DISCLOSURE ACCOUNTING
STANDARDS
AS-1, AS-4, AS-20 AND AS-24
CA R.C Thakkar
M.Com, LLB, FCA
E-mail : rcthakkarca@gmail.com
Mobile : 9879447009
PLETHORA OF ACCOUNTING
STANDARDS :

Accounting Standards (AS) issued by ICAI.

Accounting Standards notified under Companies
Accounting Standard Rules,2006.

International Accounting Standards (IAS)

International Financial Reporting Standards (IFRS)

Converged Indian Accounting Standards (Ind AS)
hosted on the website of MCA.
APPLICABILITY OF
ACCOUNTING STANDARDS: (ICAI)



All Enterprises classified into Level I, II and III
enterprises for the purpose of Applicability of
Accounting Standards.
Level I enterprises are required to comply fully
with all the accounting standards.
Level II and Level III enterprises are
considered as SMEs and they have been given
certain relaxations and exemptions from the
compliance of certain AS or part thereof.
LEVEL I ENTERPRISES :
Enterprises which fall in any one or more of the
following categories, at any time during the
accounting period:
 (i) Enterprises whose equity or debt securities
are listed whether in India or outside India.
 (ii)
Enterprises, which are in the process of
listing their equity or debt securities as
evidenced by the board of directors’ resolution
in this regard.
 (iii) Banks including co-operative banks,
Insurance Cos. and Financial institutions.
 (iv) Entities whose turnover exceeds Rs.50 Cr.
Or Borrowings exceed Rs.10 Cr. in the immediate
preceding P.Y.

LEVEL II ENTERPRISES :
(i) All commercial, industrial and business
enterprises, whose turnover for the immediately
preceding accounting period on the basis of
audited financial statements exceeds Rs. 40
lakhs but does not exceed Rs. 50 crores.
Turnover does not include ‘other income’.
 (ii) All commercial, industrial and business
enterprises having borrowings, including public
deposits, in excess of Rs. 1 crore but not in
excess of Rs. 10 crores at any time during the
accounting period.
 (iii) Holding and subsidiary enterprises of any
one of the above at any time during the
accounting period.

LEVEL III ENTERPRISES :










Enterprises, which are not covered under Level I and
Level II, are considered as Level III enterprises.
CERTAIN AS – NOT TO APPLY TO LEVEL II AND
LEVEL III ENTERPRISES:
AS-3 CASH FLOW STATEMENTS
AS-17 SEGMENT REPORTING
AS-18 RELATED PARTY DISCLOSURES
AS-21 CONSOLIDATED FINANCIAL STATEMENTS
AS-23 ACCOUNTING FOR INV. IN ASSOCIATES
AS-24 DISCOTINUING OPERATIONS
AS-25 INTERIM FINANCIAL REPORTING
AS-27 FIN. REPORTING OF INTEREST IN JV
APPLICABILITY



OF
AS
TO
COMPANIES
Applicability of AS to Companies is governed by
Companies’ AS Rules,2006….as amended…
ICAI Classification of Level I, II and III not
relevant for Cos.
Certain Exemptions and Relaxations granted to
Small & Medium Companies (SMC).
COMPANIES’ AS RULES,2006:






