Accounting Standards 1 15

Accounting Standards 1-15
Presentation by
Dr. Rana Singh
Professor of Finance

January 30, 2015 2
AS-1 Disclosure of Accounting
Policies
Fundamental Accounting Assumptions
Criteria for Selection of Accounting
Policies
Presentation of accounting significant
accounting policies
Change in accounting policies

January 30, 2015 3
AS-2 Valuation of Inventories
Basic Principles
Meaning of cost and Net Realisable Value
Cost Formulae

January 30, 2015 4
Valuation of Inventories
What is purchase price?
Should borrowing cost be included in cost?
How much of the fixed overhead be
included?
Should administrative cost be included?
Depreciation?
Selling cost?

January 30, 2015 5
Century Textiles & Inds. Ltd.
i) Raw materials, Materials in process, Construction work in progress,
Finished Goods, Goods for Trade and Property - Commercial Units
are valued at cost or Net Realisable value whichever is lower.
ii) Stores, spares etc. are valued at cost or at cost less amounts written
off.
iii) Trial Run products are valued at estimated realisable value.
iv) Goods in transit are valued at cost to date.
v) 'Cost' comprises all cost of purchase, cost of conversion and other
costs incurred in bringing the inventory to their present location and
condition.

January 30, 2015 6
Century Textiles & Inds. Ltd. March
Cost formulae used is either `first in first out', `Specific
identification' or the `Average cost', as applicable.
vi) Due allowances are made for obsolete items based on
technical estimates made by the Company.
vii) Inter -divisional transfers are valued at works/factory
costs of the transferor unit/division or at sales price, plus
transport and other charges.

January 30, 2015 7
Rallis India Ltd. March
(i) Stores and spare parts are valued at cost.
(ii) Raw Materials are valued at cost.
(iii) Work in progress is valued at aggregate of raw
material cost and production overheads up to the stage of
completion.
(iv) Finished stocks are valued at lower of cost or net
realisable value except for by-products which are valued at
the net realisable value and finished stock of technical
material at factories intended for captive consumption
which is valued at cost.

January 30, 2015 8
AS-3 Cash Flow Reporting
Who will prepare and present cash flow statement as part of financial
statements ?
Only listed companies
Should a holding company prepare and present consolidated cash flow
statement?
If the parent company is a listed company , its financial statements
include cash flow statement as per 1(a).So as per AS – 21 it should
prepare consolidated cash flow statement.
What should be the accounting period ?
Prepare Cash flow statement for the same accounting period for which
profit and loss account , and balance sheet are prepared.

January 30, 2015 9
How should the cash flow items be classified ?
To be classified into three types :
- Cash flow from operating activities
- Cash flow from investing activities
- Cash flow from financing activities

January 30, 2015 10
What are operating activities?
Principal revenue producing activities other than financing and
investing
What are the methods of preparing operating cash flow ?
Two methods : (i) direct method and (ii) indirect method.
Which method should be followed?
Follow direct Method.

January 30, 2015 11
What are investment activities?
Acquisition and disposal of long term assets and other
investments which do not form part of cash and cash
equivalents
What are financing activities ?
Activities that result in changes in size and composition of
owners’ capital and borrowed capital.

January 30, 2015 12
When should you report cash flow on net basis ?
-Cash acceptance and repayments of deposit with fixed
maturity, for example, public deposit
- Deposit made and withdrawal thereof ,e.g , if a company
place money for a period of one year or less , then only the
finance income portion will be reflected in the cash flow
statement.
- Cash advances and loans made to the customers and
repayment of such loans

January 30, 2015 13
Reconciliation
Reconcile cash and cash equivalents as appear in the cash
flow statement with equivalent item reported in the
balance sheet
Disclosure
Amount of cash flow not available for use.

