Indian Accounting Standards

Indian Accounting Standards (abbreviated as India AS) in India accounting standards were issued under the supervision and control of Accounting Standards Board (ASB), which was constituted as a body in the year 1977. ASB is a committee under Institute of Chartered Accountants of India(ICAI). ASB is an independent committee which consists of representatives from government department, academicians, space agencies, representatives from ASSOCHAM, CII, FICCI, etc., Now India will have two sets of (very confusing) accounting standards viz. existing accounting standards under Companies (Accounting Standard) Rules, 2006 and IFRS converged Indian Accounting Standards(Ind AS). The Ind AS are named and numbered in the same way as the corresponding IFRS. NACAS recommend these standards to the Ministry of Corporate Affairs. The Ministry of Corporate Affairs has to spell out the accounting standards applicable for companies in India. As on date the Ministry of Corporate Affairs notified 39 Indian Accounting Standards(Ind AS).This shall be applied to the companies of financial year 2015-16 voluntarily and from 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the banks, insurance companies etc. Standards for the computation of Tax would be notified separately.[1]

The Road Map for implementation of Indian Accounting Standards (Ind AS) for commercial Banks (Banks), Insurance Companies (Insurers) and Non-Banking Financial Companies (NBFCs) was announced on 18/01/2016[2]

OBJECTIVE The basic objective of Accounting Standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in presentation. They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial statements by different reporting enterprises so as to facilitate intra-firm and inter-firm comparison.

Bharat Bhushan Accounting Standards

List of Indian Accounting Standards(Currently Applicable)

The following are the list of Accounting Standards (AS), as listed on the site of The Institute of Chartered Accountants of India (ICAI). However, Accounting Standard- 30, 31, 32 are not mandatory as of now.

≠== AS1 Disclosure of Accounting Policies=='kp All significant accounting policies adopted in the preparation.

AS 2 Valuation of Inventories

It is to formulate the method of computation of valuation of stock, determining the closing stock is to be shown in balance sheet till it is not sold and recognized as revenue. it should be shown as market value of inventory or at the cost, whichever is lower.

AS 3 Cash Flow Statement

It is an additional information statement exhibiting the flow of incoming and outgoing cash. It assess the ability of the concern to generate cash and utilize it. One of the tools for assessing the liquidity or solvency of the enterprise.

AS 4 Contingencies and Events Occurring after the Balance Sheet Date

This concept is for preparing financial statements accounting is done by the following accrual basis of finding profit or loss account(p\l) for the year and recognize assets and liabilities in balance sheet ( B/S).

Liabilities and Asset.

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

This Standard should be applied by an enterprise in presenting profit or loss from ordinary activities, extraordinary items and prior period items in the statement of profit and loss, in accounting for changes in accounting estimates, and in disclosure of changes in accounting policies

AS 6 Depreciation

The standard applies to all depreciable assets except the following items which special considerations apply a)forest,planitations. B)wasting assets such as mineral resources oils—etc. c)expenditure on research and development d) goodwill e)livestock

AS 7 Construction Contracts

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 8 Research and Development

This standard has been withdrawn by the ASB with the issuance of AS 26.

AS 9 Revenue Recognition

                                                     Accounting Standard (AS) 9
                                                          (issued 1985)
                                                      Revenue Recognition

(This Accounting Standard includes paragraphs 10-14 set in bold italic type and paragraphs 1-9 set in plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the Preface to the Statements of Accounting Standards.)

The following is the text of the Accounting Standard (AS) 9 issued by the Institute of Chartered Accountants of India on ‘Revenue Recognition’.In the initial years, this accounting standard will be re commendatory in character. During this period, this standard is recommended for use by companies listed on a recognized stock exchange and other large commercial, industrial and business enterprises in the public and private sectors

Introduction of Accounting Standard 9 - Revenue Recognition - AS 9 1. This Statement deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise. The Statement is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from

— the sale of goods, — the rendering of services, and — the use by others of enterprise resources yielding interest, royalties and dividends. 2. This Statement does not deal with the following aspects of revenue recognition to which special considerations apply:

(i) Revenue arising from construction contracts;

(ii) Revenue arising from hire-purchase, lease agreements;

(iii) Revenue arising from government grants and other similar subsidies;

(iv) Revenue of insurance companies arising frominsurance contracts.

