Accounting Standards 1-29 - Seth & Associates

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48. If a sale and leaseback transaction results in a finance lease, any excess or deficiency of sales proceeds over the carrying amount should not be immediately recognised as income or loss in the financial statements of a seller-lessee. Instead, it should be deferred and amortised over the lease term in proportion to the depreciation of the leased asset. 49. If the leaseback is a finance lease, it is not appropriate to regard an excess of sales proceeds over the carrying amount as income. Such excess is deferred and amortised over the lease term in proportion to the depreciation of the leased asset. Similarly, it is not appropriate to regard a deficiency as loss. Such deficiency is deferred and amortised over the lease term. 50. If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value, any profit or loss should be recognised immediately. If the sale price is below fair value, any profit or loss should be recognised immediately except that, if the loss is compensated by future lease payments at below market price, it should be deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value should be deferred and amortised over the period for which the asset is expected to be used. 51. If the leaseback is an operating lease, and the lease payments and the sale price are established at fair value, there has in effect been a normal sale transaction and any profit or loss is recognised immediately. 52. For operating leases, if the fair value at the time of a sale and leaseback transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and fair value should be recognised immediately. 53. For finance leases, no such adjustment is necessary unless there has been an impairment in value, in which case the carrying amount is reduced to recoverable amount in accordance with the Accounting Standard dealing with impairment of assets. 54. Disclosure requirements for lessees and lessors apply equally to sale and leaseback transactions. The required description of the significant leasing arrangements leads to disclosure of unique or unusual provisions of the agreement or terms of the sale and leaseback transactions.. 55. Sale and leaseback transactions may meet the separate disclosure criteria set out in paragraph 12 of Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.. Appendix Sale and Leaseback Transactions that Result in Operating Leases The appendix is illustrative only and does not form part of the accounting standard. The purpose of this appendix is to illustrate the application of the accounting standard. A sale and leaseback transaction that results in an operating lease may give rise to profit or a loss, the determination and treatment of which depends on the leased asset's carrying amount, fair value and selling price. The following table shows the requirements of the accounting standard in various circumstances. Sale price Carrying Carrying Carrying
established at fair value (paragraph 50) amount equal to fair value amount less than fair value Profit No profit Recognise profit immediately amount above fair value Not applicable Loss No loss Not applicable Recognise loss immediately Sale price below fair value (paragraph 50) Profit No profit Recognise profit immediately Loss not compensated by future lease payments at below market price Loss compensated by future lease payments at below market price Sale price above fair value (paragraph 50) Recognise loss immediately Defer and amortise loss Profit Defer and amortise profit Recognise loss immediately Defer and amortise loss Defer and amortise profit No profit (note 1) (note 1) (note 1) Defer and amortise profit (note 2) Loss No loss No loss (note 1) Note 1. These parts of the table represent circumstances that would have been dealt with under paragraph 52 of the Standard. Paragraph 52 requires the carrying amount of an asset to be written down to fair value where it is subject to a sale and leaseback. Note 2. The profit would be the difference between fair value and sale price as the carrying amount would have been written down to fair value in accordance with paragraph 52.
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TABLE OF CONTENTS DISCLOSURE OF ACC
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Explanation Fundamental Accounting
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21. Examples of matters in respect
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Definitions 3. The following terms
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(b) storage costs, unless those cos
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27. Information about the carrying
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performance by different enterprise
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15. The separate disclosure of cash
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22. Cash flows arising from the fol
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34. Cash flows arising from taxes o
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The appendix is illustrative only a
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Interest expense (400) Interest inc
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Interest expense 400 Operating prof
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31,850 Less : Sundry debtors at the
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Short-term funds (650) Deposits hel
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not contingencies as defined in par
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8.6 Events occurring after the bala
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Accounting Standard (AS) 5 Net Prof
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financial statements in understandi
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gratuity scheme by an employer in p
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(ii) expected useful life of the de
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19. A change in the method of depre
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Accounting Standard 7 (REVISED) Con
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8. A group of contracts, whether wi
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a. costs that relate directly to th
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estimated reliably when all the fol
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of which recovery is probable; and
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defects have been rectified. Progre
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incurred for work performed upto th
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calculated as follows: (amount in R
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4.3 Proportionate completion method
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the time of raising of any claim it
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should be based on the sales value
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Accounting Standard (AS) 10 Account
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9.3 Administration and other genera
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14.4 On disposal of a previously re
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either to the asset given up or to
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Accounting Standard (AS) 11 (Revise
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Reporting currency is the currency
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Classification of Foreign Operation
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. income and expense items of the n
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historical cost for those items in
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Appendix Note: This Appendix is not
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Accounting Treatment of Government
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8.1 Grants related to specific fixe
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(The Accounting Standard comprises
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Accounting Standard (AS) 13 Account
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fair value provides a prudent metho
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31. Investments classified as curre
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(v) No adjustment is intended to be
