Professional Documents
Culture Documents
Sr. No.
Particulars
Annexure
Basic Notes on AS
Notes on AS
Applicability of AS
AS
Notes on AS from 1 to 14
As 1 to 14
Example on AS from 1 to 14
Example AS 1 to 14
Notes on AS from 16 to 29
As 16 to 29
Example on AS from 16 to 29
Example AS 16 to 29
ASI
Example ASI
Page No.
1 to 2
3 to 4
5 to 15
16 to 19
20 to 30
31 to 37
38 to 43
43 to 45
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Accounting Standards
What is Accounting Standards
Accounting Standards ( AS ) are written documents, policy documents issued
by expert accounting body or by government covering the aspects of Recognition,
Measurement, treatment, presentation and disclosure of accounting transaction
in the financial statement.
Classification of an Entity 1) As per ICAI AS Classification of an Entity as per ICAI, however this classification is not applicable
to companies covered by classfication made by Companies ( Accounting Standard )
Rules, 2006.
Level 1 Entity - Which fall in any one or more of the following category, at the end
of the relevant accounting period.
a) Entity whose equity or debt securities are listed or are in the process of listing
on any stock exchange, whether in India or Outside India.
b) Banks ( Including Co - op Bank ), financial Institutions or entities carrying on
Insurance Business.
c) All commercial reporting entities, whose turnover exceeds fifty crore in the
immediately preceeding accounting year.
d) All commercial reporting entities, having borrowings including public deposits
in excess of ten crore at any time during the immediately preceeding accounting
year.
e) Holding & Subsidiary entities of any one of the above.
Level 2 Entity - Which fall in any one or more of the following category, at the end
( SMEs )
of the relevant accounting period.
a) All commercial reporting entities, whose turnover exceeds forty lakh, but, does
not exceeds fifty crore in the immediately preceeding accounting year.
b) All commercial reporting entities, having borrowings including public deposits
in excess of one crore, but, does not exceeds ten crore at any time during the
immediately preceeding accounting year.
c) Holding & Subsidiary entities of any one of the above.
Prepared by - CA Nikunj Kikani
Author can be reach - nikunjkikani23@yahoo.com
Level 3 Entity ( SMEs ) - Entities which are not covered under Leve 1 or 2 Entities.
2) As per Companies AS Rules, 2006 Small & Medium Companies ( SMC ) - Company which satisty all the following
conditions as at the end of the accounting period called as SMC.
a) Entity 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) The Company is not Bank or financial Institutions or Insurance Company.
c) All Company whose turnover ( Excluding other income ) does not exceeds fifty
Fifty crore in the immediately preceeding accounting year.
d) All Company does not have borrowings including public deposits
in excess of ten crore at any time during the immediately preceeding accounting
year.
e) The Company is not a Holding & Subsidiary of Non SMC.
Back
Accounting Standard
Applicability of the AS
Sr. No.
Title of AS
Valuation of Inventories
Applicablity
As per ICAI Company
All Entity
All Company
All Entity
All Company
Level 1
Non SMC
All Entity
All Company
All Entity
All Company
Depreciation Accounting
All Entity
All Company
Construction Contracts
All Entity
All Company
Withdrawn
All Entity
All Company
Revenue Recognition
All Entity
All Company
All Entity
All Company
All Entity
All Company
12
All Entity
All Company
13
All Entity
All Company
14
All Entity
All Company
15
Employees Benefit
All Entity
All Company
16
Borrowing Cost
All Entity
All Company
17
Segment Reporting
Level 1
Non SMC
18
Level 1
All Company
19
Leases
All Entity
All Company
20
Level 1
All Company
21
Consolidates F/S
22
23
24
Discontinuing Operations
25
26
Intangible Assets
27
28
Impairment of Assets
10
11
Note 1
All Entity
All Company
Note 1
Level 1
All Company
Note 2
All Entity
All Company
Note 1
All Entity
All Company
29
All Entity
All Company
30
Non SME
Non SME
31
Non SME
Non SME
32
Non SME
Non SME
Note -
1)
2)
Back
Accounting Standard 1 - Disclosure of Accounting Policies
Accounting Policies It refer to specific accounting principles & the method of applying
those principles adopted by the enterprise in preparation & presentation
of the financial statements. ( Refer Example 1 )
Notes to Accounts Notes to account are the explanation of the management about the items
in F/S ( P/L A/c & B/s ). ( Refer Example 2 )
It is required for better understanding of F/S.
