C.V.O. Chartered & Cost Accountants' Association

Update On AS / SAP / GN / USGAAP / IAS

Contributed by : Shri Ketan D. Saiya, C.A.

Page 2

Disclosures

The financial statements should disclose the following for each class of intangible assets, distinguishing between internally generated intangible assets and other intangible assets

a) The useful lives or the amortisation rates used;

b) The amortisation methods used;

c) The gross carrying amount and the accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the period;

d) A reconciliation of the carrying amount at the beginning and end of the period showing;

i. Additions, indicating separately those from internal development and through amalgamation;

ii. Retirements and disposals;

iii. Impairment losses recognised in the statement of profit and loss during the period (if any);

iv. Impairment losses reversed in the statement of profit and loss during the period (if any);

v. Amortisation recognised during the period; and

vi. Other changes in the carrying amount during the period.

The financial statements should also disclose:

a) If an intangible asset is amortised over more than ten years, the reasons why it is presumed that the useful life of an intangible asset will exceed ten years from the date when the asset is available for use. In giving these reasons, the enterprise should describe the factor(s) that played a significant role in determining the useful life of asset;

b) A description, carrying amount and remaining amortisation period of any individual intangible asset is material to the financial statements of the enterprise as a whole;

c) The existence and carrying amounts of intangible assets whose title is restricted and the carrying amounts of intangible assets pledged as security for liabilities; and

d) The amount of commitments for the acquisition of intangible assets.

IV Accounting Standard (AS) - 27, "Financial Reporting of Interests in Joint Ventures"

AS - 27 comes into effect in respect of accounting periods commencing on or after 01-04-2002 in respect of separate financial statements of an enterprise & consolidated financial statement. It is mandatory in nature.

It should be applied in accounting for interests in joint ventures and the reporting of joint venture assets, liabilities, income and expenses in the financial statements of venturers and investors, regardless of the structures or forms under which the joint venture activities take place.

In respect of its interests in jointly controlled operations, a venturer should recognise in its separate financial statements and consequently in it's consolidated financial statement's:

a) The assets that it controls and the liabilities that it incurs; and

b) The expenses that it incurs and its share of the income that it earns from the joint venture.

In respect of its interest in jointly controlled assets, a venturer should recognise, in its separate financial statements, and consequently in it's consolidated financial statements:

a) Its share of the jointly controlled assets, classified according to the nature of assets;

b) Any liabilities which it has incurred;

c) Its share of any liabilities incurred jointly with the other venturer in relation to the joint venture; and

d) Any expenses which it has incurred in respect of its interest in the joint venture.

In its consolidated financial statements, a venturer should report its interest in a jointly controlled entity using proportionate conso-lidation except

a) An interest in a jointly controlled entity which is acquired and held exclusively with a view to its subsequent disposal in the near future; and

b) An interest in jointly controlled entity, which operates under, sever long-term restrictions that significantly impair its ability to transfer funds to the venture.

Interest in such a jointly controlled entity should be accounted for as an investment in accordance with Accounting Standard (AS) - 13 "Accounting for Investments".

A venturer should discontinue the use of proportionate consolidation from the date that;

a) It ceases to have joint control over a jointly controlled entity but retains, either in whole or in part, its interest in the entity; or

b) The use of the proportionate consolidation is no longer appropriate because the jointly controlled entity operates under sever long-term restrictions that significantly impair its ability to transfer funds to the venturer.

From the date of discontinuing the use of the proportionate consolidation, interest in a jointly controlled entity should be accounted for:

a) In accordance with Accounting Standard (AS) 21, Consolidated Financial Statements, if the venturer acquires unilateral control over the entity and becomes parent within the meaning of that Standard; and

b) In all other cases, as an investment in accordance with Accounting Standard (AS)- 13 "Accounting for Investments", or in accordance with Accounting Standard (AS)- 23 "Accounting for investments" in Associates in Consolidated Financial Statements, as appropriate. For this purpose, cost of the investment should be determined as under;

i. The venture's share in the net assets if he jointly controlled entity as at the date of discontinuance of proportionate consolidation should be ascertained and

ii. The amount of net assets so ascertained should be adjusted with the carrying amount of the relevant goodwill/capital reserve as at the date of discontinuance of proportionate consolidations.

