GAAP Advisors - Enabling Excellence in Financial Reporting in India | Thirty Third Edition
CA Manish C. Iyer
Ind AS, IFRS and Indian GAAP Advisor | Author of 16 eBooks on Ind AS | Independent Director
Welcome to Thirty Third Edition of?GAAP Advisors?TASK?Weekly newsletter
It gives me immense pleasure welcoming you to the Thirty Third edition of?GAAP Advisors?TASK?Weekly newsletter.?Hope you have installed GAAP Advisors Android App and took TASK (Test Accounting Standards Knowledge). If not, request you to?Download and Install GAAP Advisors App and Start TASK.?Readers who do not use android mobile can login / register on?https://gaapadvisors.com?and Start?TASK. This edition of newsletter has the following sections:
+ Why register on?GAAP Advisors
+ From?Issue Repository?– Classification of Cash Flows
+ From?Review Repository?– Note Reconciling Contracted Price and Revenue Recognised
+ From?Accounting Policy Repository
+ From?Key Audit Matters Repository
+ From?Term Repository?- Venture
+ Milestones achieved this Week
+ Features of?TASK
+?TASK?Statistics at the time of writing this section of newsletter
+?TASK?Ranker No.1 at the time of writing this section of newsletter
+ Daily winners for this Week
+ Note of Thanks
Why Register on?GAAP Advisors App?or on?https://gaapadvisors.com:
Registration is free. On registration, you get 7 days of subscription access to Wealth of Knowledge on Financial Reporting in India in your Pocket available anytime and anywhere:
1.?TASK Repository?- Play the learning?Game?on?Ind AS?and?Indian GAAP?with?TASK.?15000+?Question Bank. Share your certificate and get recognised for your skills on?Ind AS?and?Indian GAAP
2.?Issue Repository?-?4300+?issues and responses on?Indian GAAP?and?Ind AS. Submit issues on?Indian GAAP?and?Ind AS?for?Free
3.?Accounting Policy Repository?-?7300+?Accounting Policies
4.?Key Audit Matters Repository?-?2200+?Key Audit Matters
5.?Review Repository?-?1200+?review observations
6.?Emphasis of Matters Repository?-?600+?Emphasis of Matters
7.?Other Matters Repository?-?500+?Other Matters
8.?MCQ Repository?-?800+?Multiple Choice Questions and their responses
9.?Term Repository?-?900+?Terms defined with comparison between?Indian GAAP?and?Ind AS
Further, if you update your profile with your birthdate, you get 7 days of free access to all repositories on your birthday. Moreover, daily 2 registrants are selected randomly and awarded 7 days of free access to all repositories. See daily winners for this week section to know the names of the lucky ones.
From?Issue Repository?- Classification of Cash Flows -?Issue Id: 234??- Framework: Indian Accounting Standards (Ind AS):
Facts of the Case as submitted by the querist
A Ltd. acquires buildings for rental to others and subsequently for sale. A Ltd. has classified the cash payment made to acquire the buildings and cash receipts from sale of those buildings as cash flows from investing activities. Cash inflows from rentals have been presented as cash flows from operating activities.
Issue/Query
Whether the classification of cash flows by A Ltd. in statement of cash flows is proper?
GAAP Advisors?Response:
Paragraph 14 of Ind AS 7?Statement of Cash Flows states, inter alia, as follows:
“…However, cash payments to manufacture or acquire assets for rental to others and subsequently held for sale as described in paragraph 68A of Ind AS 16, Property, Plant and Equipment, are cash flows from operating activities. The cash receipts from rent and subsequent sales of such assets are also cash flows from operating activities.”
Therefore, the classification of cash flows by A Ltd. relating to buildings held for rental to others and subsequently for sale is not proper. All cash receipts and payments relating either to the rentals or due to acquisition or construction of those buildings or due to sale of those buildings should be classified as cash flows from operating activities.
From?Review Repository?- Note Reconciling Contracted Price and Revenue Recognised:
What has the company reported?
GAAP Advisors?Observations:
Paragraph 46 of Ind AS 115, Revenue from Contracts with Customers, states as under:
"When (or as) a performance obligation is satisfied, an entity shall recognise as revenue the amount of the transaction price (which excludes estimates of variable consideration that are constrained in accordance with paragraphs 56-58) that is allocated to that performance obligation."
Paragraph 47 of Ind AS 115 states as under:
"An entity shall consider the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both."
Paragraph 50 of Ind AS 115 states as under:
"If the consideration promised in a contract includes a variable amount, an entity shall estimate the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer."
Paragraph 51 of Ind AS 115 states as under:
"An amount of consideration can vary because of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items. the promised consideration can also vary if an entity's entitlement to consideration is contingent on the occurrence or non-occurrence of a future event, For example, an amount of consideration would be variable if either a product was sold with right of return or a fixed amount is promised as a performance bonus on achievement of a specified milestone."
Thus, the revenue in accordance with Ind AS 115 is always after deducting an estimated amount of discounts from the contracted price. In this regard, paragraph 126AA of Ind AS 115 states as under:
"An entity shall reconcile the amount of revenue recognised in the Statement of Profit and Loss with the contracted price showing separately each of the adjustments made to the contract price, for example, on account of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses etc., specifying the nature and amount of each adjustment separately."
Therefore, Ind AS 115 requires statement reconciling contracted price with revenue recognised in statement of profit and loss. This compliments the requirements of paragraph 50 and 51 of Ind AS 115. However, the company has disclosed the contracted price as gross revenue. There is no concept of gross revenue and net revenue. Revenue is measured as the transaction price which is always after discounts. Therefore, the reconciliation statement presented by the company in note 22C is not in accordance with Ind AS 115.
