Chapter 10

CHAPTER 10
ACCOUNTING STANDARDS
1. INTRODUCTION TO ACCOUNTING STANDARDS
 Accounting Standards (ASs) are written policy documents issued by expert
accounting body or by government or other regulatory body covering the
aspects of recognition, measurement, presentation and disclosure of accounting
transactions in the financial statements.
 Accounting Standards reduce the accounting alternatives in the preparation of
financial statements
2. ACCOUNTING STANDARDS DEALS WITH:

 Recognition of events and transactions in the financial statements,
 Measurement of these transactions and events,
 Presentation of these transactions and events in the financial statements in a
manner that is meaningful and understandable to the reader
 Disclosure of transactions and other events: Accounting standards also deal
with the manner of disclosure of transactions and other events in the financial
statements.
 THUS, AS helps in improving the quality of financial reporting by promoting
comparability, consistency and transparency, in the interests of users of
financial statements.
3. NEED OF ACCOUNTING STATNDARD

(a) Improvement of credibility and reliability of financial statements:
AS increase confidence among the users of accounting information by providing a
uniform structure of uniform guidelines which provide credibility and reliability
to the accounting information. So that, financial statements present a true and
fair view of the financial position and financial performance of an entity.
(b) Comparability of financial Statements made easy:
Comparability is possible only if the same accounting standards are used in the
preparation of the financial statements of the different enterprises in the same
industry. Due to this value of the accounting information is enhanced.
(c) Benefits to the accountants and auditors:
AS provide a basis for the uniform accounting principles. Hence, there is a less
possibility of frauds being committed by the accountant. There is more
transparency in the accounting information. AS are helpful not only to the
accounting entity but also to the accountants and the auditors.
(d) Additional disclosures: Certain important areas are not required to be disclosed
by the law. The AS require the disclosure of such matters such as the method of
depreciation and the change in the method of depreciation which help the users
of the financial statements to take important financial decision.
(e) Evaluation of the managerial ability: Accounting standards are useful in
measuring the efficiency of the management regarding profitability, liquidity,
solvency and other general areas of progress of the enterprise.
(f) Helpful to the Government: The Government officials would find the financial
information useful for economic planning, market analysis and tax collection if the
financial statements are based on the established accounting standards.
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4. LIST OF ACCOUNTING STANDARDS ISSUED BY ICAI
 ICAI, so far, issued 32 Accounting Standards
 However, the AS 8 “Accounting for Research and Development” was withdrawn
subsequent to the issuance of Accounting Standard 26 “Intangible Assets”
 AS 6 “Depreciation Accounting” was withdrawn subsequent to the issuance of
revised Accounting Standard 10 “Property, Plant and Equipment” including the
matters related to depreciation accounting for the old AS 10 “Accounting for
Fixed Assets”
 AS 30, 31 and 32 related to “Financial Instruments” have been withdrawn by the
ICAI in the year 2016.
 Thus, effectively, there are only 27 Accounting Standards at present
AS 1 Disclosures of Accounting Policies

AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring After the Balance Sheet Date
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies
AS 6 *Depreciation Accounting
AS 7 Construction Contracts (revised 2002)
AS 9 Revenue Recognition
AS 10 Property, Plant and Equipment (Revised)
AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003)
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 15 Employee Benefits
AS 16 Borrowing Costs
AS 17 Segment Reporting
AS 18 Related Party Disclosures
AS 19 Leases
AS 20 Earning Per Share
AS 21 Consolidated Financial Statements (Revised
AS 22 Accounting for Taxes on Income
AS 23 Accounting for Investments in Associates
AS 24 Discontinuing Operations
AS 25 Interim financial Reporting
AS 26 Intangible Assets
AS 27 Financial Reporting of Interest in Joint Venture
AS 28 Impairment of Assets
AS 29 Provisions, Contingent Liabilities & Contingent Assets.
AS 30 *Financial Instruments: Recognition and Measurement
AS 31 *Financial Instruments: Presentation
AS 32 *Financial Instruments: Disclosures
*In March 2016 withdrawn by ICAI

Exemptions or Relaxations for SMCs as defined in the Notification

5. APPLICATION OF ACCOUNTING STANDARDS (AS)
 AS are intended to apply to all types of enterprises engaged in commercial,
industrial or business activities irrespective of whether it is profit oriented or not.
 However, the AS will not apply to the enterprises which carry on only those
activities which are not of commercial, industrial or business nature (e.g. an
activity of collecting donations and giving them to flood affected people).
 Exclusion of an enterprise from the applicability of Accounting Standards would be
permissible only if no part of the activity of such enterprise is commercial, industrial
or business in nature.
 Even if a very small proportion of the activities of an enterprise is considered to be
commercial, industrial or business in nature, the Accounting Standards would apply
to all its activities including those which are not commercial, industrial or
business in nature.
Accounting Standards apply to following types of enterprises:
(a) Sole proprietorship concerns/individuals
(b) Partnership firms
(c) Societies
(d) Trusts
(e) Hindu Undivided families
(f) Association of Persons (AOP)
(g) Body of individuals (BOI)
(h) Co-operative societies
(i) Companies and LLPs
Applicability of Accounting Standard to which types of financial statements or
reports?
 Accounting Standards apply to the general-purpose financial Statements and
other financial reporting which are subject to attest functions of the members
of the ICAI.
 ‘General purpose Financial Statements’ includes ‘Balance Sheet’, ‘Statement of
Profit and Loss’, ‘A Cash Flow Statement’ (where applicable), and Statements
and explanatory notes which form part thereof issued for the use of various
stakeholders, government and their agencies and the public at large.
6. ACCOUNTING STANDARD AND AUDITORS

 It is the duty of the auditors to ensure that the Accounting Standards issued
and made mandatory by the Central Government are compiled with.
 Section 143(3)(e) requires the auditor to report whether in his opinion, the
financial statements comply with the Accounting Standards or not.
7. ACCOUNTING STANDARD AND BOARD’S REPORT Section 134(5)(A)

Directors Responsibility Statement should include that in the preparation of the
annual accounts, the applicable Accounting Standards had been followed along with
proper explanations relating to material departure.

For the purpose of applicability of AS, entities are grouped as follows:
Types of Entities
Corporate Non - corporate
SMCs Non - SMCs Level I Level II Level III
Corporate Entities
Type Conditions Applicability of Accounting
Standard
Small and SMCs are companies that satisfy the Partial Exemption:
Medium following conditions: Certain relaxations are
Companies (a) Equity and debt securities of the provided with respect to
(SMCs) company are not listed or are not following Accounting
in the process of listing on any Standard:
stock exchange, whether in India AS 17 – Segment Reporting
or outside India AS 15 – Employee Benefits
(b) Company is not a bank or AS 19 – Leases
financial institution or insurance AS 20 – Earnings Per Share
company (EPS)
(c) Company’s turnover (excluding AS 29 – Provisions,
other income) does not exceed ₹ 50 contingent liabilities and
crores in the immediately contingent assets
preceding accounting year
(d) Company does not have Full Exemption
borrowing (including public AS 3 – Cash Flow
deposits) exceeding ₹ 10 crores at Statements, shall not
any time during the immediately apply to SMCs if it is a
preceding accounting year and One Person Company
(e) Company is not a holding (OPC), dormant company
company or subsidiary of a non- and Small Company
SMC.
Non-SMCs Any Other Corporate Entities not All the accounting
falling under SMCs standards are applicable to
Non-SMCs.
Non – Corporate Entities

Level Condition Accounting Standards
applicable
Level I  Entities whose equity or debt All the accounting
instruments are listed or are in standards are applicable to
process of listing on any stock Level I entities. However,
exchange (in or outside India) AS 21, 23 and 27 will apply
 Banks (including co-operative based on regulatory
banks), financial institutions or requirement.
entities carrying on Insurance
business

 All commercial, industrial or
business reporting entities having:
– Borrowings > 10 crores (at
any time during
immediately preceding
accounting year)
– Turnover > 50 crores
(during preceding accounting
year)
 Holding or subsidiary entities of
any of the above.
Level II  Other than Level I entities if they Fully applicable AS
fall under the following limit. All accounting standards
 All commercial, industrial or are applicable to Level II
business reporting entities having: entities except AS 21, 23, 25,
– Borrowings > 1 crores (at any 27 and those discussed
time during immediately below.
preceding accounting year) AS applicable but certain
– Turnover > 10 crores relaxations regarding
(during preceding accounting disclosure requirement
year) AS 19 – Leases
 Holding or subsidiary entities of AS 20 – Earning Per Share
any of the above. As 29 – Provision,
contingent liability
and contingent assets.
Accounting standards not
applicable AS 3 – Cash Flow
Statement
AS 17 – Segment Reporting.
Level III All non-corporate entities other In addition to partial and
than Level I and Level II. full exemption as given in
Level II, full exemption with
respect to these two are
also available: AS 18 –
Related Party Disclosures AS
24
– Discontinuing Operations.
If there is conflict between Act and Accounting Standards, the provisions of the
Act shall prevail to that extent
8. OVERVIEW OF ACCOUNTING STANDARD

CA CS Harish A
AS Deals with Details
AS 1 Disclosure of Accounting policies are the specific accounting principles and
Accounting the methods of applying those principles adopted by an
Policies enterprise in the preparation and presentation of financial
statements. All significant accounting policies should be
disclosed. Such disclosure form part of financial statements. All
disclosures should be made at one place. Specific disclosure for
the adoption of fundamental accounting assumptions is not
required. Disclosure of accounting policies cannot remedy a
wrong or inappropriate treatment of the item in the accounts.
AS 2 Valuation of A primary issue in accounting for inventories is the
Inventories determination of the value at which inventories are carried in
the financial statements until the related revenues are
recognized. This Standard deals with the determination of such
value, including the ascertainment of cost of inventories and any
write-down thereof to net realizable value.
Inventories should be valued at the lower of cost and net
realizable value. The cost of inventories should comprise- All
costs of purchase
(a) Costs of conversion
(b) Other costs incurred in bringing the inventories to their
present location and condition.
AS 3 Cash Flow The Standard deals with the provision of information about the
Statements 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. An enterprise should prepare a cash flow statement
and should present it for each period for which financial
statements are presented. Cash Flows are inflows and outflows
of cash and cash equivalents.
Cash Flow Statement represents the cash flows during the
specified period by operating, investing and financing activities.
AS 4 Contingencies This Standard deals with the treatment in financial statements
and Events of:
Occurring (a) contingencies, and
After the
(b) Events occurring after the balance sheet date.
Balance
Sheet Date 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 non-occurrence, of one or more uncertain future
events.
Events occurring after the balance sheet date are those
significant events, both favourable and unfavourable, 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.
AS 5 Net Profit or The objective of this Standard is to prescribe the classification
Loss for the and disclosure of certain items in the statement of profit and
Period, Prior loss so that all enterprises prepare and present such a
Period Items statement on a uniform basis. This enhances the comparability
of the financial statements of an enterprise over time and with
and Changes
the financial statements of other enterprises. Accordingly, this
in Accounting Standard requires the classification and disclosure of
Policies extraordinary and prior period items, and the disclosure of
certain items within profit or loss from ordinary activities. It
also specifies the accounting treatment for changes in
accounting estimates and the disclosures to be made in the
financial statements regarding changes in accounting policies.
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.
AS 7 Construction The objective of this Standard is to prescribe the accounting
Contracts 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 recognised as revenue and expenses in the
statement of profit and loss. 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.
AS 9 Revenue This Standard deals with the bases for recognition of revenue in
Recognition the statement of profit and loss of an enterprise. The Standard is
concerned with the recognition of revenue arising in the
course of the ordinary activities of the enterprise from:
(a) the sale of goods,
(b) the rendering of services, and
(c) the use by others of enterprise resources yielding interest,
royalties and dividends.
Revenue is the gross inflow of cash, receivables or other
consideration arising in the course of the ordinary activities of
an enterprise from the sale of goods, from the rendering of
services, and from the use by others of enterprise resources
yielding interest, royalties and dividends. Revenue is measured by
the charges made to customers or clients for goods supplied and
services rendered to them and by the charges and rewards arising
from the use of resources by them. In an agency relationship,
the revenue is the amount of commission and not the gross
inflow of cash, receivables or other consideration.
AS 10 Property, Property, plant and equipment are tangible items that are held for
Plant and use in the production or supply of goods or services, for rental to
Equipment other or for administrative services. The objective of this AS is to
prescribe the accounting treatment for property, plant and
equipment. The principal issues in accounting for property, plant
and equipment are the recognition of the assets, determination of
their carrying amounts and depreciation charges and recognition
of impairment losses in relation to them. Under this AS, property,
plant and equipment are initially recognized at cost, subsequently
measured by using either cost model or revaluation model and
depreciated so that its depreciable amount is allocated on a
systematic basis over its useful life.
AS 11 The Effects of An enterprise may carry on activities involving foreign exchange in

