Bharat'sACCOUNTINGSTANDARDSMade EasyFor CA-Inter

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Bharat's

ACCOUNTINGSTANDARDS

Made Easyfor CA-Inter

Includes

Revised Accounting Standards All Inter/PCC/IPCC previous year examination questions

Detailed explanation with concept capsules Around 400 questions and answers Diagrammatic presentation

Simple language

CA. RAVI KANTH MIRIYALAFCA, B.Com.

BHARAT LAW HOUSE PVT. LTD.New Delhi

2018

First Edition August 2013Second Edition January 2014Third Edition January 2015

Fourth Edition January 2016Fifth Edition June 2016

Sixth Edition February 2017Seventh Edition June 2017

Eighth Edition 2018

© AuthorPUBLICATION RIGHTS OF SUBSEQUENT EDITIONS WITH THE PUBLISHERS

NO PART OF THIS BOOK MAY BE REPRODUCED IN ANY MANNERWHATSOEVER OR TRANSLATED IN ANY OTHER LANGUAGE

WITHOUT PERMISSION IN WRITING OF THE PUBLISHERSWhile every effort has been taken to avoid errors, the authors,publishers and their agents/dealers are not responsible for the

consequences of any action taken on the basis of this book

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ISBN: 978-93-5139-556-0

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ACCOUNTING STANDARDS IN SYLLABUS OF CA Inter

Group I

Paper 1: Accounting

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories

AS 3 Cash Flow Statements

AS 4 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 10 Property, Plant & Equipment

AS 11 The Effects of Changes in Foreign Exchange Rates

AS 12 Accounting for Government Grants

AS 13 Accounting for Investments

AS 16 Borrowing Costs

AS 17 Segment reporting

AS 22 Accounting for Taxes on Income

Group II

Paper 5: Advanced Accounting

AS 7 Construction Contracts

AS 9 Revenue Recognition

AS 14 Accounting for Amalgamations

AS 18 Related party disclosures

AS 19 Leases

AS 20 Earnings Per Share

AS 24 Discontinuing Operations

AS 26 Intangible Assets

AS 29 Provisions, Contingent Liabilities and Contingent Assets

PREFACE TO THE EIGHTH EDITION

I would like to take this opportunity to thank everyone who have provided me suggestions andcorrections for improving the Eighth edition of this book. I worked on the valuable suggestionsgiven by the colleagues, teachers from other academies and students to make this book more useful.Students’ & Well wishers’ feedback gave me enthusiasm and energy to write a book on“Accounting Standards made Easy for CA Final” and it is published and available in the market.

In this format, “Accounting Standards Made Easy” will meet the students requirement.

The great features of this edition are:

Updated with the recent revisions made by Ministry of Corporate Affairs;

Student friendly;

Conceptual understanding of the standards with more than 400 detailed examples;

Very simple language to understand;

It covers all previous year questions and answers of Inter, IPCC & PCC till Nov 2017;

Diagrammatic presentation at the required places gives the grip on the AS.

I am very confident that this book also helps the students preparing for CMA Inter, B.Com andM.Com examinations.

From the bottom of my heart, I am grateful to my dearest friend CA. Rama Krishna ReddyBorra & my loving wife CA. Sunitanjani Miriyala for their continuous help in motivating me andcorrecting me at every stage of composing this book.

We have taken considerable care to ensure that contents are accurate; few errors are inherent in awork of this kind. Therefore, I seek suggestions and comments from the readers.

24th November, 2017 CA. RAVI KANTH MIRIYALANew Delhi

Email: ravikanthca@gmail.com

https://www.facebook.com/ravikanthca

ACKNOWLEDGMENT

No book is the work of a single person. At first I would like to express my sincere thanks to mydearest friend CA. Ramakrishna Reddy Borra & my loving wife CA. Sunitanjani Miriyala who havebeen a source of inspiration and support personally and professionally. This book would never havebeen written without their support, encouragement and motivation.

I would like to thank CA. Lalith M Sharma, CA. M. Radha, Prof. Vaidheeswaran, CA. NikhilJobanputra, CA. Ashim Jana, Prof. Narayana Rao, CA. Mayur, CA Uma Maheswara Rao, Prof.Avinash and other seniors & juniors for their professional and personal support.

Special word of thanks is also due to my favourite students Saurab Jain, Sujendra, Himajashree,Satya Sowmya & Meenakshi, who provided incisive comments and very useful feedback.

