Accounting Standards

APPLICABILITY OF ACCOUNTING STANDARDS TO VARIOUS ENTITIES

Accounting Standard	Title of AS	Companies		Non Corporates
Accounting Standard	Title of AS	Non SMCs	SMCs	Level I	Level II (SMEs)	Level III (SMEs)
AS 1	Disclosure of Accounting Policies	✔	✔	✔	✔	✔
AS 2	Valuation of Inventories (Refer Note 7)	✔	✔	✔	✔	✔
AS 3	Cash Flow Statements	✔	Not Applicable in entirety, i.e. Optional	✔	Not Applicable in entirety, i.e. Optional	Not Applicable in entirety, i.e. Optional
AS 4	Contingencies and Events Occurring After the Balance Sheet Date (Refer Note 7)	✔	✔	✔	✔	✔
AS 5	Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies	✔	✔	✔	✔	✔
AS 6	Depreciation Accounting	Withdrawn (Refer Note 7)
AS 7	Construction Contracts (revised 2002)	✔	✔	✔	✔	✔
AS 9	Revenue Recognition	✔	✔	✔	✔	✔
AS 10	Accounting for Fixed Assets (Refer Note 7)	✔	✔	✔	✔	✔
AS 11	The Effects of Changes in Foreign Exchange Rates (revised 2003)	✔	✔	✔	✔	✔
AS 12	Accounting for Government Grants	✔	✔	✔	✔	✔
AS 13	Accounting for Investments (Refer Note 7)	✔	✔	✔	✔	✔
AS 14	Accounting for Amalgamations (Refer Note 7)	✔	✔	✔	✔	✔
AS 15	Employees Benefits (Revised 2005)	✔	Relaxations from certain requirements have been given to SMCs (Refer Note 2)	✔	Relaxations from certain requirements have been given to Non-corporate Entities falling in Level II and Level III (SMEs) (Refer Note 5)
AS 16	Borrowing Costs	✔	✔	✔	✔	✔
AS 17	Segment Reporting	✔	Not Applicable in entirety, i.e. Optional	✔	Not Applicable in entirety, i.e. Optional	Not Applicable in entirety, i.e. Optional
AS 18	Related Party Disclosures	✔	✔	✔	✔	Not Applicable in entirety, i.e. Optional
AS 19	Leases	✔	Relaxations from certain requirements have been given to SMCs (Refer Note 2)	✔	Relaxations from certain requirements have been given to Non-corporate Entities falling in Level II and Level III (SMEs) (Refer Note 5)
AS 20	Earnings Per Share	✔		✔
AS 21	Consolidated Financial Statements (Refer Note 7)	✔	Not applicable to SMCs since relevant Regulations require compliance with them only by certain Non-SMCs (Refer Note 1)	✔	Not applicable to all Non-corporate Entities since the relevant Regulators require compliance with them only by certain Level I entities (Refer Note 4)
AS 22	Accounting for Taxes on Income	✔	✔	✔	✔	✔
AS 23	Accounting for Investments in Associates in Consolidated Financial Statements	✔	Not applicable to SMCs since the relevant Regulations require compliance with them only by certain Non-SMCs (Refer Note 1)	✔	Not applicable to all Non-corporate Entities since the relevant Regulators require compliance with them only by certain Level I entities (Refer Note 4)
AS 24	Discontinuing Operations	✔	✔	✔	✔	Not Applicable in entirety, i.e. Optional
AS 25	Interim Financial Reporting	✔	(Refer Note 3)	✔	(Refer Note 6)
AS 26	Intangible Assets	✔	✔	✔	✔	✔
AS 27	Financial Reporting of Interests in Joint Ventures	✔	Not applicable to SMCs since the relevant Regulations require compliance with them only by certain Non-SMCs (Refer Note 1)	✔	Not applicable to all Non-corporate Entities since the relevant Regulators require compliance with them only by certain Level I entities (Refer Note 4)
AS 28	Impairment of Assets	✔	Relaxations from certain requirements have been given to SMCs (Refer Note 2)	✔	Relaxations from certain requirements have been given to Non-corporate Entities falling in Level II and Level III (SMEs) (Refer Note 5)
AS 29	Provisions, Contingent Liabilities and Contingent Assets (Refer Note 7)	✔		✔

