The document discusses various accounting standards in India. It explains key concepts from AS 2 on inventories, AS 6 on depreciation, AS 9 on revenue recognition, and AS 10 on fixed assets. It provides examples to illustrate the treatment of various items under different standards like treatment of work-in-progress, methods of depreciation, and recognition of revenue. The document also answers some practice questions related to valuation of inventories, cost of fixed assets, and accounting for business combinations.

1. CA. ANKUR BANSAL
(CA, CS, Ph.D., M.COM)

2. Role of Company Secretaries

3. Company Secretary in Employment
 The Companies Act 2013 recognizes CS as Key Managerial
Personnel (KMP) along with CEO, Manager, MD, Whole Time
Officer and CFO.
 Every Listed Company and other public companies (paid-up
share capital exceeds Rs.10 crore) needs to appoint a whole
time key managerial personnel. As per Rule 8.
 Companies other than covered under Rule 8 have to appoint a
whole time key managerial personnel. It happens only if their
paid-up share capital exceeds Rs.5 crores.

4. Company Secretary in Practice
 Incorporation, Formation, and Promotion of companies
Representing on behalf of the company before NCLT (Full Form)
Handling Corporate Restructuring, Liquidation and Takeover
Administrator of Rehabilitation and Revival of Sick Companies
Act as Registered Valuer Or Insolvency Professional
Secretarial Audit and Certification Services
The signing of Annual Return
Pre-certification and e-filing of various e- forms

5. GAAP, IAS/ IFRS, Ind AS
 GAAP (Generally Accepted Accounting Procedures ) - A set of accounting
guidelines & procedures, used by companies to prepare financial statements
 IAS/IFRS (International Accounting Standard/International Financial
Reporting Standard) - Universal business language followed by companies
while reporting financial statements
Ind AS – Standards adopted by India in convergence of IFRS

6. GAAP
INDIAN GAAP
AS
1977 onwards
Ind AS
2017 onwards
INTERNATIONAL
AS
1973-2001
IFRS
2001 onwards
GAAP, IAS/ IFRS, Ind AS

7. Accounting Standards
Accounting Standards are written policy documents
issued by Accounting Standard Board (ASB) under ICAI
covering the aspects of Recognition, Measurement,
Treatment, Presentation, and Disclosure of Accounting
Transactions in Financial Statements
“ An accounting standard is a common set of principles,
standards and procedures that define the basis of
financial accounting policies and practices.”

8. Evolution of Accounting Standards
Accounting Standard Period of Initiation
AS 1 to AS 15 1979 to 1995
AS 16 to AS 29 2000 to 2007
AS 30 to AS 32 Later part of 2007

9. Objectives
Accounting Standards - Utility
Standard Accounting Policies
Reliability of Financials
Disclosures of materiality
Facilitate Comparison
Eradicate Variations

10. Applicability of Accounting Standards
Level I
Level II
Level III

11. Level I Enterprises
 Listed or in the process of listing whether in India or outside India
 Insurance Companies, Banks including co-operative banks and all Financial
Institutions
 Enterprises with turnover in the preceding year exceeding Rs. 50 Cr
 Enterprises borrowings, including public deposits, in excess of Rs. 10Cr at
any time during the accounting period
 Holding and subsidiary enterprises of any one of the above at any time
during the accounting period

12. Level II Enterprises
 Enterprises whose turnover for the immediately preceding accounting
period greater than Rs. 40 lakhs but less than Rs. 50 crore
 Enterprises borrowings, including public deposits, is greater Rs. 1 crore
but less than Rs. 10 crores at any time during the accounting period
 Holding and subsidiary enterprises of any one of the above at any time
during the accounting period

13. Level III Enterprises
 Enterprises which do not fall under Level I and Level II, are considered as
Level III enterprises

14. AS-1
Disclosure of Accounting Policies (II, III)
 In AS-1, We disclose all material aspect required to exhibit true and fair
view of financial statements, keeping in mind the materiality, substance over
form and prudence
 Changes in policies, for example: Depreciation, Foreign Exchange
Disclosure, Inventory Valuation
 Example - Major Investment in Rival Company
 Purpose – Better understanding & comparison analysis

