Interpretation of Accounting Standard's issued by ICAI

Accounting Standard Interpretation (ASI) 1

Substantial Period of Time

Accounting Standard (AS) 16, Borrowing Costs

Issue

1. Accounting Standard (AS) 16, Borrowing Costs, defines the term ‘qualifying asset’ as “an asset that necessarily takes a substantial period of time to get ready for its intended use or sale”.
2. The issue is what is the meaning of the expression ‘substantial period of time’ for the purpose of this definition.

 

Consensus

 

1. The issue as to what constitutes a substantial period of time primarily depends on the facts and circumstances of each case. However, ordinarily, a period of twelve months is considered as substantial period of time unless a shorter or longer period can be justified on the basis of facts and circumstances of the case. In estimating the period, time which an asset takes, technologically and commercially, to get it ready for its intended use or sale should be considered.
2. The following assets ordinarily take twelve months or more to get ready for intended use or sale unless the contrary can be proved by the enterprise:
   1. Assets that are constructed or otherwise produced for an enterprise’s own use, e.g., assets constructed under major capital expansions.
   2. Assets intended for sale or lease that are constructed or otherwise produced as discrete projects (for example, ships or real estate developments).
3. In case of inventories, substantial period of time is considered to be involved where time is the major factor in bringing about a change in the condition of inventories. For example, liquor is often required to be kept in store for more than twelve months for maturing.

 

Accounting Standards Interpretation (ASI) 2

Accounting for Machinery Spares

Accounting Standard (AS) 2, Valuation of Inventories and AS 10, Accounting for Fixed Assets

Issue

 

1. Which machinery spares are covered under AS 2 and AS 10 and what should be the accounting for machinery spares under the respective standards.

 

Consensus

 

1. Machinery spares which are not specific to a particular item of fixed asset but can be used generally for various items of fixed assets should be treated as inventories for the purpose of AS 2. Such machinery spares should be charged to the statement of profit and loss as and when issued for consumption in the ordinary course of operations.
2. Whether to capitalise a machinery spare under AS 10 or not will depend on the facts and circumstances of each case. However, the machinery spares of the following types should be capitalised being of the nature of capital spares/insurance spares –
   1. Machinery spares which are specific to a particular item of fixed asset, i.e., they can be used only in connection with a particular item of the fixed asset, and
   2. Their use is expected to be irregular.
3. Machinery spares of the nature of capital spares/insurance spares should be capitalised separately at the time of their purchase whether procured at the time of purchase of the fixed asset concerned or subsequently. The total cost of such capital spares/insurance spares should be allocated on a systematic basis over a period not exceeding the useful life of the principal item, i.e., the fixed asset to which they relate.
4. When the related fixed asset is either discarded or sold, the written down value less disposal value, if any, of the capital spares/insurance spares should be written off.
5. The stand-by equipment is a separate fixed asset in its own right and should be depreciated like any other fixed asset.

 

Accounting Standards Interpretation (ASI) 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

Accounting Standard (AS) 22, Accounting for Taxes on Income (AS) 22, Accounting for Taxes on Income ISS

Issue

 

1. Sections 80-IA and 80-IB of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) provide certain deductions, for certain years, in determining the taxable income of an enterprise. These deductions are commonly described as ‘tax holiday’ and the period during which these deductions are available is commonly described as ‘tax holiday period’.
2. The issue is how AS 22 should be applied in the situations of tax-holiday under sections 80-IA and 80-IB of the Act.

 

Consensus

 

1. The deferred tax in respect of timing differences which originate during the tax holiday period and reverse during the tax holiday period, should not be recognised to the extent the enterprise’s gross total income is subject to the deduction during the tax holiday period as per the requirements of the Act.
2. Deferred tax in respect of timing differences which originate during the tax holiday period but reverse after the tax holiday period should be recognised in the year in which the timing differences originate. However, recognition of deferred tax assets should be subject to the consideration of prudence as laid down in paragraphs 15 to 18 of AS 22.
3. For the above purposes, the timing differences which originate first should be considered to reverse first.

 

The Appendix to this Interpretation illustrates the application of the above requirements.

Accounting Standards Interpretation (ASI) 4

Losses under the head Capital Gains

Accounting Standard (AS) 22, Accounting for Taxes on Income

Issue

 

1. The issue is how AS 22 should be applied in respect of ‘loss’ arising under the head ‘Capital gains’ of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’), which can be carried forward and set-off in future years, only against the income arising under that head as per the requirements of the Act.