Changes in two ways. It may have transactions in foreign currencies or it may
Foreign have foreign operations. In order to include foreign currency
Exchange transactions and foreign operations in the financial statements
Rates of an enterprise, transactions must be expressed in the
enterprise’s reporting currency and the financial statements of
foreign operations must be translated into the enterprise’s
reporting currency.
This Standard should be applied:
(a) in accounting for transactions in foreign currencies; and
(b) in translating the financial statements of foreign
operations
AS 12 Accounting This Standard deals with accounting for Government Grants.
for Government grants are sometimes called by other names such as
C
Government subsidies, cash incentives, duty drawbacks, etc.
Grants Government grants are assistance by government in cash or kind to
an enterprise for past or future compliance with certain
conditions. They exclude those forms of government assistance
which cannot reasonably have a value placed upon them and
transactions with government which cannot be distinguished
from the normal trading transactions of the enterprise.
The receipt of government grants by an enterprise is significant for
preparation of the financial statements for two reasons.
Firstly, if a government grant has been received, an appropriate
method of accounting therefor is necessary. Secondly, it is
desirable to give an indication of the extent to which the
enterprise has benefited from such grant during the reporting
period. This facilitates comparison of an enterprise’s financial
statements with those of prior periods and with those of other
enterprises.
AS 13 Accounting This Standard deals with accounting for investments in the
for financial statements of enterprises and related disclosure
Investments requirements.
Investments are assets held by an enterprise for earning income by
way of dividends, interest, and rentals, for capital appreciation,
or for other benefits to the investing enterprise. Assets held as
stock-in-trade are not ‘investments’.
Enterprises hold investments for diverse reasons. For some
enterprises, investment activity is a significant element of
operations, and assessment of the performance of the enterprise
may largely, or solely, depend on the reported results of this
activity.
An enterprise should disclose current investments and long term
investments distinctly in its financial statements. Further
classification of current and long-term investments should be as
specified in the statute governing the enterprise. In the absence
of a statutory requirement, such further classification should
disclose, where applicable, investments in:
(a) Government or Trust securities
(b) Shares, debentures or bonds
(c) Investment properties
(d) Others-specifying nature.

AS 14 Accounting for This standard deals with accounting for amalgamations and the
Amalgamations treatment of any resultant goodwill or reserves. This standard is
directed principally to companies although some of its
requirements also apply to financial statements of other
enterprises.
According to this Standard, amalgamation means an
amalgamation pursuant to the provisions of the Companies Act,
2013 or any other statute which may be applicable to companies. An
amalgamation may be either –
(a) an amalgamation in the nature of merger, or
(b) an amalgamation in the nature of purchase.
AS 15 Employee The objective of this Standard is to prescribe the accounting and
Benefits disclosure for employee benefits. The Standard requires an
enterprise to recognise:
 a liability when an employee has provided service in
exchange for employee benefits to be paid in the future;
and
 an expense when the enterprise consumes the economic
benefit arising from service provided by an employee in
exchange for employee benefits.
Employee benefits are all forms of consideration given by an
enterprise in exchange for service rendered by employees.
AS 16 Borrowing The objective of this Standard is to prescribe the accounting
Costs treatment for borrowing costs.
Borrowing costs are interest and other costs incurred by an
enterprise in connection with the borrowing of funds. Borrowing
costs that are directly attributable to the acquisition,
construction or production of a qualifying asset should be
capitalised as part of the cost of that asset. The amount of
borrowing costs eligible for capitalisation should be determined in
accordance with this Standard. Other borrowing costs should be
recognised as an expense in the period in which they are incurred.
The financial statements should disclose:
(a) the accounting policy adopted for borrowing costs; and
(b) the amount of borrowing costs capitalised during the period.
AS 17 Segment The objective of this Standard is to establish principles for
Reporting reporting financial information, about the different types of
products and services an enterprise produces and the different
geographical areas in which it operates. Such information helps
users of financial statements:
(a) better understand the performance of the enterprise;
(b) better assess the risks and returns of the enterprise; and
(c) make more informed judgements about the enterprise as a
whole.
If a single financial report contains both consolidated financial
statements and the separate financial statements of the parent,
segment information need be presented only on the basis of the
consolidated financial statements.
In the context of reporting of segment information in
consolidated financial statements, the references in this

Standard to any financial statement items should construed to be
the relevant item as appearing in the consolidated financial
statements.
AS 18 Related Party The objective of this Standard is to establish requirements for
Disclosures disclosure of:
 related party relationships; and
 transactions between a reporting enterprise and its related
parties.
This Standard should be applied in reporting related party
relationships and transactions between a reporting enterprise
and its related parties. The requirements of this Standard apply to
the financial statements of each reporting enterprise as also to
consolidated financial statements presented by a holding
company.
AS 19 Leases The objective of this Standard is to prescribe, for lessees and
lessors, the appropriate accounting policies and disclosures in
relation to finance leases and operating leases. This Standard
should be applied in accounting for all leases other than:
 lease agreements to explore for or use natural resources, such
as oil, gas, timber, metals and other mineral rights;
 licensing agreements for items such as motion picture films,
video recordings, plays, manuscripts, patents and copyrights; and
 lease agreements to use lands.
AS 20 Earnings per The objective of this Standard is to prescribe principles for the
Share determination and presentation of earnings per share which will
improve comparison of performance among different enterprises
for the same period and among different accounting periods for
the same enterprise. The focus of this Standard is on the
denominator of the earnings per share calculation. Even though
earnings per share data has limitations because of different
accounting policies used for determining ‘earnings’, a consistently
determined denominator enhances the quality of financial
reporting.
This Standard should be applied by all companies. However, a
Small and Medium Sized Company, as defined in the Notification
may not disclose diluted earnings per share (both including and
excluding extraordinary items).
In consolidated financial statements, the information required by
this Statement should be presented on the basis of
consolidated information.
AS 21 Consolidated The objective of this Standard is to lay down principles and
Financial procedures for preparation and presentation of consolidated
Statements financial statements. Consolidated financial statements are
presented by a parent (also known as holding enterprise) to
provide financial information about the economic activities of
its group. These statements are intended to present financial
information about a parent and its subsidiary (i.es) as a single
economic entity to show the economic resources controlled by
the group, the obligations of the group and results the group
achieves with its resources.
This Standard should be applied in the preparation and
presentation of consolidated financial statements for a group of

enterprises under the control of a parent.
This Standard should also be applied in accounting for
investments in subsidiaries in the separate financial statements of
a parent.
AS 22 Accounting The objective of this Standard is to prescribe accounting
for Taxes on treatment for taxes on income. Taxes on income is one of the
Income significant items in the statement of profit and loss of an
enterprise. In accordance with the matching concept, taxes on
income are accrued in the same period as the revenue and
expenses to which they relate. Matching of such taxes against
revenue for a period poses special problems arising from the fact
that in a number of cases, taxable income may be significantly
different from the accounting income. This divergence between
taxable income and accounting income arises due to two main
reasons. Firstly, there are differences between items of revenue
and expenses as appearing in the statement of profit and loss and
the items which are considered as revenue, expenses or deductions
for tax purposes. Secondly, there are differences between the
amount in respect of a particular item of revenue or expense as
recognised in the statement of profit and loss.
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
AS 23 Accounting The objective of this Standard is to set out principles and
for procedures for recognising, in the consolidated financial
Investments in statements, the effects of the investments in associates on the
Associates in financial position and operating results of a group.
Consolidated This Standard should be applied in accounting for investments in
Financial associates in the preparation and presentation of consolidated
Statements financial statements by an investor.
AS 24 Discontinuing The objective of this Standard is to establish principles for

Operations reporting information about discontinuing operations, thereby
enhancing the ability of users of financial statements to make
projections of an enterprise’s cash flows, earnings-generating
capacity, and financial position by segregating information
about discontinuing operations from information
about continuing operations.
This Standard applies to all discontinuing operations of an
enterprise.
The requirements related to cash flow statement contained in
this Standard are applicable where an enterprise prepares and
presents a cash flow statement.
AS 25 Interim The objective of this Standard is to prescribe the minimum
Financial content of an interim financial report and to prescribe the
Reporting principles for recognition and measurement in complete or
condensed financial statements for an interim period. Timely
and reliable interim financial reporting improves the ability of
investors, creditors, and others to understand an enterprise’s
capacity to generate earnings and cash flows, its financial
condition and liquidity.
This Standard does not mandate which enterprises should be

required to present interim financial reports, how frequently, or
how soon after the end of an interim period. If an enterprise is
required or elects to prepare and present an interim financial
report, it should comply with this Standard.
AS 26 Intangible The objective of this Standard is to prescribe the accounting
Assets treatment for intangible assets that are not dealt with
specifically in another Accounting Standard. This Standard
requires an enterprise to recognise an intangible asset if, and
only if, certain criteria are met. The Standard also specifies how
to measure the carrying amount of intangible assets and
requires certain disclosures about intangible assets.
This Standard should be applied by all enterprises in accounting
for intangible assets, except:
(a) intangible assets that are covered by another Accounting
Standard;
(b) financial assets;
(c) mineral rights and expenditure on the exploration for, or
development and extraction of, minerals, oil, natural gas
and similar non-regenerative resources; and
(d) intangible assets arising in insurance enterprises from
contracts with policyholders.
An intangible asset should be recognised if, and only if:
(a) it is probable that the future economic benefits that are
attributable to the asset will flow to the enterprise; and
(b) the cost of the asset can be measured reliably.
An enterprise should assess the probability of future economic
benefits using reasonable and supportable assumptions that
represent best estimate of the set of economic conditions that
will exist over the useful life of the asset.
AS 27 Financial The objective of this Standard is to set out principles and
Reporting of procedures for accounting for interests in joint ventures and
Interests in reporting of joint venture assets, liabilities, income and expenses
Joint in the financial statements of venturers and investors. This
Standard should be applied in accounting for interests in joint
Ventures
ventures and the reporting of joint venture assets, liabilities,
income and expenses in the financial statements of venturers
and investors, regardless of the structures or forms under which
the joint venture activities take place.
AS 28 Impairment The objective of this Standard is to prescribe the procedures
of Assets that an enterprise applies to ensure that its assets are carried
at no more than their recoverable amount. An asset is carried at
more than its recoverable amount if its carrying amount
exceeds the amount to be recovered through use or sale of the
asset. If this is the case, the asset is described as impaired and
this Standard requires the enterprise to recognise an impairment
loss. This Standard also specifies when an enterprise should reverse
an impairment loss and it prescribes certain disclosures for
impaired assets.
This Standard should be applied in accounting for the impairment
of all assets, other than:
(a) inventories (see AS 2, Valuation of Inventories);

(b) assets arising from construction contracts (see AS 7,
Construction Contracts);
(c) financial assets, including investments that are included
in the scope of AS 13, Accounting for Investments; and deferred
tax assets (see AS 22, Accounting for Taxes on Income).
AS 29 Provisions, The objective of this Standard is to ensure that appropriate
Contingent recognition criteria and measurement bases are applied to
Liabilities & provisions and contingent liabilities and that sufficient
Contingent information is disclosed in the notes to the financial statements
to enable users to understand their nature, timing and amount.
Assets
The objective of this Standard is also to lay down appropriate
accounting for contingent assets.
This Standard should be applied in accounting for provisions and
contingent liabilities and in dealing with contingent assets,
except:
(a) those resulting from financial instruments that are
carried at fair value;
(b) those resulting from executory contracts, except where the
contract is onerous;
(c) those arising in insurance enterprises from contracts with
policyholders; and
(d) Those covered by another Accounting Standard.
At present, there are two sets

of Accounting Standards
Accounting Standard (ASs). India Accounting Standard (Ind As).