Notes:

AS 21, AS 23 and AS 27 (relating to consolidated financial statements) are required to be complied with by a company if the company, pursuant to the requirements of a statute/regulator or voluntarily, prepares and presents consolidated financial statements.
Relaxations from certain requirements have been given to SMC as follows:

Accounting Standard	Details of relaxations
AS 15	a. Paragraphs 11 to 16 - to the extent they deal with recognition and measurement of short-term accumulating compensated absences which are non-vesting (i.e., short-term accumulating compensated absences in respect of which employees are not entitled to cash payment for unused entitlement on leaving); b. Paragraphs 46 and 139 – which deal with discounting of amounts that fall due more than 12 months after the balance sheet date; c. Recognition and measurement principles laid down in paragraphs 50 to 116 and presentation and disclosure requirements laid down in paragraphs 117 to 123 in respect of accounting for defined benefit plans. However, such companies should actuarially determine and provide for accrued liability in respect of defined benefit plans by using Projected Unit Credit Method and discount rate used should be determined by reference to market yields at balance sheet date on Government bonds as per paragraph 78 of the Standard. Such companies should disclose actuarial assumptions as per paragraph 120(l) of the Standard; and d. Recognition and measurement principles laid down in paragraphs 129 to 131 in respect of accounting for other long-term employee benefits. However, such companies should actuarially determine and provide for accrued liability in respect of other long-term employee benefits by using Projected Unit Credit Method and discount rate used should be determined by reference to market yields at balance sheet date on Government bonds as per paragraph 78 of the Standard.
AS 19	Paragraphs 22 (c), (e) and (f); 25 (a), (b) and (e); 37 (a) and (f); and 46 (b) and (d) relating to disclosures are not applicable to SMCs
AS 20	Disclosure of diluted earnings per share (both including and excluding extraordinary items) is exempted for SMCs.
AS 28	SMCs are allowed to measure the ‘value in use’ on the basis of reasonable estimate thereof instead of computing the value in use by present value technique. Consequently, if an SMC chooses to measure the ‘value in use’ by not using the present value technique, the relevant provisions of AS 28, such as discount rate etc., would not be applicable to such an SMC. Further, such an SMC need not disclose the information required by paragraph 121(g) of the Standard.
AS 29	Paragraphs 66 and 67 relating to disclosures are not applicable to SMCs.

AS 25, Interim Financial Reporting, does not require a company to present interim financial report. It is applicable only if a company is required or elects to prepare and present an interim financial report. Only certain Non-SMCs are required by the concerned regulators to present interim financial results, e.g, quarterly financial results required by the SEBI. Therefore, the recognition and measurement requirements contained in this Standard are applicable to those Non-SMCs for preparation of interim financial results.
AS 21, AS 23 and AS 27 (to the extent these standards relate to preparation of consolidated financial statements) are required to be complied with by a non-corporate entity if the non-corporate entity, pursuant to the requirements of a statute/regulator or voluntarily, prepares and presents consolidated financial statements.
Relaxations from certain requirements have been given to Non-corporate Entities falling in Level II and Level III (SMEs) as follows:

Accounting Standard	Details of relaxations
AS 15	Level II and Level III Non-corporate entities are exempted from the applicability of the following paragraphs:
	No. of Employees	Average No. of persons employed during the year is >=50	Average No. of persons employed during the year is < 50
	Recognition and measurement of short-term accumulated compensating absences which are non-vesting contained in paragraphs 11 to 16	Exempted
	Discounting of amounts that fall due more than 12 months after balance sheet date under para 46 (Defined Contribution Plans) or para 139 (Termination Benefits)	Exempted
	Recognition and measurement principles under paragraphs 50 to 116 and Disclosures requirements under paras 117 to 123 for accounting of defined benefit plan	Exempted However, such entities to – a. Actuarially determine & provide for accrued liability using PUCM. b. Discount rate determined by reference to market yield on Govt. bonds at balance sheet date c. Disclose actuarial assumptions as per paragraph 120(l)	Exempted However, such entities to – Calculate & account accrued liability by reference to some rational method, e.g. a method based on assumption that such benefits are payable to all employees at end of accounting year
	Recognition and measurement of other long-term employee benefits contained in paras 129 to 131	Exempted However such entities to – a. Actuarially determine & provide for accrued liability using PUCM. b. Discount rate determined by reference to market yield on Govt. bonds at balance sheet date.	Exempted However, such entities to – Calculate & account accrued liability by reference to some rational method, e.g. a method based on assumption that such benefits are payable to all employees at end of accounting year
AS 19	Paragraphs 22(c), (e) and (f); 25 (a), (b) and (e); 37 (a) and (f); and 46 (b) and (d) relating to disclosures are not applicable to non-corporate entities falling in Level II . Paragraphs 22 (c), (e) and (f); 25 (a), (b) and (e); 37 (a), (f) and (g); and 46 (b), (d) and (e) relating to disclosures are not applicable to Level III entities.
AS 20	Diluted earnings per share (both including and excluding extraordinary items) is not required to be disclosed by non-corporate entities falling in Level II and Level III and information required by paragraph 48(ii) of AS 20 is not required to be disclosed by Level III entities if this standard is applicable to these entities.
AS 28	Non-corporate entities falling in Level II and Level III are allowed to measure the ‘value in use’ on the basis of reasonable estimate thereof instead of computing the value in use by present value technique. Consequently, if a non-corporate entity falling in Level II or Level III chooses to measure the ‘value in use’ by not using the present value technique, the relevant provisions of AS 28, such as discount rate etc., would not be applicable to such an entity. Further, such an entity need not disclose the information required by paragraph 121(g) of the Standard.
AS 29	Paragraphs 66 and 67 relating to disclosures are not applicable to non-corporate entities falling in Level II and Level III.

AS 25, Interim Financial Reporting, does not require a non-corporate entity to present interim financial report. It is applicable only if a non-corporate entity is required or elects to prepare and present an interim financial report. Only certain Level I non-corporate entities are required by the concerned regulators to present interim financial results, e.g., quarterly financial results required by the SEBI. Therefore, the recognition and measurement requirements contained in this Standard are applicable to those Level I non-corporate entities for preparation of interim financial results.
Amendment to AS 2, 4, 6, 10, 13, 14, 21 and 29 issued by the Institute of Chartered Accountants of India, pursuant to issuance of amendments to Accounting Standards by the MCA (September 2016) - (28-9-2016)(http://www.icai.org/post.html?post_id=12936)

The Council of the Institute of Chartered Accountants of India (ICAI) at its 359th meeting held on August 16-17, 2016 noted that the Ministry of Corporate Affairs (MCA) has notified Companies (Accounting Standards) Amendment Rules, 2016 (G.S.R. 364(E) dated 30-3-2016) and amended the following Accounting Standards and omitted AS 6, Depreciation Accounting, issued under Companies (Accounting Standards) Rules, 2006:

AS 2, Valuation of Inventories

AS 4, Contingencies and Events Occurring After the Balance Sheet Date

AS 10, Property, Plant and Equipment

AS 13, Accounting for Investments

AS 14, Accounting for Amalgamations

AS 21, Consolidated Financial Statements

AS 29, Provisions, Contingent Liabilities and Contingent Assets

Key amendment are as follows:

