{"id":11779,"date":"2024-03-20T11:19:37","date_gmt":"2024-03-20T05:49:37","guid":{"rendered":"https:\/\/gstguntur.com\/?p=11779"},"modified":"2024-03-21T09:27:55","modified_gmt":"2024-03-21T03:57:55","slug":"accounting-standards-applicability-of-as-ca-inter-accounts-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/accounting-standards-applicability-of-as-ca-inter-accounts-study-material\/","title":{"rendered":"Accounting Standards-Applicability of AS \u2013 CA Inter Accounts Study Material"},"content":{"rendered":"

Accounting Standards-Applicability of AS \u2013 CA Inter Accounts Study Material<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Accounting Standards-Applicability of AS \u2013 CA Inter Accounts Study Material<\/h2>\n

What Are As? What Are The Advantages\/Benefits?<\/strong><\/p>\n

Question 1.
\nWhat are Accounting Standards? Explain the issues, with which they deal. (4 Marks) (November 2017)
\nAnswer:
\nAccounting Standards (ASs) are written policy documents issued by expert accounting body or by government or other regulatory body covering the aspects of recognition, measurement, presentation and disclosure of accounting transactions in the financial statements. Accounting Standards reduce the accounting alternatives in the preparation of financial statements and ensure standardization of alternative accounting treatments and comparability of financial statements of different enterprises.<\/p>\n

Accounting Standards deal with the following issues:<\/p>\n

    \n
  1. Recognition of events and transactions in the financial statements.<\/li>\n
  2. Measurement of these transactions and events.<\/li>\n
  3. Presentation of these transactions and events in the financial statements in a manner that is meaningful and understandable to the reader; and<\/li>\n
  4. Disclosure requirements which should be there to enable the public at large and the stakeholders and the potential investors, in particular, to get an insight into what these financial statements are trying to reflect and thereby facilitating them to take prudent and informed business decisions.<\/li>\n<\/ol>\n

    \"Accounting<\/p>\n

    Question 2.
    \n\u2018Accounting Standards standardize diverse accounting policies with a view to eliminate the non-comparability of financial statements and improve the reliability of financial statements.\u2019 Discuss and explain the benefits of Accounting Standards. (4 Marks) (November 2018)
    \nAnswer:
    \nAccounting Standards standardize diverse accounting policies with a view to eliminate the non-comparability of financial statements and improve the reliability of financial statements. Accounting Standards provide a set of standard accounting policies, valuation norms and disclosure requirements.<\/p>\n

    Accounting standards aim at improving the quality of financial reporting by promoting comparability, consistency and transparency, in the interests of users of bnancial statements.<\/p>\n

    The following are the benefits of Accounting Standards:
    \n(i) Standardization of alternative accounting treatments: Accounting Standards reduce to a reasonable extent confusing variation in the accounting treatment followed for the purpose of preparation of finan-cial statements.<\/p>\n

    (ii) Requirements for additional disclosures: There are certain areas where important is not statutorily required to be disclosed. Standards may call for disclosure beyond that required by law.<\/p>\n

    \"Accounting<\/p>\n

    (iii) Comparability of financial statements: The application of accounting standards would facilitate comparison of financial statements of different companies situated in India and facilitate comparison, to a limited extent, of financial statements of companies situated in different parts of the world. However, it should be noted in this respect that differences in the institutions, traditions and legal systems from one country to another give rise to differences in Accounting Standards adopted in different countries.<\/p>\n

    Levels I, I And III Entities<\/strong><\/p>\n

    Question 3.
    \nList the criteria to be applied for rating a non-corporate entity as Level I entity for the purpose of compliance of Accounting Standards in India.
    \nAnswer:
    \nNon-corporate entities which fall in any one or more of the following categories, at the end of the relevant accounting period, are classified as Level I entities:<\/p>\n

      \n
    1. Entities whose equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India.<\/li>\n
    2. Banks (including co-operative banks), bnancial institutions or entities carrying on insurance business.<\/li>\n
    3. All commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees fifty crore in the immediately preceding accounting year.<\/li>\n
    4. All commercial, industrial and business reporting entities having borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding accounting year.<\/li>\n
    5. Holding and subsidiary entities of any one of the above.<\/li>\n<\/ol>\n

