Royalties: 3. Dividends: when the shareholder’s right to receive

Royalties: It must be measured on accruals basis in accordance with the substance of the relevant agreement 3.                  Dividends: when the shareholder’s right to receive payment is established.   IAS 19-Employee benefit plan This standard provides the accounting treatment for all types of employee benefits. It can be treated as liability or expenses in the financial statement. Short term employee benefits. Short term Employee benefits are those which can be settled wholly within the 12 months after the reporting period and considered as expense or liability e.g. wages, salaries, bonuses, etc. Post employment benefits. Post Employee benefits are those which will pay after the completion of employment (excluding termination and short term benefits), such as: Retirement benefits: pensions, lump sum payments. Other post-employment benefits: post employment life insurance, medical care. Defined benefit plan (DBP) These are post employment plans other than defined contribution plans. IAS 19 (2011) prohibits delayed recognition of actuarial gains and losses and past-service-cost. Accounting treatment: Actuarial gains and losses are recognized in other comprehensive income in the period in which they occur. Past-service-costs are recognized in profit or loss in the period incurred. Defined contribution plan The entity pays fixed contributions into a fund and does not have an obligation to pay further contributions if the fund does not hold sufficient assets. This type of contribution recognize as expense /liability when the employee has rendered the service.   IAS 20-Government grants This standard provides the guide line regarding the accounting treatment of various government grants and other form of government assistance together with related disclosure requirements. A government grant is a monetary or non monetary benefits and it can be defined as: 1.   Assistance by government 2.   In the form of transfers of resources to an entity 3.   Government participation in the ownership of an entity and Government grants to Agriculture will not consider. Types of government grants Grants related to income A grant receivable as compensation for cost which have already been incurred or for immediate financial support, with no future related costs. Accounting treatment Separately as other income or deduct it from the related expense in the period in which it is receivable. Grants related to assets A grant relating to assets may be presented in one of two ways: 1.Can be treated as deferred income. 2.Or can be deducted from the asset’s carrying amount. Non-monetary grants Non-monetary grants, such as land or other resources, are usually accounted for at fair value. IAS 21-The effects of changes in foreign exchange rates A transaction in a foreign currency is recorded in the reporting currency by using the exchange rate at the date of the transaction. In case of foreign currency monetary balances, it should be reported by using the closing exchange rate. Non-monetary balance denominated in a foreign currency and carried at historical cost, reported by using the historical exchange rate at the date of the transaction. Non-monetary items carried at fair value and must be reported using the exchange rates when the fair values were determined. Exchange rate  differences are recognized as income or expense .If any differences arise on a monetary item , part of an enterprise’s net investment Such exchange differences are classified separately in equity until the disposal of the net investment, at which time they are includes in the income statement as part of the gain or loss on disposal. IAS 23-Borrowing costs Under IAS 23, borrowing costs can be defined as interest and other costs which have incurred in connection with the borrowing of funds. Borrowing costs should be recognized as an expense in the period incurred or capitalized where they are directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset can be defined as an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.                                                                                                                                                        Under IAS 23 both specific and general borrowing can be capitalized, subject to amounts capitalized in any period not exceeding the amount of borrowing costs incurred during the period and the carrying amount of the qualifying asset is not exceeding its recoverable amount. Capitalization commences when expenditures and borrowings are being incurred for the asset and activities that are necessary to prepare the asset for its intended use or sale are in progress.   IAS 24-Related party disclosures Related parties include holding companies, major shareholders, subsidiaries and associates and key management personnel but exclude finance providers and governments. Because they are includes in the normal dealings with the organization. Where there has been related party transactions, disclosure should be made of the nature of the relationship, the types of transactions and the elements thereof necessary for an understanding of the financial statements. Items of a similar nature may be disclosed in aggregate.   