AS-14 Accounting for amalgamation.

This standard deals with accounting treatment of any resultant goodwill or reserves in amalgamation of companies.

Transferor company means the company which is amalgamated into another company. Transferee company means the company into which a transferor company is amalgamated. Amalgamation in the nature of

• Pooling of interest method –merger
• Purchase

Test for 5 conditions-

1. For Merger All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company.
2. Shareholders holding not less than 90% of face value of equity shares of the transferor company become equity shareholders of the transferee company.
3. Consideration to equity shareholders of the transferor company is discharged by the transferee company wholly by the issue of equity shares, except that cash may be paid in respect of any fractional shares.
4. Intention of the transferee company is to continue the business of the transferor company.
5. Transferred assets and liabilities are recorded in the books of the transferee company at book values of the transferor company except to ensure uniform accounting policies

AS-15 Accounting for retirement / Employee Benefits

This standard deals with accounting for retirement benefits in the financial statements of employers.

The objective of this Standard is to prescribe the accounting treatment and disclosure for employee benefits in the books of employer except employee share-based payments. It does not deal with accounting and reporting by employee benefit plans.

Employee benefits are all forms of consideration given by an enterprise in exchange for service rendered by employees.

Employee Benefits include -

a) Short –term employee Benefits - Short-term employee benefits are employee benefits (other than termination benefits) which fall due wholly within twelve months after the end of the period in which the employees render the related service.

b) Post-employment Benefits - Post-employment benefits are employee benefits (other than termination benefits) which are payable after the completion of employment. Post-employment benefit plans are formal or informal arrangements under which an enterprise provides post-employment benefits for one or more employees.

c) Other long-term employee benefits - Other long-term employee benefits are employee benefits (other than postemployment benefits and termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related service.

d)Termination benefits - Termination benefits are employee benefits payable as a result of either: a) an enterprise’s decision to terminate an employee’s employment before the normal retirement date; or b) an employee’s decision to accept voluntary redundancy in exchange for those benefits (voluntary retirement).

AS-16 Borrowing Costs .

This standard deals with the uses involved relating to capitalization of interest on borrowing for purchase of fixed assets

This Standard should be applied in accounting for borrowing costs. This Standard does not deal with the actual or imputed cost of owners’ equity, including preference share capital not classified as a liability.

Inclusions:

Interest and commitment charges on borrowings

1. Amortisation of discounts and premiums related to borrowings
2. Amortisation of ancillary costs incurred in connection with arrangement of borrowings
3. Finance charges in respect of assets acquired under finance lease
4. Exchange differences arising from foreign currency borrowings to the extent they are regarded as adjustment to interest costs
5. Exchange differences on foreign currency borrowings to the extent of the difference between the interest on local currency borrowings and the interest on foreign currency borrowings are considered to be borrowing costs under this Standard

AS-17 Segment reporting.

This standard applies to companies which have an annual turnover of Rs 50 crores or more. These companies have to present financial statements and consolidated financial statements.

A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments.

A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

A reportable segment is a business segment or a geographical segment identified on the basis of definitions of business segment and geographical segment for which segment information is required to be disclosed by this Standard.

AS-18 Related party disclosures

This standard requires certain disclosure which must be made for transactions between the enterprise and related parties.

Related Party-

Parties are considered to be related if at any time during the reporting period, one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions.

Relative in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise. Control

1. ownership, directly or indirectly, of more than one half of the voting power of an enterprise, or
2. control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise, or
3. a substantial interest in voting power and the power to direct, by statute or agreement, the financial and/or operating policies of the enterprise.

Significant influence –

Participation in the financial and/or operating policy decisions of an enterprise, but not control of those policies. Generally, if an investing party holds 20% or more of the voting power of an enterprise, it is presumed that the investing party has significant influence over that enterprise.

Key management personnel

Those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise.

AS-19 Leases

This standard deals with the accounting treatment of transactions related to lease agreements.

Scope Exclusions

1. lease agreements to explore for or use natural resources, such as oil, gas, timber, metals and other mineral rights
2. licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents and copyrights
3. lease agreements to use lands

• A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.
• A finance lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset.
• An operating lease is a lease other than a finance lease.

AS-20 Earning per share.

This standard deals with the presentation and computation of earning per share (EPS).

AS 20 prescribes principles for the 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.

Presentation of Basic and Diluted EPS (BEPS and DEPS)

BEPS and DEPS to be presented on the face of the Statement of Profit and Loss for each class of equity shares that has a different right to share in the net profit for the period.

In consolidated financial statements, the information required by this Standard should be presented on the basis of consolidated information.\

BEPS and DEPS to be presented:

• with equal prominence for all periods presented
• even if the amounts disclosed are negative (a loss per share)

AS-21 Consolidated financial statements

This standard deals with the preparation of consolidated financial statements with an intention to provide information about the activities of a group.