      \"Accounting<\/p>\n

      Exemptions From As Based On ICAI Directive<\/strong><\/p>\n

      Question 4.
      \nM\/s Omega & Co. (a partnership firm), had a turnover of \u20b9 1.25 crores (excluding other income) and borrowings of \u20b9 0.95 crores in the previous year. It wants to avail the exemptions available in application of Accounting Standards to non-corporate entities for the year ended 31.3.2013. Advise the management of M\/s Omega & Co. in respect of the exemptions of provisions of ASs, as per the directive issued by the ICAI. (5 Marks) {November 2013)
      \nAnswer:
      \nThe question deals with the issue of Applicability of Accounting Standards to a non-corporate entity. For availment of the exemptions, first of all, it has to be seen that M\/s Omega & Co. falls in which level of the non-corporate entities. Its classification will be done on the basis of the classification of non-corporate entities as prescribed by the ICAI. According to the ICAI, non-corporate entities can be classified under 3 levels viz. Level I, Level II (SMEs) and Level III (SMEs).<\/p>\n

      If an entity whose turnover (excluding other income) exceeds rupees fifty crore in the immediately preceding accounting year, it does not fall under the category of Level I entities. Non-corporate entities which are not Level I entities but fall in any one or more of the following categories are classiRed as Level II entities:<\/p>\n

        \n
      1. All commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees one crore but does not exceed rupees fifty crore in the immediately preceding accounting year.<\/li>\n
      2. All commercial, industrial and business reporting entities having bor-rowings (including public deposits) in excess of rupees one crore but not in excess of rupees ten crore at any time during the immediately preceding accounting year.<\/li>\n
      3. Holding and subsidiary entities of any one of the above.<\/li>\n<\/ol>\n

        \"Accounting<\/p>\n

        As the turnover of M\/s Omega & Co. is more than \u20b9 1 crore, it falls under 1st criteria of Level II non-corporate entities as defined above. Even if its borrowings of \u20b9 0.95 crores are less than \u20b9 1 crore, it will be classified as Level II Entity. In this case, AS 3, AS 17, AS 21, AS 23, AS 27 will not be applicable to M\/s Omega & Co. Relaxations from certain requirements in respect of AS 15, AS 19, AS 20, AS 25, AS 28 and AS 29 are also available to M\/s Omega & Co.<\/p>\n

        Exemptions From As Based On Companies (Accounting Standards) RULES, 2006<\/strong><\/p>\n

        Question 5.
        \nA company was classified as Non-SMC in 2015-2016. In 2016-2017 it has been classified as SMC. The management desires to avail the exemption or relaxations available for SMCs in 2016-2017. However, the accountant of the company does not agree with the same. Comment.
        \nAnswer:
        \nAs per Rule 5 of the Companies (Accounting Standards) Rules, 2006, an existing company, which was previously not an SMC and subsequently becomes an SMC, should not be qualified for exemption or relaxation in respect of accounting standards available to an SMC until the company remains an SMC for two consecutive accounting periods. Therefore, the management of the company cannot avail the exemptions available with the SMCs for the year ended 31st March, 2017.<\/p>\n

        \"Accounting<\/p>\n

        Question 6.
        \nComment whether the following Companies can be classified as a Small and Medium Sized Company (SMC) as per the Companies (Accounting Standards) Rules, 2006:
        \n(i) A Pvt. Ltd., a subsidiary of a multinational company listed on London Stock Exchange. It has a turnover of \u20b9 12 crores and borrowings of \u20b9 5 crores.
        \n(ii) B Pvt. Ltd., has a turnover of \u20b9 45 crores, other income of \u20b9 7 crores and bank borrowings of \u20b9 9 crores.
        \nAnswer:
        \nAs per the Companies (Accounting Standards) Rules, 2006, \u2018Small and Medium Sized Company\u2019 (SMC) means, a company:<\/p>\n

          \n
        1. Whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;<\/li>\n
        2. Which is not a bank, financial institution or an insurance company;<\/li>\n
        3. Whose turnover (excluding other income) does not exceed rupee; fifty crores in the immediately preceding accounting year;<\/li>\n
        4. Which does not have borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding ac-counting year; and<\/li>\n
        5. Which is not a holding or subsidiary company of a company which is not a small and medium-sized company.<\/li>\n<\/ol>\n

          Explanation:
          \nA company shall qualify as a Small and Medium Sized Company, if the condition mentioned, therein are satisfied as at the end of the relevant accounting period.<\/p>\n

          (i) As per the definition of SMC, point (v), a company will be a SMC, if it is not holding or subsidiary company of another company which is not a SMC. Since A Pvt. Ltd., is a subsidiary of another Company which is listed, on London Stock Exchange (and is therefore not a SMC), A Pvt. Ltd., cannot be a SMC. The turnover and borrowings are not relevant in this case.<\/p>\n