All valuable comments and suggestions for further improvement of this book will be gratefullyacknowledged and appreciated.

CA. RAVI KANTH MIRIYALA

Email: ravikanthca@gmail.com

https://www.facebook.com/ravikanthca

CONTENTS

(Detailed synopsis provided in each chapter)

Bharat's 5

Accounting Standards in Syllabus of CA Inter 8

Preface to the Eighth Edition 9

Acknowledgement 10

Weightage of Accounting Standards in previous IPCC exams 12

Introduction 1

Preface to Accounting Standards (Very Important) 7

Framework for Preparation and Presentation of Financial Statements 9

CHAPTER 1 AS 1 - Disclosure of accounting policies 18

CHAPTER 2 AS 2 - Valuation of Inventories 27

CHAPTER 3 AS 3 - Cash flow statement 46

CHAPTER 4 AS 4 - Contingencies and events occurring after the balance sheet date 62

CHAPTER 5 AS 5 - Net profit or loss for the period, prior period items and changes inaccounting policies 71

CHAPTER 6 AS 7 - Construction Contracts 83

CHAPTER 7 AS 9 - Revenue Recognition 97

CHAPTER 8 AS 10 - Property, Plant & Equipment (PPE) 110

CHAPTER 9 AS 11 - The effects of changes in Foreign Exchange Rates 142

CHAPTER 10 AS 12 - Accounting for Government Grants 165

CHAPTER 11 AS 13 - Accounting for investments 179

CHAPTER 12 AS 14 - Accounting for amalgamation 197

CHAPTER 13 AS 16 - Borrowing costs 209

CHAPTER 14 AS 17 - Segment Reporting 223

CHAPTER 15 AS 18 - Related Party Disclosures 241

CHAPTER 16 AS 19 - Leases 256

CHAPTER 17 AS 20 - Earnings per shares 279

CHAPTER 18 AS 22 - Accounting for Taxes on Income 294

CHAPTER 19 AS 24 - Discontinuing Operations 315

CHAPTER 20 AS 26 - Intangible assets 324

CHAPTER 21 AS 29 - Provisions, contingent liabilities and contingent assets 342

CHAPTER 22 Guidance Notes 357

Weightage of Accounting Standards in previous IPCC examsIPCC

Group AS May-2010

Nov-2010

May-2011

Nov-2011

May-2012

Nov-2012

May-2013

Nov-2013

May-2014

Nov-2014

May-2015

Nov-2015

May-2016

Nov-2016

May-2017

Nov -2017

Group I AS 1 4 5 4AS 2 4 4 8 4 5 5 5 5 5 5AS 3 4 5AS 7 4 4 5 5 5 5 5 5AS 9 2 4 4 5 5 4 5 5 5 5

AS 10 6 4 13 9 8 10 14 9 5 10 5 5 5AS 13 10 5 5 13 8 5 4 8 13 8 10 5 9 8AS 14 4 5 5 4 4 4

Total(A)

22 13 9 25 40 16 17 24 32 32 27 34 28 24 28 23

Group II AS 4 2 5 4 4 4 5 5 5 5 5AS 5 2 4 4 4 5 5 4 5

AS 11 4 4 5 9 5 5 4AS 12 6 4 4 5 4 4 5 5AS 16 2 4 5 4 5 5 5 5 5AS 19 4 8 5 4 8 4 5 5 4 5 5AS 20 4 5 5 5 5 4 5 4 5 5AS 26 4 5 5 5 4 5 5 5 5AS 29 4 4 5 5 5 9 4 5

General 4 8 4 9Total (B) 16 17 21 26 31 21 36 27 24 32 28 19 24 28 24 29Grand Total(A + B)

38 30 30 51 71 37 53 51 56 64 55 53 52 52 52 52

It does not include 16 marks questions on AS 3 & AS 14

Introduction

SYNOPSIS

1. Who issues Accounting Standards in India? 12. What is the duty of Statutory Auditor for Compliance with Accounting Standards? 13. Procedure for Issuing an Accounting Standard from 2009 onwards 14. Applicability of Accounting Standards 2

“ACCOUNTING is the language of business”“Accounting” has been in existence ever since the dawn of civilization where a person in the settlementwanted to keep track of his belongings and ensure a legal claim on his holdings – be it land or livestock.However, Fra Luca Bartolomeo de Pacioli (1445-1517) has been regarded as the father of modernaccountancy for his noteworthy works describing the system of book-keeping i.e. the double-entry accountingsystem which is widely accepted across the business world even today!