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Treatment of Reserves on Amalgamati
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(a) consideration for the amalgamat
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41. Where the scheme of amalgamatio
Page 158 and 159: Accounting Standard (AS) 16 Borrowi
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Page 162 and 163: Accounting Standard (AS) 17 Segment
Page 164 and 165: statement of profit and loss. Segme
Page 166 and 167: segments for internal financial rep
Page 168 and 169: 24. Business and geographical segme
Page 170 and 171: calculation done in applying a part
Page 172 and 173: Secondary Segment Information 47. P
Page 174 and 175: segment, both primary and secondary
Page 176 and 177: REVENUE External sales Intersegment
Page 178 and 179: 101 90 Assets and additions to tang
Page 180 and 181: and intangible fixed assets by loca
Page 182 and 183: 4. In the context of this Statement
Page 184 and 185: (c) the director is nominated by th
Page 186 and 187: (iii) a description of the nature o
Page 188 and 189: 1. upon the occurrence of some remo
Page 190 and 191: 5. The classification of leases ado
Page 192 and 193: Rs.2,27,805. As this amount is lowe
Page 194 and 195: f. a general description of the les
Page 196 and 197: commencement of the lease term is t
Page 200 and 201: AS 20 Earnings Per Share (In this A
Page 202 and 203: c. options including employee stock
Page 204 and 205: merger is the aggregate of the weig
Page 206 and 207: 29. For the purpose of calculating
Page 208 and 209: 41. Potential equity shares are ant
Page 210 and 211: Note: These appendices are illustra
Page 212 and 213: EPS for the year 20X0 as originally
Page 214 and 215: Convertible Preference Shares Incre
Page 216 and 217: (a) the ownership, directly or indi
Page 218 and 219: the consolidated financial statemen
Page 220 and 221: subsidiary and does not become an a
Page 222 and 223: Accounting Standard (AS) 22 ACCOUNT
Page 224 and 225: accounting purposes, straight line
Page 226 and 227: (a) has a legally enforceable right
Page 228 and 229: 6. If for any reason the recognitio
Page 230 and 231: Deferred tax A/c Dr. 20,000 To Prof
Page 232 and 233: Accounting Standard (AS) 23 Account
Page 234 and 235: (b) the associate operates under se
Page 236 and 237: Disclosure 22. In addition to the d
Page 238 and 239: . that represents a separate major
Page 240 and 241: infrequently. All infrequently occu
Page 242 and 243: g. the amount of pre-tax profit or
Page 244 and 245: 35. Appendix 2 illustrates applicat
Page 246 and 247: The following is Note 5 to Delta Co
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III. Financial Statements for 20X3
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2 A separate Accounting Standard on
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6. A complete set of financial stat
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g. segment revenue, segment capital
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29. To illustrate: a. the principle
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Accounting Standard to assist in cl
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1. Basic Earnings Per Share 2.Dilut
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provisions for employees (b) Other
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(condensed or complete) for the fol
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1st Quarter 2nd Quarter 3rd Quarter
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Accounting for the Effects of Chang
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a. intangible assets that are cover
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ecoverable amount.4 Carrying amount
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supportable assumptions that repres
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Therefore, in addition to complying
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titles, customer lists and items si
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Past Expenses not to be Recognised
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The enterprise amortises the right
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assets, how it determines the recov
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e. copyrights, and patents and othe
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Appendix A This Appendix, which is
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aforesaid and expensed in an earlie
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without physical substance held for
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Application and Infrastructure Deve
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On 1-4-2003, the remaining period o
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Accounting Standard 27 Financial Re
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The arrangement identifies those de
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the assets; c. its share of any lia
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separately as part of the inventory
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44 In case of transactions between
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Accounting Standard (AS) 28 Impairm
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4. The following terms are used in
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e. evidence is available of obsoles
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15. It is not always necessary to d
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ate can be justified. This growth r
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38. A restructuring is a programme
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. the enterprise’s incremental bo
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generate cash inflows from continui
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determined excluding cash flows tha
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esult from synergy between the iden
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88. In allocating an impairment los
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paragraphs 106 to 107 and for goodw
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102. Any increase in the carrying a
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a. if the enterprise sells the disc
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ased on the enterprise’s primary
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EXAMPLE 3- EXAMPLE 4- EXAMPLE 5- EX
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determining value in use of both X
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Total 10,000 7,000 3,000 A24. T use
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of the asset for tax purposes is Rs
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Gross carrying amount 1,000 2,000 3
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in forecasting cash flows. This res
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Schedule 1. Calculation of the plan
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Schedule 5. Summary of the carrying
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End of 20X4 A B C Goodwill Z Carryi
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in Rs. lakhs) Year Future cash flow
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Accounting Standard (AS) 29 Provisi
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The objective of this Statement is
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settle the obligation; or ii. a rel
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17. Financial statements deal with
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may result in the recognition of in
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warranties). The other party may ei
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expenditures are recognised on the
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It does not form part of the Accoun
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paragraphs 14 and 21). Example 3: O
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2005, the enterprise's lawyers advi
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an onerous contract as a contract i
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Accounting Standards 1-29 - Seth & Associates

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