but to do so.

4.6.1.1 Disclosure of the Date of Authorization for issue Financial Statements

An enterprise should disclose the date when the financial statements were authorized for

issue and who gave that authorization. If the enterprises owners or others have the power

to amend the financial statements after issuance, the enterprise should disclose that fact.

4.6.1.2 Disclosure of Adjusting Events after the Balance Sheet Date

If an enterprise receives information after the balance sheet date about conditions that

existed at the balance sheet date, the enterprise should update disclosures that relate to

these conditions, in the light of the new information.

4.6.1.3 Disclosure of the Nature of Non-Adjusting Events After the Balance Sheet

Date

Where non-adjusting events after the balance sheet date are of such importance that non-

disclosure would affect the ability of the users of the financial statements to make proper

evaluations and decisions, an enterprise should disclose the following information for

each significant category of non-adjusting event after the balance sheet date:

(a) The nature of the event; and

(b) An estimate of its financial effect or a statement that such an estimate cannot be

made.

4.6.1.4 Disclosure of Dividend

IAS 1, Presentation of Financial Statements, requires an enterprise to disclose the amount

of dividends that were proposed or declared after the balance sheet date but before the

financial statements were authorized for issue. IAS 1 permits an enterprise to make this

disclosure either:

(a) on the face of the balance sheet as a separate component of equity; or

(b) in the notes to the financial statements.

4.6.2 AS 4 Contingencies and Events Occurring After the Balance Sheet Date

This Standard deals with the treatment in financial statements of

a- contingencies, and

b- events occurring after the balance sheet date.

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The following subjects, which may result in contingencies, are excluded from the scope

of this Statement in view of special considerations applicable to them:

a- liabilities of life assurance and general insurance enterprises arising from policies

issued;

b- obligations under retirement benefit plans; and

c- commitments arising from long-term lease contracts.

A contingency is a condition or situation, the ultimate outcome of which, gain or loss,

will be known or determined only on the occurrence, or nonoccurrence, of one or more

uncertain future events.

Events occurring after the balance sheet date are those significant events, both favorable

and unfavorable, that occur between the balance sheet date and the date on which the

financial statements are approved by the Board of Directors in the case of a company,

and, by the corresponding approving authority in the case of any other entity.

Two types of events can be identified:

a- those which provide further evidence of conditions that existed at the balance sheet

date; and

b- those which are indicative of conditions that arose subsequent to the balance sheet

date.

4.6.2.1 Disclosure of contingent loss in the profit or loss statement

The amount of a contingent loss should be provided for by a charge in the statement of

profit and loss if:

a- it is probable that future events will confirm that, after taking into account any related

probable recovery, an asset has been impaired or a liability has been incurred as at the

balance sheet date, and

b- a reasonable estimate of the amount of the resulting loss can be made.

4.6.2.2 Disclosure of contingent loss in the note of financial statements

If a contingent loss is not provided for, its nature and an estimate of its financial effect are

generally disclosed by way of note unless the possibility of a loss is remote (other than

the circumstances mentioned in first requirement). If a reliable estimate of the financial

effect cannot be made, this fact is disclosed.

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4.6.2.3 Disclosure of events occurring after the balance sheet date

When the events occurring after the balance sheet date are disclosed in the report of the

approving authority, the information given comprises the nature of the events and an

estimate of their financial effects or a statement that such an estimate cannot be made.

4.6.3 Observation

Here I have realized that in respect of contingencies which covered by India AS the IAS

have covered it in IAS 37 Provision, Contingent Liabilities and Contingent Assets. But

for the events after the balance sheet both IAS & India AS have same disclosure

requirements except the Date of Authorization for issue Financial Statements & dividend

disclosure requirements which India AS did not required which will make miss

information needed by the users.