As-1 to As-5, as-7 and As-9 to As-29 Ind As 1 to 41 & IND AS 101 to IND AS 116
9. NEED FOR CONVERGENCE WITH GLOBAL STANDARDS

 As each country has its own set of rules and regulations for accounting and
financial reporting. Therefore, when an enterprise decides to raise capital from
the markets other than home country, the rules and regulations of that other
country apply.
 International analysts and investors would like to compare financial statements
based on similar Accounting Standards. Harmonization will help to raise
confidence of investors generally in information they are using to make their
decisions & assess their risks.
 Strong need was felt by legislation to bring about uniformity, rationalization,
comparability, transparency and adaptability in financial statements. Having a
multiplicity of Accounting Standards around the world is against the public

interest. If accounting for the same events and information produces different
reported numbers, it creates confusion, encourages error and facilitates fraud.
 The cure for these ills is to have a single set of global standards, of the highest
quality, set in the interest of public.
 Convergence of financial reporting & Accounting Standards is valuable process
that contributes to free flow of global investment & achieves substantial
benefits for all capital market stakeholders. It improves ability of investors to
compare investments on global basis & thus lowers their risk of errors of
judgment.
RGENCE & INTERPRETATION OF IFRS & ACCOUNTING STANDARDS IN INDIA
Objective of International Accounting Standards: to improve & harmonize reporting
around the world
1. To formulate and publish international accounting standards
2. To promote their worldwide acceptance and observation.
3. To develop in public interest understandable and enforceable global accounting
standards that require high quality, transparent and comparable information in
4. To promote the use and rigorous application of those standards.
5. To bring about convergence of national accounting standards & international
accounting standards.
Reason: Non-acceptability of international Accounting Standards
 Accounting practices in different countries are different, whenever multinational
company have different way working than national company.
 Worldwide contradictions of views have been noticed in the national
standard setting bodies and international bodies.
 This require harmonization for evolving uniform accounting standard for
world wide application.
 These are the basic reason for non-acceptability of International Accounting
Standard throughout the world.
12. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IRSF)

 The world is getting smaller, globalization has made it possible to accept the
world as one market.
 Due to single set of accounting requirements would increase the comparability of
different entities.
 This is the reason for more than 120 countries to follow global accounting
standards i.e. IFRS
 For any communication language must be the same.
 This problem had overcome by introduction of common set of standards
known as Accounting Standards.
 In order to ensure transparency, consistency, comparability, adequacy and
reliability of financial reporting, it is essential to standardize the accounting
principles and policies.ing Standards
 Accounting standards are written policy documents issued by expert accounting
body or by government or other regulatory body covering the aspects of
recognition, measurement, treatment, presentation and disclosure of
accounting transactions in the financial statements.
 Every country has its own set of local accounting standards for recognition,
measurement, presentation & disclosure of financial statement.
 In India, local standards are known as Accounting Standards (AS) issued by
Accounting Standard Board (ASB) in consultation with Institute of Chartered
Accountants of India (ICAI).
 International Financial Reporting Standards (IFRSs): IFRSs refers to the entire
body of IASB pronouncements, including standards and interpretations approved
by the International Accounting Standard Board (IASB) & IASs and SIC
interpretations approved by the predecessor International Accounting Standards
Committee (IASC) (IFRS are AS of the World)
The Accounting Standards (AS) issued by ICAI are prepared on the basis of the Indian
environment, while IFRS are prepared by considering the global environment as a
whole.
The Indian environment and Global environment are different which leads to a huge
gap between AS issued by ICAI & IFRS issued by IASB. So as to bridge the gap between AS
& IFRS, ICAI issued Ind AS converged with IFRS (formally known as Ind. AS)
Convergence of Indian Accounting Standards (IAS) with International Financial
Reporting Standards (IFRS) (Roadmap for convergence)
 Convergence of its Ind ASs (Indian GAAP) with IFRS in a phased manner.
 Initial roadmap was to achieve convergence in three phases starting April 2011 and
ending April 2014, it could not be implemented due to various reasons.
 A revised roadmap for implementation of Ind ASs (Ind.. AS) finalized by the council
of the ICAI.
 As stated in earlier roadmaps for achieving convergence, there shall be two
separate sets of Accounting Standards notified under the Companies Act, 1956.
 First set would comprise the Indian Accounting Standards converged with the
IFRSs which shall be applicable for preparation of consolidated financial
statements as defined in the Companies Act, 2013, of the specified class of
companies.
 Second set would comprise the existing notified Accounting Standards (AS) and
shall be applicable for preparation of Individual financial statements of the
companies preparing consolidated financial statement as per Ind. AS and for
financial statement of other companies.
 As per the roadmap, the first set of Accounting Standards i.e. converged Indian
Accounting Standards (Ind. AS) shall be applied to the following specified class of
companies for preparing their first Indian Accounting Standards (Ind.. AS)
consolidated financial statements for the accounting period beginning on or
after 1st April, 2016, with comparatives for the year ending 31st March 2016 or
thereafter.
13. APPLICABILITY OF INDIAN ACCOUNTING STANDARDS (IND AS)

MCA, in 2015, had notified the Companies (Indian Accounting Standards (IND AS) Rules
2015, for adoption and applicability of Ind AS in a phased manner beginning from the
Accounting period 2016-17.
The MCA has issued Amendment Rules in the year 2016, 2017, 2018 and 2019 to
amend the 2015 rules.
For companies other than Banking Companies, Non-Banking financial companies

(NBFCs) and Insurance companies:
(i) For the Accounting period beginning on or after 1st April, 2016:
The following companies required to prepare their financial statements by
adopting Indian Accounting Standards (Ind ASs):
(a) Companies whose equity or debt securities are listed or are in the process of
listing on any stock exchange either in India or out of India and having the
net worth of ₹ 500 crore or more;
(b) Unlisted companies having the net worth of ₹ 500 crore or more; and
(c) Holding companies, subsidiary companies, joint venture or associate
companies of the companies mentioned at (a) or (b) above.
Comparatives for the above periods shall be for the period ending on 31st March,
2016 or thereafter.
(ii) For the Accounting period ending on or after 1st April, 2017:
The following companies were required to prepare their financial statements by
adopting Indian Accounting Standards (Ind ASs):
(a) Listed companies having net worth of less than ₹ 500 crores;
(b) Unlisted companies having net worth of ₹ 250 crore or more but less than ₹
500 crores; and
(c) Holding, subsidiary, joint venture and associate companies of the
companies mentioned at or (b) above.
Comparatives for the above periods shall be for the period ending on 31st March,
2017 or thereafter.
 Once “IND AS” always “IND AS”. (For stand-alone financial statements as well as
consolidated financial statements)
 A company may voluntarily apply the Indian Accounting Standards (Ind ASs) for
the preparation of the financial statements for the accounting period starting
on or after 1st April, 2015. However, such a company cannot subsequently revert
back.
 Net worth of the company will be considered based on the audited financial
statements as on 31.3.14
 Companies whose securities are listed or are in the process of being listed on
SME Exchanges will continue to apply the existing Accounting Standards
specified under the Companies (Accounting Standards) Rules, 2006.
 Companies which are not required to mandatorily follow Indian Accounting
Standards (Ind ASs) are required to follow the existing Accounting Standards
specified under the Companies (Accounting Standards) Rules, 2006 unless they
voluntarily choose to apply Indian Accounting Standards (Ind ASs).
For Non-banking Financial Companies (NBFCs):
(i) For the Accounting period beginning on or after 1st April, 2018:
The following NBFCs will be required to adopt Ind ASs:
(a) NBFCs having net worth of ₹ 500 crore or more; and
(b) Holding, subsidiary, joint venture and associate companies of the above
companies. The comparatives will be for the period ending on 31st March, 2018
or thereafter.
(ii) For the Accounting period beginning on or after 1st April, 2019: The following
NBFCs will be required to follow Ind ASs:

(a) Listed NBFCs having net worth of less than ₹ 500 crores;
(b) Unlisted NBFCS with net worth of ₹250 crore or more but with net worth of
less than ₹ 500 crores; and
(c) Holding, subsidiary, joint venture and associate companies of the above
companies. The comparatives will be for the period ending on 31st march,
2019 or thereafter.
Note: The net worth for the above purpose will be computed as per the audited
financial statements for the year ended 31st March, 2016 or the first audited
financial statements thereafter.
For the Scheduled commercial banks (excluding regional rural banks) & insurance
companies
The following will be required to apply Indian Accounting Standards (Ind ASs) for
preparing their financial statements for the period ending beginning on or after 1st
April, 2018:
(a) Scheduled Commercial banks (excluding regional rural banks);
(b) All India term lending refinancing institutions (i.e. Exim Bank, NHB, NABARD, SIDBI);
(c) Insurers/insurance companies; and
(d) Holding, subsidiary, joint venture and associate companies of the above
companies.
The comparatives will be given for the period ending on 31st March, 2018 or thereafter.’
Advantages of International Financial Reporting Standards or Why IFRS?
 Facilitate comparability of financial information between companies operating in
different countries.
 The financial reporting process would become more transparent.
 The standardization of accounting methodology provides creditors and investors
with the ability to analyze businesses around the world using the same financial
methods.
 It would also permit international capital to flow more freely
 Give investors a better understanding to assess the investment opportunities in
other countries.
 It would also benefit the accounting professionals as they will be able to sell their
services in the different parts of the world.
12. OVERVIEW OF “IND AS”
Ind AS Deals with Details

