CA INTER

CA. Jai Chawla

AS 3 - CASH FLOW STATEMENT ADVANCED 7887 7887 05

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1 2 Important Meanings 3 Methods of Preparing Cash Treatment of

Applicability 4
Flow from Oper. Act. Important Items

CFS to be Prepared by Cash (1) Foreign Currency Cash Flows :-

Operating Financing Investing Direct Indirect
all Companies Equivalents Must be recorded in
Activities Activities Activities Method Method
Reporting Currency
FC Amt. X Ex. Rate on date
Except :- Held for Meeting Main Revenue Activities Related Outflows to Major class of of Cash Flows
Short Term Cash Generating to Capitals & acquire Resources Receipts & Payments
a) One Person Co. (OPC)
Commitments & activities of Borrowings (Assets) for are directly taken (2) Companies having Financial Activities
b) Small Co.
includes Short an enterprise Generating Future into Consideration as Main activity then :-
c) Dormant Co.
Term Investments:- Cash Flows & Incomes Dividend Received
Interest Paid/Received
Identify all cash
Investments Must be Examples :- Example :- Examples :- shall be covered under Operating Activity
Collections &
easily Convertible into Sale of Goods/ Issue/Buy Back Purchase/Sale
Payments Related
Cash Services of Shares/ of Fixed Assets (3) Taxes on Income :- Must be reported
to Operating
Has low level of Risk Fees/Royalties Securities Investment in under Operating Activity except if it
Activities
in Changes in Commission Redemption of Securities/Shares could be specifically related to Investing/
Market Value Paid to Suppliers Debentures or Income from above Financing
of Goods/Services Bonds Shares/Securities Example : - Capital Gain on sale of Asset
Generally, Invst. having short Interest paid Dividend Incomes
Maturity of 3 months or less shall be transfer to Investing Act.
on Borrowings
are Cash & Cash Equivalents. Bank Loans (4) Acquisitions/Disposal of Business
Dividend Paid Units/Subsidiaries :-

1 Start either with 2 Eliminate Non Cash 3 Eliminate Non 4 Working Capital 5 Tax Paid shall be 6 Any Extra-Ordinary Must be shown as Investing
Activities Separately
NPBT (or) Items Operating Items - changes adjustments deducted at Last item not related to
NPAT (or) • Interest Exp. (Fin.) under Invest/Fin. Act shall
Retained Profits • Interest Income (Invst.) Operating Act. be +/- at Last
• Provision for Tax (if started Gain / Loss an Sale if CA = Deduct
from Retained Profit or NPAT) transferred to P&L CA = Add
Retained Profits = • Dividend Payable (if started (If Extra-ord. Income/ Exp. is
Closg Reserves from Retained Profits) CL = Add already transfer to P&L a/c
• Depreciation always (No need to Eliminate
(-)Openg Reserves CL = Deduct then first its effect must
• Transfer to Reserves Like GR Gains/Losses if directly
be eliminated from Oper. Act)
(if started from Retained profits) transfer to
• Revaluation loss on FA Cap. Reserves)
Transfer to P&L (AS-10)
• Prem. on redemption of Debn/
Pref. Share (if started from
Ret. Profit)

Continued to next ...

 CA INTER
CA. Jai Chawla

SUMMARY OF CASH FLOW STATEMENT ADVANCED 7887 7887 05

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1 Net Cash Inflow 2 If nothing is specified about 3 To Calculate Tax Payment, Tax Paid shall be shown under Treatment of Dividend
we should prepare following A/c
4 Cash Flow from Operating
5
means Cash Generated Cash Sales & Cash Purchases Declared or Payable
& then we would always Activities after all Adjustments
assume the Total Sales & (Sabse Last me likhna hai)
Net Cash Outflow
Purchases in Credit Only. Opening Dividend in BS Closing Dividend in BS
means Cash Used
Must have been paid in CY Non-Cash Item, it should
TAX A/c i.e. Cash Item Should be be eliminated from NP after
deducted under Financing Act. Tax or from Retained Earning
under Indirect Method.
To Opening Balance of Advance Tax By Opening Balance of Provision for Tax
To Cash Payment of Tax By Tax Provision made in CY thru P&L
To Closing Provision for Tax By Closing Bal. of Advance Tax