Fundamental Accounting Assumptions are 1) Going Concern.
2) Consistency.
3) Accrual.
Points considered for application of accounting policies A) Prudence - It means making of estimates which is required under
conditions of uncertainty.
B) Substance over form - It means that transaction should be accounted for
in accordance with actual happening & economic reality of the transactions
not by its legal form.
C) Materiality - F/S should disclose all items & facts which are sufficient
enough to influence the decisions of users of F/S.
Measurment of Inventories As per Para 5 of AS 2, inventories should be valued at lower of cost & net
realisable value.
Net Realisable Value - It means the estimated selling price in ordinary course
of business, less estimated cost of completion & estimated cost necessary
to make the sale.
Estimation of NRV also takes into account the purpose for which the inventory
held. ( Example 4 )
The comparison between cost & NRV should be made item by item or group of
items. ( Example 5 )
NRV for Raw Material - Para 24 of AS 2 1) If, FG in which RM is used, is sold at or above cost, then NRV of RM is considered
more than its cost.
2) If, FG in which RM is used, is sold below cost, then NRV of RM is equal to
replacement price of RM.
Accounting Standard 3 - Cash Flow Statement This Statement shows the flow of incoming & outgoing cash.
This statement assess the ability of the enterpris to generate cash & utilization of
Cash.
Cash Flow Statement shows the cash movement under following head 1) Cash Flow from Operating activities - This are principle revenue of the enterprises.
2) Cash Flow from Investment activities - This includes acquisition & disposal of Long
Term assets & Investment, making & collecting loans, acquiring & disposal of
property, FA.
3) Cash Flow from Financing Activities - Those activities which result in change in
Size & Composition of owners capital & borrowing of the organization.
Treatment of Tax 1) Cash Flow for tax payment / refund should be classified as Cash Flow from
Operating Activities.
2) If, Cash Flow can be specifically identified as Cash flow from Investement /
Financing Activities, then, appropriate classification should made. ( Example 6 )
Accounting Standard 4 - Contingencies & Events occuring after the B/S date
This A/s deals with 1) Contingencies.
2) Events occuring after the B/s Date.
1) What is Contingency - It refers to ,
Existing conditions or situation, results of such contingency is not known on the B/s
date, but it would be known only on happening or non happening of certain
events in future, results may be either a gain or loss. ( Example 7 )
Provision for loss is estimated on the basis of information available upto the date of
approval of A/c by competent authority.
But, the contingency must exist on the B/s date.
If, such contingency does not exist on the B/s Date then, no provision nor notes to
accounts is required.
2) Events occuring after the B/s Date - It referes to,
Events occur between the B/s Date & date on which F/s are approved by the
competent authority.
Accounting Treatment 1) The Events related to circumstances existing on the B/s Date - Loss should be
accounted in the accounts & assets & liabilities to be adjusted.
( Example 8 )
2) The Events not related to circumstances existing on the B/s Date - Disclosure by
way of notes to accounts only, i.e., no adjustment in accounts.
Events Occuring after the B/s date & also after approval of accounts by board of
directors of a company such event should be disclosed in the director's report
if, material.
Accounting Standard 5 - Net Profit or Loss for the period, Prior Period items &
Change in Accounting Policies
As per Para 12 of As 5, when items of Income & Expenses within P/L A/c from
ordinary activities are of such size, nature or incidence that, their disclosure is
relevant to explain the performance of the enterprise for the period then, the
nature & amount of such items should be disclosed separately.
Prior Period Items - This are income & expenses, which arise, in current period as
a result of error or omission in the preparation of F/S of one or more prior
Periods. ( Example 9 )
Change in Accounting Policies - In the following cases, changes in accounting
policies are made ( Example 10 )
A) For the compliance of law or Statute.
Prepared by - CA Nikunj Kikani
Author can be reach - nikunjkikani23@yahoo.com
Cost to date
Cumulative cost incurred + Estimated cost to complete
Current Contract
Contract Price * % of Completion - Revenue Previously
Revenue
=
Recognised
By Survey of work performed.
Completion of Physical proportion of the contract work.