4.7 IAS 11 Construction Contracts & AS 7 Construction Contracts

4.7.1 IAS 11 Construction Contracts (Revised 1993)

This Standard prescribes the accounting treatment of revenue and costs associated with

construction contracts. Because of the nature of the activity undertaken in construction

contracts, the date at which the contract activity is entered into and the date when the

activity is completed usually fall into different accounting periods. Therefore, the primary

issue in accounting for construction contracts is the allocation of contract revenue and

contract costs to the accounting periods in which construction work is performed. This

Standard uses the recognition criteria established in the Framework for the Preparation

and Presentation of Financial Statements to determine when contract revenue and

contract costs should be recognized as revenue and expenses in the income statement. It

also provides practical guidance on the application of these criteria.

This Standard should be applied in accounting for construction contracts in the financial

statements of contractors.

A construction contract is a contract specifically negotiated for the construction of an

asset or a combination of assets that are closely interrelated or interdependent in terms of

their design, technology and function or their ultimate purpose or use.

A fixed price contract is a construction contract in which the contractor agrees to a fixed

contract price, or a fixed rate per unit of output, which in some cases is subject to cost

escalation clauses.

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A cost plus contract is a construction contract in which the contractor is reimbursed for

allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee.

4.7.1.1 Disclosure of contract revenue

An enterprise should disclose:

a- the amount of contract revenue recognized as revenue in the period;

b- the methods used to determine the contract revenue recognized in the period;

c- the methods used to determine the stage of completion of contracts in progress.

4.7.1.2 Disclosure for contracts in progress

An enterprise should disclose the following for contracts in progress at the reporting date:

a- the aggregate amount of costs incurred and recognized profits (less recognized

losses) up to the reporting date;

b- the amount of advances received; and

c- the amount of retentions

4.7.1.3 Disclosure of contract assets and liability

An enterprise should present:

a- the gross amount due from customers for contract work as an asset;

b- the gross amount due to customers for contract work as a liability.

4.7.2 AS 7 Construction Contracts

The primary issue in accounting for construction contracts is the allocation of contract

revenue and contract costs to the accounting periods in which construction work is

performed. The objective of this Statement is to prescribe the accounting treatment of

revenue and costs associated with construction contracts. Because of the nature of the

activity undertaken in construction contracts, the date at which the contract activity is

entered into and the date when the activity is completed usually fall into different

accounting periods.

4.7.2.1 Disclosure of contract revenue

An enterprise should disclose:

a- the amount of contract revenue recognized as revenue in the period;

b- the methods used to determine the contract revenue recognized in the period;

c- the methods used to determine the stage of completion of contracts in progress.

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4.7.2.2 Disclosure for contracts in progress

An enterprise should disclose the following for contracts in progress at the reporting date:

a- the aggregate amount of costs incurred and recognized profits (less recognized

losses) up to the reporting date;

b- the amount of advances received; and

c- the amount of retentions

4.7.2.3 Disclosure of contract assets and liability

An enterprise should present:

a- the gross amount due from customers for contract work as an asset;

b- the gross amount due to customers for contract work as a liability.

4.7.3 Observation

In respect of Construction Contract I have noted the same accounting treatments and

disclosure requirements by both IAS & India AS.

4.8 IAS 12 Income Taxes & AS 22 Accounting for Taxes on Income

4.8.1 IAS 12 Income Taxes (Revised 2000)

The objective of this Standard is to prescribe the accounting treatment for income taxes.

The principal issue in accounting for income taxes is how to account for the current and

future tax consequences of:

(a) the future recovery (settlement) of the carrying amount of assets (liabilities) that are

recognized in an enterprise's balance sheet; and

(b) transactions and other events of the current period that are recognized in an

enterprise's financial statements.

It is inherent in the recognition of an asset or liability that the reporting enterprise expects

to recover or settle the carrying amount of that asset or liability. If it is probable that

recovery or settlement of that carrying amount will make future tax payments larger

(smaller) than they would be if such recovery or settlement were to have no tax

consequences, this Standard requires an enterprise to recognize a deferred tax liability

(deferred tax asset), with certain limited exceptions.

This Standard requires an enterprise to account for the tax consequences of transactions

and other events in the same way that it accounts for the transactions and other events

themselves.