Ind AS First-time The objective of this Indian Accounting Standard (Ind AS) is to
101 Adoption of ensure that an entity’s first Ind-AS financial statements, and its
Indian interim financial reports for part of the period covered by those
Accounting financial statements, contain high quality information that:
Standards (a) is transparent for users and comparable over all periods
presented;
(b) provides a suitable starting point for accounting in
accordance with Ind ASs; and
(c) can be generated at a cost that does not exceed the benefits.
An entity shall apply this Ind-AS in:
(a) its first Ind-AS financial statements, and
(b) each interim financial report, if any, that it presents in
accordance with Ind AS 34 Interim Financial Reporting for
part of the period covered by its first Ind-AS financial
statements.
An entity’s first Ind AS financial statements are the first
annual financial statements in which the entity adopts Ind
ASs according to the Ind ASs notified under the Companies Act,
2013 and makes an explicit and unreserved statement in
those financial statements of compliance with Ind ASs.
Ind AS Share-based The objective of this Standard is to specify the financial reporting
102 Payment by an entity when it undertakes a share- based payment
CA CS transaction. In particular, it requires an entity to reflect in its
Harish profit or loss and financial position the effects of share-based
payment transactions, including expenses associated with
A
transactions in which share options are granted to employees.
An entity shall apply this Standard in accounting for all share-
based payment transactions, whether or not the entity can
identify specifically some or all of the goods or services received,
including:
 equity-settled share-based payment transactions,
 cash-settled share-based payment transactions, and
 Transactions in which the entity receives or acquires goods
or services and the terms of the arrangement provide either
the entity or the supplier of those goods or services with a
choice of whether the entity settles the transaction in cash
(or other assets) or by issuing equity instruments.
A share based payment arrangement is an agreement between
the entity (or another group entity or any shareholder of any
group entity) and another party (including an employee) that
entitles the other party to receive:
(a) cash or other assets of the entity for amounts that are
based on the price (or value) of equity instruments (including
share or share options) of the entity or another group entity,
or
(b) equity instruments(including shares or share options) of the
entity or another group entity. Provided that specified vesting
conditions, if any, are met.
A share-based payment transaction is a transaction in which the
entity:
(a) receives goods or services from the supplier of those goods or
services (including an employee) in a share based payment
arrangement, or
(b) Incurs an obligation to settle the transaction with the
supplier in a share based payment arrangement when
another group entity receives those goods or services.
Ind AS Business The objective of this Indian Accounting Standard is to improve the
103 Combinations relevance, reliability and comparability of the information that a
CA CS reporting entity provides in its financial statements about a
Harish business combination and its effects. To accomplish that, this
Indian Accounting Standard establishes principles and
requirements for how the acquirer:
(a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed and any
non-controlling interest in the acquirer;
(b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and
(c) Determines what information to disclose to enable users of
the financial statements to evaluate the nature and
financial effects of the business combination.
This Indian Accounting Standard applies to a transaction or
other event that meets the definition of a business combination.
This Indian Accounting Standard does not apply to:
(a) the formation of a joint venture.
(b) the acquisition of an asset or a group of assets that does not
constitute a business. In such cases the acquirer shall identify
and recognize the individual identifiable assets acquired
(including those assets that meet the definition of, and
recognition criteria for, intangible assets in Ind AS 38
Intangible Assets) and liabilities assumed. The cost of the
group shall be allocated to the individual identifiable assets
and liabilities on the basis of their relative fair values at
the date of purchase. Such a transaction or event does not
give rise to goodwill.
(c) Appendix C deals with accounting for combination of entities
or businesses under common control.
Business combination is a transaction or other event in which an
acquirer obtains control of one or more businesses. Transactions
sometimes referred to as ‘true mergers’ or ‘mergers of equals’
are also referred to as business combinations as that term is used
in this Ind AS.
Ind AS Insurance The objective of this Ind AS is to specify the financial reporting
104 Contracts for insurance contracts by any entity that issues such contracts
(described in this Indian Accounting Standard as an insurer). In
particular, this Ind AS requires:
(a) Limited improvements to accounting by insurers for
insurance contracts.
(b) Disclosure that identifies and explains the amounts in an
insurer’s financial statements arising from insurance
contracts and helps users of those financial statements
understand the amount, timing and uncertainty of future
cash flows from insurance contracts.
An entity shall apply this Ind AS to:
(a) Insurance contracts (including reinsurance contracts) that it
issues, and reinsurance contracts that it holds.
(b) Financial instruments that it issues with a discretionary
participation feature. Ind AS 107 Financial Instruments:
Disclosures requires disclosure about financial instruments,
including financial instruments that contain such features.
An insurance contract is a contract under which one party (the
insurer) accepts significant insurance risk from another party
(the policyholder) by agreeing to compensate the policyholder if a
specified future event (the insured event) adversely affects the
policyholder.
Ind AS Non-Current The objective of this Ind AS is to specify the accounting for
assets held for sale, and the presentation and disclosure of
105 Assets Held discontinued operations. In particular, the Ind AS requires:
for Sale and (a) assets that meet the criteria to be classified as held for
Discontinued sale to be measured at the lower of carrying amount and fair
Operations value less costs to sell, and depreciation on such assets to
cease; and
(b) assets that meet the criteria to be classified as held for
sale to be presented separately in the balance sheet and the
results of discontinued operations to be presented
separately in the statement of profit and loss.
A discontinued operation is a component of an entity that either
has been disposed of or is classified as held for sale and:
(a) represents a separate major line of business or geographical
area of operations, or
(b) is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations, or
(c) is a subsidiary acquired exclusively with a view to sale.
Ind AS Exploration The objective of this Ind AS is to specify the financial reporting
106 for and for the exploration for and evaluation of mineral resources. In
Evaluation of particular, the Ind AS requires:
Mineral (a) limited improvements to existing accounting practices for
Resources exploration and evaluation expenditures.
(b) entities that recognize exploration and evaluation assets to
assess such assets for impairment in accordance with this
Ind AS and measure any impairment in accordance with Ind
AS 36 Impairment of Assets.
(c) disclosures that identify and explain the amounts in the
entity’s financial statements arising from the exploration
for and evaluation of mineral resources and help users of
those financial statements understand the amount, timing
and certainty of future cash flows from any exploration and
evaluation assets recognized.
Exploration for and evaluation of mineral resources is the search
for mineral resources, including minerals, oil, natural gas and
similar non-regenerative resources after the entity has obtained
legal rights to explore in a specific area as well as the
determination of the technical feasibility and commercial
viability of extracting the mineral resources.
Ind AS Financial The objective of this Ind AS is to require entities to provide
107 Instruments: disclosures in their financial statements that enable users to
Disclosures evaluate:
the significance of financial instruments for the entity’s
financial position and performance; and
the nature and extent of risks arising from financial
instruments to which the entity is exposed during the period
and at the end of the reporting period, and how the entity
manages those risks.
The principles in this Ind AS complement the principles for
recognizing, measuring and presenting financial assets and
financial liabilities in Ind AS 39 Financial Instruments:
Recognition and Measurement and Ind AS 32 Financial
Instruments : Presentation.

Ind AS Operating An entity shall disclose information to enable users of its financial
108 Segments statements to evaluate the nature and financial effects of the
business activities in which it engages and the economic
environments in which it operates.
This Accounting Standard shall apply to companies to which Ind ASs
(Ind AS) notified under the Companies Act apply.
If an entity that is not required to apply this Ind AS chooses to
disclose information about segments that does not comply with
this Ind AS, it shall not describe the information as segment
information.
If a financial report contains both the consolidated financial
statements of a parent that is within the scope of this Ind AS as
well as the parent’s separate financial statements, segment
information is required only in the consolidated financial
statements.
operating segment is a component of an entity:
that engages in business activities for which it may earn
revenues and incur expenses(including revenues and expenses
relating to transactions with other components of the same
entity),
(b) whose operating results are regularly reviewed by the chief
operating decision-maker to make decisions about
resources to be allocated to the segment and assess its
performance, and
(c) for which discrete financial information is available.
Ind AS Financial The objective of this Standard is to establish principles for the
109 Instruments financial reporting of financial assets and financial liabilities
that will present relevant and useful information to users of
financial statements for their assessment of the amounts,
timing and uncertainty of an entity’s future cash flows.
Ind AS Consolidated The objective of this Ind AS (Ind AS) is to establish principles for
110 Financial the presentation and preparation of consolidated financial
Statements statements when an entity controls one or more other entities.
Consolidated financial statements are the financial statements of
a group in which the assets, liabilities, equity, expenses, income
and cash flows of the parents and its subsidiaries are presented
as those of a single economic entity.
Ind AS Joint The objective of this Ind AS (Ind AS) is to establish principles for
111 Arrangements financial reporting by entities that have an interest in
CA CS arrangements that are controlled jointly (i.e. joint
Harish arrangements).
To meet the objective, this Ind AS defines joint control and
requires an entity that is a party to a joint arrangement to
determine the type of joint arrangement in which it is involved by
assessing its rights and obligations and to account for those rights
and obligations in accordance with that type of joint
arrangement.
This Ind AS shall be applied by all entities that are a party to a
joint arrangement.
A joint arrangement is an arrangement is an arrangement of which
two or more parties have joint control. A joint arrangement has
the following characteristics:

The parties are bound by a contractual arrangement.
The contractual arrangement gives two or more of those parties
joint control of the arrangement. A joint arrangement is either a
joint operation or a joint venture.
Ind AS Disclosure of The objective of this Ind AS (Ind AS) is to require an entity to
112 Interests in disclose information that enables users of its
Other Entities financial statements to evaluate:
(a) the nature of, and risks associated with, its interests in other
entities; and
(b) the effects of those interests on its financial position, financial
performance and cash flows.
Interest in another entity refers to contractual and non-
contractual involvement that exposes an entity to variability of
returns from the performance of the other entity. An interest in
another entity can be evidenced by, but is not limited to, the
holding of equity or debt instruments as well as other forms of
involvement such as provision of funding, liquidity support, credit
enhancement and guarantees. It includes other means by which
the entity has control or joint control of, or significant
influence over another entity. An entity does not necessarily
have an interest in another entity solely because of a typical
customer supplier relationship.
Ind AS Fair Value This Ind AS:
113 Measurement (a) defines fair value;
(b) sets out in a single Ind AS a framework for measuring fair

value; and
(c) requires disclosures about fair value measurements.
Fair value is a market – based measurement, not an entity-
specific measurement. For some assets and liabilities, observable
market transactions or market information might be available. For
other assets and liabilities, observable market transactions and
market information might not be available. However, the objective
of a fair value measurement in both cases is the same-to estimate
the price at which an orderly liability would take place between
market participants at the measurement date under current
market condition (i.e. an exit price at the measurement date from
the perspective of a market participant that holds the asset or
owes the liability).
Fair value is the price that would be received to sell on asset or
paid to transfer a liability in an orderly transaction between the
market participants at the measurement date.
Ind AS Regulatory The objective of this Standard is to specify the financial reporting
114 Deferral requirements for regulatory deferral account balances that arise
Accounts when an entity provides goods or services to customers at a price
or rate that is subject to rate regulation.
An entity is permitted to apply the requirements of this Standard
in its first Ind AS financial statements if and only if it: (a) conducts
rate-regulated activities; and (b) recognised amounts that qualify
as regulatory deferral account balances in its financial
statements in accordance with its previous GAAP.
A regulatory deferral account balance is a regulatory asset or a
regulatory liability as defined in the Guidance Note on Accounting
for Rate regulated activities. Rate regulated activities are the
entity’s activities that are subject to rate regulation.
Ind AS Revenue The objective of this Standard is to establish the principles that
115 from an entity shall apply to report useful information to users of
Contracts financial statements about the nature, amount, timing and
with uncertainty of revenue and cash flows arising from a contract with
a customer.
Customers
A contract is an agreement between two or more parties that
creates enforceable rights and obligations. Revenue is the income
arising in the course of an entity’s ordinary activities. Income is
increases in economic benefits during the accounting period in
the form of inflows or enhancements of assets or decreases of
liabilities that result in increases in equity, other than the
contributions from equity participants.
Ind AS Leases The objective of this Ind AS is to set out the principles for
116 recognition, measurement, presentation of disclosure of leases so
that the lessees and lessors provide the relevant information in a
manner that faithfully represent those transactions.This
information gives a basis for users of financial statements to
assess the effect that leases have on the financial position,
financial performance and cash flows of an entity.
To apply this standard, an entity shall consider the terms and
conditions of contracts and all relevant facts and circumstances.
An entity shall apply this Standard consistently to contracts
with similar characteristics and in similar circumstances.
A lease is a contract, or part of a contract that conveys the right
to use an asset (the underlying asset) for a period of time in
exchange for consideration.
Ind AS Presentation This Standard prescribes the basis for presentation of general
1 of Financial purpose financial statements to ensure comparability both with
Statements the entity’s financial statements of previous periods and with the
financial statements of other entities. It sets out overall
requirements for the presentation of financial statements,
guidelines for their structure and minimum requirements for their
contents.
An entity shall apply this Standard in preparing and presenting
general purpose financial Statements in accordance with Ind AS.
General purpose financial statements are those financial
statements that are intended to meet the needs of users who are
not in a position to require an entity to prepare reports tailored
to their particular information needs.
Ind AS Inventories The objective of this Standard is to prescribe the accounting
2 treatment for inventories. 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 deals with the determination of cost and its subsequent
recognition as an expense, including any write-down to net
realizable value. It also deals with the cost formulas that are used
to assign costs to inventories.
entories are assets:
held for sale in the ordinary course of business;
in the process of production for such sale; or