SMC defined in Rule 2(f) : Company which satisfies
the following five conditions as at the end of A/c.
Period :
(a) Co. whose equity-debt-securities are not listed
and not in the process of listing on any Stock
Exchange in India/Outside India
(b) Co. which is not a Bank or FI or Insurance Co.
(c) Co.’s turnover excluding other income does not
exceed Rs.50 crores in the immediately preceding
previous year.
(d) Co. which does not have borrowing (including
public deposits) exceeding Rs.10 Crores at any time
during the immediately preceding accounting year
and,
(e) The Co. is not a holding or subsidiary co. of a
Non-SMC Company.
APPLICABILITY OF AS TO COMPANIES
Accounting
Title of the AS
Standard
Applicability and
Exemption to SMC
AS - 1
Disclosure of Accounting Policies
ALL
AS - 2
Valuation of Inventories
ALL
AS - 3
Cash flow Statements
AS - 4
Contingencies and Events Occurring
After the Balance Sheet Date
ALL
AS - 5
Net Profit or Loss for the Period,
Prior Period Items and Changes in
Accounting Policies
ALL
AS - 6
AS - 7
Depreciation Accounting
Construction Contracts
LEVEL-I
AND NON-SMC
ALL
ALL
APPLICABILITY
OF AS TO COMPANIES
Accounting
Standard
Title of the AS
Applicability and
Exemption to SMC
AS – 9
Revenue Recognition
ALL
AS – 10
Accounting for Fixed Assets
ALL
AS – 11
The Effects of Changes in Foreign
Exchange Rates
ALL
AS – 12
Accounting for Government Grants
ALL
AS – 13
Accounting for Investments
ALL
AS – 14
Accounting for Amalgamations
ALL
AS - 15
Accounting for Retirement Benefits
in the Financial Statements of
Employers
Employees Benefits (Revised 2005)
ALL
PARTIAL
APPLICABLE TO SMC
APPLICABILITY
OF AS TO COMPANIES
Accounting
Standard
Title of the AS
Applicability and
Exemption to SMC
AS – 16
Borrowing Costs
ALL
AS - 17
Segment Reporting
LEVEL-I
AND NON-SMC
AS - 18
Related Party Disclosures
LEVEL-I
AND ALL COS.
AS - 19
Leases
AS - 20
Earnings Per Share
AS – 21
Consolidated Financial Statements
AS - 22
Accounting for Taxes on Income
ALL AND
PARTIAL TO SMC
LEVEL-I AND ALL COS.
BUT PARTIAL TO SMC
ALL COMPANIES
ALL
APPLICABILITY
OF AS TO COMPANIES
Accounting
Title of the AS
Standard
Applicability and
Exemption to SMC
AS - 23
Accounting for investments in
associates in Consolidated Financial
Statements
AS - 24
Discontinuing Operations
AS – 25
Interim Financial Reporting
ALL
AS - 26
Intangible Assets
ALL
AS - 27
Financial Reporting of Interests in Joint
Ventures
ALL
AS - 28
Impairment of Assets
ALL BUT
PARTIAL TO SMC
AS - 29
Provisions, Contingent Liabilities and
Contingent Assets
ALL BUT
PARTIAL TO SMC
ALL COS.
LEVEL I - AND
ALL COMPANIES
ACCOUNTING STANDARD-1
 DISCLOSURE
OF
ACCOUNTING POLICIES
ACCOUNTING STANDARD-1
AS-1 is proposed to be revised.
 Exposure Draft for Revised AS-1 has been issued
and it was open for comments up to September 02,
2013.
 The name of the newly Revised AS-1 shall be
“Presentation of Financial Statements”.
 AS-1 is proposed to be revised in view of the
Revised Schedule VI requiring current and noncurrent classification of assets and liabilities and
also due to significant changes in IAS-1.
 The scope of Revised AS-1 is much wider and it not
only includes Disclosure of A/c. Policies but
various aspects of Presentation of Fin. Statements.

AS-1 DISCLOSURE
OF
A/C. POLICIES

It deals with the disclosure of significant accounting
policies adopted in the preparation and presentation of
financial statements.

The view presented in the financial statements of an
enterprise of its financial position and its profit or loss
can largely be impacted by the accounting policies
followed in the preparation and presentation of its
financial statements.

The accounting policies followed may vary from
enterprise to enterprise and from year to year.
AS-1
INTRODUCTION (CONTD.)
Disclosure of Significant Accounting Policies is
necessary if the view presented by the financial
statements is to be properly appreciated and
understood.
 Disclosure of Some of the Accounting Policies is

required by law e.g. AS-2 Valuation of Inventories.

ICAI also recommends the Disclosure of certain
Accounting Policies like Translation of Policies in
respect of Foreign Currency Transactions.
AS-1
INTRODUCTION (CONTD.)
The nature and degree of Disclosure of Accounting
Policies may vary considerably between the
Corporate and Non-Corporate Sector and between
the units in the Same Sector.
 Many enterprises include in the Notes on the
Accounts the descriptions of some of the
accounting policies.
 The purpose of this Standard is to promote better
understanding of financial statements by
encouraging the proper disclosure of significant
accounting policies followed in their preparation.
 It
would also facilitate more meaningful
comparison of financial statements of different
enterprise.

AS-1
DISCLOSURE
OF
A/C.POLICIES :

24. All significant accounting policies adopted in the
preparation and presentation of financial statements should be
disclosed.

25. The disclosure of the significant accounting policies as such
should form part of the financial statements and the significant
accounting policies should normally be disclosed in one place.