January 30, 2015 14
AS-4 Contingencies and Events Occurring
After the Balance Sheet Date
What is a contingency ?
Is a demand for income tax contested a contingency?
Should it be provided for ?
- A condition or situation , the ultimate outcome of which will be known at a
future date. This outcome may be gain or loss.
- It may be required by law to deposit the tax and contest the demand. Still it is a
contingency as it is characterized by a condition that ultimate outcome will be
known at a future date.
- In case it is likely that the enterprise will suffer loss , i.e. the decision of the
appeal is expected to be against the enterprise, the enterprise should create a
provision to the maximum amount of expected loss.

January 30, 2015 15
Contingency
There is a business risk that demand for the
product will decline. Is it a contingency to
be provided for?
This may lead to impairment of cash flow
of the related project and impairment of the
value of related assets. There may arise
impairment loss.
But this is not covered by AS-4

January 30, 2015 16
Contingent Gain
A loss making enterprise is analyzing the
possibility of getting interest concession from its
lenders. This is of course pending as a part of
revival package submitted to the BIFR.
Should the enterprise recognize possible interest
write back as an income ?
No. It is contingent gain depending upon
the outcome of the BIFR decision. It should
not be accounted for.

January 30, 2015 17
When should you provide for contingent loss ?
Para 10 of AS-4 :
(i) If it is probable that future events will confirm that ,
after taking into account any probable recovery , any
asset has been impaired or liability has been created ,
and
(ii) there is a reasonable estimate of the amount of the
resulting loss can be made.

January 30, 2015 18
Provisioning Or Disclosure?
Is it sufficient to disclose the existence of the contingency
with out creating a provision?
Para 11 of AS-4 : If conditions stated in Para 10 of AS-4
are not fulfilled , a disclosure of the existence of
contingency is sufficient.
Of course, if the possibility of loss is remote , then
disclosure is not required.

January 30, 2015 19
Disclosure of contingency
When disclosure is necessary as per 11 of
AS-4, disclose –
(i) Nature of contingency ,
(ii) uncertainty which may affect future
outcome and
(iii) estimate of the financial effect or a
statement that such estimate cannot be
made.

January 30, 2015 20
Events Occurring After the Balance Sheet Date?
What is the range for considering Events Occurring After the Balance
Sheet Date?
Balance sheet date and the date on which the Board of Director approve
the annual financial statements.
Should there be any materiality test?
Yes. Events must be significant either favourable and unfavourable.
A company entered into a contract after the balance sheet date for
which no condition was prevailing on the balance sheet date. The
enterprise suffered loss in this contract. Should the asset and liability
of the enterprise be adjusted to recognize this loss?
No. Para 13 of AS-4.Disclose in the Director’s Report.

January 30, 2015 21
Events Occurring After the Balance Sheet Date?
What would happen if this loss is so significant that going
concern status of the enterprise is questionable ?
Yes. Para 13 of AS-4. Also cover in the Director’s Report
A subsidiary is sold after the balance sheet date for which
no indication was available on the balance sheet date.
Should the assets and liabilities of the enterprise be
adjusted?
No. Para 13 of AS-4. Disclose in the Director’s report.
Dividend is proposed or declared after the balance sheet ?
Should it be recognized ?
Yes. Para 14 of AS-4. Disclose in the Director’s Report as
well.

January 30, 2015 22
Disclosure of Events Occurring After the
Balance Sheet Date
When to disclose ?
Check :
Is there any material change of financial position of the
enterprise after the balance sheet date ?
Yes.
Then disclose as per Para 17 of AS-4 :
(i) the nature of the event ;
(ii) the financial effect.

January 30, 2015 23
Disclosure of Events Occurring After the
Balance Sheet Date
How to identify material change ?
A significant loss ( say fire or accident not
properly insured) affected the financial viability of
the enterprise.
In a knowledge based business a key person left
the organization.
Emergence of a new competitor resulting in a
serious threat to the business and future cash flow.