 

Consensus

 

1. Where an enterprise’s statement of profit and loss includes an item of ‘loss’ which can be set-off in future for taxation purposes, only against the income arising under the head ‘Capital gains’ as per the requirements of the Act, that item is a timing difference to the extent it is not set-off in the current year and is allowed to be set-off against the income arising under the head ‘Capital gains’ in subsequent years subject to the provisions of the Act. In respect of such ‘loss’, deferred tax asset should be recognised and carried forward subject to the consideration of prudence. Accordingly, in respect of such ‘loss’, deferred tax asset should be recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available under the head ‘Capital gains’ against which the loss can be set-off as per the provisions of the Act. However, where an enterprise has unabsorbed depreciation or carry forward of business losses under the tax laws, the deferred tax asset in respect of ‘loss’ under the head ‘Capital gains’ should be recognised and carried forward only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available under the head ‘Capital gains’ against which such loss can be set-off as per the provisions of the Act.
2. In cases where there is a difference between the amounts of ‘loss’ recognised for accounting purposes and tax purposes because of cost indexation under the Act in respect of long-term capital assets, the deferred tax asset should be recognised and carried forward (subject to the consideration of prudence) on the amount which can be carried forward and set-off in future years as per the provisions of the Act.

 

Accounting Standards Interpretation (ASI) 5

Accounting for Taxes on Income in the situations of Tax Holiday under Sections 10A and 10B of the Income-tax Act, 1961

Accounting Standard (AS) 22, Accounting for Taxes on Income

Issue

 

1. Chapter III of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) deals with incomes which do not form part of total income. Sections 10A and 10B of the Act are covered under Chapter III. These sections allow certain deductions, for certain years, from the total income of an assessee. These deductions are commonly described as ‘tax holiday’ and the period during which these deductions are available is commonly described as ‘tax holiday period’.
2. The issue is how AS 22 should be applied in the situations of tax-holiday under sections 10A and 10B of the Act.

 

Consensus

 

1. The deferred tax in respect of timing differences which originate during the tax holiday period and reverse during the tax holiday period, should not be recognised to the extent deduction from the total income of an enterprise is allowed during the tax holiday period as per the provisions of sections 10A and 10B of the Act.
2. Deferred tax in respect of timing differences which originate during the tax holiday period but reverse after the tax holiday period should be recognised in the year in which the timing differences originate. However, recognition of deferred tax assets should be subject to the consideration of prudence as laid down in paragraphs 15 to 18 of AS 22.
3. For the above purposes, the timing differences which originate first should be considered to reverse first.

 

Accounting Standards Interpretation (ASI) 6

Accounting for Taxes on Income in the context of Sections 115JB of the Income-tax Act, 1961

Accounting Standard (AS) 22, Accounting for Taxes on Income

Issue

 

1. The issue is how AS 22 is applied in a situation where a company pays tax under section 115JB (commonly referred to as Minimum Alternative Tax) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’).
2. Another issue is how deferred tax is measured on the timing differences originating during the current year if the enterprise expects that these differences would reverse in a period in which it may pay tax under section 115JB of the Act.

 

Consensus

 

1. The payment of tax under section 115JB of the Act is a current tax for the period.
2. In a period in which a company pays tax under section 115JB of the Act, the deferred tax assets and liabilities in respect of timing differences arising during the period, tax effect of which is required to be recognised under AS 22, should be measured using the regular tax rates and not the tax rate under section 115JB of the Act.
3. In case an enterprise expects that the timing differences arising in the current period would reverse in a period in which it may pay tax under section 115JB of the Act, the deferred tax assets and liabilities in respect of timing differences arising during the current period, tax effect of which is required to be recognised under AS 22, should be measured using the regular tax rates and not the tax rate under section 115JB of the Act.

 

Accounting Standards Interpretation (ASI) 7

Disclosure of deferred tax assets and deferred tax liabilities in the balance sheet of a company

Accounting Standard (AS) 22, Accounting for Taxes on Income

ISSUE

 

The authority of this ASI is the same as that of the Accounting Standard to which it relates. The contents of this ASI are intended for the limited purpose of the Accounting Standard to which it relates. ASI is intended to apply only to material items.

1. The issue is how should deferred tax assets and deferred tax liabilities be disclosed in the balance sheet of a company.

 

CONSENSUS

 

2. In case of a company, deferred tax assets should be disclosed on the face of the balance sheet separately after the head ‘Investments’ and deferred tax liabilities should be disclosed on the face of the balance sheet separately after the head ‘Unsecured Loans’.