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Thus, for transactions and other events recognized in the income statement, any related

tax effects are also recognized in the income statement. For transactions and other events

recognized directly in equity, any related tax effects are also recognized directly in

equity.

This Standard also deals with the recognition of deferred tax assets arising from unused

tax losses or unused tax credits, the presentation of income taxes in the financial

statements and the disclosure of information relating to income taxes.

This Standard should be applied in accounting for income taxes.

For the purposes of this Standard, income taxes include all domestic and foreign taxes

which are based on taxable profits. Income taxes also include taxes, such as withholding

taxes, which are payable by a subsidiary, associate or joint venture on distributions to the

reporting enterprise.

This Standard does not deal with the methods of accounting for government grants.

Deferred tax liabilities are the amounts of income taxes payable in future periods in

respect of taxable temporary differences.

Deferred tax assets are the amounts of income taxes recoverable in future periods in

respect of:

(a) deductible temporary differences;

(b) the carry forward of unused tax losses; and

(c) the carry forward of unused tax credits.

Temporary differences are differences between the carrying amount of an asset or

liability in the balance sheet and its tax base. Temporary differences may be either:

(a) taxable temporary differences, which are temporary differences that will result in

taxable amounts in determining taxable profit (tax loss) of future periods when the

carrying amount of the asset or liability is recovered or settled; (b) deductible temporary

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.

A deferred tax liability should be recognized for all taxable temporary differences, unless

the deferred tax liability arises from:

(a) goodwill for which amortization is not deductible for tax purposes; or

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(b) the initial recognition of an asset or liability in a transaction which:

(i) is not a business combination; and

(ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax

loss).

However, for taxable temporary differences associated with investments in subsidiaries,

branches and associates, and interests in joint ventures, a deferred tax liability should be

recognized. A deferred tax asset should be recognized for all deductible temporary

differences to the extent that it is probable that taxable profit will be available against

which the deductible temporary difference can be utilized, unless the deferred tax asset

arises from:

(a) negative goodwill which is treated as deferred income in accordance with IAS 22,

Business Combinations; or

(b) the initial recognition of an asset or liability in a transaction which:

(i) is not a business combination; and

(ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax

loss). However, for deductible temporary differences associated with investments in

subsidiaries, branches and associates, and interests in joint ventures, a deferred tax asset

should be recognized. Deferred tax assets and liabilities should not be discounted.

4.8.1.1 Separate disclosure of the major components of tax expense (income)

Components of tax expense (income) may include:

(a) current tax expense (income);

(b) any adjustments recognized in the period for current tax of prior periods;

(c) the amount of deferred tax expense (income) relating to the origination and reversal of

temporary differences;

(d) the amount of deferred tax expense (income) relating to changes in tax rates or the

imposition of new taxes;

(e) the amount of the benefit arising from a previously unrecognized tax loss, tax credit or

temporary difference of a prior period that is used to reduce current tax expense;

(f) the amount of the benefit from a previously unrecognized tax loss, tax credit or

temporary difference of a prior period that is used to reduce deferred tax expense;

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(g) deferred tax expense arising from the write-down, or reversal of a previous write-

down, of a deferred tax asset.

(h) the amount of tax expense (income) relating to those changes in accounting policies

and fundamental errors which are included in the determination of net profit or loss for

the period in accordance with the allowed alternative treatment in IAS 8, Net Profit or

Loss for the Period, Fundamental Errors and Changes in Accounting Policies.

4.8.1.2 Separate disclosure of the aggregate current and deferred tax assets and

liability

The following should also be disclosed separately:

(a) the aggregate current and deferred tax relating to items that are charged or credited to

equity;

(b) tax expense (income) relating to extraordinary items recognized during the period;

(c) an explanation of the relationship between tax expense (income) and accounting profit

in either or both of the following forms:

(i) a numerical reconciliation between tax expense (income) and the product of

accounting profit multiplied by the applicable tax rate(s), disclosing also the basis on

which the applicable tax rate(s) is (are) computed; or

(ii) a numerical reconciliation between the average effective tax rate and the applicable

tax rate, disclosing also the basis on which the applicable tax rate is computed;

