13 February 2017
Applicability of Standards/Guidance Notes/Legislative Amendments etc. for May, 2017 – Intermediate (IPC) Examination
Paper 1: Accounting
Accounting Standards AS 1 : Disclosure of Accounting Policies AS 2 : Valuation of Inventories AS 3 : Cash Flow Statements AS 7 : Construction Contracts (Revised 2002) AS 9 : Revenue Recognition AS 10 : Property, Plant and Equipment (2016) AS 13 : Accounting for Investments AS 14 : Accounting for Amalgamations
Paper 5: Advanced Accounting
Accounting Standards
AS 4 : Contingencies and 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 11 : The Effects of Changes in Foreign Exchange Rates (Revised 2003) AS 12 : Accounting for Government Grants AS 16 : Borrowing Costs AS 19 : Leases AS 20 : Earnings Per Share AS 26 : Intangible Assets AS 29 : Provisions, Contingent Liabilities and Contingent Assets.
Common Note for Paper 1 “Accounting” and Paper 5 “Advanced Accounting”
I. Applicability of the Companies Act, 2013 and other Legislative Amendments for May, 2017 Examination The relevant notified Sections of the Companies Act, 2013 and legislative amendments including relevant Notifications / Circulars / Rules / Guidelines issued by Regulating Authority up to 31st October, 2016 will be applicable for May, 2017 Examination.
II. Applicability of Amendments made by MCA in the Companies (Accounting Standards) Rules, 2006 and Companies (Indian Accounting Standards) Rules, 2015
Amendments made by MCA on 30.3.2016 in the Companies (Accounting Standards) Rules, 2006 and Companies (Indian Accounting Standards) Rules, 2015 are applicable for May, 2017 examination.
III. Non-Applicability of Ind ASs for May, 2017 Examination The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Rules, 2015 on 16th February, 2015, for compliance by certain class of companies. These Ind AS have not been made applicable for May, 2017 Examination.
Announcement on Applicability of Amendments in Accounting Standards for Intermediate May, 2017 Examination
The Ministry of Corporate Affairs (MCA) has notified Companies (Accounting Standards) Amendment Rules, 2016 (G.S.R. 364(E) dated 30.03.2016) [These rules have come into force on the date of their publication in the Official Gazette (ie. 30 March 2016) (Link:http://mca.gov.in/Ministry/pdf/Notification_30032016.pdf)]
MCA has omitted AS 6, Depreciation Accounting and amended the following Accounting Standards issued under Companies (Accounting Standards) Rules, 2006:
i. AS 2, Valuation of Inventories ii. AS 4, Contingencies and Events Occurring After the Balance Sheet Date iii. AS 10, Property, Plant and Equipment iv. AS 13, Accounting for Investments v. AS 14, Accounting for Amalgamations vi. AS 21, Consolidated Financial Statements (AS 21 is not covered at Intermediate level) vii. AS 29, Provisions, Contingent Liabilities and Contingent Assets
It may be noted that these amendments are applicable for May, 2017 Examination.
Paper 1 Accounting at Intermediate Level
The revisions in AS 2, AS 10, AS 13 and AS 14 are relevant for Students appearing for Paper 1 “Accounting” in May, 2017 Examinations. Those students who have July 2015 Edition of Paper 1 “Accounting” are advised to ignore Para 2.4.4 on Deprecation Accounting and Para 2.4.7 on Accounting for Fixed Assets because AS 6 ‘Deprecation Accounting’ And AS 10 ‘Accounting for Fixed Assets’ have been withdrawn after issuance of AS 10 ‘Property, Plant and Equipment’. The students are also advised to ignore the questions numbered 21 to 33 (based on AS 6) and 46 to 55 (based on AS 10) given in April, 2016 Edition of Practice Manual. They are also suggested to refer the Supplementary material on AS 10, Property, Plant and Equipment uploaded on the link http://resource.cdn.icai.org/44440bos34351.PDF along with the RTP for May, 2017 Examination.
Paper 5 Advanced Accounting at Intermediate level
The revisions in AS 4, AS 14 and AS 29 are applicable for Students appearing for Paper 5 “Advanced Accounting” in May, 2017 Examinations. Those students who have July 2015 Edition of Paper 5 Advanced Accounting are advised to refer the RTP for May, 2017 Examination.