January 30, 2015 24
AS-5 :Net Profit or Loss For the Period, Prior
Period Items , Changes in Accounting
Policies
Extraordinary Items
Prior Period Items
Change in Accounting Policies
Change in Accounting Estimates

January 30, 2015 25
Deepak Fertilisers & Petrochemicals Corpn. Ltd. March
Extraordinary items include -
Payment on account of roll back of interest concessions by
Financial Institutions and Banks Rs.277 lacs (Previous
Year: Rs. Nil).
Provision of Rs.426.05 lacs made towards unrealised
insurance claim lodged with overseas underwriters towards
DAP imported during 1998, as a prudent measure, in view
of the protracted nature of the legal proceedings involved.

January 30, 2015 26
Chennai Petroleum Corpn. Ltd.
March
Income and expenditure are disclosed as
prior period items only when the value
exceeds Rs.10,000 in each case.

January 30, 2015 27
AS-6 Depreciation Accounting
Depreciable amount
Depreciation methods
Useful life
Estimated residual life
Change in depreciation policy
Repairs – Revenue or capital expenditure?

January 30, 2015 28
Bharat Heavy Electricals Ltd. March
(i) Depreciation on fixed assets (other than those used abroad under contract) is charged on straight-
line method as per the rates prescribed in Schedule XIV of the Companies Act, 1956, except where
deprecation is charged at rates shown hereunder :-
Single Double Triple
Shift Shift Shift
General Plant & Machinery 8% 12% 16%
Automatic/Semi-Automatic Machines 10% 15% 20%
Erection Equipment, Tools & Tackles 20%
Township Buildings - Second Class 2.5%
- Third Class 3.5%
Railway Sidings 8%
Locomotives & Wagons 8%
Electrical Installations 8%
Office & Other Equipments 8%
Drainage, Sewerage & Water supply 3.34%
In respect of additions to/deductions from the fixed assets, depreciation is charged on pro-rata
monthly basis.

January 30, 2015 29
AS-7 Accounting For Construction Contracts
Percentage of Completion Method
Completed Contract Method

January 30, 2015 31
AS-8 : Research and Development
Research : Original and planned investigation with
the hope of gaining new scientific or technical
knowledge and understanding
Development : Translation of research findings or
other knowledge into a plan or design for the
production of new of new or substantially
improved materials, devices, products , processes,
systems or services prior to the commencement of
commercial production

January 30, 2015 32
Research and development costs
Salaries , wages and other related costs of personnel engaged in
research and development
Costs of material and services consumed in research and development
Depreciation
Amortisation
Overhead costs
Other costs

January 30, 2015 33
Expensing or deferral
Consider five conditions Sated in Para 9 of AS-8
Product or process is clearly defined and costs attributable to products
or process can be separately identified.
Technical feasibility of products or process is demonstrated
Management has the intention to produce and market or use , the
product or process
Cash flow matching
Adequacy of resource

January 30, 2015 34
Expensing or deferral
Defer if conditions are fulfilled
Expense otherwise

January 30, 2015 35
Corporate Accounting Policies
Associated Cement Cos. Ltd. March
Research and Development : Revenue expenditure on Research and
Development is charged out in the year in which it is incurred.
Expenditure which results in creation of assets is included in Fixed
Assets and depreciation is provided on such assets as applicable.
Kochi Refineries Ltd. March
Research and Development Expenditure : All revenue expenditure on
research and development are charged to the Profit & Loss Account.
Fixed Assets used for research and development are capitalised.

January 30, 2015 36
Corporate Accounting Policies
Hindustan Petroleum Corpn. Ltd. March
Research and Development : All expenditure other than on capital account, on
research and development are charged to Profit and Loss Account.
Iccon Oil & Specialities Ltd. March
Research and Development Expenditure : Expenditure incurred is written off
over period of five years.
India Cements Ltd. March
Research and Development expenses not resulting in any tangible
property/equipment are charged to revenue.