Paragraph 7 of Ind AS 1, Presentation of Financial Statements, states as under:
"Information is obscured if it is communicated in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information. The following are examples of circumstances that may result in material information being obscured:-
The reconciliation statement disclosed by the company in note 22C is obscuring as the language used is vague. The company has stated contracted price as Gross Revenue thus communicating information in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information.
领英推荐
Components Impacted:?Notes
From?Accounting Policy Repository?- Borrowing Costs -?Policy Id:?7489 - Applicable Standards:?Ind AS 23, Borrowing Costs
As reported by Company:
Borrowings costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for the intended use or sale.
Investment income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is recognised in the statement of profit and loss.
Discounts or premiums and expenses on the issue of debt securities are amortised over the term of the related securities and included within borrowing costs. Premiums payable on early redemptions of debt securities, in lieu of future finance costs, are recognised as borrowing costs. All other borrowing costs are recognised as expenses in the period in which it is incurred.
From?Key Audit Matters Repository?- Key Audit Id: 2239 - Business Combination under Common Control - As reported:
Key Audit Matter:
[Refer to Note 2 (t) to the Standalone Financial Statements – “Business combination under common control” and Note 44 to the Standalone Financial Statements].
Pursuant to the National Company Law Tribunal (NCLT) Order dated October 29, 2021, subsidiaries of the Company viz. TSBSL and BSL (“Transferor Companies”) were merged with the Company.
The Company has accounted for the business combination using the pooling of interest method in accordance with Appendix C of Ind AS 103 – Business Combination (the ‘Standard’).
The carrying value of the assets and liabilities of the subsidiaries as at April 1, 2020 (being the beginning of the previous period presented), as appearing in the consolidated financial statements of the Company before the merger have been incorporated in the books with merger adjustments, as applicable.
The Company has allotted 1,82,23,805 fully paid-up equity shares to the eligible shareholders of the erstwhile subsidiary (TSBSL) in accordance with the Scheme.
The Company has recognised capital reserve of Rs.1,728.36 crore directly in “Other Equity”.
Considering the magnitude and complex accounting involved, the aforesaid business combination treatment in standalone financial statements has been considered to be a key audit matter.
How was the matter addressed by auditor?:
Our audit procedures included the following:
? We understood from the management, assessed and tested the design and operating effectiveness of the Company's key controls over the accounting of business combination.
? We have traced the assets, liabilities, tax losses of TSBSL and BSL from the audited special purpose financial statements / financial information received from the other auditors under our audit instructions.
? We have recomputed the value of fully paid-up equity shares issued as the consideration with reference to the NCLT Order.
? We tested management’s assessment of accounting for the business combination and determined that it was appropriately accounted for in accordance with Ind AS 103 Business Combination.
? We tested the management’s computation of determining the amount determined to be recorded in the capital reserve.
? We also assessed the adequacy and appropriateness of the disclosures made in the standalone financial statements.
Based on the above work performed, the management’s accounting for the merger of TSBSL and BSL with the Company is in accordance with the Appendix C of Ind-AS 103 Business Combination.
From?Term Repository?- Venture:
Milestones Achieved This Week:
7300+ Accounting Policies in Accounting Policy Repository
1200+ Review Observations in Review Repository
Features of?TASK:
·??????Play the learning game on Ind AS and Indian GAAP. Take TASK to attempt 25 questions daily and experience the improvement skills on application of Ind AS and Indian GAAP
·??????Take instant skills check in interviews. Ask candidates to attempt 50 questions and share their certificate.
·??????Ask your team to participate in TASK and secure Rank #1. Monitor your team’s performance on regular basis such as daily, weekly, monthly etc. through their certificate and report.
·??????15000+ question bank with 800+ MCQ
·??????Get credit points on consistent answers. Credit points result in amounts in discount wallet and cash wallet on 1st of every month based on subscriptions received and shared in the immediately preceding month.
TASK?Statistics at the time of writing this section of newsletter
TASK?Ranker no. 1 at the time of writing this section of Newsletter:
Daily winners for this Week:
Daily two registrants are awarded 7 days of free access to all repositories in daily winner scheme. You can see the daily winners for last seven days on?home page of GAAP Advisors. This week following were awarded 7 days of free access to all repositories:
Collaborative Model Creating Value for All:
GAAP Advisors?is based on collaborative model. Your subscription benefits all registrants including resource persons and approvers who devote their time and share their knowledge for development of repositories. Below is given the view of collaborative model:
You get credit points for submitting issues, accessing the contents of repositories, participating in?TASK?and on subscription. These credit points result in amounts in discount wallet and cash wallet on 1st of every month based on the subscriptions received and shared in immediately preceding month. For example, amounts in discount and cash wallet will be loaded on 1st August based on subscriptions received and shared in the month of July. Till date?GAAP Advisors?has distributed??7,00,987?in discount wallet and cash wallet of all registrants including resource persons and approvers.
GAAP Advisors?acknowledges contribution of subscribers by awarding them certificate which can be shared on social media and is also displayed on?home page of GAAP Advisors.
Note of Thanks
GAAP Advisors?thanks all subscribers and readers of newsletter for taking their time out in knowing how?GAAP Advisors?enables?Excellence in Financial Reporting in India.?GAAP Advisors?thanks all subscribers of repositories for contributing to support the mission of spreading the knowledge and awareness of financial reporting standards in?Collaborative Manner Creating Value For All.?GAAP Advisors?thanks all participants of?TASK?for spending time in learning financial reporting in India.?GAAP Advisors?also thanks all?2300+?registrants?for their faith on the repository services rendered by?GAAP Advisors.
Ind AS, IFRS and Indian GAAP Advisor | Author of 16 eBooks on Ind AS | Independent Director
2 年Prakash Saraswat Thank you so much for spreading the word on #GAAPAdvisors #TASK