 

Accounting Standards Interpretation (ASI) 8

Interpretation of the term ‘Near Future’

Accounting Standard (AS) 21, Consolidated Financial Statements, AS 23, Accounting for Investments in Associates in Consolidated Financial Statements and AS 27, Financial Reporting of Interests in Joint Ventures

ISSUE

 

1. Paragraph 11 of AS 21, paragraph 7 of AS 23 and paragraph 29 of AS 27 use the words ‘near future’ in the context of exclusions from consolidation, application of the equity method and application of the proportionate consolidation method, respectively.
2. The issue is what period of time should be considered as ‘near future’ for the above purposes.

 

CONSENSUS

 

1. The issue as to what period of time should be considered as near future for the purposes of AS 21, AS 23 and AS 27 primarily depends on the facts and circumstances of each case. However, ordinarily, the meaning of the words ‘near future’ should be considered as not more than twelve months from acquisition of relevant investments unless a longer period can be justified on the basis of facts and circumstances of the case. The intention with regard to disposal of the relevant investment should be considered at the time of acquisition of the investment. Accordingly, if the relevant investment is acquired without an intention to its subsequent disposal in near future, and subsequently, it is decided to dispose off the investment, such an investment is not excluded from consolidation, application of the equity method or application of the proportionate consolidation method, as the case may be, until the investment is actually disposed off. Conversely, if the relevant investment is acquired with an intention to its subsequent disposal in near future, however, due to some valid reasons, it could not be disposed off within that period, the same will continue to be excluded from consolidation, application of the equity method or application of the proportionate consolidation method, as the case may be, provided there is no change in the intention.

 

Accounting Standards Interpretation (ASI) 9

Virtual certainty supported by convincing evidence

Accounting Standard (AS) 22, Accounting for Taxes on Income

ISSUE

 

1. Paragraph 17 of AS 22 requires that “Where an enterprise has unabsorbed depreciation or carry forward of losses under tax laws, deferred tax assets should be recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised”.
2. The issue is what amounts to ‘virtual certainty supported by convincing evidence’ for the purpose of paragraph 17 of AS 22.

 

CONSENSUS

 

1. Determination of virtual certainty that sufficient future taxable income will be available is a matter of judgement and will have to be evaluated on a case to case basis. Virtual certainty refers to the extent of certainty, which, for all practical purposes, can be considered certain. Virtual certainty cannot be based merely on forecasts of performance such as business plans.
2. Virtual certainty is not a matter of perception and it should be supported by convincing evidence. Evidence is a matter of fact. To be convincing, the evidence should be available at the reporting date in a concrete form, for example, a profitable binding export order, cancellation of which will result in payment of heavy damages by the defaulting party. On the other hand, a projection of the future profits made by an enterprise based on the future capital expenditures or future restructuring etc., submitted even to an outside agency, e.g., to a credit agency for obtaining loans and accepted by that agency cannot, in isolation, be considered as convincing evidence.

 

Accounting Standards Interpretation (ASI) 10

Interpretation of paragraph 4(e) of AS 16

Accounting Standard (AS) 16, Borrowing Costs

ISSUE

 

1. Paragraph 4 (e) of AS 16, ‘Borrowing Costs’, provides that borrowing costs may include “exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs”.
2. The issue is which exchange differences are covered under paragraph 4 (e) of AS 16.

 

CONSENSUS

 

1. Paragraph 4 (e) of AS 16 covers exchange differences on the amount of principal of the foreign currency borrowings to the extent of difference between interest on local currency borrowings and interest on foreign currency borrowings. For this purpose, the interest rate for the local currency borrowings should be considered as that rate at which the enterprise would have raised the borrowings locally had the enterprise not decided to raise the foreign currency borrowings. If the difference between the interest on local currency borrowings and the interest on foreign currency borrowings is equal to or more than the exchange difference on the amount of principal of the foreign currency borrowings, the entire amount of exchange difference is covered under paragraph 4 (e) of AS 16.The Appendix to this Interpretation illustrates the application of the above requirements.

 

Accounting Standards Interpretation (ASI) 11

Accounting for Taxes on Income in case of an Amalgamation

Accounting Standard (AS) 22, Accounting for Taxes on Income

ISSUES

 