January 30, 2015 37
AS –9 Revenue Recognition
Basic revenue recognition criteria
Performance : Transfer of property in goods
from the seller to the buyer
No uncertainty as regards consideration
It is not unreasonable to expect ultimate
collection

January 30, 2015 38
Revenue recognition of services
Completed service contract method
Proportionate completion method

January 30, 2015 39
Revenue Recognition Policy
Infosys Technologies Ltd. March
Revenue recognition :
Revenue from software development on time-and-materials contracts
is recognized based on software developed and billed to clients as per
the terms of specific contracts. On fixed-price contracts, revenue is
recognized based on milestones achieved as specified in the contracts
on the proportionate-completion method on the basibs of the work
completed. Revenue from rendering Annual Technical Services
(“ATS") is recognized proportionately over the period in which
services are rendered. Revenue from the sale of licenses for the use of
software applications is recognized on transfer of the title in the user
license.

January 30, 2015 40
Bharti Telenet Ltd. March
REVENUE RECOGNITION AND RECEIVABLES : Billing revenue
from telephony and Internet service, and revenue from sale of goods,
is recognised on completion of provision of services and despatch of
goods respectively. Provision for doubtful debts is made for dues
outstanding more than 90 days in case of active subscribers and dues
from customers who have been deactivated, other than those covered
by security deposits or in specific cases where management is of the
view that the amounts are recoverable.

January 30, 2015 41
Indian Oil Corpn. Ltd. March
Claims on Oil Coordination Committee/Government arising on
account of Administered Pricing Mechanism are booked on
acceptance in principle thereof. Such claims and provisions are
booked on the basis of available instructions/clarifications subject to
final adjustment as per separate audit.

January 30, 2015 42
Chambal Fertilisers & Chemicals Ltd. March
REVENUE RECOGNITION : i) Fertiliser Division
Revenue in respect of sale of products including Retention Price
Support receivable from the Government of India under the Retention
Price Scheme is recognised on raising of invoices on the basis of
release orders duly receipted by the customers or their agents,
deliveries of which may, in some cases, be effected at a later date.

January 30, 2015 43
Oil & Natural Gas Corpn. Ltd. March
As per Accounting Policy {2(iv)}, Producing Properties are created in respect
of areas when commercial production commences. Company has not defined
`Commercial Production' either with respect of their recoverable hydrocarbon
reserves or actual financial / commercial practices. This has resulted in
creation of Producing Properties during the years 1995-96 to 2000-01,
amounting to Rs. 273.49 millions in respect of areas where production was nil
or negligible (below 2000 MT per year).
Under the Successful Efforts Method of accounting begin followed by the
company, a policy has been framed to create producing area as soon as
commercial productions commences therein irrespective of the quantum of
production involved. The includes cost of all development wells and
successful exploratory wells. As per consistent practice being followed out of
company, commercial production is considerable as production is considered
as productions which can be sold in the ordinary course of business. Further
the company has system of reviewing such properties on regular basis and
based on such review, properties, which are not producing for a period of 3
years or more, are being fully depleted.

January 30, 2015 44
Indo Count Inds. Ltd. March
Revenue Recognition : Export sales are accounted for on the basis of
the date of bill of lading/airway bill. Other sales are accounted for ex-
factory on despatch. Sales are inclusive of excise duty and net of
rebates and discounts.
Kandagiri Spinning Mills Ltd. March
Sales are recognised on despatch to customers and include excise duty,
sales tax, Textile Committee Cess and Textile Export Promotion
Council charges recovered and sale proceeds of export entitlement
licence.

January 30, 2015 45
Global Boards Ltd. March
a) During the year 1993, the Company had imported Plant and
Machinery of total value Rs. 1065.43 Lakh under Export Promotion
Capital Goods Scheme (EPCG) at concessional rate of 15% Customs
Duty as against then prevailing rate of 35%, resulting in to a saving of
Rs. 213.09 Lakhs in Project Cost. As per the EPCG Scheme the
Company was required to fulfil Export obligation equal to 4 times the
value of Imports within a period of 5 years. However the Company
could not complete Export obligation due to recession in Paper
Industry. Therefore during the year the Director General of Foreign
Trade (DGFT) has raised demand for the Duty saved with 24%
interest per annum as per the EPCG Scheme.