15. AS-2
Accounting for Inventories (II,III)
 Computation of Cost of inventories (RM, WIP, FG)
 Determine Net Realizable Value ( Sale - Cost necessary for sale)
 Cost include all cost of purchase, cost of conversion and other cost incurred
in bringing the inventories to their present location and condition less rebate,
trade discount or duty drawbacks.
 EXCEPT- abnormal amount, storage cost, administrative overhead & selling
and distribution cost

16. AS-2
Accounting for Inventories (II,III)
 AS-2 does not cover-
Construction Contracts, WIP in Services, Shares or debentures held as stock in
trade, Inventories of livestock, agricultural forest product, mineral oil ores and
gases valued at NRV as per established practices in those industries
Ex: ABC ltd is a consultancy firm, get a contract worth Rs 10 cr of restructuring
of organisation. They deploy 3 personnel with salary Rs. 20K per month. They
work for 1 month during current financial year and book WIP of Rs. 60K as per
AS-2. Comment??

17. AS-3
Cash Flow Statements
 It assess company liquidity & solvency
 CFS prepare in three heads-
 Operating activities : Direct Method & Indirect Method
 Investing activities
 Financing activities
 Cash equivalents :
 which are readily convertibles into known amount of cash
 having maturity less than three months
 held for meeting short term obligations

18. Operating & Investment Activities
 Operating Activities:
 Cash receipts from sale of goods / rendering services;
 Cash receipts from royalties, fees, commissions and other revenue;
 Cash payments to suppliers of goods and service;
 Cash payments to and on behalf of employees
 Investment Activities
 Cash payments to acquire fixed assets
 Cash receipts from disposal of fixed assets
 Cash payments to acquire shares, warrants or debt instruments of
other enterprises and interest in joint ventures
 Cash receipt from disposal of above investments

19. Financing Activities
 Financing Activities:
 Sale of share
 Buy back of shares
 Redemption of preference shares
 Issue / redemption of debentures
 Long term loan / payment thereof
 Dividend / interest paid
 Non Cash Transaction
 Acquisition of assets by assuming directly related liabilities
 Acquisition of an enterprise by means of issue of equity sshares
 Conversion of debt to equity
 Ex: SBI give a loan of Rs. 1000 cr to a real estate builder. Category ??

20. AS-4
CONTINGENCIES AND EVENTS OCCURING AFTER BALANCE SHEET DATE(II, III)
 Deals with
 Contingencies
 Events occurring after Balance Sheet Date
 Not applied on-
 Liabilities of life assurance and general life insurance enterprises
 Obligations under retirement benefit plans
 Commitments arising from long-term lease contracts

21. CONTINGENCIES
 Contingencies -
 Result is not known on the date balance sheet
 Estimation of outcome of contingency is determined by management.
 The fact that an estimate involved-does not make it a contingency.
 Treatment -
 If contingent loss likely, provide for the loss in financial statements
 In case of insufficient evidence for estimation of contingent loss, make
disclosure
 If contingent loss is remote, ignore it

22. EVENTS OCCURING AFTER BALANCE SHEET DATE
 Two types of EVENTS:-
 Evident of conditions that existed at the balance sheet date.
 Indicative of conditions that arose subsequent to the balance sheet date
 Treatment –
 Adjustments are required if we get additional information which can materially
affect the amounts relating to conditions existing at balance sheet date.
(Insolvency confirmation after the balance sheet date)
 NO adjustment is required if the event does not relate to the conditions
existing at the balance sheet date. (Decline in value of investments)
 Events which do not effect the figures of financial statements but can
significantly influence decision making must be disclosed in report of
approving authority. (Information on new projects etc.)

23. AS-6
Depreciation Accounting (II,III)
 Wear & Tear, Consumption or other loss of value of a Depreciable Asset
arising from use, efflux of time or obsolescence through Technology and
Market Changes
 Cost of depreciable asset (expenditure on its acquisition, installation and
commissioning, cost of additions or improvement of the asset)
 Residual (scrap) value of an asset
 Methods of depreciation to be used:
 Straight line method
 Reducing balance method
 Different Methods can be used for different Assets in a Company.

24. Disclosure
 Method, total depreciation for the period for each class of assets,
accumulated depreciation are to be disclosed
 Depreciation rate or useful life to be disclosed only if different from
principal rate
 In case of revaluation, provision for depreciation is based on revalued
amount on remaining useful life
 Change in method is treated as change in accounting policy and is
disclosed accordingly.