Provision for Expected Loss ( Example 12 )
As per Para 35 of AS 7, when it is probable that total contract cost will exceed total
Contract revenue then, expected loss should be recognised as an expenses
irrespective of,
* Whether or not work has commenced.
* Stage of completion of contract.
AS 9.
Since, in such case, risks & rewards remain within the enterprise & also there is no
consideration from the point of view of the enterpris as a whole, the recognition
criteria for revenue recognition are also not fulfilled in respect of inter divisional
transfers.
Revenue on Installment Sales Revenue of Sale price excluding interest should be recognised on the date of sale.
Interest should be recognised proportionately to the unpaid balance.
Note 1) As per Para 9.2 of As 9, where the ability to assess the ultimate collection with
reasonable certainty is lacking at the time of sale, the revenue recognition
is postponed till uncertainty involved.
2) As per Para 9.5 of AS 9, It should be recognised only when it becomes reasonable
certain that ultimate collection will be certain.
3) As per Para 9.3 of As 9, When uncertainty of collection of revenue arises after,
The revenue recognition it is better to make provision for the uncertainty in
Collection rather than adjustment in already recognised revenue.
Disposal & Retirement of FA A) Disposal 1) FA are deleted from the F/S either on disposal or an expected economic benefit
Is over.
2) Gain or Loss arising on such disposal are recognised in P/L account.
AA ) Disposal of previously revalued FA 1) If, there is profit then, credited to P/L account.
2) If, there is loss then, it can be adjusted against the balance of revaluation reserve
which arising out of revaluation of the same asset, if any.
B) Retire & held for disposal 1) Such asset is stated at lower of net book value & net realisable value in F/S.
2) Any expected loss is recognised immediately in P/L account.
3) Such asset should be separately shown in F/S.
Forward Contract has been classified in two types 1) Forward exchange contract entered for managing risk Exchange difference i.e. premimu or discount that arises on entering into
Contract should be recognised by transfer to P/L account.
Premium / Discount = Exchange rate at the date of inception of the contract ( - )
Forward rate sepcified in contract.
2) Forward exchange contract entered for trading or speculation As per this AS premium or discount on such forward contract not to be
Recognised.
At each B/S date, the value of contract is marked to its current market value &
Gain or Loss on the contract is recognised.
Asset Linked Exchange Differences 1) Foreign Currency exchange difference will not be transfer to P/L account arising on
Long Term Foreign Currency Monetary Items.
2) Exchange Difference related to Acquisition of Depreciable Asset
- Same will be added or deducted from
Cost of the Assets.
Acquisition of Non Depreciable Asset - Same will be transfer to " Foreign
Currency Monetary Items Translation Difference Account ".
Accounting Standard 12 - Accounting for Government Grants
Meaning - GOVT Grants are assistance by the govt in the form of cash or kind to an
Enterprise in return for past or future compliance with certain conditions.
Recognition of Govt Grants - Should be recognise when following conditions are
Fulfilled
The enterprise will comply with the conditions attached to them.
The Grants will received.
Two types of Govt Grants 1) Non Monetary - in the form of Asseets.
2) Monetary
Disposal of Investment ( A ) When all the investment is sold - Difference between carrying amount & net
Sale proceeds should be recognised in P/L account.
( B ) When part of investment is sold - Carrying amount of that part of investment
is determined on the basis of the average amount of the total investment.
Reclassification of Investment ( A ) From Long Term investment to Current Investment Transfer sholud be made at the lower of cost & carrynig amount at the date
of transfer.
( B ) From Current Investment to Long Term Investment Transfer should be made at the lower of cost & fair value on the date of
Transfer.
Transferee company.
No Adjustment is made in the book value of the assets & liabilities of the
Transferor company by way of revaluation or otherwise.
- Purchsase Method.
Treatment of Goodwill arising in case of amalgamation 1) It should be Amortize over a period not exceeding five years unless longer
period can be justified.
2) The AS 26 intangible asset regarding amortization shall not apply to such goodwill.
Back
Example on Accounting Standard 1 to 14
Example 1 - Accounting Policies
Depreciation - Depreciation on FA has been provided on Straight line
Method at the rates prescribed under Schedule XIV of the companies Act, 1956.
Inventories - Inventories are valued at lower of cost & net realizable value. The
cost comprises of cost of purchase, cost of conversion & other cost including
appropriate production overhead incurred in bringing such inventories to their
present location.