January 30, 2015 46
Panacea Biotec Ltd. March
Export incentives are accounted on accrual basis and include the
estimated value of export receivable under the Duty Entitlement Pass
Book Scheme and the Duty Drawback Scheme.
Raptakos, Brett & Co. Ltd. March
Export Incentives : Benefit on account of entitlement to import duty-
free materials under the "Duty Exemption Pass Book Scheme" and
duty drawback are accounted as and when admitted.

January 30, 2015 47
Carrier Aircon Ltd. March
PRODUCT WARRANTY EXPENSES : Warranty costs are determined on the
basis of past experience and provided for in the year of sale.
Honda Siel Power Products Ltd. March
Warranty costs : Warranty costs are provided on accrual basis on the total
sales made during the year, based on past experience of claims.
Indo Matsushita Appliances Co. Ltd. March
Product Warranty : The company has warranty obligations on the products
manufactured and sold by it. Provision for warranty is made based on past
experience.
Kirloskar Systems Ltd. March
Provision is made for product warranty claims on the basis of Management
estimates.

January 30, 2015 48
AS-10 :Accounting For Fixed Assets
Distinction between tangible and intangible
asset
Carrying amount
Exchange Fluctuation loss
Borrowing costs

January 30, 2015 49
Accounting For Fixed Assets
Capital Work In Progress to Capitalization
Improvement and repairs
Retirement and disposal
Revaluation

January 30, 2015 50
Accounting Policy
Malanpur Steel Ltd. Sept 2000
Interest on the funds borrowed and allocated to capital
projects along with other related expenses, payments to
contractors etc. from time to time is capitalised as per the
allocation made in this regard by the Management. Capital
Work-in-Progress includes machinery in transit, machinery
to be installed, advance for construction and erection
materials, machinery, consultation fee and project pre-
operative expenses pending allocation

January 30, 2015 51
Accounting Policy
Hindustan Motors Ltd. March
(a) Fixed Assets are stated at cost of acquisition inclusive of duties (net
of modvat/cenvat), taxes, incidental expenses, erection/
commissioning expenses, technical know-how fees and interest etc. up
to the date the asset is put to use. In case of revaluation of fixed assets
the original cost as written up by the valuer, is considered in the
accounts and the differential amount is transferred to capital reserve.
(b) Machinery spares which can be used only in connection with an
item of fixed assets and whose use as per technical assessment is
expected to be irregular, are capitalised and depreciated over the
residual useful life of the respective assets.

January 30, 2015 52
Accounting Policy
Tata Engineering & Locomotive Co. Ltd. March
Fixed Assets are stated at cost of acquisition or construction less
depreciation. All costs relating to the acquisition and installation of
fixed assets are capitalised and include financing costs relating to
borrowed funds attributable to construction or acquisition of fixed
assets, up to the date the asset is put to use, net of charges on foreign
exchange contracts and adjustments arising from exchange rate
variations relating to specific borrowings, attributable to those fixed
assets.

January 30, 2015 53
Accounting Policy
Mahindra & Mahindra Ltd. March
(a) (i) All Fixed Assets are carried at cost less depreciation except as stated in
(ii) below. Cost includes financing cost relating to borrowed funds attributable
to the construction or acquisition of fixed assets upto the date the asset is
ready for use. In case of borrowed funds and liabilities in foreign currencies
for the acquisition of fixed assets, the exchange differences are adjusted to the
cost of such asset.
When an asset is scrapped or otherwise disposed off, the cost and related
depreciation are removed from the books of account and resultant profit
(including capital profit) or loss, if any, is reflected in the Profit and Loss
Account.
ii) Land and Buildings, had been revalued as at 31st October, 1984 at
depreciation replacement values on the basis of a valuation made by a firm of
Chartered Surveyors & Valuers The indices, if any, used are not stated in the
valuation.