          (ii) As per the definition of SMC, point (iii), a company will be a SMC if its turnover does not exceed \u20b9 50 crores or borrowings do not exceed \u20b9 10 crore. For calculating this turnover, other income is not to be included. Since B Pvt. Ltd., has a turnover of \u20b9 45 crores and borrowing of \u20b9 9 crores, it will satisfy the definition and can be classified as SMC.<\/p>\n

          \"Accounting<\/p>\n

          Question 7.
          \nA company was classified as Non-SMC in 2013-14. In 2014-15 it has been classified as SMC. The management desires to avail the exemption or relaxations available for SMCs in 2014-15. However, the accountant of the company does not agree with the same. Comment.
          \nAnswer:
          \nAs per Rule 5 of the Companies (Accounting Standards) Rules, 2006, an existing company, which was previously not an SMC and subsequently becomes an SMC, shall not be qualified for exemption or relaxation in respect of accounting standards available to an SMC until the company remains an SMC for two consecutive accounting periods. Therefore, the management of the company cannot avail the exemptions available with the SMCs for the year ended 31st March, 2015.<\/p>\n

          Question 8.
          \nXYZ Ltd., (a corporate entity) with a turnover of \u20b9 35 lakhs and borrowings of \u20b9 10 lakhs during any time in the previous year, wants to avail the exemptions available in adoption of Accounting Standards applicable to companies for the year ended 31.3.2017. Advise the management on the exemptions that are available as per the Companies (ASs) Rules, 2006.
          \nIf XYZ is a partnership firm is there any other exemptions additionally available.
          \nAnswer:
          \nThe question deals with the issue of Applicability of Accounting Standards for corporate & non-corporate entities.
          \nThe companies can be classified under two categories viz. SMCs and Non-SMCs under the Companies (ASs) Rules, 2006.
          \nAs per the Companies (ASs) Rules, 2006, criteria for above classification as SMCs, are:
          \n\u2018Small and Medium Sized Company\u2019 (SMC) means, a company-<\/p>\n

            \n
          1. whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;<\/li>\n
          2. which is not a bank, financial institution or an insurance company;<\/li>\n
          3. whose turnover (excluding other income) does not exceed rupees fifty crore in the immediately preceding accounting year;<\/li>\n
          4. which does not have borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding ac-counting year; and<\/li>\n
          5. which is not a holding or subsidiary company of a company which is not a small and medium-sized company.<\/li>\n<\/ol>\n

            \"Accounting<\/p>\n

            Since, XYZ Ltd.\u2019s turnover of \u20b9 35 lakhs do not exceed \u20b9 50 crores & borrowings of \u20b9 10 lakhs are less than \u20b9 10 crores, it is a small and medium sized company.
            \nThe following relaxations and exemptions are available to XYZ Ltd.<\/p>\n

              \n
            1. AS 3 ‘Cash Flow Statements’ is not mandatory.<\/li>\n
            2. AS 17 \u2018Segment Reporting\u2019 is not mandatory.<\/li>\n
            3. SMEs are exempt from some paragraphs of AS 19 ‘Leases\u2019.<\/li>\n
            4. SMEs are exempt from disclosures of diluted EPS (both including and excluding extraordinary items).<\/li>\n
            5. SMEs are allowed to measure the \u2018value in use\u2019 on the basis of reasonable estimate thereof instead of computing the value in use by present value technique under AS 28 \u2018Impairment of Assets\u2019.<\/li>\n
            6. SMEs are exempt from certain disclosure requirements of AS 29 (Revised) \u2018Provisions, Contingent Liabilities and Contingent Assets\u2019.<\/li>\n
            7. SMEs are exempt from certain requirements of AS 15 \u2018Employee Benefits\u2019.<\/li>\n
            8. Accounting Standards 21, 23, 27 are not applicable to SMEs.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

              Accounting Standards-Applicability of AS \u2013 CA Inter Accounts Study Material is designed strictly as per the latest syllabus and exam pattern. Accounting Standards-Applicability of AS \u2013 CA Inter Accounts Study Material What Are As? What Are The Advantages\/Benefits? Question 1. What are Accounting Standards? Explain the issues, with which they deal. (4 Marks) (November 2017) …<\/p>\n

              Accounting Standards-Applicability of AS \u2013 CA Inter Accounts Study Material<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/11779"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=11779"}],"version-history":[{"count":4,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/11779\/revisions"}],"predecessor-version":[{"id":11839,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/11779\/revisions\/11839"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=11779"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=11779"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=11779"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}