IAS 25-Accounting for investments Long-term investments within the scope of IAS 25 should be carried at either cost or revalued amounts. Marketable equity securities may alternatively be carried at the lower of cost and market value determined on a portfolio basis. Reductions in carrying value (determined on an individual investment basis) should be made to recognize a permanent decline in the values of long-term investments. Increases in the carrying amount of investments arising from a revaluation should be credited to shareholders’ equity. IAS 25 specifies rules for dealing with subsequent revaluations of the same asset. Investments classified as current assets should be carried at either market value or the lower of cost and market value, determined either on an aggregate portfolio basis (in total or by category of investment) or on an individual investment basis. Where current asset investments are carried at market value, any changes in market value should either be included in the income statement or taken to shareholders’ equity as a revaluation adjustment. On disposal of an investment the difference between net disposal proceeds and the carrying amount should be recognized as income or expense. For current investments carried on a portfolio basis at the lower of cost or market, the profit or loss on sale should be based on cost IAS 26-Accounting and reporting by retirement benefit plans. This standard provides guidance on the accounting and reporting by a retirement benefit plan to its employees. In case of contribution plan, the report must include: a statement that shows net assets available for benefits; a summary of significant accounting policies. For a defined benefit plan, the report must include: a statement that shows the net assets available for benefits, the actuarial present value of promised retirement benefits and the resulting excess or deficit. IAS 27-Consolidated financial statements and accounting for investments in subsidiaries. Subsidiary can be defined as, an enterprise which is controlled by the parent. Here Control means the power to govern the financial and operating policies of an enterprise. An enterprise which has one or more subsidiaries should present consolidated financial statements unless it is itself a wholly (or virtually wholly) owned subsidiary. Consolidation of a subsidiary takes place from the date of acquisition, the date on which control of the net assets and operations of the acquiree is effectively transferred to the acquirer. From that date the acquirer should consider the results of operations into the consolidated income statement and recognize in the consolidated balance sheet the assets and liabilities of the acquire, and any goodwill or negative goodwill arising on the acquisition.   IAS 28-Accounting for investments in associates An associate is an enterprise in which the investor has significant influence, but which is neither a subsidiary nor a joint venture of the investor. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control over those policies. It is presumed to exist when the investor holds at least 20% of the investee’s voting power but not to exist when less than 20% is held. In consolidated financial statements, associates should be accounted for using the equity method, unless the investment is acquired and held exclusively for disposal in the near future, in which case it should be carried at cost. IAS 29-Financial reporting in hyperinflationary economies Under IAS 29, where an enterprise belongs in hyperinflationary economy, the financial statements must be restated to take account of inflation. All non-monetary assets (like machine, plant) and liabilities should be considered to their current value at the balance sheet date. Monetary assets (loans) and liabilities are restated at carrying amount. Because they are already expressed in terms of the monetary unit current at the balance sheet dates (although comparative amounts are restated). The net gain or loss arising from holding such assets and liabilities is disclosed in arriving at profit before tax.   IAS 31-Financial reporting of interests in joint ventures Joint venture is nothing but a contractual agreement whereby two or more parties undertake an economic activity which is subject to sharing of control. . The parties should account for its investment based on the type of joint venture. It can be jointly controlled operations or jointly controlled assets or jointly controlled entities. The most common type of joint venture is a jointly controlled entity. For this, the venturer should disclose his interest by preparing its consolidated financial statements reports and. The venture can use either proportional consolidation (benchmark) or the equity method (allowed alternative).   IAS 32-Financial instruments: disclosure and presentation IAS 32 addresses the presentation of certain financial instruments, gives rules about offsetting financial assets and liabilities and requires detailed disclosures about on and off balance sheet financial instruments. The classification between liabilities and equity depends on whether the issuer has a contractual obligation to deliver cash or another financial asset to the holder of the instrument, regardless of its legal form. Where such an obligation exists, the financial instrument is presented as a liability. IAS 32 concludes, for example, that mandatorily redeemable preference shares should be shown in liabilities. When a financial instrument contains a right to convert to equity (eg convertible debt), the issuer should identify the instrument’s component parts and account it separately, allocating the proceeds between liabilities and shareholders’ equity. IAS 33-Earnings per share IAS 33 requires all enterprises with listed ordinary shares, or potential listed ordinary shares (eg convertible debt, preference shares) to disclose with equal prominence on the face of the income statement both basic and diluted earnings per share (EPS). Basic EPS will be