1. The following issues relating to accounting for taxes on income in the case of an amalgamation are dealt with in this Interpretation:
   1. In an amalgamation in the nature of purchase, where the consideration for the amalgamation is allocated to the individual identifiable assets/liabilities of the transferor enterprise on the basis of their fair values at the date of amalgamation as per AS 14, ‘Accounting for Amalgamations’, and the carrying amounts thereof for tax purposes continue to be the same as that for the transferor enterprise, whether deferred tax on the difference between the values of the assets/liabilities arrived at for accounting purposes on the basis of their fair values and the carrying amounts thereof for tax purposes should be recognised.²
   2. If any deferred tax asset, including in respect of unabsorbed depreciation and carry forward of losses, was not recognised by the transferor enterprise, because the conditions relating to prudence laid down in paragraph 15 or paragraph 17, as the case may be, of AS 22, were not satisfied, whether the transferee enterprise can recognise the same if the conditions relating to prudence as per AS 22 are satisfied.
2. In case of an amalgamation in the nature of merger and amalgamation in the nature of purchase where the transferee enterprise incorporates the assets/liabilities of the transferor enterprise at their existing carrying amounts as per AS 14 and the carrying amounts thereof for tax purposes continue to be the same as that for the transferor enterprise, the amalgamation does not, in itself, give rise to any difference between the carrying amounts of assets/liabilities for accounting purposes and tax purposes and, consequently, to any deferred tax asset/liability. Accordingly, in respect of such amalgamations, this issue does not arise.

 

CONSENSUS

 

1. In an amalgamation in the nature of purchase, where the consideration for the amalgamation is allocated to the individual identifiable assets/liabilities on the basis of their fair values at the date of amalgamation as per AS 14, ‘Accounting for Amalgamations’, and the carrying amounts thereof for tax purposes continue to be the same as that for the transferor enterprise, deferred tax on the difference between the values of the assets/liabilities, arrived at for accounting purposes on the basis of their fair values, and the carrying amounts thereof for tax purposes should not be recognised as this constitutes a permanent difference. The consequent differences between the amounts of depreciation for accounting purposes and tax purposes in respect of such assets in subsequent years would also be permanent differences.
2. In a situation where any deferred tax asset, including in respect of unabsorbed depreciation and carry forward of losses, was not recognised by the transferor enterprise, because the conditions relating to prudence laid down in paragraph 15 or paragraph 17, as the case may be, of AS 22, were not satisfied, the transferee enterprise can recognise the same if the conditions relating to prudence as per AS 22 are satisfied. In such a case, the accounting treatment, as described below, depends on the nature of amalgamation as well as the accounting treatment adopted for amalgamation in accordance with AS 14.
   1. Where the amalgamation is in the nature of purchase and the consideration for the amalgamation is allocated to individual identifiable assets/liabilities on the basis of their fair values at the date of amalgamation as permitted in AS 14, the deferred tax assets should be recognised by the transferee enterprise at the time of amalgamation itself considering these as identifiable assets. These deferred tax assets can be recognised at the time of amalgamation only if the conditions relating to prudence laid down in paragraph 15 or paragraph 17, as the case may be, of AS 22, are satisfied from the point of view of the transferee enterprise at the time of amalgamation. The recognition of deferred tax assets will automatically affect the amount of the goodwill/capital reserve arising on amalgamation.In a case where the conditions for recognition of deferred tax assets as per AS 22 are not satisfied at the time of the amalgamation, but are satisfied by the first annual balance sheet date following the amalgamation, the deferred tax assets are recognised in accordance with paragraph 19 of AS 22. The corresponding adjustment should be made to the goodwill/capital reserve arising on the amalgamation. If, however, the conditions for recognition of deferred tax assets are not satisfied even by the first annual balance sheet date following the amalgamation, the corresponding effect of any subsequent recognition of the deferred tax asset on the satisfaction of the conditions should be given in the statement of profit and loss of the year in which the conditions are satisfied and not in the goodwill/capital reserve.
   2. Where the amalgamation is in the nature of purchase and the transferee enterprise incorporates the assets/liabilities of the transferor enterprise at their existing carrying amounts as permitted in AS 14, the deferred tax assets should not be recognised at the time of amalgamation. However, if, by the first annual balance sheet date subsequent to amalgamation, the unrecognised deferred tax assets are recognised pursuant to the provisions of paragraph 19 of AS 22 relating to re-assessment of unrecognised deferred tax assets, the corresponding adjustment should be made to goodwill/capital reserve arising on the amalgamation. In a case where the conditions for recognition of deferred tax assets as per AS 22 are not satisfied by the first annual balance sheet date following the amalgamation, the corresponding effect of any subsequent recognition of the deferred tax asset on the satisfaction of the conditions should be given in the statement of profit and loss of the year in which the conditions are satisfied and not in the goodwill/capital reserve.
   3. Where the amalgamation is in the nature of merger, the deferred tax assets should not be recognised at the time of amalgamation. However, if, by the first annual balance sheet date subsequent to the amalgamation, the unrecognised deferred tax assets are recognised pursuant to the provisions of paragraph 19 of AS 22 relating to re-assessment of unrecognised deferred tax assets, the corresponding adjustment should be made to the revenue reserves. In a case where the conditions for recognition of deferred tax assets as per AS 22 are not satisfied by the first annual balance sheet date following the amalgamation, the corresponding effect of any subsequent recognition of the deferred tax asset on the satisfaction of the conditions should be given in the statement of profit and loss of the year in which the conditions are satisfied and not in the revenue reserves.