in the form of materials or supplies to be consumed in the
production process or in the rendering of services.
Ind AS Statement of Information about the cash flows of an entity is useful in providing
7 Cash Flows users of financial statements with a basis to assess the ability of
CA CS the entity to generate cash and cash equivalents and the needs
of the entity to utilize those cash flows. The economic decisions
that are taken by users require an evaluation of the ability of an
entity to generate cash and cash equivalents and the timing and
certainty of their generation. The objective of this Standard is to
require the provision of information about the historical changes
in cash and cash equivalents of an entity by means of a statement
of cash flows which classifies cash flows during the period from
operating, investing and financing activities.
An entity shall prepare a statement of cash flows in accordance
with the requirements of this Standard and shall present it as an
integral part of its financial statements for each period for
which financial statements are presented.
A statement showing cash flows is called a Statement of Cash
Flows. Cash flows are the inflows and outflows of cash and cash
equivalents. Cash comprises cash on hand and demand deposits.
Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Ind AS Accounting The objective of this Standard is to prescribe the criteria for
8 Policies, selecting and changing accounting policies, together with the
Changes in accounting treatment and disclosure of changes in accounting
Accounting policies, changes in accounting estimates and corrections of
errors. The Standard is intended to enhance the relevance and
Estimates
reliability of an entity’s financial statements and the
and Errors comparability of those financial statements over time and with
the financial statements of other entities. Disclosure requirements
for accounting policies, except those for changes in accounting
policies, are set out in Ind AS 1 Presentation of Financial
Statements.
This Standard shall be applied in selecting and applying accounting
policies, and accounting for changes in accounting policies,
changes in accounting estimates and corrections of prior period
errors.
Accounting policies are the specific principles, bases,
conventions, rules and practices applied by an entity in preparing
and presenting financial statements. A change in an accounting
estimate is the adjustment in the carrying amount of an asset or
a liability, or the amount of the periodic consumption of an asset
that results from the assessment of the present status of, and
expected future benefits and obligations with the asset or
liability. Changes in accounting estimates result from new
estimates or new developments, and accordingly are not
correction of errors.
Ind AS Events after The objective of this Standard is to prescribe:
10 the Reporting (a) When an entity should adjust its financial statements for events
Period after the reporting period; and
(b) the disclosures that an entity should give about the date when
the financial statements were approved for issue and about
events after the reporting period.

The Standard also requires that an entity should not prepare its
financial statements on a going concern basis if events after the
reporting period indicate that the going concern assumption is
not appropriate.
This Standard shall be applied in the accounting for, and
disclosure of, events after the reporting period. Events after the
reporting period are those events, favourable and unfavourable,
that occurs between the end of the reporting period and that
date when 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 for issue.
Ind AS Income Taxes The objective of this Standard is to prescribe the accounting
12 treatment for income tax. The principal issue in accounting for
income tax 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 entity’s balance
sheet; and
(b) transactions and other events of the current period that
are recognized in an entity’s financial statements.
It is inherent in the recognition of an asset or liability that the
reporting entity 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 entity to recognize a deferred tax liability (deferred
tax asset), with certain limited exceptions.
Ind AS Property, The objective of this Standard is to prescribe the accounting
16 Plant and treatment for property, plant and equipment so that users of the
Equipment financial statements can discern information about an entity’s
investment in its property, plant and equipment and the changes
in such investment. The principal issues in accounting for property,
plant and equipment are the recognition of the assets, the
determination of their carrying amounts, and the depreciation
charges and impairment losses to be recognized in relation to
them.
This Standard shall be applied in accounting for property, plant
and equipment except when another Standard requires or permits
a different accounting treatment.
Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or
services, for rental to others or for administrative purposes;
and
(b) are expected to be used during more than one period.
Ind AS Employee The objective of this Standard is to prescribe the accounting
19 Benefits and disclosure for employee benefits. The Standard requires an
entity to recognize:
(a) a liability when an employee has provided service in
exchange for employee benefits to be paid in the future;
and
(b) an expense when the entity consumes the economic

benefit arising from the service provided by an employee in
exchange for employee benefits.
Employee benefits are all forms of consideration given by an entity
in exchange for service rendered by employees or for the
termination of employment.
Ind AS Accounting This Standard shall be applied in accounting for, and in the
20 for disclosure of, government grants and in the disclosure of other
Government forms of government assistance.
Grants and This Standard does not deal with:
Disclosure of (a) the special problems arising in accounting for government
Government grants in financial statements reflecting the effects of
Assistance changing prices or in supplementary information of a
similar nature.
(b) Government assistance that is provided for an entity in the
form of benefits that are available in determining taxable
profit or tax loss, or are determined or limited on the basis
of income tax liability. Examples of such benefits are income
tax holidays, investment tax credits, accelerated
depreciation.
(c) Government participation in the ownership of the entity.
(d) Government grants covered by Ind AS-41, Agriculture.
(e) Government assistance is action by government designed to
provide an economic benefit specific to an entity or range
of entities qualifying under certain criteria. Government
assistance does not include benefits provided only indirectly
through actions affecting general trading conditions, such
as the provision of infrastructure in development areas or
the imposition of trading constraints on the
competitors. Government grants are assistance by
government in the form of transfer of resources to an
entity in return for past or future compliance with
certain conditions relating to the operating activities of
the entity. Government grants exclude those forms of
government assistance which cannot reasonably have a
value placed upon them and transactions with the
government which cannot be distinguished from the
trading transactions of the entity.
Ind AS The Effects An entity may carry on foreign activities in two ways. It may have
21 of Changes transactions in foreign currencies or it may have foreign
in Foreign operations. In addition, an entity may present its financial
Exchange statements in a foreign currency. The objective of this Standard
is to prescribe how to include foreign currency transactions and
Rates
foreign operations in the financial statements of an entity and
how to translate financial statements into a presentation
currency.
The principal issues are which exchange rate(s) to use and how to
report the effects of changes in exchange rates in the financial
statements.
Ind AS Borrowing Borrowing costs that are directly attributable to the acquisition,
23 Costs construction or production of a qualifying asset form part of the
cost of that asset. Other borrowing costs are recognized as an
expense.
An entity shall apply this Standard in accounting for borrowing
costs.
The Standard does not deal with the actual or imputed cost of
equity, including preferred capital not classified as a liability.
An entity is not required to apply the Standard to borrowing costs
directly attributable to the acquisition, construction or
production of:
(a) a qualifying asset measured at a fair value, for example, a
biological asset; or
(b) Inventories that are manufactured or otherwise produced,
in large quantities on a repetitive basis.
Ind AS Related Party The objective of this Standard is to ensure that an entity’s
24 Disclosures financial statements contain the disclosures necessary to draw
attention to the possibility that its financial position and profit
or loss may have been affected by the existence of related
parties and by transactions and outstanding balances, including
commitments, with such parties.
This Standard shall be applied in:
(a) identifying related party relationships and transactions;
(b) identifying outstanding balances, including commitments,
between an entity and its related parties;
(c) identifying the circumstances in which disclosure of the
items in (a) and (b) is required; and
(d) Determining the disclosures to be made about those items.
A related party is a person or entity that is related to the entity
preparing its financial statements. A related party transaction is
a transfer of resources, services or obligations between a
reporting entity and a related party regardless of whether the
price is charged.
Ind AS Separate The objective of this Standard is to prescribe the accounting and
27 Financial disclosure requirements for investments in subsidiaries, joint
CA CS Statements ventures and associates when an entity prepares separate
Harish financial statements.
This Standard shall be applied in accounting for investments in
subsidiaries, joint ventures and associates when an entity elects,
or is required by law, to present separate financial statements.
This Standard does not mandate which entities produce separate
financial statements. It applies when an entity prepares separate
financial statements that comply with Ind ASs.
Separate financial statements are those presented by a parent
(i.e. an investor with control of a subsidiary) or an investor with
joint control of, or significant influence over, an investee, in which
the investments are accounted for at cost or as per Ind AS 9
“Financial Instruments”.
Ind AS Investments The objective of this Standard is to prescribe the accounting for
28 in Associates investments in associates and to set out the requirements for the
and Joint application of the equity method when accounting for investments
Ventures in associates and joint ventures.
This Standard shall be applied by all entities that are investors
with joint control of, or significant influence over, an investee.
An associate is an entity over which the investor has significant
influence. A joint venture is a joint arrangement whereby the
parties that have the joint control of the arrangement has rights
to the net assets of the arrangement.
Ind AS Financial This Standard shall be applied to the financial statements,
29 Reporting in including the CFS of any entity whose functional currency is the
Hyperinflation currency of a hyperinflationary economy.
ary Economies In a hyperinflationary economy, reporting of operating results and
financial position in the local currency without restatement is
not useful. Money loses purchasing power at such a rate that
comparison of amounts from transactions and other events that
have occurred at different times, even within the same accounting
period, is misleading.
Ind AS Financial The objective of this Standard is to establish principles for
32 Instruments: presenting financial instruments as liabilities or equity and for
Presentation offsetting financial assets and financial liabilities. It applies to the
classification of financial instruments, from the perspective of
the issuer, into financial assets, financial liabilities and equity
instruments; the classification of related interest, dividends,
losses and gains; and the circumstances in which financial assets
and financial liabilities should be offset.
The principles in this Standard complement the principles for
recognising and measuring financial assets and financial liabilities
In Ind AS 39 Financial Instruments: Recognition and Measurement,
and for disclosing information about them in Ind AS 107 Financial
Instruments: Disclosures.
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or an equity
instrument of another entity.
Ind AS Earnings per The objective of this Standard is to prescribe principles for the
33 Share determination and presentation of earnings per share, so as to
improve performance comparisons between different entities in
the same reporting period and between different reporting
periods for the same entity. Even though earnings per share data
have limitations because of the different accounting policies that
may be used form determining ‘earnings’, a consistently
determined denominator enhances financial reporting. The focus
of this Standard is on the denominator of the earnings per share
calculation.
An entity shall calculate basic earnings per share amounts for
profit or loss attributable to the ordinary equity holders of the
parent entity and, if presented, profit or loss from continuing
operations attributable to those equity holders. Basic earnings
per share shall be calculated by dividing profit or loss
attributable to the ordinary equity holders of the parent entity
by the weighted average number of ordinary shares outstanding
during the period.
An entity shall calculate diluted earnings per share amounts for
parent entity and, if presented, profit or loss from continuing
operations attributable to those equity holders. For the purpose
of calculating diluted earnings per share, an entity shall adjust
parent entity and weighted average number of ordinary shares
outstanding during the period, from the effects of all dilutive
potential ordinary shares.