6 Pre-acquisition Dividend 7 If Debentures are shown in BS 8 If Debenture or Pref. Shares are 9 Grant Received
received on Investments with % of Interest is also given redeemed during the year
even if nothing is mentioned at Premium, if Such premium is
about interest then also we written off from P&L ,
Should be deducted from have to make adjustment then in such case Premium shall be For Capital Projects For Revenue Expenses
Investment A/c while preparing of Interest. added back under Operating Investing Activities Operating Activities.
the Investment A/c in working Activities as elimination. If such grant is amortised in P&L
note and also it should be Then less back under If Already transfer to P&L
eliminated from NP. Operating Activities then no need to eliminate under
If Nothing is mentioned then Indirect Method.
It is not income, it should be always assume that Premium
deducted from Investment A/c. is not written off in the P&L A/c
If it is wrongly credited to P&L
then add back from NP
 AS 10 - Property, Plant & Equipment (PPE) CA INTER
CA. Jai Chawla
ADVANCED 7887 7887 05
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Recognition Subsequent
1 What is PPE 2 of PPE 3 Initial Reg. at Cost - Different Cases 4 Expenditures
5 Depreciation

1
Exchange Beyond Normal Consolidated F. lease On components
Tangible Item Conditions Initial Credit Periods Price Day to day Replacement wise-based on
Recognition Grant Service Cost & Major Estimated life
1st Priority:- Apply AS 19 of components
P&L Inspection
a) FEB probable FV of Asset Given up
Held for Use in Expected to flow AS 12 Cash Price Entire Price 2
At Cost (or)
ÜProduction to be b) Cost-Reliably Equivalent shall be At end of B/S date
ÜSupply used for 2nd Priority:- 1
measured apportioned in Dep. Method
ÜRental more than FV of Asset Received Capitalize if
or OR the ratio of FV
ÜAdministration 12 M It means at of each PPE recognition
CA of Asset given If Free - If PV of Future
Decommissioning criteria meets Review
Bearer plant is PPE Purchase or Restoration if FV not Nominal Concessional - Outflow
Cost + Non 2
Biological Assets for Refundable
Cost at PV available or Value Actual Previous Carrying
3
agriculture purpose - Not PPE when there is Lack Acq.
Taxes Directly Amount if any If any change arise
Attributable of Commercial Cost Finance Cost Charge
De-recognise then it is change in
Cost i.e Labour, Substance to P&L A/c A/c Estimate
Out of scope of PPE
Testing Exp.,
Ü Lease, Biological. Assets
Installation
Ü Held for sale PPE Prospective
Ü Exploration & Evaluation
Effect
4
Cessation of Dep.

OR
Residual value CA Earlier of:-
a) Retired from active use
& Held for sale
or
b) De-recognition of PPE
(W/off/sold)

Continued to next ...

 AS 10 - Property, Plant & Equipment (PPE) For Most Recent Updates
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6 Measurment at 7 Revaluation 8 De-Recognition

9
Change in
B/S date of PPE Existing De-Comm. Liability
Option 1 Techniques:- Loss/Gain -
P&l a/c OR
PPE is Under PPE is Under
Cost Revaluation Cost model Revaluation Model
Model Gross Net
Model

Adjust original Acc Dep shall

Original Cost Fv at Measurement
cost &Acc Dep first be W/off (A) (B) (C) (D)
(-) accumulated date
by % of with Org. Cost Increase in Liability (Loss)
Depreciation (-) subsequent Decrease in Liability (Gain) Increase in Liability (Loss) Decrease in Liability (Gain)
change then Net Carrying
(-) accumulated Depreciation Setoff the loss with Transfer the Gain First to
amount shall be PPE A/C Dr.
Impairement (-) Subsequent Prov. for De-comm. Liab A/C Dr. Revaluation Surplus if available P&L to the extent of any earlier
Increase/ Decrease To Provision for De-comm. Liab A/C
Impairement To PPE A/C & if loss exceeds the available Revaluation Loss which was
Surplus then transfer the Excess Transferred to P&L A/C.
PPE Dr. (If Decrease is More than C.A. loss to P&L A/c
To Acc Dep A/c of PPE than difference Remaining Gain transfer to
in P&L A/C) Revaluation Surplus A/c Dr. Revaluation surplus
To Rev. Surplus Profit and Loss A/c Dr.
To Prov. for De-Comm. Liab. A/c
2 Transfer Rev. Surplus Provision A/c Dr.
to Retained Earning To Profit and Loss A/c
PPE shall be Reduced to (to the extent of earlier loss)
the Extent of its Book Values. To Revaluation Surplus A/c
If Earlier Loss was transfer
Equal to Excess Transfer full amt, Remaining Gain should be to P&l then this Gain should
Depreciation When finally transfer to P&L a/c be First setoff with P&l
if PPE is being used disposed
Gain a/c Dr.
3 Treatment of Revaluation To PPE a/c Provision a/c Dr.
To P&L a/c To P&l (to the extent of earlier loss)
To Revaluation Res.