 

Accounting Standards Interpretation (ASI) 12

Applicability of AS 20

Accounting Standard (AS) 20, Earnings Per Share

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 1/2002, issued in March 2002 stands withdrawn.]

 

ISSUE

 

1. Whether companies which are required to give information under Part IV of Schedule VI to the Companies Act, 1956, should calculate and disclose earnings per share in accordance with AS 20.

 

CONSENSUS

 

1. Every company, which is required to give information under Part IV of Schedule VI to the Companies Act, 1956, should calculate and disclose earnings per share in accordance with AS 20, whether or not its equity shares or potential equity shares are listed on a recognised stock exchange in India.

 

Accounting Standards Interpretation (ASI) 13

Interpretation of paragraphs 26 and 27 of AS 18

Accounting Standard (AS) 18, Related Party Disclosures

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 2/2002, issued in May 2002 stands withdrawn.]

 

ISSUES

 

1. Paragraph 23 of AS 18 requires certain disclosures in respect of transactions between related parties. Paragraph 26 of AS 18, inter alia, provides that items of a similar nature may be disclosed in aggregate by type of related party. The issue is as to what is the meaning of type of related party for this purpose.
2. Paragraph 27 of AS 18 provides that “Disclosure of details of particular transactions with individual related parties would frequently be too voluminous to be easily understood. Accordingly, items of a similar nature may be disclosed in aggregate by type of related party. However, this is not done in such a way as to obscure the importance of significant transactions. Hence, purchases or sales of goods are not
   aggregated with purchases or sales of fixed assets. Nor a material related party transaction with an individual partly is clubbed in an aggregated disclosure” (emphasis added). The issue is as to how the test of the materiality should be applied for this purpose.

 

CONSENSUS

 

1. The type of related party for the purpose of aggregation of items of a similar nature should be construed to mean the related party relationships given in paragraph 3 of AS 18. The manner of disclosure required by paragraph 23 of AS 18, read with paragraph 26 thereof, in accordance with the above requirement, is illustrated in the Appendix to this Interpretation.
2. Materiality primarily depends on the facts and circumstances of each case. In deciding whether an item or an aggregate of items is material, the nature and the size of the item(s) are evaluated together. Depending on the circumstances, either the nature or the size of the item could be the determining factor. As regards size, for the purpose of applying the test of materiality as per paragraph 27 of AS 18, ordinarily a related party transaction, the amount of which is in excess of 10% of the total related party transactions of the same type (such as purchase of goods), is considered material, unless on the basis of facts and circumstances of the case it can be concluded that even a transaction of less than 10% is material. As regards nature, ordinarily the related party transactions which are not entered into in the normal course of the business of the reporting enterprise are considered material subject to the facts and circumstances of the case.

 

Accounting Standards Interpretation (ASI) 14

Disclosure of Revenue from Sales Transactions

Accounting Standard (AS) 9, Revenue Recognition

[Pursuant to the issuance of this Accounting Standards Interpretation, General Clarification (GC) – 3/2002, issued in June 2002 stands withdrawn.]

ISSUE

 

1. What should be the manner of disclosure of excise duty in the presentation of revenue from sales transactions (turnover) in the statement of profit and loss.

 

CONSENSUS

 

1. The amount of turnover should be disclosed in the following manner on the face of the statement of profit and loss:
   Turnover (Gross) XX
   Less: Excise Duty XX
   Turnover (Net) XX

 

Accounting Standards Interpretation (ASI) 15

Notes to the Consolidated Financial Statements

Accounting Standard (AS) 21, Consolidated Financial Statements

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 5/2002, issued in June 2002, stands withdrawn.]

 

ISSUE

 

1. Whether all the notes appearing in the separate financial statements of the parent enterprise and its subsidiaries should be included in the notes to the consolidated financial statements.