Example 2 - Notes to Accounts
The Company has an investment of Rs. 100 Crore in ESC of ABC Limited. The
Loss of ABC Co. exceeds its paid up ESC & Reserves as on 31st March. In view of
long term investment strategies of the company, in opinion of management, no
provision is required to be made, since diminution in the value of such investment
is of temporary nature.
Example 3 - Allocation of Fixed OH Suppose ABC LTD has a plant with capacity to produce 1lakh units p.a. & FOH is Rs. 18
Lakh, i.e. FOH on the basis of normal capacity is Rs. 18 per unit.
Case 1 - Actual Production is 1 Lakh units FOH on the basis of normal capacity & actual OH will lead to 18 Lakh.
Case 2 - Actual Production is 90,000 units FOH will remain same. Therfore, OH on actual basis is Rs. 20 per unit.
Hence, by valuing stock at Rs. 20 for FOH, it will over valued & loss of Rs. 1.8 Lakh
will also included in closing stock which lead to higher GP.
Therefore, FOH for stock should be Rs. 16.2 Lakh ( 90,000*18 ) & balance of Rs. 1.2
Lakh will be transferred to P/L A/c.
Case 2 - Actual Production is 1.2 Lakh units At Rs. 18 per unit total FOH will be Rs. 21.6 Lakh, whereas actual FOH would be Rs. 18
Lakh. Therefore, FOH for stock purpose should be on actual basis i.e. 15 per unit.
Example 3A - Allocation of Fixed OH Total Production - 100 Units
Normal Capacity - 50 Units
Goods Sold
- 80 Units
Prepared by - CA Nikunj Kikani
Author can reach - nikunjkikani23@yahoo.com
Closing Stock
Direct Cost
FOH
Variable OH
- 20 Units
- 10 per unit
- 80
- 120
Y
16
16
16
Z
8
12
8
Total
44
42
38
Case Study - 2
A Company entered into an agreement to sell its Property included in B/s at Rs. 50
Lakh to another company for Rs. 80 Lakh. The agreement to sell was concluded on
31/01 & sale deed was registered on 30/04.
Now, on 31/03 Balance Sheet date, Assets should be adjusted because, sale of such
asset was concluded before B/s date. Such event is an event occuring after the
B/s date.
Registration of the sale deed only provides additional information relating to the
conditions existing at the B/s date. Therefore, Adjustment to Asset should be made.
Example 9 - Prior Period Items
Machinery Cost
- Rs. 10 Crore
Usefule Life
- 10 Years
Depreciation Rate
- 10% on SLM
Depreciation p.a.
- 1 Crore
Suppose, in above example, management by mistake calculates depreciation in 5th
year as 10% of Rs. 60 Lakh i.e. Rs. 6 Lakh instead of Rs. 10 Lakh then, in next year
depreciation will be Rs. 14 Lakh i.e., Rs. 10 Lakh as current year deprecation &
Rs. 4 Lakh a Prior Period Items.
Example 10 -Change in Accounting Policies
The company has been including interest in valuation of stock. After Revision of AS 2,
company decided to exclude interest from valuation of stock. This will result in
decrease in profit by Rs. 50 Lakh.
As per AS 5, change in accounting policies can be made in order to compliance with
accounting standard. Then, Disclosure will be,
" To be in conformity with the AS on Valuation of inventories issued by ICAI, interest
has been excluded from valuation of stock unlike preceeding years. Had the same
principle followed in previous years, Profit for the year & its corresponding
effect on the year end net assets would have beenhigher by Rs. 50 Lakh.
Example 11 - Application of AS 7
This AS would not be applicable for the construction projects undertaken by the
enterprises on its own account as a commercial nature.
E.g., Construction of housing projects on its own account & selling of this
Commercial flats to Public.
Example 11 - Provision of Loss
Contract Price
Cost incurred till date
- 80 Lakh
- 75 Lakh
Prepared by - CA Nikunj Kikani
Author can reach - nikunjkikani23@yahoo.com
on actual
Back
Accounting Standard 16 - Borrowing Cost
Meaning - It is defined as Interest & other costs incurred relating to borrowing of
Funds.
This AS does not deal with cost of owner's equity including PSC.
Applicability - BC which is directly related to the acquisition, construction or
Production of Qualifying Assets ( QA ) should be capitalsied.