Accounting Standard	Key changes
AS 2	Inventories shall not include spare parts, servicing equipment and standby equipment which fall under definition of PPE under revised AS 10 (i.e. those which are intended to be used for a period of more than 12 months).
AS 4	Dividends declared after balance sheet date but before the financial statements are approved for issue will not be recognised as a liability at the balance sheet date but be disclosed as part of notes to accounts.
AS 10	1. It defines as to what constitutes the unit of measure for recognition, i.e. what constitutes an item of PPE. 2. Entity has to choose either cost or revaluation model as its accounting policy for subsequent measurement. If an item of PPE is revalued, the entire class to which that asset belongs is revalued. 3. Cost of an item of PPE is its cash price at date of recognition. If payment is deferred beyond normal credit terms, difference between cash price and total payment is charged as interest. 4. Component accounting to be made mandatory in line with Companies Act 2013 Schedule II. 5. Depreciation method applied to assets to be reviewed every financial year, any change in method to be accounted as change in accounting estimate in accordance with AS 5.
AS 13	An investment property will now be accounted for in accordance with the cost model as prescribed in the revised AS 10 instead of AS 13.
AS 14	Disclosure required in situations where scheme of amalgamation prescribes a different treatment to be given to reserves of the transferor company as compared to the requirement of the standard shall not apply to any scheme of amalgamation approved under the Companies Act, 2013
AS 21	Where an enterprise does not have a subsidiary but has an associate and/or JV, such an enterprise should also prepare consolidated financial statements in accordance with the applicable accounting standards.
AS 29	Amount of provision recognised under revised AS 10 with respect to decommissioning, restoration and similar liabilities should be discounted.

Full amendment can be accessed at below link:

http://resource.cdn.icai.org/43440asb33184a.pdf

Ants as stated in point (3) above will come into effect prospectively in respect of accounting periods commencing on or after April 1, 2017. However, early application of the aforementioned amendments is permitted.

For Ministry of Corporate Affairs notification dated March 30, 2016 on the above amendment refer - http://resource.cdn.icai.org/41956asb31668.pdf

OTHER ANNOUNCEMENT ISSUED DURING FY 2016-17

A. Accounting Standards withdrawn vide360th meeting of the Council held on November 7-9, 2016
(http://www.icai.org/post.html?post_id=8659)&(http://www.icai.org/post.html?post_id=3137)

Accounting Standard (AS) 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29(http://www.icai.org/post.html?post_id=451)
AS 31, Financial Instruments: Presentation(http://resource.cdn.icai.org/280announ1223.pdf)
Accounting Standard (AS) 32, Financial Instruments: Disclosures, and limited revision to Accounting Standard (AS) 19, Leases (16-9-2008) (http://www.icai.org/post.html?post_id=3366)

B. Announcement issued by ICAI “Harmonisation of various differences between the Accounting Standards issued by the ICAI and the Accounting Standards notified by the Central Government” (http://www.icai.org/post.html?post_id=3610)

Status of accounting standard interpretations issued by the ICAI
(http://resource.cdn.icai.org/13597announ30108.pdf)

