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Fiba Notes

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unnatideb7
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FIBA NOTES

IND AS -101 FIRST TIME ADOPTION


Transition - In India
Existing GAAP ------IND AS
FOR TRANSITION

1. change in accounting standards was required


2. staff training was required
3. format of financial statement will change
TRANSITION OF FINANCIAL STATEMENT

⦁ balance sheet -IND AS 101 applied


⦁ profit and loss -IND AS 101 not applied
⦁ cash flow IND AS 101 not applied
transition is required only for the ledger which continue year by year [values]
PROCESS OF TRANSITION

⦁ If the assets are in AS but not in IND -AS you need to write off the asset
⦁ if asset /liability is in as and in IND as but the values are different then there is a requirement for
adjustment
IND-AS 101

Specific requirements
➢ Recognize all assets and liabilities whose recognition is required by IND as
➢ Not recognize items as assets and liabilities if Ind as do not permit such recognition.
➢ reclassify items that are recognized under the previous gap as one type of asset liability, but are a
different type of asset, liability or component of equity under Ind as 101.
➢ Apply IND AS in measuring all recognized assets and liabilities.
IND AS 103
1. What do you mean by your business?
As per IDs 103.

Integrated set of activities and assets that is capable of being conducted and managed for the purpose of
providing goods and services to customers, generating investment income or producing other economic
benefits.
2 What are the elements of business?

As for Ind AS103.


a. Input- Items such as raw materials, intellectual property, and employees to produce output0
b. Process-Systematic and organized way of using inputs to produce outputs. (Including various processes
and operations)
c. Output- The result of the input and output in the form of goods and services.
d. Ability to generate returns- A business having capability to make profit, to give dividends to investors or
owners.
3) Difference between business combinations and asset acquisition.

business combination. ASSET ACQUISITION


• goodwill / Bargain may arise. • Goodwill/ Bargain does not arise.
• Assets and liabilities are recorded at • Assets and liabilities are recorded at
fair value. allocated value.
• DTA/DIL May arise. • DTA/DIL May not arise.
• Initial direct acquisition cost • Acquisition cost is capitalized.
transferred to P/L

4) Different forms of acquisition and how will you measure purchase consideration?
a. Asset acquisition.:
Acquiring company purchases the assets and liabilities of the target company. Including tangible assets such as
property, plant and equipment, and intangible assets and liabilities.
b. equity instruments.
If equity Instruments example shares are a part of the purchase consideration. The fair value is determined on
the acquisition date. (MEASUREMENT OF PURCHASE CONSIDERATION

c. equity acquisition.

• The company buys a significant ownership interest equity share in the target company.
• This may result in gaining control over the targets, operation and financial decision.
d. Reverse acquisition.

• Occurs when a smaller entity acquires a larger entity.


• Results in small entity gets recognized as the acquirer for accounting purposes

Measurement of purchase consideration.

➢ Fair value - purchase consideration measured at a fair value of the asset given equity instrument
liability incurred and contingent consideration assumed at acquisition date.
➢ Equity instrument- If equity instrument. Are a part of purchase consideration. Their fair value is
determined on the acquisition.
➢ Transaction cost- directly attributable transactional costs are added to the purchase consideration. But
indirect cost and general administrative cost are expensed.
➢ Deferred and contingent payments- Any such payments are discounted to their present value at the
date of acquisition.
➢ Consideration Transfer in stages - When this happens, the fair value of equity instrument transferred in
the initial stage is used as the basis for subsequent measurement.
IND AS 113

What is the meaning of IND-AS 113?


➢ IND AS 113 refers to the Indian Accounting Standards 113, which is titled Fair Value Measurement.
➢ IND AS 113 Provides guidelines on how entities should measure fair value for financing reporting
purposes.
➢ Fair value is the price that would be received to sell an asset or paid to transfer reliability in an orderly
transaction between market participants at measurement date.
➢ Stablished Or framework for measuring fair value and sets out specific requirements for disclosing fair
value measurement.