Qualifying Assets - An which takes substantial period of time to get ready for its
intended use or sale is called QA.
Conditions for Capitalization of BC 1) Those BC which are directly attributable to the acquisition, construction or
Prodcution of QA, are eligible for capitalization.
2) QA will give future economic benefit to the enterprise & cost can be measured
reliably.
Amount of BC elegible for capitalization Specific Borrowing - Amount of BC to be capitalized will be, Actual BC incurred
during the period Less any income on the temporary
Investment of borrowed amount.
General Borrowing ( Example 1 )
1) Amount of BC to be capitalized should be determined by applying a
Capitalization rate to the expenditure on that asset.
2) Capitalization rate should be weighted average of BC.
3) Amount of BC capitalized during a period should not exceed the amount of BC
incurred during that period.
Commencement of Capitalization of BC - Following conditions must be fulfilled Activities which are essential to prepare the asset for its intended use, should
be in progress.
Borrowing Cost is Incurred.
Expenditure for acquisition, cinstruction or production of a QA is being incurred.
Cessation of Capitalization It should cease when substantially all the activities necessary to prepare the QA
for its use or sale are completed.
( Example 2 )
Segment Results also means if, some segments are in loss then, total of loss of all
Loss making segments or if, some segments are in profit then, total profit of all
Profit making segments, whichever is higher i.e. total profit or total loss figure in
Aboslute term.
Reporting Period.
Important Definitions 1) Minimum Lease Payment ( MLP ) from lessee point view = Lease Rent + Guaranteed
Residual Value ( GRV ) by or on behalf of lessee.
2) MLP from Lessor point of view = Lease rent + GRV by or on behalf of lessee or by an
Independent third party.
3) Unguaranteed Residual Value ( UGRV ) = Residual Value ( - ) GRV
4) Gross Investment ( GI ) = MLP from Lessor point view ( + ) UGRV.
5) Net Investment ( NI ) = Present Value of GI.
6) Unearned Finance Income = GI ( - ) NI.
7) Implicit Interest Rate - It means the discount rate that equates present value of GI
to the Fair Value. It is IRR for the Lessor.
2) Diluted EPS = Net Profit attributable to ESH ( after adjustment for diluted earning )
Average number of wieghted ES o/s during the period
Calculation of Weighted Average Nos. of ES Bonus Shares - Number of ES must be adjusted as if, the Bonus issue was made
at the start of the earliest reporting period.
Right Issue
- If, the right issue is made at the Fair value then, it is treated on a
Normal issue, i.e. included in weighted average from the date
of issue.
However, in case of Right issue at below the fair value i.e. there is bonus element
to it, in such case, number of shares O/S before the right issue are to multiplied by a
Rights Factor.
Rights Factor - FV per share immediatelt beofre to the exercise of rights
Theoritical Ex - rights FV per share
Prepared by - CA Nikunj Kikani
Author can reach - nikunjkikani23@yahoo.com
Unrealised Losses
Adjustment in case of minority interest is in negative 1) When minority interest comes in negative, this should be adjusted against
Majority Interest.
2) In other words, negative minority interest will not be shown in consolidated
Balance Sheet.
3) If, the subsidiary subsequent reports profits, all such profits should be allocated
to Majority interest until minority share of losses previously absorbed by the
Majority has been recovered.
2) Measure
The difference between Tax Expenses & Current Tax arises only on account of
Timing difference & thus creating Deferred Tax Asset / Liability.
( Example 6 )
Timing Difference
Permanent Difference - These differences originate in one period & do not reverse
subsequently.
Situation when DTL or DTA arises Situation
Particulars
i) Accounting Income ( AI ),
> Taxable Income ( TI )
ii) AI < TI
Remarks
2) Development Phase - It is the activity that converts the result of the research into
Marketable product.
Accounting Treatment for Research & Development cost Research Cost
( Example 8 )
Net Selling Price - It is the amount obtainable from the sale of an asset less
Disposal Cost.
Value in Use
Discount Rate - It
(
(
(
If, Asset carried at the Revalued Amount ( a ) Impairment loss should be adjusted to revaluation reserve, if any.
( b ) Balance amount should be transfer to P/L account.
( Example 9 )
Provision is a liability.
A Liability is a present obligation, not future obligation.
Settlement of liability should result in an outflow from enterprise of resources.
Liability is a result of obligation event.