Gain Loss
a) P&L
Revaluation Exception:- or
surplus If Earlier downward
b) If Rev. Surplus
then this Gain
exist then transfer
shall be transfer to
to Rev. Surplus
P&L to the extent of Loss
 CA INTER
CA. Jai Chawla

AS 16 - BORROWING COSTS ADVANCED 7887 7887 05

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Definition of Recognition
Borrowing Cost (B.C.)
Qualifying Assets (Q.A.) 1 Commencement of Types of Borrowing Misc Provisions
Any Asset of B.C. Capitalization Cost
Incurred in Relation Interest on Temp.
If B.C. is incurred
to Arrangement of Necessary Investment of
That takes To get For Intended in relation to:- Expenditure B.C. must
Funds, it includes - must be be Activities Specific General Borrowed Funds
**Substantial Ready Use or Sale Acquisition (A)
(a) Interest Cost Period of Time Construction (C) incurred incurred Should be B.C. B.C.
(b) Other Costs Production (P) on ACP in Progress.
Eg:- IP/PPE/Intangible Asset (Software) Deduction From Total
of Q.A., then
B.C. Covers Exclusively Capitalised One to One One to Many Borrowing Cost before
Is Inventory a Q.A.?
2 Suspension Relation of Q.A. (or) Capitalization & before
otherwise P&L
& Borrowing Many to Many Calculating W.A.C.R.
If Yes Active Development is Interrupted
1) Interest: Short term & When ? during Extended Period.
Long Term both But When such Interruption is Capitalise B.C. To Capitalise
2) Finance Charges Necessary for active Development to a Specific B.C. Calculate:
in Leases (AS 19) Inventory must Not Produced then No Suspension of Capitalization Q.A. only W. Avg
3) Ancilliary Cost Such as not be Produced & on Repetitive Basis Capitalisation
Stamp Duty, Processing in Larger Quantities Rate
Fees - Amortised Part 3 Cessation
and takes Substantial Period
4) Discount on Issue &
Premium on Redumption Eg:- Aircrafts or Ships A/C/P is Substantially Completed
Manufactured on Special Total B.C. During the Year
of Debn - Amortised Part If Completion takes place in Parts, then
Orders Total Borrowings O/s During the Period
5) Ex. Diff. to the extent Cessation for Such Part of QA only (Take months as Weight)
of Saving in Interest on when the Part is Capable of being
F.C. Loan* Used/Sold Separately What to do now when W.A.C.R.
is Calculated?
**Subsantial Period :- Generally 12months or
more but a Lesser period can also be Expenditure
Substantial based on Facts & Circumstances on Q.A. x W.A.C.R. x Months
Weight
*Lower of :-
(a) Ex. Loss
Expenditure Incurred till last year xxx
OR
(Including BC Capitalised)
(b) Saving in Interest
+ Cash Payment on Material & Lab. xxx
+ Non - Cash Exp. xxx
(-) Grant / Subsidy xxx
(-) Progress Payments Received if any xxx
xxxx
 CA INTER
CA. Jai Chawla

AS 20 - EARNINGS PER SHARE ADVANCED 7887 7887 05

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1 Presentation 2 Measurement & Restatement