 

CONSENSUS

 

1. All the notes appearing in the separate financial statements of the parent enterprise and its subsidiaries need not be included in the notes to the consolidated financial statements. For preparing consolidated financial statements, the following principles should be observed in respect of notes and other explanatory material that form an integral part thereof:

1. Notes which are necessary for presenting a true and fair view of the consolidated financial statements should be included in the consolidated financial statements as an integral part thereof.
2. Only the notes involving items which are material need to be disclosed. Materiality for this purpose should be assessed in relation to the information contained in consolidated financial statements. In view of this, it is possible that certain notes which are disclosed in separate financial statements of a parent or a subsidiary would not be required to be disclosed in the consolidated financial statements when the test of materiality is applied in the context of consolidated financial statements.
3. Additional statutory information disclosed in separate financial statements of the subsidiary and/or a parent having no bearing on the true and fair view of the consolidated financial statements need not be disclosed in the consolidated financial statements. For instance, in the case of companies, the information such as the following given in the notes to the separate financial statements of the parent and/or the subsidiary, need not be included in the consolidated financial statements:

1. Source from which bonus shares are issued, e.g., capitalisation of profits or Reserves or from Share Premium Account.
2. Disclosure of all unutilised monies out of the issue indicating the form in which such unutilised funds have been invested.
3. The name(s) of small scale industrial undertaking(s) to whom the company owe any sum together with interest outstanding for more than thirty days.
4. A statement of investments (whether shown under “Investment” or under “Current Assets” as stock-in-trade) separately classifying trade investments and other investments, showing the names of the bodies corporate (indicating separately the names of the bodies corporate under the same management) in whose shares or debentures, investments have been made (including all investments, whether existing or not, made subsequent to the date as at which the previous balance sheet was made out) and the nature and extent of the investment so made in each such body corporate.
5. Quantitative information in respect of sales, raw materials consumed, opening and closing stocks of goods produced/traded and purchases made, wherever applicable.
6. A statement showing the computation of net profits in accordance with section 349 of the Companies Act, 1956, with relevant details of the calculation of the commissions payable by way of percentage of such profits to the directors (including managing directors) or manager (if any).
7. In the case of manufacturing companies, quantitative information in regard to the licensed capacity (where licence is in force); the installed capacity; and the actual production.
8. Value of imports calculated on C.I.F. basis by the company during the financial year in respect of :-

1. raw materials;
2. components and spare parts;
3. capital goods.

1. Expenditure in foreign currency during the financial year on account of royalty, know-how, professional, consultation fees, interest, and other matters.
2. Value of all imported raw materials, spare parts and components consumed during the financial year and the value of all indigenous raw materials, spare parts and components similarly consumed and the percentage of each to the total consumption.
3. The amount remitted during the year in foreign currencies on account of dividends, with a specific mention of the number of non-resident shareholders, the number of shares held by them on which the dividends were due and the year to which the dividends related.
4. Earnings in foreign exchange classified under the following heads, namely:-

1. export of goods calculated on F.O.B. basis;
2. royalty, know-how, professional and consultation fees;
3. interest and dividend;
4. other income, indicating the nature thereof.

 

Accounting Standards Interpretation (ASI) 16

Adjustments to the Carrying Amount of Investment arising from Changes in Equity not Included in the Statement of Profit and Loss of the Associate

Accounting Standard (AS) 23, Accounting for Investments in Associates

in Consolidated Financial Statements

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 7/2002, issued in June 2002, stands withdrawn.]

 

ISSUE

 

1. The issue is as to how the adjustments to the carrying amount of investment in an associate arising from changes in the associate’s equity that have not been included in the statement of profit and loss of the associate, should be made.

 

CONSENSUS

 

1. Adjustments to the carrying amount of investment in an associate arising from changes in the associate’s equity that have not been included in the statement of profit and loss of the associate should be directly made in the carrying amount of investment without routing it through the consolidated statement of profit and loss. The corresponding debit/credit should be made in the relevant head of the equity interest in the consolidated balance sheet. For example, in case the adjustment arises because of revaluation of fixed assets by the associate, apart from adjusting the carrying amount of investment to the extent of proportionate share of the investor in the revalued amount, the corresponding amount of revaluation reserve should be shown in the consolidated balance sheet.

 

Accounting Standards Interpretation (ASI) 17

Adjustments to the Carrying Amount of Investment arising from Changes in Equity not Included in the Statement of Profit and Loss of the Associate

Accounting Standard (AS) 23, Accounting for Investments in Associates in Consolidated Financial Statements

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 7/2002, issued in June 2002, stands withdrawn.]

 

ISSUE

 

1. The issue is as to how the adjustments to the carrying amount of investment in an associate arising from changes in the associate’s equity that have not been included in the statement of profit and loss of the associate, should be made.