When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction should reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer should recognise only that portion of the gain or loss, which is attributable to the interests of the other venturer. The venturer should recognise the full amount of any loss when the contribution or sale provides evidence of a reduction in the net realisable value of current assets or an impairment loss.

When a venturer purchases assets from a joint venture, the venturer should not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. A venturer should recognise its share of the losses resulting from these transactions in the same way as profits except that losses should be recognised immediately when they represent a reduction in the net realisable value of current assets or an impairment loss.

An investor in a joint venture, which does not have joint control, should report its interest in a joint venture in its consolidated financial statements in accordance with Accounting Standard (AS) 13 - "Accounting for Investments," Accounting Standard (AS) 23 - "Accounting for Investments in Associates in Consolidated Financial Statements, as appropriate."

In separate financial statements of an investor, the interests in joint ventures should be accounted for in accordance with Accounting Standard (AS) 13- "Accounting for Investments."

Operators or managers of a joint venture should account for any fees in accordance with Accounting Standard (AS) 9 - "Revenue Recognition."

A venturer should disclose the aggregate amount of the following continent liabilities, unless the probability of loss is remote, separately from the amount of other contingent liabilities;

a) Any contingent liabilities that the venturer has incurred in relation to its interests in joint ventures and its share in each of the contingent liabilities which have been incurred jointly with other venturer;

b) Its share of the contingent liabilities of the joint ventures themselves for which it is contingently liable; and

c) Those contingent liabilities that arise because the venturer is contingently liable for the liabilities of the other venturer of a joint venture.

A venturer should disclose the aggregate amount of the following commitments in respect of its interests in joint ventures separately from other commitments:

a) Any capital commitments of the venturer in relation to its interest in joint ventures and its share in the capital commitments that have been incurred jointly with other venturer; and

b) Its share of the capital commitments of the joint venturer themselves.

A venturer should disclose a list of all joint ventures and description of interests in significant joint ventures. In respect of jointly controlled entries, the venturer should also disclose the proportion of ownership interest, name and country of incorporation or residence.

A venturer should disclose, in its separate financial statements, the aggregate amounts of each of the assets, liabilities, income and expenses related to its interests in the jointly controlled entities.

Venturer in consolidated financial statements should report its interest in a jointly controlled entity using its share of each of the assets, liabilities, income and expenditure of a jointly controlled entity is reported as separate line items except jointly controlled entity which is acquired and held exclusively with a view to its subsequent disposal in the near future; and an interest in a jointly controlled entity, which operates under severe long-term restrictions that significantly, impairs its ability to transfer funds to the venturer.

A venturer should discontinue the use of above consolidation from the date that:

it ceases to have joint control over a jointly controlled entity but retains, either in whole or in part, its interest in the entity; or the use of the proportionate consolidation is no longer appropriate because the jointly controlled entity operates under severe long-term restrictions that significantly impair its ability to transfer funds to the venturer.

Interest in such a jointly controlled entity should be accounted for as an investment in accordance with Accounting Standard (AS) 13 - "Accounting for Investments."

A venturer should disclose a list of all joint ventures and description of interests in significant joint ventures. In respect of jointly controlled entities, the venturer should also disclose the proportion of ownership interest, name and country of incorporation or residence.

Few Copies of NRRC Paper book containing more than 125 pages, which can be a useful reference material, is available for sale at Association's office for Rs. 100/- per copy.

Few extra copies of some ITR are available at Association's office. Any one interested may contact Shri Nanjibhai between 3 p.m. and 7 p.m.

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