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Accounting Standard And General Notes For Commerce Students

Published in: Accountancy
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Ind AS Vs AS: Relevance, Applicability and Critical Issues Maintenance of Registers and Returns Members' Meeting AS 10 (Revised) - Property, Plant and Equipment Companies (Accounting Standards) Amendment Rules, 2016 Management and Administration

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    Companies (Accounting Standards) Amendment Rules, 2016 Even though Indian Accounting Standards (Ind AS) implementation is in its track, Ministry of Corporate Affairs (MCA) has notified Companies (Accounting Standards) Amendment Rules, 2016 omMarchv30, 20 and rules made applicable from the date of notification in the Officia azette. The rule modifies 6 existing AS, omits AS6 'Depreciation Accounting' and substituting ASIO with a new AS, viz., ASIO Revised) 'Proper y, plant and equipment'. Why the Amendment rule h skee ma e? Currently India is having two sets of Accounting standards, viz., 1. Accounting Standards notified under Companies (Accounting Standards) Rules, 2006 and 2. Indian Acc untmg Standards notified under Companies (Indian Accounting Standards) Rules, 2015. AS i applicable for larger enterprises and the exiting AS still in force to Small •and Medium Enterprises. MCA aims at modifying the existing AS in conformity with Ind AS/IFRS. This Amendment is the first steps towards thesame. Major c nges in the Amendment Rule, 2016 Even though the rule deals with eight Accounting Standards in force, major changes have been made to two Accounting Standards only, viz., AS6 'Depreciation Accounting' and ASIO 'Accounting for Fixed Assets'.
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    Removal of AS6 1 Depreciation Accounting' AS6 'Depreciation Accounting' is originally issued in 1982 and subsequently revised in 1994. The standard deals with accounting treatments for depreciation and disclosure requirement and it was based on IAS 4 'Depreciation Accounting' issued by IASC. IASC had withdrawn the standard in 1999. As a step towards harmonize the existing standards with international standards, AS6 have been omitted from the Annex re to Companies (Accounting Standards) Rules. As per the amendment, depreciation accounting shall be made in accordanc with ASIO (Revised) Property, plant and equipment'. ASIO (Revised) 1 Property, plant and equipment? Property, plant and equipment (P PE is the erm used in IFRS to denote tangible fixed assets. The new ru e substitutes ASIO 'Fixed Assets' with a new standard ASIO (Revised) 'Property, plant and equipment' which is nothing but a standard based on the IAS16 'Property, plant and equipment' issued byiÄSC. The new tandard deals with principal issues in the Accounting for PE ike recognition, determination of carrying amount, depreciatiön charges an impairment loss to be recognized. Majorc •and ASIO vis-a-vis ASIO (Revised) he ASIO Revised) 'Property, plant and equipment' is having several differences between the provisions as laid down in AS6 and ASIO. They are; A 10 had specifically excluded accounting for real estate developers from the scope of the standard whereas new standard does not exclude such developers from its scope. Apart from that ASIO (Revised) clearly makes the standard applicable to bearer plants (e.g. Rubber trees, grape wine).
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    Apart from the definition of P PE, ASIO(Revised) also lays down the following recognition criteria for items of P PE; The cost of an item of property, plant and equipment should be recognised as an asset if, and only if: a) It is probable that future economic benefits associated with the item will flow to the enterprise; and b) The cost of the item can be measured reliably. Whereas ASIO only gives a definition for fixed assets. ASIO (Revised) requires that cost ofrmajor Inspection should be capitalised with consequent derecogniåon of any remaining carrying amount of the cost of pre ious inspegtlon. AS 10 doesn't deal with the same. ASIO (Revised) requires an entity to choose either the cost method or the revaluation method as its agcounting policy and to apply that policy to an entir class of P PE. ASIO(Revise ) specificall amentions that the cost of abnormal amounts of wasted ateria , labour, or other resources incurred in self-constr cting an asset is not included in the cost of the asset ereas existing as is silent about the same. Existin A»pecifically deals with fixed assets owned jointly with others. But the ASIO (Revised) does not specifically deal with them AS 10 Revised) requires that the residual value and useful life of an asset be reviewed at the end of each financial year. Under AS 6, such a review is not obligatory since it simply provides that useful asset of an asset may be reviewed periodically. ASIO (Revised) requires that the depreciation method applied should be reviewed at least at the end of each financial year. If there is significant change in expected pattern of consumption of
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    future economic benefits embodied in the asset, the method should be changed to reflect that pattern and the change should be treated as a change in accounting estimate whereas AS6 recognises change in depreciation method as a change in accounting policy. Method can be changed only if there is a change in AS or statute or for better preparation and presentation of financial Statements. As per the new standard, Items of P PE retired from active use and held for disposal should be stated at the lower f their carrying amount and net realisable value. Any write-down n this regard should be recognised immediately in the statement f profit and loss. The disclosure requirements unde Sl Revised) are more wider as compared to ASIO 'fixed Asset'. AS6 'Depreciation Accounting' and ASIO ix d Assets' is still in force for non-corporate entities an th same is followed by them even after the issuance of this standard. A new Accounting Standard on Agriculture under formation which Wilf also coyer accounting for live-stock also. Let's expect more changes in AS and introduction of new standards.


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