ASI No.	Title of the ASI	Relevant paragraphs of Accounting Standards
1	Substantial period of time (Re.AS 16)	Incorporated in (AS) 16 "Borrowing Costs" as Explanation below para 3.2
3	Accounting for taxes on income in the situations of tax holiday under sections 80-IA and 80-IB of the Income-tax Act, 1961 (Re. AS 22)	Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation below para 13.
4	Losses under the head Capital Gains (Re. AS 22)	Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation 2 to para 17.
5	Accounting for taxes on income in the situations of tax holiday under sections 10A and 10B of the Income-tax Act, 1961 (AS 22)	Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation below para 13.
6	Accounting for taxes on income in the context of section 115JB of the Income-tax Act, 1961 (AS 22)	Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation below para 21.
7	Disclosure of Deferred Tax Assets and Deferred Tax Liability in the balance sheet of a Company (AS 22)	Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation below para 30.
8	Interpretation of the term 'Near Future' (AS 21, AS 23 & AS 27)	Incorporated in (AS) 21 "Consolidated Financial Statements" as Explanation (b) to para 11. Also incorporated in (AS) 23" Accounting for Investments in Associates in Consolidated Financial Statements" as Explanation below para 7 and in (AS) 27 "Financial Reporting of Interests in Joint Ventures" as Explanation below para 28.
9	Virtual certainty supported by convincing evidence (AS 22)	Incorporated in (AS) 22 "Accounting for Taxes on Income" as Explanation 1 to para 17.
10	Interpretation of paragraph 4(e) of AS 16 (Re. AS 16)	Incorporated in (AS) 16 "Borrowing Costs" as Explanation below para 4(e)
13	Interpretation of paragraphs 26 and 27 of AS 18 (Re. AS 18)	Incorporated in (AS) 18 "Related Party Disclosures" as Explanation below para 26 and 27.
14	Disclosure of Revenue from Sales Transactions (AS 9)	Incorporated in (AS) 9 "Revenue Recognition" as Explanation below para 10.
15	Notes to Consolidated Financial Statements (AS 21)	Incorporated in (AS) 21 "Consolidated Financial Statements" as Explanation below para 6.
16	Treatment of Proposed Dividend under AS 23	Incorporated in (AS) 23 "Accounting for Investments in Associates in Consolidated Financial Statements" as Explanation (b) to para 6.
17	Adjustments to the carrying amount of Investments arising from changes in Equity not included in statement of Profit and Loss of the associate (AS 23)	Incorporated in (AS) 23 "Accounting for Investments in Associates in Consolidated Financial Statements" as Explanation (a) to para 6.
18	Consideration of Potential Equity shares for determining whether an investee is an associate under AS 23	Incorporated in (AS) 23 "Accounting for Investments in Associates in Consolidated Financial Statements" as Explanation below para 4.
19	Interpretation of the term 'Intermediaries' (AS 18)	Incorporated in (AS) 18 "Related Party Disclosures" as Explanation below para 13.
20	Disclosure of Segment information (AS 17)	Incorporated in (AS) 17 "Segment Information" (Re. AS 20) as Explanation below para 38.
21	Non-Executive Directors on the Board – whether related parties	Incorporated in (AS) 18 "Related Party Disclosures" as Explanation below para 14.
22	Treatment of interest for determining segment expense (AS 17)	Incorporated in (AS) 17 "Segment Information" as Explanation below para 5.6(b).
24	Definition of 'Control' (AS 21)	Incorporated in (AS) 21 "Consolidated Financial Statements" as Explanation below para 10.
25	Exclusion of a subsidiary from consolidation (AS 21)	Incorporated in (AS) 21 "Consolidated Financial Statements" as Explanation (a) below para 11.
26	Accounting for taxes on income in the consolidated financial statements (AS 21)	Incorporated in (AS) 21 "Consolidated Financial Statements" as Explanation (a) below para 13.
27	Applicability of AS 25 to Interim Financial Results (AS 25)	Not incorporated in Notified ASs.
28	Disclosure of Parent's/venture's shares in	Incorporated in (AS) 21 "Consolidated Financial Statements" as post acquisition reserves of a subsidiary/jointly controlled entity (AS 21 and AS 27) Explanation (b) to Para 13 and in (AS) 27 "Financial Reporting of Interests in Joint Ventures" as Explanation below para 32.
30	Applicability of AS 29 to onerous contracts (AS 29)	Incorporated in (AS) 29 "Provisions, Contingent Liabilities and Contingent Assets" as Explanation below Para 1(b).

Following ASIs have not been included in the notified Accounting Standards:

ASI 2 Accounting for Machinery Spares (Re. AS 2 and AS 10)
ASI 11 Accounting for Taxes on Income in case of an Amalgamation (Re. AS 22)
ASI 12 Applicability of AS 20 (Re. AS 20)
ASI 23 Remuneration paid to key management personnel – whether a related party transaction (Re. AS 18)
ASI 27 Applicability of AS 25 to Interim Financial Results (Re. AS 25)
ASI 29 Turnover in case of Contractors (Re. AS 7 (revised 2002))

The Council decided to withdraw the above ASIs and issue the same as Guidance Notes except ASI 2 and ASI 11.