26. Any change in the accounting policies which has a material
effect in the current period or which is reasonably expected to
have a material effect in later periods should be disclosed. In
the case of a change in accounting policies which has a
material effect in the current period, the amount by which any
item in the financial statements is affected by such change
should also be disclosed to the extent ascertainable. Where
such amount is not ascertainable wholly or in part, the fact
should be indicated.
AS-1
DISCLOSURE
OF
A/C.POLICIES :

27. If the fundamental accounting assumptions, viz.
Going Concern, Consistency and Accrual are
followed in financial statements, specific disclosure
is not required. If a fundamental accounting
assumption is not followed, the fact should be
disclosed.

23. Disclosure of accounting policies or of changes
therein cannot remedy a wrong or inappropriate
treatment of the item in the accounts.
AS-1
DISCLOSURE
OF
A/C.POLICIES :

16. The primary consideration in the selection of
accounting policies by an enterprise is that the
financial statements prepared and presented on the
basis of such accounting policies should represent a
true and fair view of the state of affairs of the
enterprise as at the balance sheet date and of the
profit or loss for the period ended on that date.

17. Major considerations governing the selection
and application of accounting policies are:—
(a) Prudence e.g. Collectability of Receivables
(b) Substance over Form e.g Hire Purchase and,
(c) Materiality.
AS-1
DISCLOSURE
OF
A/C.POLICIES :
14. The following are examples of the areas in which different
accounting policies may be adopted by different enterprises :
 (a) Methods of depreciation, depletion and amortisation
 (b) Treatment of expenditure during construction period
 (c) Conversion or translation of foreign currency items
 (d) Valuation of inventories
 (e) Treatment of goodwill
 (f) Valuation of investments
 (g) Treatment of retirement benefits
 (h) Recognition of profit on long-term contracts
 (i) Valuation of fixed assets
 (j) Treatment of contingent liabilities.
15. The above list of examples is not intended to be exhaustive.
ACCOUNTING STANDARD-4
 CONTINGENCIES
AND
EVENTS OCCURING AFTER
BALANCE SHEET DATE
CONTINGENCIES


A Contingency is a condition or situation, the
ultimate outcome of which, gain or loss, will be known
or determined only on the occurrence, or nonoccurrence, of one or more uncertain future events.
However now contingencies are no more dealt with by
Accounting Standard – 4 after coming into force of
Accounting Standard – 29 on Provisions, Contingent
Liabilities and Contingent Assets (except provision
for Bad & Doubtful Debts).
EVENTS OCCURRING AFTER THE
BALANCE SHEET DATE
 This
are events, favourable or unfovourable
which occur between
The Balance Sheet date
&
The date on which the financial statements
are approved by the approving authority.
EVENTS OCCURRING AFTER THE
BALANCE SHEET DATE
Events Occurring after Balance
Sheet Date
Events provide further
evidence of circumstances &
conditions existing on balance
sheet date.
Events do not provide any
further evidence of
circumstances & conditions
existing on balance sheet
date.
Adjusting Event
Non Adjusting Event
ADJUSTING EVENTS

These events require the restatement of
financial statements.

Examples:-

Insolvency of debtors,

Judgment of pending law suite,

Retrospective changes in government regulation,

Proposed Dividend (proposed or declared after
the Balance Sheet Date)
NON-ADJUSTING EVENTS


These events are non-adjusting in nature & hence
financial statement should not be restated.
If it is material then disclosure should be provided
in notes to account
&
If it is a routine event then even disclosure is not
required.

Examples:- Loss caused by fire or theft, Decline in
Market Value of Investments, Fluctuations in
exchange rate, Prospective changes in government
regulations, Mergers, Demergers, Discontinuing
operations or any other form of corporate
restructuring.
EVENTS OCCURRING AFTER THE
BALANCE SHEET DATE


Events occurring after the balance sheet date
should not be so significant that the
fundamental accounting assumption of going
concern becomes invalid……. In such a situation,
the assets & liabilities should be restated at
their liquidation value.
An event occurs after balance sheet date and
also after the approval of financial statements
then such an event can neither be reflected in
financial statements nor in notes to accounts.
However such an event if material… then it
should be disclosed in directors report.
LATEST DEVELOPMENTS



AS-4 has been revised & its title has been
changed simply to “Events Occurring After The
Balance Sheet Date”.
A major change between existing AS-4 & revised
AS-4 is in the treatment of Proposed Dividend.
Existing AS-4 considers proposed dividend as an
adjusting event while revised AS-4 considers it
to be a non adjusting event.
However revised AS-4 is still not notified under
the companies act. Hence company has to follow
existing AS-4.
ACCOUNTING STANDARD-20
 EARNINGS
PER SHARE
AS-20 EARNINGS PER SHARE

AS-20 came into effect in respect of accounting
periods starting from 01.04.2001 and is mandatory
in nature.

