Accounting std1
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Presentation on Accounting Standards
17,18,29By
Rajan DasguptaDigen Pd Sah
Nirbhay Kumar
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AS-17
SEGMENT REPORTING
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Objective
To establish the principles for reporting financial information about the different types of products and services an enterprises produces and different geographical areas in which it operates
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Segment Reporting helps to user of financial statements
• To better understand the performance of the enterprise
• To better assess the risks & returns of the enterprise
• To make more informed judgement about the
enterprises as a whole.
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Segment
Business Segment:• It is distinguishable component of an
enterprise
• It is engaged in providing an individual product or services
• It is subject to risk & returns that are different from those of other business segment .
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Geographical Segment:
•Distinguishable component of an enterprise
•Engaged in providing products or services within a particular economic environment
•That is subject to risks and returns that are different from those of components operating in other economic environments
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•Enterprise Revenue
•Segment Revenue
•Segment Expense
•Segment Result
•Segment Assets
•Segment Liabilities
Definitions
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Identification of Reportable Segments
• Segment revenue – 10% or more
• Segment result – 10% or more
• Segment asset – 10% or more • Segment - Management discretion • At least 75% of total external revenue
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Reportable Segments
Primary Secondary
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Basis of Classification
Risks & return mainly effect by difference in product
• Primary – Business • Secondary – Geographical
Risks & return mainly effect by geographical area• Primary – Geographical• Secondary – Business
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Risks & return mainly effect by both of by difference in product & its operation in different geographical area
• Primary – Business • Secondary – Geographical
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Disclosure
•Segment Revenue from sales to external customers
•Segment revenue from transactions with other segments
•Segment Result
•Total carrying amount of segment assets
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•Total segment liabilities
•Additions to tangible & intangible fixed assets
•Depreciation & ammortisation for the period
•Significant other non-cash expenses
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AS-18
RELATED PARTY DISCLOSURE
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Need & Objective Sometimes business transactions between related parties lose the feature and character of the arms length transaction.
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Related Party • Holding companies(a company having one or more subsidiaries),
Subsidiaries & Fellow subsidiaries(a company is considered to be fellow susidiary of another company if both are susidiaries of the self holding company)
• Associates(an enterprise in which an investing reporting party has significant influence and which is neighter an subsidiary nor a joint venture of that party) & Joint venture(The cooperation of two or more individuals or businessness in which each agrees to share profit,loss and control in a specific enterprise)
• Individuals owing , directly or indirectly interest in the voting power
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• Relative of such individual –Spouse, son, daughter, mother, father, brother, sister.
. Key management personnel(those persons who have the authority and resposibility for planning, directing and controlling the activities of the reporting enterprise) & relative of such personnel
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What should be disclosed
• Related party relationship
• Transactions between a reporting enterprises and its related parties
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Control Concept • Control by ownership (directly or indirectly more than
50% of the voting power
• Control over composition of BOD or other governing body
• Control of substantial interest in the voting power & power to direct the financial or operating policies of the enterprise
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Significant Influence
• By representation of the Board of Directors
• Participation in policy-making process
• Material inter-company transactions
• Inter-charge of management personnel
• Dependence on technical information
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Exception of Related Party
• Two companies have a director in common dealing between the companies
• A Single customer or supplier or distributor
• Provider of finance
• enterprises.
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• Trade union
• Govt. department & agencies
• State controlled enterprises with other State
controlled enterprises.
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Related Party Transactions
• Purchase/Sales of goods
• Purchase/Sales of fixed assets
• Rendering /receiving of services
• Leasing or hire purchase arrangements
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• Transfer of research and development
• License agreement
• Finance (incl. loan & equity)
• Guarantees & collateral
• Management contracts of deputation employees
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Disclosure
• Name of the related party should be disclosed
• Nature of the related party relationship should be disclosed
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Details of Disclosure
• Name of the related party
• Description of related party
• Description of the nature of transaction
• Volume of the transactions either as an amount or as an appropriate proportion
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• Any other element of the transaction, which is essential for understanding the financial statements
• Amount or appropriate proportion of outstanding items & provision for doubtful debts
• Amount written off or written back in the period in
respect of debts due from doubtful debts.
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AS-29PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT
ASSETS
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To prescribed the accounting for – Provisions
Contingent liabilities
Contingent assets
Provision for restructuring cost
Objective
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Provision is liability
What is provision
What is liability
• Liability is a present obligation
• Arising from past events
• Settlement of which result in outflow of resources
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What is Present Obligation
An obligation is present obligation if based on evidence available its existence in the balance sheet date is considered probable i.e., more likely than not.
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Onerous Contract
A contact in which the unavoidable costs of meeting the obligation under the contract exceed the economic benefits expected to be recovered under it.
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Recognition of Provision
• Present probable obligation as a result of a past obligating event
• An outflow of resources embodying economic benefits in settlement
• A reliable estimate
• Number of similar obligations – to consider the outflow of resources ‘probable’ obligation as a whole to be considered
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Measurement of provision
• Best estimate of the expenditure required
• No discounting
• No tax effect
• Additional evidence after balance sheet to be considered
• Re-imbursement of expenditure • Review of provision
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Contingent Liability
• Possible obligation (not probable) as a result of past event.
• Existence of which will be confirmed only by the occurrence or non-occurrence of future event.
• Future event not wholly within the control of the
enterprises.
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Contingent Liability
Contingent liability is a possible obligation however it may also be a present obligation
• Probability of outflow of resources is very low.• Reliable estimate of the amount of the present obligation cannot be made.
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What is Contingent Assets?
• Possible asset as a result of past events.
• Existence of contingent assets is to be confirmed by the occurrence & non-occurrence of one or more future events.
• Future event not wholly within the control of the
enterprise.
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Recognition Principles of Contingent Asset
• An enterprise should not recognise a contingent asset
• No disclosure is required of contingent asset
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Provision for Restructuring Cost
• AS-29 deals with provision of restructuring cost
• AS-29 does not prescribe the accounting of restructuring cost
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What is Restructuring ?
• Sale or termination of line of business.
• Relocation of business activities from one country or region to another.
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What is Restructuring ?
• Change in management structure
• Fundamental re-organization that has material effect on the nature & focus of the enterprise operations
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Restructuring does not include
• Retraining or relocating continuing staff
• Marketing
• Investment in new system & distribution networks
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What is Restructuring Cost?
Provision for restructuring cost should include only the direct expenditure arising from restructuring & not associated with the ongoing activities of the enterprises.
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Financial Instrument carried at Fair Value. Resulting from Executory Contract. Insurance Enterprise Those covered under another Accounting
Standards.. A.S-7, A.S-15, A.S-19, A.S-22.
Accounting Standard 29 is not applicable…to…