January 30, 2015 54
Accounting Policy
Vidula Chemicals & Mfg. Inds. Ltd. March
(a) The Assets mentioned below were revalued as on 31st March, 1997 by an approved
valuer at Current replacement value resulting in increase by - Land Rs. 77,78,994/-,
Building Rs. 37,05,264/-, Plant & Machinery Rs. 1,86,93,595/- and Electrical
Installation Rs 7,40,421/-. The resultant increase of Rs. 3,09,18,274/- has been
transferred to Revaluation Reserve.
(b) Depreciation on Fixed Assets items covered by re-evaluation referred to in 3(a) above
is calculated on their respective revalued amounts at rates considered applicable by the
valuers on straight line method as against the methods/rates/bases which would have
otherwise adopted for the purpose of the annual accounts of the company and
accordingly includes additional depreciation charge An amount equivalent to the
aforesaid additional depreciation charge is transferred to the credit of Profit & Loss
Account from Capital Reserve Revaluation of Fixed Assets, such transfer, according to
an authoritative professional view being acceptable for the purpose of the Company's
annual accounts.

January 30, 2015 55
AS –11 Accounting For the Effects of
Changes in Foreign Exchange Rates
Monetary and Non – monetary Items
Initial Recognition
Valuation at the balance sheet date
Forward exchange contract

January 30, 2015 56
Accounting Policy
Grasim Industries Ltd. March
Foreign currency assets and liabilities covered by forward contracts are
stated at the forward contract rates while those not covered are restated
at year end rate. Exchange differences relating to fixed assets are
adjusted in the cost of the asset. Any other exchange difference is dealt
with in the profit and loss account. Premium in respect of forward
contracts is recognised over the life of contracts. Transactions relating
to overseas offices have been converted as under:
i) Net revenues at the average rate for the year.
ii) Fixed assets at rates prevailing on the dates of addition. Depreciation
is accounted for at the same rate at which assets are converted.
iii) Other current assets and liabilities, at rates prevailing at the end of
the year.

January 30, 2015 57
Accounting Policy
Reliance Industries Ltd. March
a. Transactions denominated in foreign currencies are normally recorded at the exchange
rate prevailing at the time of the transaction.
b. Monetary items denominated in foreign currencies at the year end and not covered by
forward exchange contracts are translated at year end rates and those covered by forward
exchange contracts are translated at the rate ruling on the date of transaction as increased
or decreased by the proportionate difference between the forward rate and exchange rate
on the date of transaction, such difference having been recognised over the life of the
contract.
c. Non monetary foreign currency items are carried at cost.
d. Branch income and expenses are translated at average rate. Branch monetary assets and
liabilities are translated at year-end rates. Non monetary items are translated at the rates
on the date of transaction.
e. Any income or expense on account of exchange difference either on settlement or on
translation is recognised in the profit and loss account except in cases where they relate
to acquisition of fixed assets in which case they are adjusted to the carrying cost of such
assets.

January 30, 2015 58
AS-12 : Accounting For Government
Grants
Capital approach vs. Income Approach
Revenue grants
Grants related to specific fixed assets
Grants in the nature of promoter’s
contribution

January 30, 2015 59
When to follow Capital Approach
Is the Government Grant in the nature of Promoters’ Contribution ?
Is it linked to any particular asset creation ? Is it in the nature of
capital subsidy ?
If yes , then follow capital approach. The grant should be treated as
subsidy reserve or any other similar reserve.

January 30, 2015 60
How to apportion subsidy reserve?
If a government grant is linked to any tangible or intangible asset ,
then how to apportion the amount of subsidy reserve ?
This should be apportioned in the ratio of depreciation charge of the
asset or any other systematic basis. The basic principle is that grant
should be linked to life of the related asset in a systematic manner.

January 30, 2015 61
Government Grants
Net approach
Gross approach

January 30, 2015 62
How to recognise revenue grant
if the grant is of revenue nature like raw material subsidy , cost
subsidy, export incentive , etc. income approach should be followed.
By this grant should apportioned over the periods in which an
enterprise recognizes expenses related to the grant.