 

CONSENSUS

 

1. Adjustments to the carrying amount of investment in an associate arising from changes in the associate’s equity that have not been included in the statement of profit and loss of the associate should be directly made in the carrying amount of investment without routing it through the consolidated statement of profit and loss. The corresponding debit/credit should be made in the relevant head of the equity interest in the consolidated balance sheet. For example, in case the adjustment arises because of revaluation of fixed assets by the associate, apart from adjusting the carrying amount of investment to the extent of proportionate share of the investor in the revalued amount, the corresponding amount of revaluation reserve should be shown in the consolidated balance sheet.

 

Accounting Standards Interpretation (ASI) 18

Consideration of Potential Equity Shares for Determining whether an Investee is an Associate under AS 23

Accounting Standard (AS) 23, Accounting for Investments in Associates in Consolidated Financial Statements

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 8/2002, issued in June 2002, stands withdrawn.]

 

ISSUE

 

1. For applying the definition of an ‘associate’, whether the potential equity shares of the investee held by the investor should be taken into account for determining the voting power of the investor.

 

CONSENSUS

 

1. The potential equity shares of the investee held by the investor should not be taken into account for determining the voting power of the investor.

 

Accounting Standards Interpretation (ASI) 19

Interpretation of the term ‘intermediaries’

Accounting Standard (AS) 18, Related Party Disclosures

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 9/2002, issued in October 2002, stands withdrawn.]

 

ISSUE

 

1. The issue is how the term ‘intermediaries’ should be interpreted for the purposes of paragraphs 3 and 13 of AS 18.

 

CONSENSUS

 

1. For the purposes of paragraphs 3 and 13 of AS 18, the term ‘intermediaries’ should be confined to mean enterprises which are ‘subsidiaries’ as defined in AS 21, Consolidated Financial Statements.

 

Accounting Standards Interpretation (ASI) 20

Disclosure of Segment Information

Accounting Standard (AS) 17, Segment Reporting

 

[Pursuant to the issuance of this Accounting Standards Interpretation, General

Clarification (GC) – 11/2002, issued in October 2002, stands withdrawn.]

 

ISSUE

 

1. Whether an enterprise, which has neither more than one business segment nor more than one geographical segment, is required to disclose segment information as per AS 17.

 

CONSENSUS

 

1. In case, by applying the definitions of ‘business segment’ and ‘geographical segment’, contained in AS 17, it is concluded that there is neither more than one business segment nor more than one geographical segment, segment information as per AS 17 is not required to be disclosed.

 

Accounting Standards Interpretation (ASI) 21

Non-Executive Directors on the Board – whether related parties

Accounting Standard (AS) 18, Related Party Disclosures

ISSUES

 

1. The issue is as to whether a non-executive director on the Board of Directors of a company is a key management person.
2. Another related issue is as to whether a non-executive director is covered by AS 18 in case he participates in the financial and/or operating policy decisions of an enterprise.

 

CONSENSUS

 

1. A non-executive director of a company should not be considered as a key management person under AS 18 by virtue of merely his being a director unless he has the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise.
2. The requirements of AS 18 should not be applied in respect of a non-executive director even if he participates in the financial and/or operating policy decision of the enterprise, unless he falls in any of the categories in paragraph 3 of AS 18.

 

Accounting Standards Interpretation (ASI) 22

Treatment of Interest for determining Segment Expense

Accounting Standard (AS) 17, Segment Reporting

ISSUES

 

1. Whether interest expense relating to overdrafts and other operating liabilities identified to a particular segment should be included in the segment expense or not.
2. Another issue is that in case interest is included as a part of the cost of inventories where it is so required as per Accounting Standard (AS) 16, Borrowing Costs, read with Accounting Standard (AS) 2, Valuation of Inventories, and those inventories are part of segment assets of a particular segment, whether such interest would be considered as a segment expense.

 

CONSENSUS

 

1. The interest expense relating to overdrafts and other operating liabilities identified to a particular segment should not be included as a part of the segment expense unless the operations of the segment are primarily of a financial nature or unless the interest is included as a part of the cost of inventories as per paragraph 4 below.
2. In case interest is included as a part of the cost of inventories where it is so required as per AS 16, read with AS 2, Valuation of Inventories, and those inventories are part of segment assets of a particular segment, such interest should be considered as a segment expense.

In this case, the amount of such interest and the fact that the segment result has been arrived at after considering such interest should be disclosed by way of a note to the segment result.

 

Accounting Standards Interpretation (ASI) 23

Remuneration paid to key management personnel – whether a

related party transaction

Accounting Standard (AS) 18, Related Party Disclosures

ISSUES

 

1. The issue is whether remuneration paid to key management personnel is a related party transaction. Another related issue is whether remuneration paid to non-executive directors on the Board of Directors is a related party transaction.