Ind AS Interim The objective of this Standard is to prescribe the minimum
34 Financial content of an interim financial report and to prescribe the
Reporting principles for recognition and measurement in complete or
condensed financial statements for an interim period. Timely and
reliable interim financial reporting improves the ability of
investors, creditors, and others to understand an entity’s
capacity to generate earnings and cash flow and its financial
condition and liquidity.
Interim financial report is a financial report containing either a
complete set of financial statements or a set of condensed
financial statements for an interim period. An interim period is a
financial reporting period shorter than a full financial year.
Ind AS Impairment The objective of this Standard is to prescribe the procedures that
36 of Assets an entity applies to ensure that its assets are carried at no more
than their recoverable amount. An asset is carried at more than
its recoverable amount if its carrying amount exceeds the amount
to be recovered through use or sale of the asset. If this is the
case, the asset is described as impaired and the Standard
requires the entity to recognize an impairment loss. The Standard
also specifies when an entity should reverse an impairment loss
and prescribes disclosures.
An impairment loss is the amount by which the carrying amount of
an asset or a cash generating unit exceeds its recoverable
amount. Carrying amount is the amount at which an asset is
reocgnized after deducting any accumulated depreciation
(amortization) and any accumulated impairment losses thereon. A
cash generating unit is the smallest identifiable group of assets
that generates cash flows that are largely independent of the
cash inflows from other assets or group of assets.
Ind AS Provisions, The objective of this Standard is to ensure that appropriate
37 Contingent recognition criteria and measurement bases are applied to
Liabilities provisions, contingent liabilities and contingent assets and that
and sufficient information is disclosed in the notes to enable users to
understand their nature, timing and amount.
Contingent
Assets A provision is a liability of uncertain timing or amount. A
contingent liability is:
(a) a possible obligation that arises from past events and
whose existence will be confirmed only by the occurrence
or non- occurrence of one or more uncertain events not
wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not
reocgnized because:
(i) it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation;
or
(ii) the amount of obligation cannot be measured with
sufficient reliability.
A contingent asset is a possible asset that arises from past
events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain events
not wholly within the control of the entity.
Ind AS Intangible The objective of this Standard is to prescribe the accounting
38 Assets treatment for intangible assets that are not dealt with

specifically in another Standard. This Standard requires an entity
to recognize an intangible asset if, and only if, specified criteria
are met. The Standard also specifies how to measure the
carrying amount of intangible assets and requires specified
disclosures about intangible assets.
An intangible asset is an identifiable non-monetary asset without
physical substance. Monetary assets are money held and assets to
be received in fixed or determinable amount of money. An
intangible asset to be identifiable should be distinguishable from
goodwill. An asset is identifiable if it either:
(a) is separable, i.e., is capable of being separated or dividend
from the entity and sold, transferred, licensed, rented or
exchanged either individually or together with a related
contract, identifiable asset or liability, regardless of whether
the entity intends to do so; or
(b) arises from contractual or other legal rights, regardless of
whether those rights are transferrable or separable form the
entity or from other rights and obligations.
Ind AS Investment The objective of this Standard is to prescribe the accounting
40 Property treatment for investment property and related disclosure
requirements.
This Standard shall be applied in the recognition, measurement
and disclosure of investment property.
Among other things, this Standard applies to the measurement in
a lessee’s financial statements of investment property interests
held under a lease accounted for as a finance lease and to the
measurement in a lessor’s financial statements of investment
property provided to a lessee under an operating lease. This
Standard does not deal with matters covered in Ind AS 17 Leases,
including:
(a) classification of leases as finance leases or operating leases;
(b) recognition of lease income from investment property (see
also Ind AS 18 Revenue);
(c) measurement in a lessee’s financial statements of property
interests held under a lease accounted for as an operating
lease;
(d) Measurement in a lessor’s financial statements of its
net investment;
(e) accounting for sale and lease back transactions; and
(f) disclosure about finance leases and operating leases.
Investment property is a property (i.e. land or a building or
part of a building or both) held (by the owner or a lessee as a
right of use asset) to earn rentals, or for capital
appreciation, or both rather than for:
(a) use in the production or supply of goods or serviced or for
administrative purposes; or
(b) sale in the ordinary course of business.
CInd AS Agriculture The objective of this Standard is to prescribe the accounting
41 treatment and disclosures related to agricultural activity. This
Standard shall be applied to account for the following when they

relate to agricultural activity:
(a) biological assets;
(b) agricultural produce at the point of harvest; and
(c) Government grants covered by paragraphs 34 and 35.
Agricultural activity is the management by an entity of
the biological transformation and harvest of biological
assets for sale or for conversion into agricultural produce
or into additional biological assets. Agricultural produce is
the harvested produce of the entity’s biological asset. A
biological asset is a living animal or plant. Biological
transformation comprises the processes of growth,
degeneration, production, and procreation that cause
qualitative or quantitative changes in a biological asset.
15. DISTINGUSH BETWEEN: IFRS & IGAAP
Points IFRS IGAAP

First time Full retrospective application of No needs to prepare reconciliation
adoption IFRS to Profit & Loss A/ c and on first time adoption
Balance Sheet.
Reconciliation of Profit & Loss A/c
and Balance Sheet in respect of
last year reported numbers
under previous GAAP.
Components of Comprises of Balance Sheet, Comprises of Balance Sheet, Profit
Financial Profit & Loss A/c, Cash Flow and Loss A/c. Cash Flow Statement
Statements Statement, changes in equity and (if applicable), and Notes to
accounting policy and notes to Accounts.
Accounts
Balance Sheet No particular format, a As per Format Prescribed in
current/non-current presentation Schedule to the Companies Act for
of assets and Companies, adherence to Banking
liabilities is used. Regulation for
Banks etc.
Income No particular format prescribed As per Format Prescribed in to
Statement (IAS-1) the Companies Act (AS-1).
Cash Flow Mandatory for all entities (IAS-7) Level 3 entities exempted (AS-3)
Statements
Dividends Liability to be recognized in the Recognized as an appropriation
period when dividend is declared. against the profit, and recorded as
(IAS-10) liability at BS date even if declared
subsequent to reporting period
but before the
approval of Financial statements
(AS-4)
Cost of major Recognized in carrying amount of Expensed off. Only expenses which
repairs & the assets (IAS-16). increase the FEB are to be
overhaul exp. on capitalized (AS-10).
fixed assets
Revaluation Revaluation (if done) to be No specific requirement for
updated periodically so that revaluation. Revaluation can be
carrying amount does not differ done on systematic basis like for
from fair value at the end period. one location leaving aside the
Revaluation to be done for entire assets of other location (AS-10).
class of assets (IAS-16).
Change in the Considered as a change in Considered as change in accounting
method of accounting estimate. To Be policy, retrospective computation
depreciation applied prospectively. (IAS-16 and excess or deficit is adjusted
and IAS 8) in same period. Required to be
disclosed (AS-6)
Earnings Per Disclosure to be made in only Disclosure of EPS in both
Share consolidated financials of the consolidated and separate
parent Co. (IAS-33) financials. (AS-20)
Intangible Assets Intangible assets can have There is no concept of indefinite
Indefinites useful life and hence useful life. Assets have definite life,
such assets are tested for (usually 10 years)
impairment and not amortized.
Reporting Requires measurement of profit Schedule to the Companies Act
Currency using the functional currency. specifies Indian Rupees as the
Entities may, however, present reporting currency. (AS-11)
financial statements in a
different currency. (IAS-21)
Key Management Includes Executive as well as Excludes non-executive directors.
Personnel (KMP) non-executive directors (IAS-24) (AS-18)
Compensation to Disclosure to be made for total AS-18 does not require the break-up
KMP compensation such as short term of compensation cost.
employee benefits and post-
Employment benefits.
Fringe Benefits Included as part of related expense Disclosed as a separate item after
Tax (fringe benefit) which gives rise profit before tax on the face of
to incurrence of the tax. the income statement.
Uniform Prepared using uniform Policies may differ due to
Accounting accounting policies across all impracticability. (AS-21)
Policies entities in a group. (IAS-27)
Disclosure of Prohibits such disclosure (IAS-1). Disclosure to be made in notes (AS-
extraordinary No such term in IFRS 5)
items
16. COMPARISON OF INDIAN GAAP ANS IND AS
Comparison of Ind AS 1 with Existing Indian GAAP 1

Basis of Ind AS 1 AS 1
Comparison Presentation of Financial Statements Disclosure of
Accounting
Policies
Presentation Prohibits presentation of any item as Allows for
of extraordinary item in the statement of Extraordinary items
Extraordinary profit and loss or in the notes to be disclosed
Item separately.
Disclosure of Requires disclosure of critical Does not require any
Critical assumptions about the future and other such disclosure.
Assumption sources of measurement uncertainty that
can affect carrying amounts of assets and
liabilities within next financial year.
Classification Requires classification of expenses be Does not require any
of Expenses presented on the basis of nature of such classification.

expenses.
Reclassificati Reclassification of items, nature,
No such nature,
on amount & reason for reclassification are
amount & reason for
disclosed in notes to financial
reclassification are
statement. required to be
disclosed.
Statement of Requires a statement of changes in Statement of changes
Changes in equity including reconciliation between in equity is not
equity opening & closing balance for each required.
component of equity.

Basis of Ind AS 2 Inventories AS 2
Comparison Inventories
Reversal of Provides for reversal of the write- Does not provide any
Written down down of inventories to net specific guidance on the
value to Net realizable value limited to the same.
Realizable amount of original write-down, and
value requires recognition and disclosure
thereof in the financial statements.
Exclusion Excludes from its scope inventories Excludes from its scope only
held by commodity broker traders the measurement of such
(who measure their inventories at a inventories. Further Ind AS 2
fair value minus costs to sell), defines fair value and
producers of agricultural and forest provides an explanation in
products, agricultural produce respect of distinction
after harvest, and minerals and between net realizable value
mineral products. and fair value.
Explanation Provides explanation with regard to Does not contain such an
inventories of service providers explanation
Formula Requires only the use of consistent Specifically requires that the
cost formulas for all inventories formula used in determining
having a similar nature and use to the cost of an item of
the entity inventory should reflect the
fairest possible
approximation to the
cost incurred in bringing
the item of inventory to their
present location and condition

Bases of Ind AS 7 “Statement of Cash AS 3 “Cash Flow
Comparison Flows” Statements”
Bank Specifically provides that the bank As 3 is silent on this
overdraft borrowings are generally classified as aspect.
repayable on financing activities. However, bank
demand overdraft repayable on demand is treated
as part of cash and cash equivalents.
Treatment of Provides for the treatment of cash AS 3 does not contain
cash payments to manufacture or acquire such requirements.
payments in assets held for rental to others and
specific cases subsequently held for sale in the ordinary

c0urse of business as cash flows from
operating activities. Further, treatment
of cash receipts from rent and
subsequent sale of such assets as cash
flow from operating activities is also
provided.
New examples Ind AS 7 includes the following new AS 3 does not contain
of cash flows examples of cash flows arising from such examples.
arising from financing activities:
financing Cash payments to owners to acquire or
activities redeem the entity’s shares;
cash proceeds from mortgages; Cash
payments by the lessee for the reduction
of the outstanding liability relating to a
finance lease.
Adjustments Ind AS 7 specifically requires the AS 3 does not contain
of the profit adjustment of the profit or loss for the such requirements.
or loss for effects of ‘undistributed profits of
the effects of associates and non-controlling interests’
undistributed while determining the net cash flows
profits of the from operating activities using the
associates indirect method.
and non-
controlling
interests
Cash flows Ind AS 7 does not contain
this AS 3 requires cash
Associated requirement. flows associated with
with extra ordinary
extraordinary Activities to be
activities separately classified as
arising from, operating,
investing & financing
activities.
Classification Ind AS 3 requires that only the AS 3 does not contain
an investing expenditures results in a recognized asset such requirements.
activities in the balance sheet are eligible for
classification as investing activities.
Disclosure of Ind AS 7 requires and entity (except an AS 3 does not contain
the amount of investment entity) to disclose the such requirements.
cash and cash amounts of cash and cash equivalents
equivalents in and other assets and liabilities in the
specific subsidiaries or other businesses over
situations which control is obtained or lost. It also
requires to report the aggregate amount
of cash paid or received as consideration
for obtaining or losing control of such
subsidiaries or other businesses in the
Statement of Cash Flows, net of cash and
cash equivalents acquired or disposed of
as part of such transactions, events or
changes in circumstances.
Cash flows Ind AS 7 requires classifying cash flows AS 3 does not contain

arising from arising from changes in ownership such requirements.
changes in interest in subsidiaries that do not result
ownership in a loss of control as cash flows from
interest in financing activities.
subsidiaries
Investments Ind AS 7 mentions the use of equity or AS 3 does not contain
in subsidiaries cost method while accounting for an such requirements.
associates investment in an associate, joint venture
and joint or a subsidiary. It also specifically deals
ventures with the reporting of interest in an
(investees) associate or a joint venture using equity
method.
Use of Ind AS uses the term ‘functional currency AS 3 uses the term
different instead of ‘reporting currency’ (as in AS ‘reporting currency’. AS
terminology 3). It also deals with the translation of 3 does not deal with the
and cash flows of a foreign subsidiary. translation of cash
translation of flows of a foreign
cash flows of a subsidiary.
foreign
subsidiary
Disclosures Ind AS 7 requires more disclosures as As 3 requires less
compared to AS 3. disclosures as
compared to Ind AS 7.
Comparison of Ind AS 8 with existing Indian GAAP 5

Ind AS 8 “Accounting Policies Changes in AS 5
Bases of Accounting Estimates “Net Profit or loss for the
Comparison and Errors” period, prior period and
Changes in Accounting
Policies”
Rectification Ind AS 8 requires rectification of prior AS 5 requires the
of Prior period period errors with retrospective rectification of prior
errors effect subject to limited exceptions. period items with
prospective effect.
Prior period Ind AS 8 defines the term errors as a Existing AS 5 defines
items rising from a failure to use or misuse prior period items as
reliable information that was available incomes or expenses which
when the financial statements of the arise in the current
prior periods were approved for period as a result of
issuance and could reasonably be errors or omissions in the
expected to obtained and taken into preparation of financial
account in the preparation and statements of one or
presentation of those financial more prior periods.
statements..

