Issues on accounting

download Issues on accounting

of 33

  • date post

    04-Jun-2018
  • Category

    Documents

  • view

    215
  • download

    0

Embed Size (px)

Transcript of Issues on accounting

  • 8/14/2019 Issues on accounting standards.pdf

    1/33

    Workshop on Issues inWorkshop on Issues in

    Accounting StandardsAccounting Standards

    April 17, 2009

    Himanshu Kishnadwala

    Contractor, Nayak & Kishnadwala

  • 8/14/2019 Issues on accounting standards.pdf

    2/33

    Todays AgendaTodays Agenda

    AS 11

    AS 1 AS 4

    AS 29

    CNK

    2

  • 8/14/2019 Issues on accounting standards.pdf

    3/33

    Nature of Forex Losses/gainsNature of Forex Losses/gains

    1. On Forex Loans (incl FCCB, ECBs):

    Utilised for acquisition of Fixed assets Outside India

    Within India

    Utilised for other purposes

    2. On Short er! "orro#in$s, Creditors, de"tors, etc

    %. &tilisation o' 'or#ard coers

    . Cancellation o' For#ard Coers

    *. ++ Losses$ains on o-en 'or#ard coers

    3

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    4/33

    AS 11: ecent !e"e#op$entsAS 11: ecent !e"e#op$ents

    Fe" 2/: +atter re'erred to 0SB (2 !eetin$s held)

    0SB could not arrie at a consensus and re'erred to

    Council

    +arch 2/: IC0I Council could not reach a decision

    In !id!arch discussions #ere held "et#een IC0I, CII

    re-resentaties and 3t .Secretar4, 5OI

    6ecision de'erred to Council +eetin$ in 0-ril 2/ 70C0S held a !eetin$ on 2th+arch 2/, to discuss

    !odi'ication to 0S 11

    IC0I o"8ected to a!end!ent o' 0S 11 #as oerruled

    MCA issued notification on 31stMarch 2009

    4

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    5/33

    Treat$ent of Forex %xposuresTreat$ent of Forex %xposures

    5

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    6/33

    1& Forex Loans:1& Forex Loans:For ac'uisition of Fixed assets or for other purposesFor ac'uisition of Fixed assets or for other purposes

    O-tion to 'ollo# 0S 11 or +C0 noti'ication

    I' 0S 11 'ollo#ed:

    0ll losses on loans (#hether 'or ac9uisition o' 'ixed 0ssets or

    others) hae to "e taen to ; < L ac Sa!e treat!ent een 'or losses on 4ear end restate!ent

    MCA notification also omits 2ndpararaph! "xpl# 1$2 in %art

    & of Schedule '

    hus co!-anies, (usin$ "acin$ o' le$al o-inions), a--l4in$Schedule =I 'or ca-italisin$ 'orex losses on ac9uisition o' 'ixed

    assets cannot do so no#

    Such co!-anies no# need to 'ollo# 0S 11 or +C0 noti'ication

    6

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    7/33

  • 8/14/2019 Issues on accounting standards.pdf

    8/33

    reat!ent i' +C0 o-tion exercised: Exchan$e di''erences 'or all LFC+ relatin$ to de-recia"le 'ixed

    assets to "e ad(usted to the cost of the fixed assets>

    6e-reciation on ad8usted cost oer the "alance li'e o' the asset> Other eli$i"le exchan$e di''erences to "e accu!ulated in a account

    called: )*orei#n Currency +onetary tem -ranslation .ierence

    A!c*# +FCM&,-.

    0!ount accu!ulated under FC+I6 0c to "e amortised o/er

    alance period of the lon term asset$liailit U, "F"

    31stMarch 2011#

    0"oe not applicale'or exchan$e di''erences dealt in -ara 1*

    o' 0S 11 (i.e. 7et Inest!ent in a noninte$ral 'orei$n

    o-eration.)

    8

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    9/33

    ransitional ;roisions: Exchan$e di''erences relatin$ to de-recia"le 'ixed assets to "e

    ad8usted to the cost o' the 'ixed assets>

    Other eli$i"le exchan$e di''erences to "e accu!ulated in theDForei$n Currenc4 +onetar4 Ite! ranslation 6i''erence 0c

    (FC+I6)

    Corres-ondin$ e''ect to "e $ien to 5"6"A7 "S"'"

    0dditional char$e 'or de-reciation

    0!ortisation o' FC+I6

    0dditional 6isclosures:

    Fact o' exercisin$ the o-tion

    0!ount re!ainin$ to "e a!ortised in 'uture 4ears

    9

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    10/33

    1& Forex Loans:1& Forex Loans:

    For ac'uisition of Fixed assets or for other purposes (For ac'uisition of Fixed assets or for other purposes (

    Schedule =I allo#ed 'orex losses$ains to "e ad8usted to cost o'

    the 'ixed assets onl4 i' the assets #ere ac9uired 'ro! outside

    India

    MCA notification does not ha/e such condition and requiresad(ustment for all assets +i#e# acquired outside &ndia or

    8ithin &ndia.

    Co!-anies #ho had earlier 'ollo#ed Schedule =I (rather than

    0S 11) #ould hae ad8usted losses onl4 'or assets ac9uiredoutside India

    o 'ollo# +C0 noti'ication, these co!-anies #ould no# hae to

    $ie retros-ectie e''ect ('ro! 2?A) 'or een assets

    ac9uired #ithin India corres-ondin$ e''ect to 5eneral esere

    10

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    11/33

    Financial

    ear

    Amount

    repaid

    +in US-.

