amendment notes for financial reporting - nov 2014 - ca final

8/10/2019 Amendment Notes for Financial Reporting - Nov 2014 - CA Final

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Prepared by Raju Choudhary [email protected] +91 8854810117

Amendment Notes for Financial Reporting

Revised Schedule VI: - No More Relevant

Schedule III of Companies Act 2013 is Relevant

Old Revised Schedule VI and schedule III of new companies Act 2013 are same except for a statementon subsidiary, Associates joint Venture

Revised Schedule VI Schedule III

1. Balance Sheet2.

Profit & Loss3.

Notes to Accounts

1. Balance Sheet2.

Profit & Loss3.

Notes to Accounts4. Statement on Subsidiary

Following Companies is relevant

Old Revised Schedule VI of Companies Act,

1956 (Applicable up to 31-3-2013)

Schedule III of Companies Act, 2013 (Applicable

From 1-04-2014

Balance Sheet Format Same Balance Sheet Format

Statement of P/L Same Statement of P/L

Notes to Accounts Same Notes to Accounts

- Statement on Subsidiary, Associates, J.V.

2. How to prepare statement on subsidiary etc.? (Instant of report of sec 212)

Name of % of Net Assets % of Profit

% Amount % Amount

Subsidiary

Associates

Joint Venture

Share in Minority

Interest

3 Statement prepared u/s 212 of companies act, 1956 is not relevant

Example:-

Balance Sheet as on 31stMarch 2015

H Ltd S Ltd J Ltd A Ltd

Share Capital 100000 80000 60000 50000

Reserve & Surplus 90000 80000 70000 60000

Sundry Lib. (Creditors) 50000 40000 30000 20000

Fixed Assets 120000 50000 30000 60000

Investment

60 % Share in S Ltd 70000

30 % Share in J Ltd 25000

25 % Share in A Ltd 15000

Cash 10000 150000 130000 70000
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Additional Information

i.

J Ltd is a joint venture between H Ltd & K Ltd. A Ltd is Associate

ii.

When H Ltd is acquired investment in S,J,& A Than balance in Reserves were as follows

Date of Acquisition Balance of Reserve in Acquiring Co.

1-4-2014S Ltd 25000

1-4-2013J Ltd 10000

1-4-2013A Ltd 15000

iii. Prepare Consolidated Balance sheet and statement under Schedule III for subsidiary

iv. Balance Sheet should be as per schedule III

Solution.

W.N.1Analysis of Profit (AOP)

S Ltd.

Particulars Capital Revenue Total

Reserve & Surplus 25000 55000 80000

Holding 60% 15000 33000

Minority 40% 10000 22000 32000

J Ltd



Minority 25% 3000 18000

A Ltd



Minority 25% 3750 11250

W.N.2Calculation of Cost of Control, Minority Interest, Investments in Associates

Cost of Control


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S Ltd J Ltd A Ltd

Investment 70000 25000 15000

(-) Share Capital 48000 18000 12500

(-) Pre Acquisition Profit 15000 3000 3750

Goodwill/ (CR) 7000 4000 (1250)

Minority interest in S Ltd

Share Capital 32000

Profit of Subsidiary

Pre 10000

Post 22000

Total 62000

Investment in A Ltd

Opening Balance 15000

(+) Reserve & Surplus 11250

26250

Consolidated P & L

Reserve & Surplus 90000

(+) Post Reserve & Surplus of S Ltd 33000

(+) Post Reserve & Surplus of J Ltd 18000

(+) Post Reserve & Surplus of A Ltd 11250

Total 152250

Balance Sheet as Per Schedule IIIParticulars Amount

Share Holders Fund

Share Capital 100000

Consolidated R & S 152250

NonCurrent Liabilities

Minority Interest 64000

Current Liabilities

Trade Payables [50000 + 40000 + 9000] 99000

Holding Sub. J.V. A.