(d) an explanation of changes in the applicable tax rate(s) compared to the previous

accounting period;

(e) the amount (and expiry date, if any) of deductible temporary differences, unused tax

losses, and unused tax credits for which no deferred tax asset is Recognized in the

balance sheet;

(f) the aggregate amount of temporary differences associated with investments in

subsidiaries, branches and associates and interests in joint ventures, for which deferred

tax liabilities have not been recognized;

(g) in respect of each type of temporary difference, and in respect of each type of unused

tax losses and unused tax credits:

(i) the amount of the deferred tax assets and liabilities recognized in the balance sheet for

each period presented;

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(ii) the amount of the deferred tax income or expense recognized in the income statement,

if this is not apparent from the changes in the amounts recognized in the balance sheet;

and

(h) in respect of discontinued operations, the tax expense relating to:

(i) the gain or loss on discontinuance; and

(ii) the profit or loss from the ordinary activities of the discontinued operation for the

period, together with the corresponding amounts for each prior period presented.

(i) the amount of income tax consequences of dividends to shareholders of the enterprise

that were proposed or declared before the financial statements were authorized for issue,

but are not recognized as a liability in the financial statements.

4.8.1.3 Disclose the amount of a deferred tax asset and the nature of the evidence

supporting its recognition

An enterprise should disclose the amount of a deferred tax asset and the nature of the

evidence supporting its recognition, when:

(a) the utilization of the deferred tax asset is dependent on future taxable profits in excess

of the profits arising from the reversal of existing taxable temporary differences; and

(b) the enterprise has suffered a loss in either the current or preceding period in the tax

jurisdiction to which the deferred tax asset relates.

4.8.1.4 Disclose the nature of the potential income tax result from the payment of

dividends

In some jurisdictions, income taxes are payable at a higher or lower rate if part or all of

the net profit or retained earnings is paid out as a dividend to shareholders of the

enterprise. In some other jurisdictions, income taxes may be refundable or payable if part

or all of the net profit or retained earnings is paid out as a dividend to shareholders of the

enterprise. In these circumstances, current and deferred tax assets and liabilities are

measured at the tax rate applicable to undistributed profits. In the circumstances

described above, an enterprise should disclose the nature of the potential income tax

consequences that would result from the payment of dividends to its shareholders. In

addition, the enterprise should disclose the amounts of the potential income tax

consequences practicably determinable and whether there are any potential income tax

consequences not practicably determinable.

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4.8.2 AS 22 Accounting for Taxes on Income

This Standard should be applied in accounting for taxes on income. This includes the

determination of the amount of the expense or saving related to taxes on income in

respect of an accounting period and the disclosure of such an amount in the financial

statements.

For the purposes of this Standard, taxes on income include all domestic and foreign taxes

which are based on taxable income. This Statement does not specify when, or how, an

enterprise should account for taxes that are payable on distribution of dividends and other

distributions made by the enterprise.

Deferred tax is the tax effect of timing differences.

Timing differences are the differences between taxable income and accounting income

for a period that originate in one period and are capable of reversal in one or more

subsequent periods.

Permanent differences are the differences between taxable income and accounting

income for a period that originate in one period and do not reverse subsequently.

Where an enterprise has unabsorbed depreciation or carry forward of losses under tax

laws, deferred tax assets should be recognized only to the extent that there is virtual

certainty supported by convincing evidence4 that sufficient future taxable income will be

available against which such deferred tax assets can be realized.

Current tax should be measured at the amount expected to be paid to (recovered from) the

taxation authorities, using the applicable tax rates and tax laws. Deferred tax assets and

liabilities should be measured using the tax rates and tax laws that have been enacted or

substantively enacted by the balance sheet date.

The carrying amount of deferred tax assets should be reviewed at each balance sheet date.