Present Basic EPS Diluted EPS

- Both EPS & DEPS
on the Face of SPL When to calculate this DEPS?
- with equal Prominence When Co. has O/s Potential Eq.Sh.
Numerator Denominator
to both
- Negative EPS & DEPS Net Profit Available for Eq.Sh. Weighted Avg. Eq.Shares O/s
shall also be Presented
Dilutive Anti-dilutive
- Consolidated EPS & DEPS
in CFS to be Presented
NP/loss
(-) Tax Exp. (CT +/- DT)
(-) Pref Divd.
( Opening New Bought
O/s Shares + issue - Back ) x Time weight
EPS Decreases EPS Increases
Pref Divd.
Numerator Denominator
(a) Cumulative PSC (b) Non Cumulative PSC
Deduct the Dividend will be From When...? Diluted NPAESH WAES for Basic EPS
Dividend always deducted if declared
+

3 Right Issue see below

Public Conversion
Issue

Cash
Receivable
of
Issue in
lieu of Int.
Debenture or Principle
or Pref. Sh. on other
Loans
Issued in Issue in case of
Exchange Amalgamation
of Liability
Settlement Merger
from Beg.
Purchase
from
( NP/Loss + Post Tax + Saving in + CDT/
available Saving in
for ESH Interest on
for
Basic EPS
Pref. Div
on
Debentures Conversion
DDT

) New Issue on
Conversion
of Deb. / Pref. Sh.
+
Issue of Stock Option
for Free of Cost
X Time Weight

Conversion Settlement of Reporting Acquisition

Steps Date When
becomes Period Date
Interest
STEP - 1:- Calculate Theoretical Ex - Right Price Effective
Ceases to
(Cum - Right Price)
Accrue
= [Before RightX Before Right ] + Shares X
Fair Value No. of Shares Right Excercise
Price
4 Special Cases
5 Example of Potential Eq. Sh.

No. of Shares after Right Issue

- Convertible Debn
STEP - 2:- Right Factor OR Adjustment element A] (i) Reduce Cum. Prf. Divd. - if Declared or not - Convertible Pref. Sh.
= Fair Value Prior to Right (Cum - Right Price) (ii) Reduce Non Cum. PD - Only if Declared - ESOP for Free Portion
Theoretical Ex - Right Price - Share Warrants
B] Different Face Value OR Partly paid Sh. - Share Application Money
STEP - 3:- Basic EPS - Use Amount of Equity Capital instead of Nos. Pending Allotment
Net P/L for ESH C] Bonus / Split / Reverse split -
Date is always irrelevant (time weight always
[(O/s Eq. Share Before Right x Right Factor)xTime Weight]
+ [Total no. of shares after Right Issue x Time Weight] 12/12)
 CA INTER
CA. Jai Chawla

AS 28 - IMPAIRMENT OF ASSETS ADVANCED 7887 7887 05

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Scope
3
Indications of Impairment & Indications of Reversal
Applicable to Not Applicable to

1. PPE 1. Inventory
Impairment Reversal of
2. Intangible Assets 2. DTA
3. Assets taken on 3. Financial Assets Impairment
Finance Lease e.g. Investment in
4. Investment Euity
For Assets Other
Property 4. Assets arising in than Investments
Construction Contract in Sub/JV/Ass. External Indicators Internal Indicators
Ü Signf. Increase in M.V. Ü Fav. Effect Due to enhanced
2 of Assets performance & Improved
External Indicators Internal Indicators Ü Favourable Effect Business operations
Important Definitions Ü Significant Decline Ü Damage & Obsolescence Due to
in Market Value of Asset of Assets C Technological Changes Ü Economic Performance of Asset is
Ü Adv. Effect Due to :- C Legal Changes Better than Expected
1) Carrying Amt :- Ü Adverse Effect Due to C Economical Changes
C Asset is Idle C Market Changes
Book value of Asset after charging Depreciation C Technological Changes C Discontinuation of Business
C Legal Changes Ü Market Interest Rate
C Restructuring of Operation Decreases Significantly
2) Net selling Price :- C Economical Changes
C Market Changes C Plan to Dispose of Assets
Amount obtainable from Sale of an Asset in an
C Reassessing the life from
Arm’s length transaction between Knowledgeable,
Ü Market Interest Rate Infinite to Finite
willing parties, Less Costs of disposal. How to Calculate Impairment
Increased Significantly Ü Economic Performance of Asset
is Worse 4
3) Cost of disposal :- Loss & its Reversal
Directly attributable cost to dispose the Asset Ü Book Value of N.A. > Market Value of
excluding Finance Cost & Income Tax. Net Assets

4) Value in Use :- Impairment Reversal

PV of Estimated Future Cash Flows from Loss of Imp. Loss
continuing use of an Asset including its disposal at
end of its useful life. Carrying Amt. (C.A.) After Reversal the Revised
Less CA should be lower of :-
5) Recoverable Amount Recoverable Amt. (R.A.) Lower of
Higher of (a) Recoverable Amount
a) Net Selling Price &
& (b) C.A. after Dep. had there been
b) Value in Use no Impairment

Continued to next ...

