CA Intermediate PAPER 1 : ADVANCED ACCOUNTING Syllabus

Under AS 9, when is revenue from the rendering of services recognised?

By the proportionate completion method or the completed service contract method, depending on the nature of the service, when no significant uncertainty exists regarding the amount of consideration and its collectability.

Under AS 9, how are interest, royalties and dividends recognised?

Interest: on a time proportion basis taking into account the amount outstanding and rate applicable. Royalties: on an accrual basis as per the relevant agreement. Dividends: when the owner's right to receive payment is established.

Under AS 10, how is the cost of an item of Property, Plant and Equipment measured initially?

At its cost, comprising the purchase price (including import duties and non-refundable taxes, less trade discounts and rebates), directly attributable costs of bringing the asset to working condition for its intended use, and the initial estimate of dismantling/removal/restoration costs.

Under AS 10, what are the two models for measurement after recognition of PPE?

The Cost Model (cost less accumulated depreciation and impairment losses) and the Revaluation Model (revalued amount less subsequent accumulated depreciation and impairment losses).

Under AS 11, how are foreign currency monetary items reported at each balance sheet date?

They are reported using the closing rate. Exchange differences arising on settlement or on reporting monetary items are generally recognised as income or expense in the period in which they arise.

Under AS 11, how are non-monetary items carried at historical cost translated?

Using the exchange rate at the date of the transaction (i.e., not retranslated at the closing rate).

Under AS 11, what is the difference between an 'integral' and a 'non-integral' foreign operation?

An integral foreign operation carries on business as if it were an extension of the reporting enterprise. A non-integral foreign operation accumulates cash and other items, generates income and incurs expenses largely in the local currency, and operates with significant autonomy.

Under AS 12, what are the two broad approaches to accounting for government grants?

The Capital approach (grant credited to shareholders' funds/capital reserve) and the Income approach (grant taken to income over the relevant periods to match with related costs). AS 12 generally follows the income approach for revenue grants.

Under AS 12, how is a government grant related to a depreciable fixed asset accounted for?

Either by deducting the grant from the gross value of the asset (cost), or by treating it as deferred income recognised in the profit and loss account over the useful life of the asset in proportion to depreciation.

Under AS 13, how are 'current investments' and 'long-term investments' valued?

Current investments are carried at the lower of cost and fair value (determined either on an individual investment basis or category basis). Long-term investments are carried at cost, less any provision for a decline other than temporary in their value.

Under AS 14, what are the two types/methods of amalgamation?

Amalgamation in the nature of merger (accounted for using the Pooling of Interests Method) and amalgamation in the nature of purchase (accounted for using the Purchase Method).

Under AS 14, list the five conditions for an amalgamation to be 'in the nature of merger'.

(1) All assets and liabilities of transferor become those of transferee; (2) Shareholders holding ≥90% of face value of equity shares (other than already held) become shareholders of transferee; (3) Consideration discharged wholly by issue of equity shares (except cash for fractional shares); (4) Business of transferor is intended to be carried on; (5) Assets and liabilities are incorporated at book values (no adjustment except to ensure uniform accounting policies).

Under AS 14, how is goodwill arising on amalgamation treated?

Goodwill arising on amalgamation (in the nature of purchase) should be amortised to income on a systematic basis over its useful life, normally not exceeding five years unless a longer period can be justified.

Under AS 15, how are 'defined contribution plans' and 'defined benefit plans' distinguished?

In a defined contribution plan, the employer's obligation is limited to the agreed contributions; the actuarial/investment risk falls on the employee. In a defined benefit plan, the employer guarantees a defined benefit and bears the actuarial and investment risk.

Under AS 15, how are short-term employee benefits recognised?

On an undiscounted basis as an expense (and liability) in the period in which the employee renders the related service.

Under AS 16, what are 'borrowing costs' and when are they capitalised?

Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. They are capitalised as part of the cost of a qualifying asset; other borrowing costs are expensed in the period incurred.

Under AS 16, what is a 'qualifying asset'?

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

Under AS 17, how is a 'business segment' and a 'geographical segment' defined?

A business segment is a distinguishable component providing a product/service or group of related products/services that is subject to risks and returns different from other segments. A geographical segment provides products/services within a particular economic environment subject to risks and returns different from segments in other environments.

Under AS 17, what are the quantitative thresholds (the '10% rule') for identifying a reportable segment?

A segment is reportable if its segment revenue (external + inter-segment) is ≥10% of total revenue, OR its segment result (profit or loss) is ≥10% of the greater of combined profit of profitable segments or combined loss of loss segments, OR its segment assets are ≥10% of total assets of all segments. Reportable segments must together cover at least 75% of total external revenue.

Under AS 18, who is considered a 'related party'?

Parties are related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions. Includes holding/subsidiary/fellow subsidiaries, associates, joint ventures, key management personnel and their relatives, and enterprises over which KMP/relatives have significant influence.

Under AS 18, name the relationships that are NOT deemed related parties merely by virtue of the dealing.

Two companies merely with a common director; a single customer/supplier/distributor/agent with significant volume of business; and providers of finance, trade unions, public utilities, and government departments in the course of normal dealings.

Under AS 19, what is the difference between a 'finance lease' and an 'operating lease'?

A finance lease transfers substantially all the risks and rewards incidental to ownership of an asset (title may or may not eventually transfer). An operating lease is any lease other than a finance lease.

Under AS 19, how does a lessee account for a finance lease at commencement?

The lessee recognises the leased asset and a corresponding liability at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

Under AS 20, how is Basic Earnings Per Share (EPS) calculated?

Basic EPS = (Net profit or loss attributable to equity shareholders) / (Weighted average number of equity shares outstanding during the period). Net profit is after deducting preference dividends and tax thereon.

Under AS 20, what is the formula for Diluted EPS?

Diluted EPS = (Adjusted net profit attributable to equity shareholders + after-tax effect of dilutive potential equity shares) / (Weighted average number of equity shares + weighted average number of dilutive potential equity shares).

Under AS 21, what is the definition of 'control' for consolidation?

Control is (a) the ownership, directly or indirectly through subsidiary(ies), of more than one-half of the voting power of an enterprise; OR (b) control of the composition of the board of directors (or governing body) so as to obtain economic benefits from its activities.

Under AS 21, how is goodwill or capital reserve on consolidation calculated?

Compare the cost of the parent's investment with the parent's share in the equity (net assets) of the subsidiary at the date of acquisition. Excess of cost over share = Goodwill; excess of share over cost = Capital Reserve.

Under AS 21, how is 'minority interest' presented in the consolidated balance sheet?

Minority interest is the amount of equity attributable to minorities (the share in net assets/equity of the subsidiary not held by the parent). It is presented separately from the parent's shareholders' equity and from liabilities in the consolidated balance sheet.

Under AS 22, what is the difference between a 'timing difference' and a 'permanent difference'?

Timing differences are differences between taxable income and accounting income for a period that originate in one period and are capable of reversal in subsequent periods (they create deferred tax). Permanent differences originate in one period and do not reverse subsequently (no deferred tax).

Under AS 22, when is a 'deferred tax asset' recognised, and what additional condition applies for unabsorbed depreciation/carried-forward losses?

A deferred tax asset is recognised only to the extent there is reasonable certainty that sufficient future taxable income will be available to realise it. For deferred tax assets arising from unabsorbed depreciation or carry-forward losses, recognition requires virtual certainty supported by convincing evidence.

Under AS 28, what is an 'impairment loss' and how is the recoverable amount determined?

An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of the asset's net selling price and its value in use (present value of estimated future cash flows expected from the asset).