There is no realistic of alternative settlement of that obligation event.
As per Para 14 of AS 29, Provision should be recognised when 1) An enterprise has a present obligation as a result of a past event.
2) It is probable that an outflow of resources embodying economic benefits will be
Required to settle the obligation.
3) A reliable estimate can be made of the amount of the obligation.
If, above all conditions are not met, no provision should be recognised.
Measurement of the Provision It should be the best estimate of the expenditure required to settle the present
Obligation.
No discounting of provision amount to paid in future to its present value.
It should be measured before tax.
Reimbursement of the expenditure ( Provision ) Amount of reimbursement against the provision may be presented net of the
Reimbursement in the P/L account if, reimbursement is virtually certain.
Use of the Provision
efer ASI 24 )
Back
Example on Accounting Standard 16 to 30
Example 1 - BC to be capitalized in case of General Borrowing
1) Borrowing Details Borrowing Type
18% Bank Loan
14% Debentures
16% Term Loan
Date of Borrowing
Amount
1/04/11
1/10/11
1/07/11
3,000
2,000
1,000
Amount
2,500
1,500
1,000
Period
12 Months
9 Months
7 Months
- 3,000*18%
= 540
- 2,000*14%*6/12 = 140
- 1,000*16%*9/12 = 120
BC
= 800
Step 3 - BC to be Capitalized
Factory Shed - 2,500*16.84%*12/12 = 421
Plant 1
- 1,500*16.84%* 9/12 = 189.45
Plant 2
- 1,000*16.84%*7/12
= 98.23
BC to be capitalized = 708.68
Step 4 - BC transfer to P/L account = BC incurred - BC to be Capitalized
= 800 - 708.68
= 91.32.
Particluars
Segment Revenue
Segment Results
Segment Assets
Segment
B
C
A
150
25
20
310
( 95 )
40
40
5
15
30
5
10
40
30
( 5 ) 15
10
5
Reportable Segment
A&B
A, B & F
A, B, C, D & E.
- 3 Years
- 5 Years
- Rs. 3,00,000/- Rs. 40,000/- 10%
State whether, Lease constiture Finance or Operating Lease & also calculate
Unearned Finance Income.
IRR is 10% i.e. Present Value of MLP from Lessor point of view ( + ) UGRV = 3,00,000
PV of MLP ( + ) PV of UGRV = 3,00,000
( 40,000 * 0.7513 ) ( + ) X
= 3,00,000
30,052
(+)X
= 3,00,000
Therefore, X
= 2,69,948
Due to following reasons lease can be said as Finance Lease 1) At the beginnig of lease period the PV of MLP cover substantially the initial
Fair Value ( FV ) i.e. 90% ( 2,69,948 / 3,00,000 ) approximately.
Calculation of Unearned Finance Income 1) Annual Lease Payment to lessor = PV of MLP / PV annuity factor for 3 years
= 2,69,948 / 2.4868
= Rs. 1,08,552/2) Gross Investment
= MLP ( + ) UGRV
= ( 1,08,552 * 3 ) ( + ) 40,0000
= Rs. 3,65,657/-
= GI ( - ) PV of GI
= 3,65,657 ( - ) 3,00,000
= Rs. 65,657/-.
Example 4 - EPS
Suppose,
1) O/s ES on 1st April - 20,00,000
2) Average FV per ES during the year - Rs. 75/3) Potential ES in capital strcture of the company ( a ) Options - 1,00,000 shares with exercise price of Rs. 60/( b ) 8% Convertible PS of 8,00,000 shares of Rs. 100 to be converted into 2 ES,
Corporate Dividend Tax - 10%.
( c ) 12% Convertible Debentures of Rs. 100 each, nominal value Rs. 10 Crore
convertible into 4 ES.
4) Tax Rate - 30%
5) Net profit for ESH during the period - Rs .1,00,00,000/Calculate Basic & Diluted EPS.
1) Basic EPS =
NP for ESH
Number of Shares O/s
= 1,00,00,000 / 20,00,000
= Rs. 5 per share.
2) Diluted EPS =
Partculars
a) in earning
b) in number of ES
c) EPS for in ES
Options
NIL
20,000
NIL
8% PS
70,40,000
16,00,000
4.4
12% Debentures
84,00,000
40,00,000
2.1
Therefore, Options are most diluted, debentures are less & PS are least diluted.
