Financial Reporting - May 2015

Measurement IAS 39 requires all changes in fair values in case of financial liabilities designated at fair value through Profit and Loss at initial recognition shall be recognised in profit or loss. IFRS 9 which will replace IAS 39 requires these to be recognised in ‘other comprehensive income’ Carve out A proviso has been added to paragraph 48 of Ind AS 39 that in determining the fair value of the financial liabilities which upon initial recognition are designated at fair…

Combinations IFRS 3 requires bargain purchase gain arising on business combination to be recognised in profit or loss. Carve out Ind AS 103 requires the same to be recognised in other comprehensive income and accumulated in equity as capital reserve, unless there is no clear evidence for the underlying reason for classification of the business combination as a bargain purchase, in which case, it shall be recognised directly in equity as capital reserve.

Standards (i) Presentation of comparatives in the First-time Adoption of Indian Accounting Standards (Ind AS) 101 (corresponding to IFRS 1) IFRS 1 defines transitional date as beginning of the earliest period for which an entity presents full comparative information under IFRS. It is this date which is the starting point for IFRS and it is on this date the cumulative impact of transition is recorded based on assessment of conditions at that date by applying the standards retrospectively except to…

On the basis of principles of the IAS 18, IFRIC 15 on Agreement for Construction of Real Estate, prescribes that construction of real estate should be treated as sale of goods and revenue should be recognised when the entity has transferred significant tisks and rewards of ownership and has retained neither continuing managerial involvement nor effective control. Carve out IFRIC 15 has not been included in Ind AS 18, Revenue. Such agreements have been scoped out from Ind AS 18…

A footnote has been added in paragraph 1 to Ind AS 18, Revenue, that for rate regulated entities, this standard shall stand modified, where and to the extent the recognition and measurement of revenue of such entities is affected by recognition and measurement of regulatory assets/liabilities as per the Guidance Note on the subject being issued by the Institute of Chartered Accountants of India. PAPER - 1 : FINANCIAL REPORTING 11

Benefits vis-a-vis IFRSs/IASs restricting options According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19, the government bonds can be used only where there is no deep market of high quality corporate bonds. To illustrate treatment of gratuity subject to ceiling under Indian Gratuity Rules, an example has been added in Ind AS 19. IAS 19 permits various options…

(a) Hema Ltd. is in the business of manufacturing computers. During the year ended 31st March, 2015 the company manufactured 550 computers, it has the policy of valuing finished stock of goods at a standard cost of % 1.8 lakhs per computer. The details of the cost are as under: (@ in lakhs) Raw material consumed 400 Direct Labour 250 Variable production overheads 150 Fixed production overheads (including interest of ₹100 lakhs) PAPER - 1 : FINANCIAL REPORTING 13 Compute…

2015, High Ltd. was holding long-lived assets, which it intended to sell. The company appropriately recognized a loss in 2014-15 related to these assets. State whether on High Ltd.’s Income Statement for the year ended March 31, 2015, this loss should be reported as (a) An extraordinary item. (b) A component of income from continuing operations before income-taxes to be disclosed separately. (c) A separate component of selling or general and administrative expenses, disclosed net of tax benefit. (d) A…