 

CONSENSUS

 

1. Remuneration paid to key management personnel should be considered as a related party transaction requiring disclosures under AS 18. In case non-executive directors on the Board of Directors are not related parties (see Accounting Standards Interpretation 21), remuneration paid to them should not be considered a related party transaction.

 

Accounting Standards Interpretation (ASI) 24

Definition of ‘Control’

Accounting Standard (AS) 21, Consolidated Financial Statements

ISSUE

 

1. In case an enterprise is controlled by two enterprises – one controls by virtue of ownership of majority of the voting power of that enterprise and the other controls, by virtue of an agreement or otherwise, the composition of the board of directors so as to obtain economic benefits from its activities – whether in such a case both the controlling enterprises should consolidate the financial statements of the first mentioned enterprise.

 

CONSENSUS

 

1. In a rare situation, when an enterprise is controlled by two enterprises as per the definition of ‘control’ under AS 21, the first mentioned enterprise will be considered as subsidiary of both the controlling enterprises within the meaning of AS 21 and, therefore, both the enterprises should consolidate the financial statements of that enterprise as per the requirements of AS 21.

 

Accounting Standards Interpretation (ASI) 25

Exclusion of a subsidiary from consolidation

Accounting Standard (AS) 21, Consolidated Financial Statements

ISSUE

 

1. In case an enterprise owns majority of the voting power of another enterprise but all the shares are held as ‘stock-in-trade’, whether this will amount to temporary control within the meaning of paragraph 11(a) of AS 21.

 

CONSENSUS

 

1. Where an enterprise owns majority of voting power by virtue of ownership of the shares of another enterprise and all the shares held as ‘stock-in-trade’ are acquired and held exclusively with a view to their subsequent disposal in the near future, the control by the first mentioned enterprise should be considered to be temporary within the meaning of paragraph 11(a).

 

Accounting Standards Interpretation (ASI) 26

Accounting for taxes on income in the consolidated financial statements

Accounting Standard (AS) 21, Consolidated Financial Statements

ISSUE

 

1. For preparing consolidated financial statements, whether the tax expense (comprising current tax and deferred tax) should be recomputed in the context of consolidated information or the tax expense appearing in the separate financial statements of the parent and its subsidiaries should be aggregated and no further adjustments should be made for the purposes of consolidated financial statements.

 

CONSENSUS

 

1. While preparing consolidated financial statements, the tax expense to be shown in the consolidated financial statements should be the aggregate of the amounts of tax expense appearing in the separate financial statements of the parent and its subsidiaries.

 

Accounting Standards Interpretation (ASI) 27

Applicability of AS 25 to Interim Financial Results

Accounting Standard (AS) 25, Interim Financial Reporting

ISSUE

 

1. Whether AS 25 is applicable to interim financial results presented by an enterprise pursuant to the requirements of a statute/regulator, for example, quarterly financial results presented under Clause 41 of the Listing Agreement entered into between Stock Exchanges and the listed enterprises.

 

CONSENSUS

 

1. The presentation and disclosure requirements contained in AS 25 should be applied only if an enterprise prepares and presents an ‘interim financial report’ as defined in AS 25. Accordingly, presentation and disclosure requirements contained in AS 25 are not required to be applied in respect of interim financial results (which do not meet the definition of ‘interim financial report’ as per AS 25) presented by an enterprise. For example, quarterly financial results presented under Clause 41 of the Listing Agreement entered into between Stock Exchanges and the listed enterprises do not meet the definition of ‘interim financial report’ as per AS 25. However, the recognition and measurement principles laid down in AS 25 should be applied for recognition and measurement of items contained in such interim financial results.

 

Accounting Standards Interpretation (ASI) 28

Disclosure of parent’s/venturer’s shares in postacquisition reserves of a subsidiary/jointly controlled entity

Accounting Standard (AS) 21, Consolidated Financial Statements

and AS 27, Financial Reporting of Interests in Joint Ventures

ISSUE

 

1. What should be the manner of disclosure of the parent’s/venturer’s share in the post-acquisition reserves of a subsidiary/jointly controlled entity in the consolidated balance sheet?

 

CONSENSUS

 

1. The parent’s share in the post-acquisition reserves of a subsidiary, forming part of the corresponding reserves in the consolidated balance sheet, is not required to be disclosed separately in the consolidated balance sheet.

1. While applying proportionate consolidation method, the venturer’s share in the post-acquisition reserves of the jointly controlled entity should be shown separately under the relevant reserves in the consolidated financial statements.