SHENHA SHARMA

ROLL NO. 46

1. Accounting Standard (AS) 2: Valuation of Inventories:Objective:-

A primary issue in accounting for inventories is the determination of the value at which inventories
are carried in the financial statements until the related revenues are recognized.
This Standard deals with the determination of such value, including the ascertainment of cost of
inventories and any write-down thereof to net realizable value.
Inventories are assets:
(A) Held for sale in the ordinary course of business;
(b) In the process of production for such sale; or
(c) In the form of materials or supplies to be consumed in the production process or in the rendering
of services.Net realizable value is the estimated selling price in the ordinary Course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.

2.Accounting Standard (AS) 3: Cash Flow Statement

Users of an enterprises financial statements are interested in how the enterprise generates and uses
cash and cash equivalents. This is the case regardless of the nature of the enterprises activities and
irrespective of whether cash can be viewed as the product of the enterprise, as may be the case with a
financial enterprise. Enterprises need cash for essentially the same reasons, however different their
principal revenue-producing activities might be. They need cash to conduct their operations, to pay
their obligations, and to provide returns to their investors.
Benefits of Cash Flow Information
A cash flow statement, when used in conjunction with the other financial statements, provides
information that enables users to evaluate the changes in net assets of an enterprise, its financial
structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash
flows in order to adapt to changing circumstances and opportunities. Cash flow information is useful
in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to
develop models to assess and compare the present value of the future cash flows of different
enterprises. It also enhances the comparability of the reporting of operating performance by different
enterprises because it eliminates the effects of using different accounting treatments for the same
transactions and events.

3. Accounting Standard (AS) 6: Depreciation Accounting

This Standard deals with depreciation accounting and applies to all depreciable assets, except the
following items to which special considerations apply:
(I) forests, plantations and similar regenerative natural resources;
(ii)Wasting assets including expenditure on the exploration for and extraction of minerals, oils,
natural gas and similar non-regenerative resources;

(iii)Expenditure on research and development;

(iv) goodwill and other intangible assets;
(v) Livestock.

Definitions
The following terms are used in this Standard with the meanings specified:
Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable
asset arising from use, efflux ion of time or obsolescence through technology and market changes.
Depreciation is allocated so as to charge a fair proportion of the depreciable amount in each
accounting period during the expected useful life of the asset.
Depreciation includes amortization of assets whose useful life is pre determined.
Depreciable assets are assets which
(i) are expected to be used during more than one accounting period; and
(ii)have a limited useful life; and
(iii)are held by an enterprise for use in the production or supply of goods and services, for rental to
others, or for administrative purposes and not for the purpose of sale in the ordinary course of
business.
Useful life is either (i) the period over which a depreciable asset is expected to be used by the
enterprise; or (ii) the number of production or similar units expected to be obtained from the use of
the asset by the enterprise.

4. Accounting Standard (AS) 10: Accounting for Fixed Asset

The following terms are used in this Standard with the meanings specified:
Fixed asset is an asset held with the intention of being used for the purpose of producing or providing
goods or services and is not held for sale in the normal course of business.
Fair market value is the price that would be agreed to in an open and unrestricted market between
knowledgeable and willing parties deal in gat arms length who are fully informed and are not under
any compulsion to transact.
Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in
the books of account or financial statements. When this amount is shown net of accumulated
depreciation, it is termed as net book value.

Explanation
Fixed assets often comprise a significant portion of the total assets of an enterprise, and therefore are
important in the presentation of financial position. Furthermore, the determination of whether an
expenditure represents an asset or an expense can have a material effect on an enterprises reported
results of operations.

5. Accounting Standard (AS) 13: Accounting for Investment:

This Standard deals with accounting for investments in the financial statements of enterprises and
related disclosure requirements.
2. This Standard does not deal with:
(a) the bases for recognition of interest, dividends and rentals earned on investments which are
covered by Accounting Standard 9 on Revenue Recognition;
(b) Operating or finance leases;
(c) investments of retirement benefit plans and life insurance enterprises; and
(d) mutual funds and venture capital funds and/or the related asset management companies, banks and
public financial institutions formed under a Central or State Government Act or so declared under the
Companies Act, 1956.

Definitions
The following terms are used in this Standard with the meanings assigned:
Investments are assets held by an enterprise for earning income byway of dividends, interest, and
rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stockin-trade are not investments.
A current investment is an investment that is by its nature readily realizable and is intended to be held
for not more than one year from the date on which such investment is made.
A long term investment is an investment other than a current investment.
An investment property is an investment in land or buildings that are not intended to be occupied
substantially for use by, or in the operations of, the investing enterprise.
Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing
buyer and a knowledgeable, willing seller in an arms length transaction. Under appropriate
circumstances, market value or net realizable value provides an evidence of fair value.
Market value is the amount obtainable from the sale of an investment in an open market, net of
expenses necessarily to be incurred on or before disposal.

Accounting Standard 5:
Net Profit/Loss for the Period, Prior Period Items and Changes in Accounting
Policies:
All items of income and expense, which are recognised in a period, should be included in
determination of net profit or loss for the period unless an accounting standard requires or permits
otherwise. Ordinary activities are activities which are undertaken by an Enterprise as part of its
Business and such related activities in which enterprise engaged in furtherance of, incidental to, or
arising from these activities.