Preapred by - CA Nikunj Kikani
Author ca reach - nikunjkikani23@yahoo.com
NP to ESH
NP reported
Options
1,00,00,000
NIL
1,00,00,000
12% Debentures
84,00,000
No. of ES
20,00,000
5
20,000
20,20,000
70,40,000
Remarks
4.95
Dilutive
40,00,000
1,84,00,000
8% PS
EPS
60,20,000
3.06
Dilutive
3.34
Anti Dilutiv
16,00,000
2,54,40,000
76,20,000
Example 6 - AS 22
Suppose,
1) Profit before Depreciation & Taxes Year
2007 2008 2009 2010 -
08
09
10
11
Amount
15,00,000
18,00,000
25,00,000
30,00,000
Amount
4,00,000
3,00,000
4,00,000
Year 1
Year 2
Year 3
Book Depreciation
IT
Depreciation
60,000
1,00,000
96,000
1,50,000
81,600
1,12,500
Timing Difference
40,000
54,000
30,900
Year 4
1,29,360
1,84,376
55,015
45%
40%
35%
35%
18,000
21,600
10,815
19,255
NIL
( 2,000 )
( 2,000 )
NIL
( 40,000 * 5% )
NIL
NIL
( 2,700)
NIL
( 54,000 * 5% )
18,000
19,600
6,115
19,255.
P/ L Account Statement
Particulars
Year 1
NPBT
Less - Current Tax
Less - DTL ( Net )
NPAT
Year 2
Year 3
Year 4
14,40,000
17,04,000
24,18,400
28,70,640
( 7,00,000 )
( 7,42,500 )
( 9,55,000 )
( 9,85,469 )
( 18,000 )
( 19,600 )
( 6,115 )
( 19,255 )
7,26,000
9,41,900
14,57,285
18,65,916
on
on
on
on
December
March
June
September
Income
400
400
400
400
Average actual tax rate for the financial year ending on 31st March is 30% for Year 1 &
40% for year 2.
Calculate Tax Expense for each QTR as per AS 25.
QTR end on
End
End
End
End
on
on
on
on
December
March
June
September
Tax Expenses
Rs. 120/- ( 400 * 30% )
Rs. 120/- ( 400 * 30% )
Rs. 160/- ( 400 * 40% )
Rs. 160/- ( 400 * 40% )
Cash Flow
100
60
60
Preapred by - CA Nikunj Kikani
Author ca reach - nikunjkikani23@yahoo.com
4
5
40
40
Discount Rate
Net Selling Price
- 25%
- 120
Cash Flow
100
60
60
40
50
DF @ 25%
0.8
0.64
0.512
0.4096
0.32768
Present Value ( PV )
80
38.4
30.72
16.384
16.384
Remarks
Dilutive
Dilutive
Anti Dilutive
Back
from changes in the associate's equity that have not been included in
the statement of P/L of the associate should be directly made in the
Carrying amount of investment without routine it through the P/L of
CFS.
Related to
AS 16
AS 2 & 10
As 22
AS 22
AS 22
AS 22
AS 21, 23,
27
AS 22
AS 16
AS 20
AS 18
AS 9
AS 21
AS 23
AS 23
AS 23
AS 23
AS 23
AS 18
AS 17
AS 18
AS 17
AS 17
AS 18
AS 21
AS 21
AS 21
AS 25
AS 21, 27
Prepared by - CA Nikunj Kikani
Author can reach - nikunjkikani23@yahoo.com
AS 21, 27
AS 7
AS 29
Back
Example 3 - ASI 5
Tax holiday period - 10 Years
Current period
- 2nd Year
Timing difference on depreciation Year 1 - Rs. 100
Year 2 - Rs. 200
Tax Rate
- 35%
Assume that, timing diffrence would reverse from 3rd year by Rs. 5.
1) In above case, deferred tax liability arose in year 1 of Rs. 100 will be
Reversed from 3rd year to the extent of Rs. 40 in tax holiday period
Only, balance of Rs. 60 is not reversed during the tax holiday period.
2) Rs. 200 which resulted during the year 2 is also not reversed during the
Tax holiday period.
3) Therefore, DTL of Rs. 91 ( ( 60 + 200 ) * 35% ) should be recognised at
the end of 2nd year & charged to P/L account.