Important features of Ind as 113


Framework- Stablished as a framework for fair value measurement, categorizing inputs into 3 levels.
Valuation techniques- Tides on various valuation methods such as market income and cost approaches.
Fair value hierarchy- That's the first input into three levels

• quoted price, inactive market for identical assets and liabilities.


• Inputs other than quoted prices, included It level one that are observable for the assets or liabilities.
• Unobservable inputs that reflect the entities' own assumptions.

Q) Difference between principal market and most advantageous market?


a) Principal market.
The market with the greatest volume and level of activity for the assets or liabilities being measured.

Market that is not commonly used by market participants to buy or sell assets or incur the liability.
When determining fair value, IND AS 113 directs entities to consider the principal market as market, which
maximizes the observable input to the fair value measurement.

b) Most advantageous market.

Market that maximizes the price for the assets or minimizes price for the liability (Considering transaction cost
and transportation cost)
IND AS 113 allows entities to consider a market as most advantageous even if not the principal market.
This is relevant when a market is more advantageous due to lower transaction costs and other factors, even if
it is not the market with the highest volume or level of activity.

IFRS, Indian accounting standards, IAS


What is the difference between IFRS IND AS and IAS
International Financial Reporting Standards.

− Developed by International Accounting Standard Board


− Global standard for the preparation of public company financial Statement.
− Aim to bring consistency, transparency and comparability across financial statements globally.

Indian Accounting standards (IND AS)

• Converged with IFRS for application in India.


• Not identical to IFRS, but closely aligned, Modifications have been made to cater to Indian economic
environment, legal framework and other conditions.
• Aim to bring Indian accounting standards in line with global standards.
international accounting standards.

➢ Older set of standards issued by International Accounting Standards Committee preceded to IASB
➢ Gradually replaced by IFRS although many of the original IS have been adapted as IFRS with little or no
change.
➢ Provided basis for both IFRS and IND AS.

IND AS 28
What is the difference between depreciation and impairment of loss?

BASIS Impairment of loss. Depreciation.


Meaning A permanent reduction in the The distribution of assets
value of the asset. over its useful life.
Reasons. Due to changed customer Due to normal wear and tear,
preferences, natural disaster, use of the acid for day-to-day
etc. use.
Treatment. Treated as loss. Treated as expenses.
Duration. Nonrecurring. Recurring.
Method. Subtract the fair value of an Straight line method. Written
asset from its book value. down value method.

Types of assets. Can be on fixed, current and On only tangible assets.


intangible assets.

IND AS 19 and IND AS 116


What is the definition of a lease?

• It is an agreement enforceable by law (CONTRACT)


• Benefit of lease include transfer of ownership by the end of lease term.
• Option for lease to purchase asset at a price lower than fair value.
• Lease term covers major part of assets, economic life.

Operating lease.

• Lesser retains the significant risk and rewards associated with ownership of underlying asset.
• Lessee does not have right to purchase asset at the end of lease term at a bargain price
IND AS 109
I Public Limited Company.

• minimum 7 directors No maximum and three directors.


• Minimum share capital of rupees 5,00,000.
• All directors must have a DIN.
• At least one directors DIL at time of submission of identity and address proof.
• Apply for company name through Reserve unique Name (RUN) service on MCA portal.
• prescribed registration fees be paid to ROC
• Form DIR-12, INC-7 and 7.INC- 22 filled with application submitted to ROC.
• Preparation and filing of MOA and AOA

II Private limited company.

• At least 2 shareholders (maximum 200 directors) and 2directors (with one being a resident of India)
• Minimum share capital of RS 100000
• Rest same as public limited company

III One person Company.

• One shareholder who is also the director, with one nominee appointed.
• Minimum authorized capital of Rupees 1,00,000
• Rest process same as public limited company.

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