25. AS – 9
Revenue Recognition (II, III)
 For an item to be recognized as revenue
 It should be measurable
 There should be reasonably certainty about its collectability
 Areas covered
 Sale of goods/service, Interest, Dividend, Royalty
 Not covered
 Constructed Flats/Building, Hire Purchase/Lease, Govt Grants &
Subsidies

26. AS-10
Accounting for Fixed Assets (II, III)
 Expected to used for more than a Accounting period like L &B, P/M, etc
 Shown at either Historical or Revalued value
 Revaluation is permitted provided it is done for the entire class of assets.
The basis of revaluation should be disclosed.
 Increase in value on revaluation shall be credited to Revaluation Reserve
while the decrease should be charged to Profit and Loss Account.
 Spares that can be used only in conjunction of specific asset shall be
capitalized
 Improvement??

27. AS-11
Effect of change in FOREX Rates (II,III)
Classification for Accounting treatment:-
 Category I: Foreign currency transaction: at transaction date & closing date
 Buying and selling of goods or services
 lending and borrowing in foreign currency
 Acquisition and disposition of assets
 Category II: Foreign operations: Assets and liabilities at closing rates and revenue
items at average rates
 Foreign branch
 Joint venture
 Foreign Subsidiary
 Category III: Foreign Exchange contracts: at reporting date
 For managing Risk/hedging
 For trading and Speculation

28. Example-
Goods purchased by Amazon on 24.02.2018 of USD $10000.
Date of payment- 06.06.2019.
Exchange Rate
24.02.2018- 46.00/-
31.03.2018- 47.00/-
05.06.2019- 48.00/-

29. AS-12
Accounting for Govt. Grants (II,III)
 Assistance provided by Govt. in cash or in kind like
 Grants of Assets like P/M, Land, etc
 Grants related to depreciable FA
 Tax exemptions in notified area
 Grants in the form of non monetary assets given at concessional rate be
accounted at their acquisition cost.
 Asset given free of cost be recorded at nominal value

30.  Example-
Asset having value Rs. 10lacs is supplied by Govt to SMS
Hospital at (I) Concessional Value of Rs. 3 lacs or (II) free
of cost. What will be the treatment?

31. AS-13
Accounting for Investments (II,III)
 Assets held for earning incomes like dividend, interest, rental, capital
appreciation, etc
 It involves:-
 Classification of Investment
 Cost of Investment
 Valuation of Investment
 Reclassification of Investment
 Disposal of Investment
 Disclosure of Investment in FS
 Cost of investment to include acquisition charges, e.g., brokerage, fees and
duties
Current Investment values at cost or NRV which ever is lower (Dr to P&L)
Long term Investment values at cost (Dr to P&L, if decline is permanent)

32. AS-14
Accounting for Amalgamation (II,III)
Two Methods
 Pooling of Interest Method
 Purchase Methods
 Mode of payment of consideration
 Shareholding pattern pre and Post Merger
 Intention to carry-on business after the merger
 Pooling of all assets and liabilities after the merger
 Intention to carry all assets and liability after the merger.
 Disclosures:
 Names and nature of amalgamating companies
 Effective date of amalgamation
 Method of Accounting used
 Particulars of scheme sanctioned under a statute

33. Googlies
 TATA tea ltd values their Finished Goods at Cost or Market value whichever is less. Cost
includes cost of raw material Rs. 7 lac, direct production cost Rs. 2 lac, labour charges Rs
3 lac & packing material cost Rs. 2.5 lac. Market Value of roduct is Rs 15 lac. At what
value finished goods get book?
 Fixed Assets by Reliance capital are booked at cost of acquisition Rs. 100 cr including
interest of Rs. 10 cr and other financial cost Rs. 5 cr till such asset is put to use. What will
be the value to be book by co.?
What if, in above case, Govt give grant of Rs. 40cr.
 Company has purchased a boiler for Rs. 15 cr. Installation charge for boiler is Rs. 50 lacs.
Afterwards Company enhance the boiler capacity by spending Rs 2 cr. What will be the
cost of boiler in the books?
 During 2018-19, HAL acquire 10000 shares of NAV Co. by giving its 5000 shares.
Market Value of share of HAL is Rs. 10 & NAV is Rs. 20? What is the cost of
investment?