An enterprise should write-down the carrying amount of a deferred tax asset to the extent

that it is no longer reasonably certain or virtually certain, as the case may be, that

sufficient future taxable income will be available against which deferred tax asset can be

realized. Any such write-down may be reversed to the extent that it becomes reasonably

certain or virtually certain, as the case may be, that sufficient future taxable income will

be available.

An enterprise should offset assets and liabilities representing current tax if the enterprise:

http://www.icai.org/icairoot/resources/accounting_standards_as22.html#4#4

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a. has a legally enforceable right to set off the recognized amounts; and

b. intends to settle the asset and the liability on a net basis.

An enterprise should offset deferred tax assets and deferred tax liabilities if:

a. the enterprise has a legally enforceable right to set off assets against liabilities

representing current tax; and

b. the deferred tax assets and the deferred tax liabilities relate to taxes on income

levied by the same governing taxation laws.

4.8.2.1 Disclosure of Deferred tax assets and liabilities separately

Deferred tax assets and liabilities should be distinguished from assets and liabilities

representing current tax for the period. Deferred tax assets and liabilities should be

disclosed under a separate heading in the balance sheet of the enterprise, separately from

current assets and current liabilities.

4.8.2.2 Disclosure of The break-up of deferred tax assets and deferred tax liabilities

The break-up of deferred tax assets and deferred tax liabilities into major components of

the respective balances should be disclosed in the notes to accounts.

4.8.2.3 Disclose the nature of the evidence supporting the recognition of deferred tax

assets

The nature of the evidence supporting the recognition of deferred tax assets should be

disclosed, if an enterprise has unabsorbed depreciation or carry forward of losses under

tax laws.

4.8.3 Observation

My observation for this standard is as follow, except the IAS required in addition to other

requirements require the enterprise to disclose the nature of the potential income tax

result from the payment of dividends which will be useful for the users of the financial

statements, both IAS & India AS disclosure requirements are the same.

4.9 IAS 14 Segment Reporting & AS 17 Segment Reporting

4.9.1 IAS 14 Segment Reporting (Revised 1997)

This Standard establish principles for reporting financial information by segment

information about the different types of products and services an enterprise produces and

the different geographical areas in which it operatesto help users of financial

statements:

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(a) better understand the enterprises past performance;

(b) better assess the enterprises risks and returns; and

(c) make more informed judgments about the enterprise as a whole.

Many enterprises provide groups of products and services or operate in geographical

areas that are subject to differing rates of profitability, opportunities for growth, future

prospects, and risks.

Information about an enterprises different types of products and services and its

operations in different geographical areasoften called segment informationis relevant

to assessing the risks and returns of a diversified or multinational enterprise but may not

be determinable from the aggregated data. Therefore, segment information is widely

regarded as necessary to meeting the needs of users of financial statements.

This Standard should be applied by enterprises whose equity or debt securities are

publicly traded and by enterprises that are in the process of issuing equity or debt

securities in public securities markets.

A business segment is a distinguishable component of an enterprise that is engaged in

providing an individual product or service or a group of related products or services and

that is subject to risks and returns that are different from those of other business

segments. Factors that should be considered in determining whether products and

services are related include:

(a) the nature of the products or services;

(b) the nature of the production processes;

(c) the type or class of customer for the products or services;

(d) the methods used to distribute the products or provide the services; and

(e) if applicable, the nature of the regulatory environment, for example, banking,

insurance, or public utilities.

A geographical segment is a distinguishable component of an enterprise that is engaged

in providing products or services within a particular economic environment and that is

subject to risks and returns that are different from those of components operating in other

economic environments. Factors that should be considered in identifying geographical

segments include:

(a) similarity of economic and political conditions;

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(b) relationships between operations in different geographical areas;

(c) proximity of operations;

(d) special risks associated with operations in a particular area;

(e) exchange control regulations; and

(f) the underlying currency risks.

A reportable segment is a business segment or a geographical segment identified based

on the foregoing definitions for which segment information is required to be disclosed by

this Standard.