Toatl Liabilities 415250

Non Current Assets

Fixed AssetsTangible Assets (120000+50000+9000) 179000

- Intangible Assets(G/w) (7000+4000) 11000

Investment In Associate (Including Capital Reserve 1250) 26250

Current Assets

Cash & CashEquivalents [10000(H) + 150000(S) + 39000 (J) 199000

Total Assets 415250


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Statement under Schedule III for Subsidiary (Instant of Sec 212 statement)

Name Net Assets Reserve & Surplus

% Amount % Amount

Subsidiary

S Ltd.52.81

(167000/316250*100)167000 21.67

(33000/152250*100)33000

Share in M. Intt. 20.33

(64000/316250*100)

64000 14.41 22000

Joint Venture

J Ltd

13.60 43000 11.32 18000

Associates

A Ltd.

8.30 2625 7.39 11250

Note:-

Net Assets

Overall Balance Sheet = 316250

Sub. Part = 167000

% of Sub. = 167000/316250*100 = 52.81%

(4) As Per Section 129 of New Act, Consolidation of A/cs is Mandatory. Earlier Clause 32 of SEBI

listing requirements was reason for consolidation but now consolidation is required as per

companies Act, 2013

(5) As per Accounting Standard21 Subsidiary which is temporary in nature is not required to be

consolidation

Rules notified by MCA state that Form No AOCI should be submitted to ROC, for non

consolidation of temporary subsidiaries

(6) Example [Will You Consolidate]

Old Law New Law

H Ltd (+) S Ltd Yes Yes

H Ltd (+) S Ltd (+) J Ltd Yes Yes

H Ltd (+) J Ltd No Yes

H Ltd (+) A Ltd No Yes

Reason of change in section 2(87) & sec 129

Basic Objection is to increase scope of consolidation

(7) Para 6, Explanation of AS -21 is Not Relevant Now

Explanation was for Report U/S 212 Which has now been deleted

(8) All Companies whose year ending is other than 31stMarch, Should make financial statement at

par by 31-03-2016


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(9) AS of ICAI will remain as it is

As of MCA (Notified) will change section 132 of new law not yet notified, hence all AS will

remain same

(10) Control Definition changed

2(87): - Control can be due to

Power to compose governing body of another entity.

Ownership of more than of total share capital (Share Capital = Equity SC, Pref. SC)

Example

S Ltd H Ltd Consolidation Yes/No (New Law)

E Share Cap. Pref. Sh. Cap. E Share Cap. Pref. Sh. Cap.

10,00,000 0 6,00,000 0 60% Yes

10,00,000 10,00,000 6,00,000 6,00,000 60% Yes10,00,000 10,00,000 6,00,000 - 30% No

10,00,000 4,00,000 0 30,00,000 60% Yes

(11) Ind As are still not applicable as per ICAI press Release in March, 14 Ind AS should apply from

1/04/2016. Hence its effects can be seen in 2016-17. ICAI has asked the comparatives will not be as

per IND AS but as per AS of MCA.

2016-17 2015-16

Share Capital

AS Per IND - AS As Per AS of NACAS

R & S

N C L

CL

N C A

AS Per IND - AS As Per AS of NACASCA

Note: - Best Chance for INDAS in exam can be Nov. Or after that

(12) AS 30, 31, 32 are still not mandatory (But ICAI asked questions from these chapter)

(13) LevelII Entities of framework had following Points

Entities whose turnover in previous year was Rs 40 Lakh = 1 Crore

Entities Whose borrowings in Previous year were 1 crore

(14) AS- 15 Allowed Entities to purchase own shares through trust.

Generally these shares were used for ESOPS

SEBI Has issued one order, Which Prohibits such purchase of shares through trusts


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(15) Corporate Social Responsibility (CSR) (Sec 135)

Certain Selected Companies are require to expend 2% of avg. profits for last 3 year on

purpose specified in schedule - VII

Example

A Ltd Has Following Profits

2012-13 100 Cr.

201314 120 Cr.

2014-15 160 Cr.

During the year 2014-15, Company has incurred expenses on CSR for Rs 1.5 Cr. What should be itsaccounting treatment?

Solution

Calculation of Avg. Profits

100+120+160 = 122.67

3

Expenses to be incurred @ 2% of Profits = 2.5333 Cr

Less: - Expenses Incurred = 1.5000 Cr.