calculated by dividing the net profit or loss by the weighted average number of ordinary shares outstanding (including adjustments for bonus and rights issues). For diluted EPS, the weighted average number of ordinary shares takes into account with the dilutive potential ordinary shares, for example convertible debt and share options. Comparative EPS figures (both basic and diluted) should be adjusted retrospectively for the effect of capitalizations, bonus issues or share splits. Disclosure is required of the numerators used to calculate the EPS amounts (reconciled to net profit or loss for the period) and the weighted average number of ordinary shares used as denominators for the basic and diluted EPS calculations (reconciled to one another). IAS 34-Interim financial reporting The IASC is unable to mandate that enterprises publish interim financial reports. However, it encourages publicly traded entities to prepare interim reports at least for the half year and for these to be issued within 60 days of the interim balance date. An interim financial report prepared in accordance with IAS 34 should include a condensed balance sheet, income statement, cash flow statement, statement of changes in equity and selected note disclosures. The same accounting policies will generally be appropriate for recognizing and measuring assets, liabilities, revenues, expenses, gains and losses at interim dates as are used in the annual financial statements, with special measurement rules applying to items such as tax which are computed annually. Any changes in accounting policy from those used in the previous annual financial statements should be disclosed.   IAS 36-Impairment of assets This standard covers all assets except inventories, construction contract assets, deferred tax assets, financial assets and employee benefit assets. It sets out factors to be considered at each balance date which may indicate that the carrying amount of an asset is impaired (when the carrying amount below its recoverable amount). IAS 36 identifies external and internal sources of information which may indicate impairment. External indications are, for example, a decline in an asset’s market value, significant adverse changes in the technological, market, economic or legal environment, increases in market interest rates, or the enterprise net asset value is above its market capitalization. Internal indications may be evidence of obsolescence or physical damage of an asset, changes in the way an asset is used (ie due to restructuring or discontinuing an operation), or evidence from internal reporting that the economic performance of an asset is, or will be, worse than expected. Recoverable amount is the higher of the asset’s net selling price (NSP) and its value in use (VIU). Value in use requires estimations to be made of the future cash flows to be derived from the particular asset, and discounting them using a pre-tax market determined rate that reflects current assessments of the time value of money and the risks specific to the asset. Cash flow projections should cover a maximum period of five years (unless a longer period can be justified.   IAS 37-Provisions, contingent liabilities and contingent assets As per IAS 37 the provision should be recognized only when the enterprise has a present obligation to transfer economic benefits as a result of past events. The provision amount should be estimated as expenditure and it must be settled with the present obligation at the balance sheet date. A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation. Contingent liabilities can be defined as liabilities whose outcome will be confirmed only on the occurrence or non-occurrence of uncertain future events outside the enterprise’s control. Contingent liabilities can be recognized provided it is more likely than not that a transfer of economic benefits will result from past events and a reliable estimate can be made. Contingent assets should not be recognized until they are virtually certain. IAS 38-Intangible assets Intangible asset should be recognized and considered if any future economic benefits attributes to the enterprise’s normal course of activities. And the cost of the asset can be measured reliably. Classes of intangible assets are carried at cost less any accumulated amortization or at revalued amount (fair value at the date of revaluation less accumulated amortization and impairment losses). Where an intangible item acquired through business combination and if it does not meet the recognition criteria as an intangible asset, the amount should be considered as goodwill or negative goodwill. The period of amortization must comprise the best estimate of the asset’s useful life, with a rebuttable presumption that the useful life will not exceed twenty years.   IAS 40-Investment property Under IAS 40 an investment property (land or building or even part of a building) held to earn rentals, for capital appreciation, or both. It is required to determine its fair value (rental or capital appreciation) reliably on a continuing basis. If it is not possible on a continuous basis, then it will not meet the definition of investment property and the enterprise would apply the rules in IAS 16.   IAS 41-Agriculture All biological assets should be measured at fair value, with the change in fair value reported as part of profit or loss from operating activities. Enterprises are encouraged to disclose separately the amount of change in fair value which is attributable to (1) biological transformation and (2) changes in prices.  Agricultural product should be measured at fair value at the point of harvest