Limited Revision has been made to this standard in
2004. Para 48 and 51 relating to disclosure
requirements have been revised in 2004.

Presently, limited revision to the Standard is
proposed. Exposure Draft relating to the limited
revision to the standard has been published by
ICAI in May,2013.
AS- 20 EARNINGS PER SHARE
Objective of the AS :
To prescribe principles for determination and
presentation of EPS which will improve
comparison of performance among different
enterprises or different accounting periods.
 Scope and Applicability :
The Standard applies to all enterprises whose
equity shares or potential equity shares are listed
on a recognized stock exchange in India.
The Standard also applies to all the companies
whether their equity shares are listed or not.

AS-20 EPS
PRESENTATION
An Enterprise should present basic and diluted EPS
on the face of the Profit & Loss Statement for each
class of equity shares.
 An Enterprise should present basic and diluted EPS
with equal prominence for all the periods.
 AS requires the Enterprise to disclose basic and
diluted EPS even if the amounts disclosed are
negative i.e. Net Loss per Share.
 In
consolidated
financial
statements,
the
information relating to basic and diluted EPS
should be presented on the basis of consolidated
information.

BASIC

AND
DILUTED EARNINGS PER SHARE
Basic Earnings Per Share :
Net Profit / Loss for the Period
Attributable to Equity Share Holders
(After Tax and Pref. Dividend)

= -------------------------------------------------------Weighted Average Number of Shares
outstanding during the Period
(to be adjusted for further issue, bonus, rights etc.)
BASIC

AND
DILUTED EARNINGS PER SHARE
Diluted Earnings Per Share :
Net Profit / Loss for the Period
Attributable to Equity Share Holders
(After adjustment of Diluted Earnings)

= -------------------------------------------------------Weighted Average Number of Equity Shares
outstanding during the Period
(to be adjusted for potential equity shares
Assuming conversion of debt in to equity etc.)
ACCOUNTING STANDARD-24
DISCONTINUING
OPERATIONS
Purpose: To establish principles of
reporting information about
Discontinuing Operations
MEANING OF DISCONTINUING
OPERATIONS

Discontinuing operations is a distinguishable
component* of an enterprise representing a
major line** of business or geographical area of
operations, which pursuant to a single plan*** is
to be disposed off entirely or substantially by
way of sale or demerger or change in ownership
or piecemeal sale or by way abandonment.
*Distinguishable Component-
By distinguishable it means it must have an
identity separate from other components of
an enterprise. This is necessary to provide
operating & financial information.
**Major line-
AS-24 is silent on what constitutes a major
line of business or geographical area of
operations. Hence, 10% criteria for
identifying reportable segment as described
in AS-17 can be applied under AS-24.
***Single Plan-
Single plan reflects single mindedness on
the part of the enterprise to discontinue an
operation.
INITIAL DISCLOSURE EVENT

An enterprises is required to provide disclosure for
discontinuing operations whenever the financial
statements are prepared after the occurrence of
Initial Disclosure Event(IDE).
IDE is earlier of:
Enterprise enters into a binding contract of sale.
OR

Board of director or similar approving authority
approves a formal plan for discontinuance & makes an
announcement of it.
DISCLOSURE REQUIREMENTS OF AS-24
A) NARRATIVE DISCLOSURES
Followings details should be provided:g
Description of discontinuing operations.
g
Source & nature of initial disclosure event.
g
Estimated time period for completion &
disposal of discontinuing operations.
g
Name of the party with whom binding contract of
sale has been entered into & negotiated price (if
applicable).
DISCLOSURE REQUIREMENTS OF AS-24
B) QUANTITATIVE DISCLOSURES
Disclosure shall be provided for discontinuing
operation as well as continuing operation so that the
impact of discontinuing operation measured easily.
PARTICULARS
DISCONTINUING
OPERATIONS
(`)
CONTINUING
OPERATIONS
(`)
TOTAL
(`)
Assets
xxxx
xxxx
xxxx
Liabilities
xxxx
xxxx
xxxx
Revenue
xxxx
xxxx
xxxx
Less: Expenses
xxxx
xxxx
xxxx
Profit Before Tax(PBT)
xxxx
xxxx
xxxx
Less: Tax
xxxx
xxxx
xxxx
Profit After Tax (PAT)
xxxx
xxxx
xxxx
Balance Sheet Items
P & L Items
THANK YOU
CA R.C Thakkar
M.Com, LLB, FCA
E-mail : rcthakkarca@gmail.com
Mobile : 9879447009