Short Fall 1.0333 Cr

Company should make provision for CSR expenses for Rs 1.03333 Cr.

Expenses of Rs. 2.5333 will be shown in P &L as Expenses

(16) Assets worth Rs 5000 or less were earlier written off as expenses

But ScheduleII of new companies act does not require such written off. Hence as per new

law companies can show assets whose is Rs 5000 or Low in Books of Accounts

[Both Options Are available (we written off and we show)]

(17) Depreciation will be charged as per scheduleII and ScheduleXIV of old Act is not relevant

(18) Depreciation Charged on revalued assets will always be adjusted against P & L account

Revaluation Reserve will not be used for adjusting Depreciation

Example

BuildingBook Value = 1000000

(+) Upward Revaluation = 200000

1200000


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Solution

i. Building A/c Dr. 200000

To Revaluation Reserve 200000

(Being Building Revalued)

ii. Depreciation A/c Dr. 120000

To Building 120000

(Being Depreciation Charged)

iii.

SPL A/c Dr. 120000

Revaluation Reserve A/c Dr.

To Depreciation 120000

(Being Depreciation Written Off)

(19) Para 46: Inserted an AS of ICAI in March, ICAI has Inserted Para in AS - 11 of ICAI

As Per Para 46 - :

i.

Exchange Difference on Long Term foreign Currency Monetary Item (LTFCMI)

will be dealt as follows.

Exchange Difference on LTFCMIrelating to depreciable asset will be capitalised

to asset and depreciated over life of assets

Exchange Difference on LTFCMI not relating to depreciable asset will be shown

as FCMIT Difference Account in reserve and surplus, It will be Written off

over life of LTFCMI.

ii. 31-03-2020 is not relevant in para 46 of ICAI standards.

iii. Para 46 is optional for entities and open ended.

Example

A Partnership (AS of ICAI Apply) firm gives following information.

1. Long Term loan 1st(Repayable After 3 Year) Rs 10,00,000 , Exchange Loss Rs 50,000

2.

Long Term loan 2nd(Repayable After 5 Year) Rs 20,00,000 , Exchange Loss Rs 80,000

3.

Long Term loan 3rd(Repayable After 7 Year) Rs 15,00,000 , Exchange Loss Rs 90,000


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4.

Long Term loan Taken For Machine (Repayable After 6 Year) Rs 20,00,000 , Exchange Loss

Rs 1,00,000

5. Short Term Loan Rs 10,00,000 , Exchange Loss Rs 50000

Additional Information:-

Life of machine is 20 year

Book Value of Machine is Rs 25,00,000

(Opening Balance)

Suggest Accounting Treatment

Solution

AS of NACAS are not applicable on Partnership firm, Earlier AS 11 of ICAI had accountingtreatment under Para13, which required Exchange Loss / Gain to be transferred to SPL. Now also

option to para13 exists

Hence partnership firm can transferred total Exchange loss to SPL Rs 3, 70,000

OR

2ndChoice is newly introduced para 46

Loan No 1 2 3 4 5

Covered By Para 46 Yes Yes Yes Yes No

Hence Exchange Difference on Loan 5 will be covered under Para13 only

Para 46FCMIT Difference A/c (Loan No 1)

Particulars Amount Particulars Amount

To Exchange Loss 50000 By SPL (50000/3) 16667

By Balance c/d 33333

FCMIT Difference A/c (Loan No 2)




FCMIT Difference A/c (Loan No3)




Machine A/c (For Loan No 4)


To Balance B/d 2500000 By SPL (20,00,000/20) 130000To Exchange Loss 100000 By Balance c/d 24,70,000


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Balance Sheet

Particulars Amount

Share Holders Fund

Share Capital

Reserve & Surplus

MIT Diff ( 33333+64000+77143) (174476)

(20) As per notification of MCA, FCMIT difference A/c should be shown in Balance Sheet under head

reserve and surplus.

(21) In Case Exchange Difference is treated under Para 46, than such Exchange difference cannot be

classified Borrowing cost, hence AS- 16 will not be applied on Such Exchange Difference

amendment notes for financial reporting - nov 2014 - ca final

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