A subsidiary is an enterprise that is controlled by another enterprise (known as the parent). A parent is an enterprise that has one or more subsidiaries. A group is a parent and all its subsidiaries.

Control

1. the ownership, directly or indirectly through subsidiary (ies), of more than one half of the voting power of an enterprise; or
2. control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise so as to obtain economic benefits from its activities

Consolidated financial statements are the financial statements of a group presented as those of a single enterprise. Minority interest is that part of the net results of operations and of the net assets of a subsidiary attributable to interests which are not owned, directly or indirectly through subsidiary(ies), by the parent.

AS-22 Accounting for taxes on Income

This standard deals with determination of the account of tax expenses for the related revenue. There are two types of income

• Accounting income - Accounting income (loss) is the net profit or loss for a period, as reported in the Statement of Profit and Loss, before deducting income tax expense or adding income tax saving.

• Taxable income - Taxable income (tax loss) is the amount of the income (loss) for a period, determined in accordance with the tax laws, based upon which income tax payable (recoverable) is determined

Current tax is the amount of income tax determined to be payable (recoverable) in respect of the taxable income (tax loss) for a period.

Deferred tax is the tax effect of timing differences

Tax expense for the period, comprising current tax and deferred tax, should be included in the determination of the net profit or loss for the period.

Deferred tax should be recognized for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets (DTA).

When there is unabsorbed depreciation or carry-forward of losses under tax laws- DTA should be recognised only to the extent there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.

In other circumstances, DTA should be recognised only to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

AS-23 Accounting for investments in Associates in consolidated financial statements

This standard deals with the principles and procedures to be followed for recognizing, in the consolidated financial statement.

A discontinuing operation is a component of an enterprise:

(a) that the enterprise, pursuant to a single plan, is:

• disposing of substantially in its entirety, such as by selling the component in a single transaction or by demerger or spin-off of ownership of the component to the enterprise's shareholders; or
• disposing of piecemeal, such as by selling off the component's assets and settling its liabilities individually; or
• terminating through abandonment; and

(b) that represents a separate major line of business or geographical area of operations; and

(c) that can be distinguished operationally and for financial reporting purposes

Associate is an enterprise in which the investor has significant influence and which is neither a subsidiary nor a joint venture of the investor. If an investor holds, directly or indirectly, through subsidiaries, 20% or more of the voting power of the investee, it is presumed that the investor has significant influence unless it can be clearly demonstrated that this is not the case

AS-24 Discontinued operations

This standard deals with the principles of discontinuing operations of an enterprise with the activities which are continuing. Initial disclosure event is the occurrence of one of the following, whichever occurs earlier:

a) the enterprise has entered into a binding sale agreement for substantially all of the assets attributable to the discontinuing operation; or b) the enterprise's board of directors or similar governing body has both

(i) approved a detailed, formal plan for the discontinuance and

(ii) made an announcement of the plan.

AS-25 Interim financial reporting

This standard deals with the minimum content of interim financial report. Interim financial report means a financial report containing either a complete set of financial statements for an interim period or a set of condensed financial statements (as described in this Standard) for an interim period

Contents of complete or condensed set of interim financial statements

1. Balance Sheet;
2. Statement of Profit and Loss;
3. Cash Flow Statement; and

1. Notes including those relating to accounting policies and other statements and explanatory material that are an integral part of the financial statements. In condensed financial reports only selected notes need to be presented

AS-26 Intangible Assets

• This standard prescribed the accounting treatment for intangible assets which are not covered by any other specific accounting standard.
• Intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.

AS-27 Financial reporting of interest for joint venture

• This standard sets principles and procedure for accounting for interest in joint venture.
• Joint venture is a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control.
• Joint control is the contractually agreed sharing of control over an economic activity.

AS-28 Impairment of Assets

This standard prescribed procedure to ensure that an asset is carried at no more than its carrying amount and procedures as to when to recognise an asset as impaired.

The objective of AS 28 is to prescribe the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount. The asset is described as impaired if its carrying amount exceeds the amount to be recovered through use or sale of the asset and AS 28 requires the enterprise to recognise an impairment loss in such cases. It should be noted that AS 28 deals with impairment of all assets unless specifically excluded from the scope of the Standard.

AS-29 Provision for contingent liabilities and contingent assets

• This standard deals with measurement and recognition criteria in three areas, namely provisions, contingent liabilities and contingent assets.
• Provision is a liability which can be measured only by using substantial degree of estimation.
• Liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.

Contingent Liability is

• a possible obligation arising from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or
• a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a reliable estimate of the amount of obligation cannot be made.

Contingent Asset is a possible asset that arises from past events the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise. Present obligation- An obligation is a present obligation if, based on the evidence available, its existence at the balance sheet date is considered probable, i.e., more likely than not.

An obligation is a possible obligation if, based on the evidence available, its existence at the balance sheet date is considered not probable.