3. Examples of items not included within the definition of "revenue" for the purpose of this Statement are:

(i) Realised gains resulting fromthe disposal of, and unrealised gains resulting fromthe holding of, non-current assets e.g. appreciation in the value of fixed assets;

(ii) Unrealised holding gains resulting from the change in value of current assets, and the natural increases in herds and agricultural and forest products;

(iii) Realised or unrealised gains resulting from changes in foreign exchange rates and adjustments arising on the translation of foreign currency financial statements;

(iv) Realised gains resulting from the discharge of an obligation at less than its carrying amount;

(v) Unrealised gains resulting from the restatement of the carrying amount of an obligation.

Definitions of Accounting Standard 9 - Revenue Recognition - AS 9

4. The following terms are used in this Statement with the meanings specified:

4.1 Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise6 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.

4.2 Completed service contract method is a method of accounting which recognises revenue in the statement of profit and loss onlywhen the rendering of services under a contract is completed or substantially completed.

4.3 Proportionate completion method is a method of accounting which recognises revenue in the statement of profit and loss proportionately with the degree of completion of services under a contract.

Explanation of Accounting Standard 9 - Revenue Recognition - AS 9

5. Revenue recognition is mainly concerned with the timing of recognition of revenue in the statement of profit and loss of an enterprise. The amount of revenue arising on a transaction is usually determined by agreement between the parties involved in the transaction. When uncertainties exist regarding the determination of the amount, or its associated costs, these uncertainties may influence the timing of revenue recognition.

6. Sale of Goods of Accounting Standard 9 - Revenue Recognition - AS 9

6.1 A key criterion for determining when to recognise revenue from a transaction involving the sale of goods is that the seller has transferred the property in the goods to the buyer for a consideration. The transfer of property in goods, in most cases, results in or coincides with the transfer of significant risks and rewards of ownership to the buyer.However, theremay be situations where transfer of property in goods does not coincide with the transfer of significant risks and rewards of ownership. Revenue in such situations is recognised at the time of transfer of significant risks and rewards of ownership to the buyer. Such cases may arise where delivery has been delayed through the fault of either the buyer or the seller and the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault. Further, sometimes the parties may agree that the risk will pass at a time different from the time when ownership passes.

6.2 At certain stages in specific industries, such as when agricultural crops have been harvested or mineral ores have been extracted, performance may be substantially complete prior to the execution of the transaction generating revenue. In such cases when sale is assured under a forward contract or a government guarantee or where market exists and there is a negligible risk of failure to sell, the goods involved are often valued at net realisable value. Such amounts,while not revenue as defined in this Statement, are sometimes recognised in the statement of profit and loss and appropriately described.

7. Rendering of Services of Accounting Standard 9 - Revenue Recognition - AS 9

7.1 Revenue from service transactions is usually recognised as the service is performed, either by the proportionate completion method or by the completed service contract method.

(i) Proportionate completion method—Performance consists of the execution of more than one act. Revenue is recognised proportionately by reference to the performance of each act. The revenue recognised under this method would be determined on the basis of contract value, associated costs, number of acts or other suitable basis. For practical purposes, when services are provided by an indeterminate number of acts over a specific period of time, revenue is recognised on a straight line basis over the specific period unless there is evidence that some other method better represents the pattern of performance.

(ii) Completed service contract method—Performance consists of the execution of a single act.Alternatively, services are performed in more than a single act, and the services yet to be performed are so significant in relation to the transaction taken as a whole that performance cannot be deemed to have been completed until the execution of those acts. The completed service contract method is relevant to these patterns of performance and accordingly revenue is recognised when the sole or final act takes place and the service becomes chargeable.

8. The Use by Others of Enterprise Resources Yielding Interest, Royalties and Dividends of Accounting Standard 9 - Revenue Recognition - AS 9

8.1 The use by others of such enterprise resources gives rise to:

(i) interest—charges for the use of cash resources or amounts due to the enterprise;

(ii) royalties—charges for the use of such assets as know-how, patents, trade marks and copyrights;

(iii) dividends—rewards from the holding of investments in shares.