For easy reference of students, the changes in the above-mentioned Accounting Standards are tabularized as follows:
Name of the standard Para no. As per the Companies (Accounting Standards) Rules, 2006 As per the Companies (Accounting Standards) Amendment Rules, 2016 Implications AS 2 4 (an extract) Inventories do not include machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular; such machinery spares are accounted for in accordance with Accounting Standard (AS) 10, Accounting for Fixed Assets. Inventories do not include spare parts, servicing equipment and standby equipment which meet the definition of property, plant and equipment as per AS 10, Property, Plant and Equipment. Such items are accounted for in accordance with Accounting Standard (AS) 10, Property, Plant and Equipment. Now, inventories also do not include servicing equipment and standby equipment other than spare parts if they meet the definition of property, plant and equipment as per AS 10, Property, Plant and Equipment. 27 Common classifications of inventories are raw materials and components, work in progress, finished goods, stores and spares, and loose tools. Common classifications of inventories are: (a) Raw materials and components (b) Work-in progress (c) Finished goods (d) Stock-in-trade (in respect of goods acquired for trading) (e) Stores and spares (f) Loose tools (g) Others (specify nature)”. Para 27 of AS 2 requires disclosure of inventories under different classifications. One residual category has been added to the said paragraph i.e. ‘Others’. AS 4 Footnote to AS 4 Pursuant to AS 29, Provisions, Contingent Liabilities and Contingent Assets, becoming mandatory in respect of accounting periods commencing on or after 1-4-2004, all paragraphs of this Standard that deal with contingencies (viz. paragraphs 1(a), 2, 3.1, 4 (4.1 to 4.4), 5 (5.1 to 5.6), 6, 7 (7.1 to 7.3), 9.1 (relevant portion), 9.2, 10, 11, 12 and 16) stand withdrawn except to the extent they deal with impairment of assets not covered by other Indian Accounting Standards. For example, impairment of receivables (commonly referred to as the provision for bad and doubtful debts), would continue to be covered by AS 4. All paragraphs of this Standard that deal with contingencies are applicable only to the extent not covered by other Accounting Standards prescribed by the Central Government. For example, the impairment of financial assets such as impairment of receivables (commonly known as provision for bad and doubtful debts) is governed by this Standard. Footnote has been modified. 8.5 There are events which, although they take place after the balance sheet date, are sometimes reflected in the financial statements because of statutory requirements or because of their special nature. Such items include the amount of dividend proposed or declared by the enterprise after the balance sheet date in respect of the period covered by the financial statements There are events which, although they take place after the balance sheet date, are sometimes reflected in the financial statements because of statutory requirements or because of their special nature. For example, if dividends are declared after the balance sheet date but before the financial statements are approved for issue, the dividends are not recognised as a liability at the balance sheet date because no obligation exists at that time unless a statute requires otherwise. Such dividends are disclosed in the notes. No liability for proposed dividends has to be created now. Such proposed dividends are to be disclosed in the notes. 14 Dividends stated to be in respect of the period covered by the financial statements, which are proposed or declared by the enterprise after the balance sheet date but before approval of the financial statements, should be adjusted. If an enterprise declares dividends to shareholders after the balance sheet date, the enterprise should not recognise those dividends as a liability at the balance sheet date unless a statute requires otherwise. Such dividends should be disclosed in notes. No liability for proposed dividends has to be created now. Such proposed dividends are to be disclosed in the notes. AS 10 All Fixed Assets Property, Plant and Equipment Entire standard has been revised with the title AS 10: ‘Property, Plant and Equipment’. AS 13 20 The cost of any shares in a cooperative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property. An investment property is accounted for in accordance with cost model as prescribed in Accounting Standard (AS) 10, Property, Plant and Equipment. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property. Accounting of investment property was not stated in this para but now incorporated i.e. at cost model. 30 An enterprise holding investment properties should account for them as long term investments. An enterprise holding investment properties should account for them in accordance with cost model as prescribed in AS 10, Property, Plant and Equipment Accounting of investment property shall now be in accordance with AS 10 i.e. at cost model AS 14 3(a) Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies. Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes ‘merger’. Definition of Amalgamation has been made broader by specifically including ‘merger’. 18 and 39 39 In such cases the statutory reserves are recorded in the financial statements of the transferee company by a corresponding debit to a suitable account head (e.g., ‘Amalgamation Adjustment Account’) which is disclosed as a part of ‘miscellaneous expenditure’ or other similar category in the balance sheet. When the identity of the statutory reserves is no longer required to be maintained, both the reserves and the aforesaid account are reversed. In such cases the statutory reserves are recorded in the financial statements of the transferee company by a corresponding debit to a suitable account head (e.g., ‘Amalgamation Adjustment Reserve’) which is presented as a separate line item. When the identity of the statutory reserves is no longer required to be maintained, both the reserves and the aforesaid account are reversed. Corresponding debit on account of statutory reserve in case of amalgamation in the nature of purchase is termed as ‘Amalgamation Adjustment Reserve’ and is now to be presented as a separate line item since there is not sub-heading like ‘miscellaneous expenditure’ in Schedule III to the Companies Act, 2013 AS 29 35 (An extract) The amount of a provision should not be discounted to its present value The amount of a provision should not be discounted to its present value except in case of decommissioning, restoration and similar liabilities that are recognised as cost of Property, Plant and Equipment. The discount rate (or rates) should be a pre-tax rate (or rates) that reflect(s) current market assessments of the time value of money and the risks specific to the liability. The discount rate(s) should not reflect risks for which future cash flow estimates have been adjusted. Period in unwinding of discount should be recognised in the statement of profit and loss. Now discounting of provision for decommissioning, restoration and similar liabilities has to be done as per the pre-tax discount rate as mentioned therein. 73 Transitional Provisions All the existing provisions for decommissioning, restoration and similar liabilities (see paragraph 35) should be discounted prospectively, with the corresponding effect to the related item of property, plant and equipment. Discounting of above existing provisions and similar liabilities should be prospectively, with the corresponding effect to the related item of property, plant and equipment.
CAclubindia