Bases of Ind AS 12 AS 22 “Accounting for Taxes
Comparison “Income Taxes” on
Income”

Approach Ind AS 12, in contracts, is based on Existing AS 22, based on
balance sheet approach and recognizes income statement
tax consequences of differences approach, recognizes tax
between the carrying amounts of consequences of
assets and liabilities and their tax base. differences between
taxable income and
accounting income.
Recognizes Ind AS 12 recognizes deferred tax assets Existing AS 22 recognizes
for all deductible temporary difference and carries forward
to the extent that it is probable that deferred tax assets only
taxable profit will be available against to the extent where there
which the deductible temporary is a reasonable certainty
difference can be utilized. that sufficient future
taxable income will be
available against which
such deferred tax assets
can be utilized.
Recognize of Under Ind AS 12, deferred tax assets in Under existing AS 22,
Deferred Tax case of unused tax losses and deferred tax assets in case
Assets in case unabsorbed depreciation are recognized of unused tax losses and
of unused tax only to the extent that the entity has unabsorbed depreciation
losses and sufficient taxable temporary is recognized to the
unabsorbed differences, or there is convincing other extent that there is
depreciation evidence that sufficient taxable profit virtual certainty
will be available against which the supported by convincing
unused tax losses or unused tax evidence that sufficient
credits can be utilized by the entity. future taxable income will
be available against which
such deferred tax assets
can be realized.

Bases of Ind AS 16 AS 10 Property, Plant and
comparison Property, Plant and Equipment’s Equipment’s
Property, plantInd AS 16 does not deal with the AS 10 deals with the
and equipment assets held for sale because the accounting for items of
retired from treatment of such assets is covered fixed assets retired from
active use and under Ind AS 105 “Non-current assets active use and held for
held for sale held for sale and Discontinued sale.
operations”.
Stripping costs in Ind AS 16 provides guidance on AS 10 does not contain this
the production measuring the stripping cost in the guidance.
phase of production phase of a surface mine.
a surface mine

Bases of Ind AS 116 AS 19
comparison Leases Leases
Coverage Ind AS 116 deals with specific AS 19 does not deal with all
provisions related to leases of land types of leases.
and building.
Residual value Ind AS 116 does not define residual AS 19 defines residual value.

value.
Inception of Ind AS 116 defines and AS 19 neither defines nor
Lease & distinguishes between inception of distinguishes between the
commencement lease and commencement of lease. two.
of lease
Recognition of As per Ind AS 116, lessee should As per AS 19, the lessee
finance lease recognize finance lease as assets & should recognize the
liabilities at the commencement of finance lease at the
lease. inception of lease.
Upward revision Ind AS 116 permits the upward AS 19 prohibits such upward
of revision of unguaranteed residual revision.
unguaranteed value during the lease term.
residual value
Initial direct Ind AS 116 provides that the initial AS 19 provides that such
costs direct costs incurred by the lessor costs should be charged off
in case of an operating lease should by the lessor or amortized
be included in the carrying amount over the lease term.
of the leased asset and amortized
as an expense over the lease term.
Sale and Ind AS 116 also requires that the AS 19 provides that the
leaseback excess of sale proceeds over the excess of sale proceeds
transactions in carrying amount of the asset over the carrying amount
case of should be deferred and amortized of the asset should be
finance lease but it does not specify the method deferred and amortized
of amortization. over the lease term in
proportion to depreciation
of the leased asset.
Single lease Ind AS 116 now has a single lease As 19 prescribes for the
accounting accounting model for the leassee lessee lease accounting
model for lessee by eliminating the difference depending on the type of
between operating lease and lease i.e. operating lease
finance lease i.e. the lessee has to and finance lease.
recognize the lease liability with a
corresponding ‘right of use’ asset.
Comparison between Ind AS 115 with existing Indian GAAP AS 7 and AS 9

Bases of Ind AS 115 AS 7 and AS 9 Construction
comparison Revenue from Contracts with Contracts and Revenue
Customer Recognition
Framework of Ind AS 115 gives a framework of AS 7 and AS 9 do not provide any
revenue revenue recognition within the such principle to fall upon in
recognition standard. It specifies the core case of doubt.
principle for revenue recognition
which requires the revenue to
depict the transfer of promised
goods or services to customers in
an amount that reflects the
consideration to which the entity
expects to be entitled in
exchange for those goods or
services.
Comprehensiv Ind AS 115 provides AS 7 and AS 9 do not provide any

e guidance on comprehensive guidance on how such guidance on this aspect.
recognition to recognize and measure multiple
and elements of contracts with a
measurement customer.
of multiple
elements of
contracts
with
a customer
Coverage Ind AS deals with all types of AS 7 deals only with the revenue
CA CS Harish A performance obligation contracts from construction contracts
with customers. However, it does which measures the revenue
not deal with interest and at the consideration received/
dividend dealt with in the receivable. AS 9 deals with only
standard on financial the revenue from sale of goods,
instruments. rendering of services and
income form royalty, dividend
and interests.
Measurement Ind AS 115 measures the revenue at AS 9 provides for the
of Revenue the transaction price i.e. the measurement of revenue at the
consideration to which the entity amount of charges made to the
expects to be entitled in exchange customers or clients for the
for the transfer of the promised goods transferred or services
goods or services, excluding the supplied or the rewards arising
amounts collected on behalf of from the use of resources by
third parties. others.
AS 7 measures the revenue at
the consideration received or
receivable.
Recognition of Ind AS 115 provides that the AS 9 provides that revenue is
revenue revenue is recognized when the recognized upon the transfer of
control is transferred to the significant risk as and rewards
customer. of ownership to the clients.
AS 7 provides that the revenue is
recognized when the outcome
of a construction contract can
be reliably estimated.
Capitalization Ind AS 115 provides guidance on AS 7 and AS 9 do not deal with
of costs the recognition of costs to obtain capitalization of such costs.
and fulfil a contract as an asset.
Guidance on Ind AS 115 gives guidance on Ass donot provide such
service service concession arrangements & guidance.
concession disclosures thereof.
arrangements
Disclosure Ind AS 115 contains more AS 7 and AS9 contain very less
requirements disclosure requirements as disclosure requirements as
compared to AS 7 & AS 9. compared to Ind AS 115.

comparison Employee Benefits Employee Benefits
Constructive Ind AS 19 covers employee Existing AS 15 is silent on the

Obligation benefits arising from constructive same.
obligations.
Employee Ind AS 19 the term employee AS 15, the term employee
Includes includes directors. includes whole time directors.
Scope Cover Ind AS 19 in its scope covers Existing AS 15 is silent on the
situations of contractual agreement same.
between a multi- employer plant
and its participants that determines
how the surplus in the plan will be
distributed to the participants (or
the deficit funded).
Ind AS 19 defines the same as the Existing AS 15 defines the limit
total of for asset ceiling as present
(i) any cumulative unrecognized value of economic benefits
past service cost and (ii) the present available in the form of refunds
value of economic benefits available from the plant or reductions in
in the form of refunds from the plan future contributions to the plan.
or reduction in future contributions
to the plan.

Ind AS 20
Bases of Accounting for Government AS 12
comparison Grants and Disclosure of Government Grants
Government Assistance
Government Ind AS 20 does not recognize Existing AS 12 requires government
grants of the government grants of such grants of the nature of promoter’s
nature of nature and accordingly contribution to be credited directly
promoters recognize as income over the to capital reserve and treated as a
contribution periods. part of shareholders’ funds.
Non- Ind AS 20 value non- AS 12 which records it at nominal
Monetary monetary grants at their fair value.
Grants value.
Presentation Ind AS 20 requires such grants Under existing AS 12, grants related to
to be presented as deferred assets (including non-monetary
income only. grants) can be presented as deferred
income or by deducting the grant
from the gross value of asset
concerned in arriving at its book
value.

comparison Effects of Change in Forex Rates Effects of Change in
Foreign Exchange Rates
Forward exchange Ind AS 21 excludes forward Existing AS 11 covers in its
contracts and exchange contracts and other scope, forward exchange
other similar similar financial instruments (as contracts and other similar
financial it gets treated in accordance financial instruments.
instruments with Ind AS 39 Financial
Instruments: Recognition
and

Measurement).
Approach Ind AS 21 is based on AS 11 is based on reporting
Presentation functional currency approach. currency approach.
currency Ind AS 21 allows for Existing AS 11 does not allow
presentation currency to be it.
different from local currency.
Recognizing of Ind AS 21 allows recognizing of Existing AS 11 permits such
exchange exchange differences arising on an option for items not
differences translation of certain long-term related to acquisition of
arising on monetary items from foreign fixed assets up to 31st
translation of currency to functional currency March 2011, where such
certain long- directly in equity and items are related to
term monetary transferring the same to profit or acquisition of fixed assets,
items from loss over the term of such items the foreign exchange
foreign currency in an appropriate manner. differences can be
to functional recognized as part of the
currency cost of the asset.

comparison Borrowing Costs Borrowing Costs
Borrowing Ind AS 23 given an option to an entity to exclude The same is not
cost exclusion from this standards, borrowing costs directly exists in AS 16
attributable to the acquisition, construction or
production of a qualifying asset measured at fair
value. Further it also excludes application of this
standard to borrowing costs directly
attributable to the acquisition, construction or
production of inventories that are
manufactured, otherwise produced, in large
quantities on a repetitive basis.

Bases of Ind AS 24 AS 18 Related
comparison Related Party Disclosure Party Disclosure
Scope of Under Ind AS 24, the scope and definition of -
Definition of relatives (or close members of the family)
Relatives & government enterprises, key management
additional personnel (KMP) and joint ventures have
disclosure been expanded. Further, Ind AS 24 requires
additional disclosures in case of government
related enterprises and compensation of
KMP under different categories.