January 30, 2015 63
Accounting policy
C M C Ltd. March
Grants-in-aid :
(I) Grants-in-aid received for capital expenditure incurred, are included in “Capital
Reserve”.
(ii) Grants received in kind are recognized at notional value and the corresponding amount is
credited to “Capital Reserve”.
(iii) Grants-in-aid received for revenue expenditure is recognized at rates agreed with the
grantor and included in other revenue. Corresponding expenditure is included under
revenue expenditure. Unutilised grants are shown under other liabilities.
(iv) Sharing of revenues from sale of technologies developed with grants received from
Government of India are accounted in the year of sale of such technologies and
finalisation of such sharing arrangements

January 30, 2015 64
AS –13 Accounting For Investments
Investments in subsidiary
Investments in Associates
Investments in Joint Venture
Other Investments

January 30, 2015 65
Investment Classification
Current Investments :
- Investments which are readily realizable and
- Intended to be sold within a period of one year.
Not necessarily the quoted investments are only
readily realizable investments.
Investments in unquoted securities can also
classified as current if there is evidence that they
are readily realizable.

January 30, 2015 66
Long term investments
Investments other than current investments

January 30, 2015 67
Cost of investments
If acquired in cash :Purchase price, brokerage , duties , etc.
If acquired by issue securities :-
-At fair value of securities issued and related other expenses
- Fair value securities need not be its nominal value
If acquired by exchange of another asset :-
-At fair value of asset exchanged and related other expenses; or
- At fair value of asset exchanged which is more evident.

January 30, 2015 68
Carrying Amount
Para 31 : Current investments
- Present in financial statements at lower of the cost or fair
value;
- Cost and fair value should be determined on individual
investment basis or by category of investments;
- These should not be valued on overall basis.

January 30, 2015 69
Carrying Amount
Para 32 : Long term Investments
- At cost
- Provision for diminution in value of investments
should be recognized which are other than
temporary.
- Diminution should be computed on individual
investment basis .

January 30, 2015 70
Accounting Policy
Monica Electronics Ltd. March
INVESTMENTS : Investments are stated at cost.
Bharat Bijlee Ltd. March
Investments : Investments are carried at cost of acquisition.
Birla Yamaha Ltd. March
Investments : Investments (Long Term) are stated at cost.
Carbon Everflow Ltd. March
INVESTMENTS : Investments are stated at cost. Income from investments are accounted
for when received.
Carrier Aircon Ltd. March
INVESTMENTS : Long Term Investments are stated at cost.

January 30, 2015 71
Accounting Policy
Eveready Industries (India) Ltd. March
Investments : Investments have been classified as Long Term and
Current Investments in accordance with the Accounting Standard 13
issued by the Institute of Chartered Accountants of India. Long Term
Investments are stated at cost or below. Current Investments are
valued at lower of cost and fair value. Reclassification of investments
from Long Term to Current is made by the Management at the lower
of cost and carrying amount on the date of transfer. Gains/losses on
disposal of investments are recognised as income/expenditure.
Dividends are accounted for when received.

January 30, 2015 72
Accounting Policy
Ballarpur Industries Ltd. June 2000
(a) Investments made by the Company in various securities are primarily meant to be held
over long term period.
(b) (i) Holding of certain Investments are of Strategic importance to the Company and
therefore, the Company does not consider it necessary to provide for decrease in the
Book Value of such Investments, till continuation of the relationship of Strategic
Importance with the Investee Company, say that of a Subsidiary, Associate, Company
under the same management, Foreign Joint Ventures and/or Company associated with
Thapar Group.
(ii) However, appropriate provisions are made to recognise decrease in the Book Value
of Investments in companies of Strategic importance also, as and. when the Investee
Company is either wound up or goes into liquidation or where the operations cease or
are taken over by Receiver by Operation of Law.
(c) Investments in Government Securities are shown at cost and Investments, other than
that of Strategic Importance to the Company are shown in the books at lower of the cost
or fair market value.
(d) As a conservative and prudent policy, the Company does not provide for increase in the
Book Value of individual investments held by it on the date of Balance Sheet.