Segment revenue is revenue reported in the enterprises income statement that is directly

attributable to a segment and the relevant portion of enterprise revenue that can be

allocated on a reasonable basis to a segment, whether from sales to external customers or

from transactions with other segments of the same enterprise. Segment revenue does not

include:

(a) extraordinary items;

(b) interest or dividend income, including interest earned on advances or loans to other

segments, unless the segments operations are primarily of a financial nature; or

(c) gains on sales of investments or gains on extinguishment of debt unless the segments

operations are primarily of a financial nature.

Segment expense is expense resulting from the operating activities of a segment that is

directly attributable to the segment and the relevant portion of an expense that can be

allocated on a reasonable basis to the segment, including expenses relating to sales to

external customers and expenses relating to transactions with other segments of the same

enterprise. Segment expense does not include:

(a) extraordinary items;

(b) interest, including interest incurred on advances or loans from other segments, unless

the segments operations are primarily of a financial nature;

(c) losses on sales of investments or losses on extinguishment of debt unless the

segments operations are primarily of a financial nature;

(d) an enterprises share of losses of associates, joint ventures, or other investments

accounted for under the equity method;

(e) income tax expense; or

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(f) general administrative expenses, head-office expenses, and other expenses that arise at

the enterprise level and relate to the enterprise as a whole.

However, costs are sometimes incurred at the enterprise level on behalf of a segment.

Such costs are segment expenses if they relate to the segments operating activities and

they can be directly attributed or allocated to the segment on a reasonable basis.

4.9.1.1 Disclosure in case of Primary Reporting Format

The following disclosure requirements should be applied to each reportable segment

based on an enterprises primary reporting format.

a. An enterprise should disclose segment revenue for each reportable segment. Segment

revenue from sales to external customers and segment revenue from transactions with

other segments should be separately reported.

b. An enterprise should disclose segment result for each reportable segment.

c. An enterprise should disclose the total carrying amount of segment assets for each

reportable segment.

d. An enterprise should disclose segment liabilities for each reportable segment.

e. An enterprise should disclose the total cost incurred during the period to acquire

segment assets that are expected to be used during more than one period (property, plant,

equipment, and intangible assets) for each reportable segment. While this sometimes is

referred to as capital additions or capital expenditure, the measurement required by this

principle should be on an accrual basis, not a cash basis.

f. An enterprise should disclose the total amount of expense included in segment result

for depreciation and amortization of segment assets for the period for each reportable

segment.

g. An enterprise is encouraged, but not required to disclose the nature and amount of any

items of segment revenue and segment expense that are of such size, nature, or incidence

that their disclosure is relevant to explain the performance of each reportable segment for

the period.

h. An enterprise should disclose, for each reportable segment, the total amount of

significant non-cash expenses, other than depreciation and amortization for which

separate disclosure is required by paragraph 58, that were included in segment expense

and, therefore, deducted in measuring segment result.

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i. An enterprise that provides the segment cash flow disclosures that are encouraged by

IAS 7 need not also disclose depreciation and amortization expense or non-cash

expenses.

j. An enterprise should disclose, for each reportable segment, the aggregate of the

enterprises share of the net profit or loss of associates, joint ventures, or other

investments accounted for under the equity method if substantially all of those associates

operations are within that single segment.

k. If an enterprises aggregate share of the net profit or loss of associates, joint ventures,

or other investments accounted for under the equity method is disclosed by reportable

segment, the aggregate investments in those associates and joint ventures should also be

disclosed by reportable segment.

l. An enterprise should present reconciliation between the information disclosed for

reportable segments and the aggregated information in the consolidated or enterprise

financial statements. In presenting the reconciliation, segment revenue should be

reconciled to enterprise revenue from external customers (including disclosure of the

amount of enterprise revenue from external customers not included in any segments

revenue); segment result should be reconciled to a comparable measure of enterprise

operating profit or loss as well as to enterprise net profit or loss; segment assets should be

reconciled to enterprise assets; and segment liabilities should be reconciled to enterprise

liabilities.