Extraordinary items are incomes and expenses that arise from events or transactions that are clearly
distinct from ordinary activities of the enterprise and therefore are not expected to recur frequently or
regularly. Prior period items are incomes or expenses which arise in the current period as a result of
errors or omissions in the preparation of then financial statement of one or more prior periods.
Prior period, extraordinary items be separately disclosed in a manner that their impact on
current profit or loss can be perceived. Nature and amount of significant items be provided.
Extraordinary items should be disclosed as a part of profit or loss for the period.
Effect of a change in the accounting estimate should be included in the determination of net
profit or loss in the period of change and also future periods if it is expected to affect future periods.
Change in accounting policy, which has a material effect, should be disclosed. Impact and the
adjustment arising out of material change should be disclosed in the period in which change is made.
If the change does not have a material impact in the current period but is expected to have a material
effect in future periods then the fact should be disclosed.
Accounting policy may be changed only if required by the statute or for compliance with an
accounting standard or if the change would result in appropriate presentation of the financial
statements.
A change in accounting policy on the adoption of an accounting standard should be accounted
for in accordance with the specific transitional provisions, if any, contained in that accounting
standard

Accounting Standard 20:

Earnings Per Share
Focus is on denominator to be adopted for earnings per share (EPS) calculation.
In case of enterprises presenting consolidated financial statements EPS to be calculated on the basis of
consolidated information.
Requirement is to present basic and diluted EPS on the face of Profit and Loss statement for each class of
equity shares with equal prominence to all periods presented.
EPS required to be presented even when negative.

Basic EPS is calculated by dividing net profit or loss for the period attributable to equity
shareholders by weighted average of equity shares outstanding during the period. Basic & Diluted
EPS to be computed on the basis of earnings excluding extraordinary items (net of tax expense).
(Limited Revision w.e.f. 142004)
Earnings attributable to equity shareholders are after the preference
dividend for the period and the attributable tax.

Accounting Standard 9:
Revenue Recognition
Standard does not deal with revenue recognition aspects of revenue arising from construction
contracts, hire purchase and lease agreements, government grants and other similar subsidies and
revenue of insurance companies from insurance contracts. Special considerations apply to these cases.
Revenue from sales and services should be recognised at the time of sale of goods or rendering of
services if collection is reasonably certain; i.e when risks and rewards of ownership are transferred to
the buyer and when effective control of the seller as the owner is lost.
Interest is recognised on time basis, royalties on accrual and dividend when owners right to
receive payment is established. Disclose circumstances in which revenue recognition has been
postponed pending significant uncertainties.
In Accounting Standard 9 of Companies (Accounting Standards) Rules, ASI 14 is incorporated in
(AS)9 Revenue Recognition as an explanation below para 10 as follows:
In cases where revenue cycle of the entity involves collection of excise duty, the enterprise is
required to disclose revenue at gross as reduced by excise amount thereby finally arriving at net sales
on the face of the profit and loss account.

Accounting Standard 7 :
Accounting for Construction Contracts (Revised 2002)
The standard is applicable in accounting of contracts in the books of contractor. It is to be noted
that this standard is not applicable for construction projects undertaken by the entity on behalf of its
own. For example a builder constructing flats to be sold. It is also not applicable to service contracts
which are not related to construction of assets.
Construction contract may be for construction of a single/combination of interrelated or
interdependent assets. A fixed price contract is a contract where contract price is fixed or per unit rate
is fixed and in
some cases subject to escalation clause.
A cost plus contract is a contract in which contractor is reimbursed for allowable or defined
cost plus percentage of these cost or a fixed fee.
In a contract covering a number of assets, each asset is treated as a separate construction
contract when there are:
separate proposal;
subject to separate negotiations and the contractor and customer is able to accept/reject that part of
the contract;

Accounting Standard (AS) 18

Related Party Disclosures
(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have
equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard
should be read in the context of its objective and the General Instructions contained in part A of the
Annexure to the Notification.) Objective The objective of this Standard is to establish requirements
for disclosure of: (a) related party relationships; and (b) transactions between a reporting enterprise
and its related parties. Scope 1. This Standard should be applied in reporting related party
relationships and transactions between a reporting enterprise and its related parties. The requirements
of this Standard apply to the financial statements of each reporting enterprise as also to consolidated
financial statements presented by a holding company. 2. This Standard applies only to related party
relationships described in paragraph 3. 3. This Standard deals only with related party relationships
described in (a) to (e) below: (a) enterprises that directly, or indirectly through one or more
intermediaries, control, or are controlled by, or are under common control with, the reporting
enterprise (this includes holding companies, subsidiaries and fellow subsidiaries);
3. This Standard deals only with related party relationships described in (a) to (e) below: (a)
enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled
by, or are under common control with, the reporting enterprise (this includes holding companies,
subsidiaries and fellow subsidiaries); (b) associates and joint ventures of the reporting enterprise and
the investing party or venturer in respect of which the reporting enterprise is an associate or a joint
venture;
(c) individuals owning, directly or indirectly, an interest in the voting power of the reporting
enterprise that gives them control or significant influence over the enterprise, and relatives of any
such individual; (d) key management personnel and relatives of such personnel; and (e) enterprises
over which any person described in (c) or (d) is able to exercise significant influence. This includes
enterprises owned by directors or major shareholders of the reporting enterprise and enterprises that
have a member of key management in common with the reporting enterprise.