January 30, 2015 73
AS-15 : Accounting For Retirement Benefits
in the Financial Statements of Employees
Defined Contribution schemes
Amounts to be paid as contribution is known . Contribution
may a fixed amount or a fixed percentage of salary .
Example : Contribution to provident fund , gratuity fund ,
superannuation fund , pension fund , etc.
Defined Benefit schemes
Benefit is defined and charge on the enterprise is not
defined. Gratuity to be paid on retirement based on last
salary to be drawn. Pension to be paid with reference to
last salary to be drawn during the retired life of the
employee.

January 30, 2015 74
Accounting Treatment for Charge on account of
Defined Contribution Schemes
Contribution payable during the current year
Any shortfall / excess in contribution for any previous
year is prior period item as it relates to past service cost.
Amount paid for the current year is less than contribution
payable during the year : create provision for outstanding
contribution.
Amount paid for the current year is more than contribution
payable during the year : Charge only current year’s
contribution and excess is shown as prepayments.

January 30, 2015 75
Accounting treatment for defined benefit
schemes
If the enterprise decided to create its own managed funds:
- Decide the accrued liability on the basis actuarial valuation.
- Debit appropriate charge so determined in the Profit and Loss Account
- Gratuity Fund will appear in the balance sheet under the head reserves and
surplus but clearly distinguishing from free reserves.
- Investments made outside the business against such fund should separately
disclosed under the head Investments.
A small enterprise which employs only few employees may ascertain the
accruing liability under defined benefit schemes applying any suitable method.
Actuarial method may not used.

January 30, 2015 76
schemes
If the employer creates a trust:
-Decide the accrued liability on the basis actuarial valuation. Such
actuarial assessment should be carried at least once in every three
years.
- Where actuarial valuation is not conducted annually , the actuary’s
report should specify annual contribution to be made by the employer
during the inter – valuation period.
- Debit appropriate charge so determined in the Profit and Loss Account.
- Any shortfall in contribution should be provided for and any excess
contribution should be treated as prepayments

January 30, 2015 77
schemes
If the contribution to defined benefit scheme is funded through scheme
administered by an insurer:
- Obtain an actuarial certificate or confirmation from the insurer about
the appropriate contribution to the scheme which reflects the liability
of the current year.
- Any shortfall in contribution should be provided for and any excess
contribution should be treated as prepayments

January 30, 2015 78
Accounting Policy
Calcutta Chemical Co. Ltd. March
(a) Contributions towards retirement benefits (excluding gratuity and employees pension
scheme) are made on a monthly basis to the Trustees of the respective funds.
Contribution to gratuity fund is made annually on the basis of actuarial valuation and
contribution to employees pension scheme is made to the Government authorities. All
funds are administered by independent Board of Trustees.
(b) Leave encashment liability towards employees is accounted for on accrual basis.
Detergents India Ltd. Mar
a) The company has an arrangement with M/s Life Insurance Corporation of India to
administer its Superannuation and Gratuity schemes. The premium paid / payable are
accounted on accrual basis. Provision for leave encashment has been made on accrual
basis.
b) Voluntary Retirement payment made during the year has been treated as Deferred
Revenue expenditure and the amount is amortised over a period of 10 years.

January 30, 2015 79
Accounting Policy
Vashisti Detergents Ltd. March
Retirement Benefits
(i) The Company has taken a Group Gratuity Policy with the Life
Insurance Corporation of India (LIC), for its permanent employees
and liability has been accrued based on LIC's actuarial valuation.
(ii) Provision for Leave Encashment has been made on the basis of actual
calculation as per Company policy.

Accounting Standards 1 15

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Accounting Standards 1 15