As time progressed, a natural evolution in accounting became evident. Industrial revolution and voluminoustransactions in a complex financial and business environment led to need-based accounting, specific to thenature of transactions involved. The pressing demand for uniform Accounting Standards was felt in early1930s post the Wall Street crash and the following Great Depression post the economic boom of 1920s.

Accounting Standards are the statements of code of practice of the regulatory accounting bodies that are to beobserved in the preparation and presentation of financial statements. In layman terms, accounting standardsare the written documents issued by the expert institutes or other regulatory bodies covering various aspectsof measurement, treatment, presentation and disclosure of accounting transactions.

Financial statements are prepared to summarize the end-result of all the business activities by an enterpriseduring an accounting period in monetary terms. These business activities vary from one enterprise to other.To compare the financial statements of various reporting enterprises poses some difficulties because of thedivergence in the methods and principles adopted by these enterprises in preparing their financial statements.In order to make these methods and principles uniform and comparable to the extent possible standards areevolved.

1. Who issues Accounting Standards in India?

The Institute of Chartered Accountants of India (ICAI), being the premier standard-setting body in thecountry, has been making relentless efforts in this direction by formulating/revising the Accounting Standardssince 1977 to be followed in the preparation and presentation of financial statements.

The main role of Accounting Standards Board (ASB) is to formulate/revise the Accounting Standards fromtime to time.

2. What is the duty of Statutory Auditor for Compliance with Accounting Standards?

Section 129 of The Companies Act, 2013 provides that every Profit and Loss account and Balance Sheet ofthe company shall comply with the accounting standards.

The statutory auditors are required to make qualification in their report in case any item is treated differentlyfrom the prescribed Accounting Standard. However, while qualifying, they should consider the materiality ofthe relevant item. In addition to this Section 143 of The Companies Act, 2013 requires an auditor to reportwhether, in his opinion, the Profit and Loss account and Balance Sheet are complied with the accountingstandards referred to in Section 129 of The Companies Act, 2013.

3. Procedure for Issuing an Accounting Standard from 2009 onwards

1. Accounting Standards Board (ASB) determines the broad areas in which Accounting Standards needto be formulated and the priority in regard to the selection thereof.

2 Accounting Standards Made Easy

2. In the preparation of AS, ASB will be assisted by Study Groups constituted to consider specificsubjects. In the formation of Study Groups, provision will be made for wide participation by themembers of the Institute and others.

3. The draft of the proposed standard will normally include the following:

(a) Objective of the Standard,

(b) Scope of the Standard,

(c) Definitions of the terms used in the Standard,

(d) Recognition and measurement principles, wherever applicable,

(e) Presentation and disclosure requirements.

4. ASB will consider the preliminary draft prepared by the Study Group and if any revision of the draftis required on the basis of deliberations, ASB will make the same or refer the same to the StudyGroup.

5. The Exposure Draft of the proposed Standard will be issued for comments by the members of theInstitute and the public. The Exposure Draft will be sent to specified bodies like stock exchanges, andother interest groups, as appropriate.

6. After taking into consideration the comments received, the draft of the proposed Standard will befinalised by the ASB and submitted to the Council of the ICAI.

7. The Council of the ICAI will consider the final draft of the proposed Standard, and if foundnecessary, modify the same in consultation with the ASB. The Accounting Standard on the relevantsubject will then be issued by the ICAI.

4. Applicability of Accounting Standards

Every entity need NOT follow ALL Accounting standards. It is based on the classification of entities.

Let us learn about CORPORATE entities classification and the applicability of the AS:

Small and Medium sized Companies (SMC)

“Small and Medium Sized Company” means, a company—(a) whose equity or debt securities are not listed or are not in the process of listing on any stock

exchange, whether in India or outside India;

(b) which is not a bank, financial institution or an insurance company;

(c) whose turnover (excluding other income) does not exceed rupees fifty crore in the immediatelypreceding accounting year;

Level IIILevel IILevel I

Few AS exempted(discussed below)

Few AS exempted(discussed below)

Non corporate entities likepartnership firms, etc.

Entities

ALL AS needs to becomplied

Corporate

Non SMC’sSmall and Medium sizedCompanies (SMC)

Accounting Standards Made Easy ForCA-Inter

Publisher : Bharat Law House ISBN : 9789351395560Author : CA. Ravi KanthMiriyala

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