 CA INTER
CA. Jai Chawla

AS 28 - IMPAIRMENT OF ASSETS ADVANCED 7887 7887 05

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(Page 2)
For Take all Assets of CGU
5 Recoverable Amt. R.A .of CGU + Liabilities of CGU if such
& Liab. are Necessary Part of CGU
Higher of C.A. of CGU
(a) Value in Use &
(b) Net Selling Price 6
Treatment of Impairment Loss
Value in Use depends on - How to Estimate Net Selling
Price

Projected Cash Discount Rate Check Binding Sale Agreement Providing Reversal of
Flows Impairment Loss Imp. Loss
Not Available
Consider When Asset specific rate Check Active Market & Identify
How to Estm. Cash Flows?
is not available then Current Bid Price of Asset Charge to Charge to Reverse it Then Transfer
Ü Reasonable / Supportable Ü Time Value consider following Revaluation P&L to Rev. Surplus to P&L
Assumptions of Management of Money Surplus if & thereafter thereafter
& Ü WACC Not Available (Had there been
Ü Greater Weight to Available if there is no no Impairment
Ü Risk Specific Ü Incremental Price From Most Recent Transaction From Active Market
External Evidences Borr. Rate Revaluation what would be
to Asset
Ü Take most Recent Financial Ü Other Market Surplus the Bal of Rev.
Forecasts Approved by Mang. Borr. Rate No Active Market Surplus)
Ü Projections not more than
5 years unless Evidenced Best Estimate of Management

Agar Humse No Ho Payega

then Take Value in Use Only.

Continued to next ...

 CA INTER
CA. Jai Chawla

AS 28 - IMPAIRMENT OF ASSETS ADVANCED 7887 7887 05

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7
Impairment Testing
8
Ü Smallest Identifiable group
of Assets
Impairment in case of
First Preference When Individual Asset is Ü Generate Cash Inflows
Ü Independently from other
Discontinuing Operations
to Individual Asset only not able to Generate group of Assets
Independent Cash Inflows
C.A. of Asset
(-) Consider Cash Generating Unit (CGU) If Discontining Operation If entity Plans to dispose
R.A. of Asset is Planned to be Sold the Assets individually
How to Impair the entire CGU in its Entirety (Piecemeal Sale)

Apply Impairment Apply Impairment

How to Allocate Total Impairment Loss Goodwill and Test for whole Test for Individual Asset
Goodwill & Corp. Assets (-) Goodwill Value Corporate Assets operation or Grp of Asset wise

In absence of any info, Bal. Imp. Loss

If Value is If
allocate Goodwill in Allocable to Un-allocable
Ratio of Fair Values of Apportion to all all CGU’s to all CGU’s
all CGU’s at
time of Acquisition
Assets including
Corp. Assets in
9
Bottom Up First Bottom up
Ratio of Carrying
Amount Approach then Top Down Misc. Provisions
Allocate Corp. Assets in
Proportion of respective
Carrying Amt. of CGUs Under Bottom Up - Under Top Down -
CA of CGUs is Entire Entity’s CA is
compared with Entity’s I/L of No Impairment
compared with R.A. of CGUs. Goodwill Testing on Following Assets
R.A.
If Impairment Loss arise If Impairment Loss arise
then allocate the loss first to then allocate the loss first to Reversal Ü Biological Assets
Goodwill, then all Remaining Unallocable Goodwill not (IndAS 41)
Assets Including Corp. Assets. then Unallocable Corp. Assets. Permissible Ü Non-Current Assets
Held For Sale (IndAS
105)
Ü DTA (IndAS 12)
Ü Inventories (IndAS 2)
Ü Financial Assets
(IndAS 109)