8.2 Interest accrues, in most circumstances, on the time basis determined by the amount outstanding and the rate applicable.Usually, discountor premium on debt securities held is treated as though it were accruing over the period to maturity.

8.3 Royalties accrue in accordancewith the terms of the relevant agreement and are usually recognised on that basis unless, having regard to the substance of the transactions, it is more appropriate to recognise revenue on some other systematic and rational basis.

8.4 Dividends frominvestments in shares are not recognised in the statement of profit and loss until a right to receive payment is established.

8.5 When interest, royalties and dividends from foreign countries require exchange permission and uncertainty in remittance is anticipated, revenue recognition may need to be postponed.

9. Effect of Uncertainties on Revenue Recognition of Accounting Standard 9 - Revenue Recognition - AS 9

9.1 Recognition of revenue requires that revenue is measurable and that at the time of sale or the rendering of the service it would not be unreasonable to expect ultimate collection.

9.2 Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collectionwill bemade.Where there is no uncertainty as to ultimate collection, revenue is recognised at the time of sale or rendering of service even though payments are made by instalments.

9.3 When the uncertainty relating to collectability arises subsequent to the time of sale or the rendering of the service, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded.

9.4 An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use by others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed.

9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognised.

Accounting Standard 9 - Revenue Recognition - AS 9

10. Revenue from sales or service transactions should be recognised when the requirements as to performance set out in paragraphs 11 and 12 are satisfied, provided that at the time of performance it is not unreasonable to expect ultimate collection. If at the time of raising of any claim it is unreasonable to expect ultimate collection, revenue recognition should be postponed.

11. In a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions have been fulfilled:

(i) the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; and

(ii) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods.

12. In a transaction involving the rendering of services, performance should be measured either under the completed service contract method or under the proportionate completion method, whichever relates the revenue to the work accomplished. Such performance should be regarded as being achieved when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service.

13. Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends should only be recognised when no significant uncertainty as to measurability or collectability exists.

These revenues are recognised on the following bases:

(i) Interest : on a time proportion basis taking into account the amount outstanding and the rate applicable.

(ii) Royalties : on an accrual basis in accordance with the terms of the relevant agreement.

(iii) Dividends from : when the owner’s right to receive payment investments in is established. shares Disclosure of Accounting Standard 9 - Revenue Recognition - AS 9

14. In addition to the disclosures required by Accounting Standard 1 on ‘Disclosure of Accounting Policies’ (AS 1), an enterprise should also disclose the circumstances in which revenue recognition has been postponed pending the resolution of significant uncertainties.

AS 10 Accounting for Fixed Assets

Definitions: Fixed Asset is an asset held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business'Italic text'. (It is expected to be used for more than one accounting period.) The cost of fixed asset includes: • Purchase price • Import Duties and other non-refundable taxes • Direct cost incurred to bring the asset to its working condition • Installation cost • Professional fees like fees of architects • General overhead of enterprise when these expenses are specifically attributable to acquisition/preparation of fixed assets • Any expenses before the commercial production, including cost of test run and experimental production • Any expenses before the asset is ready for use not put to use • Loss on deferred payment arising out of foreign currency liability • Price adjustment, changes in duties and similar factors. The cost of fixed asset is deducted with: • Trade discounts and rebates • Sale proceeds of test run production • Amount of government grants received/receivable against fixed assets (See AS- 12) • Gain on deferred payment arising out of foreign currency liabilitItalic text

AS 18 Related Party Disclosure

AS 18 Is related party....

AS 20 Earning Per Share

Earning Per Share is a portion of a company's profit that is allocated to each outstanding shares of common stock. It can be calculated by using the below formula:

         Net Income - Dividends

EPS = ----------------------------------------------

        Average Outstanding Shares

List of Indian Accounting Standards(IND ASs)

IND ASs are converged with International Financial Reporting Standrands. Following is the list of IND ASs hosted on MCA's website. The date on which these come into force is yet to be notified.

See also

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References

  1. ↑ "Indian Accounting Standards Converged with IFRS Notified". Press Information Bureau.
  2. ↑ "Indian Accounting Standards implementation Road Map - Tax Heal". Tax Heal. 2016-04-29. Retrieved 2016-05-01.
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