4.9.1.2 Disclosure in case of Secondary Segment Information

The disclosure requirements to be applied to each reportable segment based on an

enterprises secondary reporting format, as follows:

a. If an enterprises primary format for reporting segment information is business

segments, it should also report the following information:

(i) segment revenue from external customers by geographical area based on the

geographical location of its customers, for each geographical segment whose revenue

from sales to external customers is 10 per cent or more of total enterprise revenue from

sales to all external customers;

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(ii) the total carrying amount of segment assets by geographical location of assets, for

each geographical segment whose segment assets are 10 per cent or more of the total

assets of all geographical segments; and

(iii) the total cost incurred during the period to acquire segment assets that are expected

to be used during more than one period (property, plant, equipment, and intangible assets)

by geographical location of assets, for each geographical segment whose segment assets

are 10 per cent or more of the total assets of all geographical segments.

b. If an enterprises primary format for reporting segment information is geographical

segments (whether based on location of assets or location of customers), it should also

report the following segment information for each business segment whose revenue from

sales to external customers is 10 per cent or more of total enterprise revenue from sales to

all external customers or whose segment assets are 10 per cent or more of the total assets

of all business segments:

(i) segment revenue from external customers;

(ii) the total carrying amount of segment assets; and

(iii) the total cost incurred during the period to acquire segment assets that are expected

to be used during more than one period (property, plant, equipment, and intangible

assets).

c. If an enterprises primary format for reporting segment information is geographical

segments that are based on location of assets, and if the location of its customers is

different from the location of its assets, then the enterprise should also report revenue

from sales to external customers for each customer-based geographical segment whose

revenue from sales to external customers is 10 per cent or more of total enterprise

revenue from sales to all external customers.

d. If an enterprises primary format for reporting segment information is geographical

segments that are based on location of customers, and if the enterprises assets are located

in different geographical areas from its customers, then the enterprise should also report

the following segment information for each asset-based geographical segment whose

revenue from sales to external customers or segment assets are 10 per cent or more of

related consolidated or total enterprise amounts:

(i) the total carrying amount of segment assets by geographical location of the assets; and

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(ii) the total cost incurred during the period to acquire segment assets that are expected to

be used during more than one period (property, plant, equipment, and intangible assets)

by location of the assets.

4.9.1.3 Other Disclosures

Other Disclosure Matters:

a. If a business segment or geographical segment for which information is reported to the

board of directors and chief executive officer is not a reportable segment because it earns

a majority of its revenue from sales to other segments, but nonetheless its revenue from

sales to external customers is 10 per cent or more of total enterprise revenue from sales to

all external customers, the enterprise should disclose that fact and the amounts of revenue

from (a) sales to external customers and (b) internal sales to other segments.

b. In measuring and reporting segment revenue from transactions with other segments,

inter-segment transfers should be measured on the basis that the enterprise actually used

to price those transfers. The basis of pricing inter-segment transfers and any change

therein should be disclosed in the financial statements.

c. Changes in accounting policies adopted for segment reporting that have a material

effect on segment information should be disclosed, and prior period segment information

presented for comparative purposes should be restated unless it is impracticable to do so.

Such disclosure should include a description of the nature of the change, the reasons for

the change, the fact that comparative information has been restated or that it is

impracticable to do so, and the financial effect of the change, if it is reasonably

determinable. If an enterprise changes the identification of its segments and it does not

restate prior period segment information on the new basis because it is impracticable to

do so, then for the purpose of comparison the enterprise should report segment data for

both the old and the new bases of segmentation in the year in which it changes the

identification of its segments.

4.9.2 AS 17 Segment Reporting

The objective of this Statement is to establish principles for reporting financial

information, about the different types of products and services an enterprise produces and

the different geographical areas in which it operates.

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A business segment is a distinguishable component of an enterprise that is engaged in

providing an individual product or service or a group of related products or services and

that is subject to risks and returns that are different from those of other business

segments.

A geographical segment is a distinguishable component of an enterprise that is engaged

in providing products or services within a particular economic environment and that is

subject to risks and returns that are different from those of components operating in other

economic environments.

A reportable segment is a business segment or a geographical segment identifie