    Amt o$s

    +in

    US-.

    ate Amount

    +s. in

    la:hs

    Forex

    +7oss.

    $ ain

    +la:hs.

    emar:s

    2@? 1,, 2 2. Os Loan

    2?A 2, 1 A.2 .2 5ain to ; < L ac

    2?A A, %2. 1.@ ++ $ain to ; < L ac

    2A/ %, * 1%.* (1.*) 0ctual Loss

    2A/ *, * 2*. (*.) ++ Loss

    +4#;0.

    Loan is taen "4 the co!-an4 in Oct 2@ and is re-a4a"le in %

    instal!ents Oct 2?, Oct 2A and Oct 2/.

    11

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    12/33

    0ssu!in$ Loan is 'or Capital Asset acquisition

    I' +C0 noti'ication a--lied, e''ectie 2?A, all 'orex $ains

    losses to "e ad8usted #ith cost o' ca-ital asset.

    For 2?A, $ain o' s. 1.A lahs #ill "e reduced 'ro! 'ixedassets corres-ondin$ e''ect to 5eneral esere

    For 2A/, loss o' s. @.* lahs #ill "e added to the 'ixed

    assets corres-ondin$ restate!ent o' loans

    6e-reciation 'or 2A/ to "e re#ored "4 considerin$excess de-reciation -roided in 2?A and additional

    de-reciation 'or 2A/

    12

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    13/33

    0ssu!in$ Loan is 'or

  • 8/14/2019 Issues on accounting standards.pdf

    14/33

    )& *n ST +orro,ings- .reditors- de+tors- etc)& *n ST +orro,ings- .reditors- de+tors- etc

    Outstandin$ "alances o' de"torscreditors are

    !onetar4 ite!s and #ould nor!all4 not exceed a

    -eriod o' 12 !onths

    +C0 noti'ication #ould there'ore not a--l4

    0S 11 #ould "e a--lica"le to these ite!s

    0ll exchan$e di''erences on settlement o' these ite!s

    or on restatement at the 4ear end #ould there'ore "eta:en to the %7 a$c

    14

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    15/33

    /0& ti#isation or cance##ation of/0& ti#isation or cance##ation of

    For,ard .o"ersFor,ard .o"ers

    0S 11 a--lies 'or 'or#ard contracts : Baced "4 actual transactions (-ara %@%?)

    Intended 'or tradin$ or s-eculation -ur-oses (-ara %A%/)

    In "oth cases a"oe, the -ro'itloss on cancellation or

    on ++ is to "e char$ed to the ;L ac +C0 7oti'ication does not coer this

    I' 'or#ard contracts are 'or DForecast or Bihl%roale future transactions, 0S 11 does not a--l4

    o 'ollo# IC0I 0nnounce!ent o' +arch 2A in such

    cases

    15

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    16/33

    2& 3T3 Losses/gains on open for,ard co"ers2& 3T3 Losses/gains on open for,ard co"ers

    7either 0S 11 nor +C0 noti'ication a--l4 to such ite!s

    IC0I announce!ent o' +arch 2A #ould "e

    a--lica"le 'or such ite!s

    0s -er the announce!ent 2 o-tions: Char$in$ ++ losses to the ;L ac (no entr4 'or -ro'its)

    i' not so done "4 the co!-an4, statutor4 auditor to $ie

    Dappropriate disclosures in his re-ort

    Such disclosures ma not amount to a qualification

    Earl4 ado-tion o' 0S %

    16

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    17/33

    2& 3T3 Losses/gains on open for,ard co"ers2& 3T3 Losses/gains on open for,ard co"ers

    I' 0S % ado-ted oluntaril4: o 'ollo# 0S % to the extent -er!itted "4 existin$ la#s and

    re$ulations

    O-en deriatie contracts are to "e ++ unless the4 can "econsidered as DCash Flo# ed$e

    I' treated as DCash Flo# ed$e, $ainslosses can "e taen to

    DE9uit4 rather than ;L ac+for the effecti/e portion of the

    hede. +normall ta:en to )Bedin eser/e a$c.* Strin$ent docu!entation necessar4 'or the sa!e

    For ineffecti/e-ortion $ainslosses to "e taen to ;L ac

    On closure, $ainslosses to "e trans'erred to the ;L ac

    17

    CNK

  • 8/14/2019 Issues on accounting standards.pdf

    18/33

    2& 3T3 Losses/gains on open for,ard co"ers2& 3T3 Losses/gains on open for,ard co"ers

    ransitional -roisions i' 0S % ado-ted Ine''ectie -ortion o' such deriatie contracts as at the

    "e$innin$ o' the accountin$ -eriod is to "e ad8usted a$ainst the

    o-enin$ eenue eseres

  • 8/14/2019 Issues on accounting standards.pdf

    19/33

    ;ara A1 o' 0S % #hich deals #ith Guali'4in$ ed$in$

    Instru!ents states DThis Standard does not restrict thecircumstances in which a derivative maybe designated as a hedging

    instrument, provided the conditions of para 98 are met, except for

    some options.However, a non-derivative financial asset or non-

    derivative financial liability maybe designated as a hedging

    instrument only for a hedge of a foreign currency ris.

    ;ara /@(") o' 0S % de'ines Cash 'lo# hed$e as !a hedge of the

    exposure to variability in cash flows that" #i$ is attributable to a particular ris associated with a recognised

    asset or liability#such as all or some future intere