Comparison Consolidated & Separate Financial Consolidated Financial
Statements Statement
Mandatory Under Ind As 27 preparation of This does not mandate the same.
consolidated financial

statements is mandatory for a
parent company.
Guidance Ind AS 27 contains guidance Under existing AS 21 there is no
regarding accounting for guidance regarding accounting for
investments in subsidiaries, investments in subsidiaries, jointly
jointly controlled entities and controlled entities and associates
associates in preparing the in preparing the separate financial
separate financial statements. statements.
Exemption Ind AS 27 does not provide any AS 21 provides for exclusion of
such exemption from subsidiary from consolidation under
consolidation. circumstances where control is
intended to be temporary or when
subsidiary operates under serve
long term restrictions.
Effect of Ind AS 27 takes into account AS 21 does not take into account
potential existence and effect of potential potential equity shares of the
voting rights voting rights that are currently investee held by investor for
exercisable or convertible while considering share ownership.
assessing the control of entity
over the subsidiary.
comparison Investment in Associates & Accounting for investment in
Joint Ventures Associates
Scope Ind AS 28 excludes them from Existing AS 23 includes in its scope,
its scope as the same is investments in associates held by
included in Ind AS 39 (Financial venture capital organizations,
Instruments : Recognition and mutual funds, unit trusts and
Measurement) similar entities including
investment linked insurance funds.
Potential voting Ind AS 28 considers existence Existing AS 23 does not consider
rights & effect of potential voting potential equity shares of the
rights that are currently investee held by investor for
exercisable or convertible determining significant influence.
for assessing significant
influence.
Equity Method Ind AS 28 requires application Existing AS 23 requires application
of equity method in financial of the equity method only in case of
statement, even if the entity subsidiary consolidation.
does not have subsidiaries.
Length of Ind AS 28, length of difference Existing AS 23 specifies no maximum
difference in in the reporting dates of the difference between the reporting
the reporting investor and the parent date of the associate and that of
dates of the should not be more than the parent.
investor and three months unless it is
the parent impractical.
While both existing AS 23 and Ind AS 28 require uniform accounting policies for the
preparation of investor’s financial statements for a like transactions and events in
similar circumstances, existing AS 23 provides exemption to the same, if it is not
possible to make adjustments to the accounting policies of the associates.
However, the fact needs to be disclosed along with a brief description of the
differences between the accounting policies

comparison Earnings Per Share Earnings Per Share
Options held by Ind AS 33 specifically deals with Existing AS 20 does not
the options held by the entity on its share. deal with the same.
entity
Presentation of Ind AS 33 requires presentation of Existing AS 20 does not
basic & diluted basic and diluted EPS from continuing require the same.
EPS from and discontinued operations
continuing & separately.
discontinued
operations
Presentation of Ind AS 33 does not require the Existing AS 20 requires
EPS with & presentation of EPS with and without the presentation of EPS
without extraordinary items as Ind AS 1 with and without
extraordinary (Presentation of Financial extraordinary items.
items Statements) prohibits the disclosure
of items as extraordinary.

comparison Interim Financial Reporting Interim Financial Reporting
Comply Ind AS 34 requires such Under existing AS 25, if an entity is
compliance only if the required or elects to prepare and
interim financial report is present an interim financial
required to be prepared and report, it should comply with
presented in accordance that Standard.
with accounting
standards.
Condensed Ind AS 34, in addition, Existing AS 25 requires at a
statement of requires a condensed minimum condensed balance
changes in equity statement of changes in sheet, a condensed statement of
equity for the period in profit and loss, a condensed cash
addition to above flow statement and selected
requirements. explanatory notes in the contents
of an interim financial report.
Preparation of Ind AS 34 neither requires AS 25 requires preparation of
both consolidated nor prohibits the inclusion both consolidated and separate
and separate of the parents’ separate financial statements, complete or
financial statements in the entity’s condensed.
statements, interim report prepared on a
complete or consolidated basis.
condensed.
Furnishing Ind AS 34 specifies Existing AS 25 requires furnishing
Information of that information, if of information on contingent
contingent significant, on both liabilities only.
liabilities and contingent liabilities and
contingent assets contingent assets is required
to be furnished.

comparison Impairment of Assets Impairment of Assets
Frequency for Ind AS 36 requires goodwill and Existing AS 28 does not require
Testing of other intangible assets to be goodwill to be tested for
Intangibles tested for impairment at last impairment annually unless there is
annually. an indication of impairment.
Reversal of Ind AS 36 prohibits reversal of Existing AS 28 allows for reversal of
impairment impairment losses in a impairment losses on account of
losses subsequent period. goodwill in a subsequent period if
the loss was caused by a specific
external event of an exceptional
nature that is not expected to
recur, and subsequent external
events that would occur and
reverse the effect of that event.
Bottom-up or Under Ind AS 36 there is no Existing AS 28 specifies bottom up
top- down bottom-up or top- down or top-down approach for
approach approach for allocation of allocation of goodwill under which
good will. Rather goodwill is goodwill is tested for impairment by
allocated to CGUs that are allocating its carrying amount to
expected to benefit from the each CGU (cash generating unit) or
synergies of the business the smallest CGU on a reasonable
combination from which it and consistent basis.
arose.

comparison Provisions, Contingent Provisions, Contingent Liabilities and
Liabilities & Contingent Contingent Assets
Assets
Provisions for Ind AS 37 requires creation of Under existing AS 29 provisions are
constructive provisions in respect of not recognized on constructive
obligations constructive obligations. obligations. However, provisions
CA CS may be created on account of
obligations arising out of normal
business practices, custom and a
desire to maintain good business
relations or to act in an equitable
manner.
Discounting of Ind AS 37 requires discounting The same is prohibited under AS 29.
Provision of the amount of provisions in
cash effect of the time value
of money
is material.
Disclosure of Ind AS 37 requires disclosure AS 29 does not require disclosure of
Contingent of contingent assets, when the contingent assets in the financial
Assets inflow statements.
of economic benefits is
probable.

comparison Intangible Assets Intangible Assets
Cost or Ind AS 38 permits revaluation Existing standard AS 26 allows for
Revaluation model in addition to cost only the cost model as a part of
Model model. accounting policy.
Useful life Ind AS 38 recognizes that useful Under existing standard AS 26,
may be finite life may be finite or indefinite useful life of an intangible asset is
or indefinite subject towards fulfilment of not always indefinite. It includes a
certain conditions. rebuttable presumption that the
useful life will not exceed ten
years from the date the asset is
available for use.
Recognize of Ind AS 38 requires such Under the existing standard AS 26,
Intangible intangible asset to be if an intangible asset is acquired in
Assets recognized at the fair value of exchange of a non- monetary
acquired in the asset given up unless asset, its cost should be recognized
exchange of a (a) The exchange transaction with reference to the fair market
non-monetary lacks commercial substance, value of the consideration given.
asset or (b) the fair value of neither
the asset received nor the
asset given is reliably
measurable.
Deferment of Ind AS 38 requires that in case Existing AS 26 is silent on this
payment of deferment of payment aspect.
beyond normal credit terms in
case of an intangible asset,
the difference between this
amount and the total
payments is to be recognized
as interest expense over the
period of credit unless it
is capitalized as per Ind AS 23.

Bases of Ind AS 103 AS 14 Accounting for
comparison Business Combination Amalgamation
Scope Ind AS 103 is much wider in scope as it Existing AS 14 defines only
deals with business combinations. amalgamations.
Method Ind AS 103 allows for only Existing AS 14 allows pooling of
acquisition method for each interest method as well as
business combination. purchase method for
amalgamation.
Recognize Ind AS 103 requires the acquired Existing AS 14 requires that
at Book identifiable assets liabilities and acquired assets and liabilities
Value or non- controlling interest to be are recognized at their existing
Fair Value recognized at a fair value under book value or at the fair
acquisition method. value under the purchase
method.
Measure of Ind AS 103 requires that for each Existing AS 14 defines that the
Non- business combination, the acquirer minority interest is the amount
Controlling shall measure any non-controlling of equity attributable to

interest interest in the acquired at either minorities at the date on which
a fair value, or the present investment in a subsidiary is
ownership instruments’ made, and it is shown outside
proportionate share in the as shareholders equity.
recognized amount of the acquirer’s
identifiable net assets.
Testing for Ind AS 103 requires goodwill to be Existing AS 14 requires
impairment tested for impairment on an annual amortization of goodwill
of Goodwill basis in accordance with Ind AS 36. arising on amalgamation in the
nature of purchase.
Guidance on Ind AS 103 specifically provides Existing AS 14 is silent on the
accounting guidance on accounting for reverse same.
for reverse acquisitions.
acquisitions.
Treatment Ind AS 103 requires bargain purchase Existing AS 14 treats the excess
of excess gain arising on business amount as capital reserve.
amount combination to be recognized as
other comprehensive income on the
acquisition date and accumulation of
the same in equity as capital reserve.

Bases of Ind AS 105 Non-Current AS 24
comparison Assets Held for Sale & Discontinued Operations
Discontinued Operations
Dealt with Ind AS 105 specifically Under existing AS 24, same is not dealt
non- current deals with accounting for with. Rather it falls under the ambit of
assets held for non- current assets held existing AS 10 (Accounting for Fixed
sale for sale. Assets).
Measure of Under Ind AS 105 non- Existing AS 24 follows the principles set
non- current current assets held for out in existing AS 10 which requires fixed
assets held for sale are measured lower assets retired from active uses and held
sale than the carrying for sale to be stated at the lower of
amount, and fair value their net book value and net realizable
minus costs to sell. value.
Classification Under Ind AS 105, an Under AS 24, classification of
of operation is classified as discontinuing operation happens at the
discontinuing discontinued when either occurrence of one of the following
operation it has been disposed of, or the enterprise has entered into a binding
is classified as held for sale agreement for substantially all of
sale. the assets attributable to the
discontinuing operation ; or
the enterprise’s Board of Directors or
similar governing body has both
approved a detailed, formal plan for the
discontinuance, and made an
announcement of the plan.

Bases Ind AS 108 Operating Segment AS 17 Segment Reporting
Identificatio Ind AS 108, on the contrary identifies Existing AS 17 requires an
n of segments based on internal reports enterprise to identify

segment regularly reviewed by the entity’s segments based on business
chief operating decision maker so as products and geographical
to make decisions about resources areas with internal financial
to be allocated to the segment and reporting system serving
assess its performance. only as the starting point for
identifying those items that
can be directly attributed, or
reasonably allocated, to
segments.
Measure of Ind AS 108 requires measurement basis Under existing AS 17 segment
Segment for cash segment reported to be that information is prepared in
used by the chief operating decision- conformity with the
maker for the purposes of making accounting policies adopted
decisions about allocating resources for preparing and presenting
to the segment and assessing its the financial statements.
performance.
Aggregation Ind AS 108 specifically requires AS 17 does not deal with the
criteria aggregation criteria for aggregation same.
of two or more segments.
Disclosure Ind AS 108 requires disclosures of Existing AS 17 requires
revenues from external customers disclosures based on the
for each product and service, or each classification of the
group of similar products and segments as primary or
services. With respect to secondary segments.
geographical areas, disclosure is
required for revenues from external
customer attributed to the
entity’s country of domicile
attributed to all foreign countries in
total from which the entity derives
revenue.
ES Academy, Pune 8888 545 545


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2. ACCOUNTING STANDARDS DEALS WITH:

3. NEED OF ACCOUNTING STATNDARD

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.1

AS 1 Disclosures of Accounting Policies

*In March 2016 withdrawn by ICAI

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.2

6. ACCOUNTING STANDARD AND AUDITORS

7. ACCOUNTING STANDARD AND BOARD’S REPORT Section 134(5)(A)

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.3

Corporate Non - corporate

SMCs Non - SMCs Level I Level II Level III

Non – Corporate Entities

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.4

8. OVERVIEW OF ACCOUNTING STANDARD

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.7

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.8

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.9

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.10

AS 24 Discontinuing The objective of this Standard is to establish principles for

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.11

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.12

At present, there are two sets

Accounting Standard (ASs). India Accounting Standard (Ind As).

9. NEED FOR CONVERGENCE WITH GLOBAL STANDARDS

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.13

12. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IRSF)

13. APPLICABILITY OF INDIAN ACCOUNTING STANDARDS (IND AS)

For companies other than Banking Companies, Non-Banking financial companies

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.16

12. OVERVIEW OF “IND AS”

Ind AS Deals with Details

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.20

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.21

(b) sets out in a single Ind AS a framework for measuring fair

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.23

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.24

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.25

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.28

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.29

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.30

15. DISTINGUSH BETWEEN: IFRS & IGAAP

Points IFRS IGAAP

16. COMPARISON OF INDIAN GAAP ANS IND AS

Comparison of Ind AS 1 with Existing Indian GAAP 1

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.32

Comparison of Ind AS 2 with Existing Indian GAAP 2

Comparison of Ind AS 7 with Existing Indian GAAP 3

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.33

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.34

Comparison of Ind AS 8 with existing Indian GAAP 5

Comparison of Ind AS 12 with existing Indian GAAP 22

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.35

Comparison of Ind AS 16 with existing Indian GAAP 10

Comparison of Ind AS 116 with existing Indian GAAP 19

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.36

Comparison between Ind AS 115 with existing Indian GAAP AS 7 and AS 9

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.37

Comparison of Ind AS 19 with existing Indian GAAP 15

Excel Educational Institute CS- Executive – Corporate Accounts Page 10.38