01. CBDT had constituted a committee to suggest modification required under section 145 of the Income tax Act, 1961 (“ACT”).
02. The committee has now submitted final draft of 14 Tax Accounting Standards (“TAS”) and requested from general public stakeholders to submit their comments by November 26, 2012.
03. The TAS is not meant for maintaining two sets of accounts , but required to be followed while preparing computation of total income
04. In case of any conflict between ACT and TAS, ACT will prevail over TAS.
05.
(i)
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AS-6
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Depreciation
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(ii)
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AS-20
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EPS
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(iii)
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AS-21
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CFS
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(iv)
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AS-22
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Deferred Tax
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(v)
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AS-23
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AIACFS
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(vi)
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AS-25
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IFS
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(vii)
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AS-28
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Impairment of Assets
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06. Following 10 AS are only discloser and hence not required for harmonization.
(i)
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AS-3
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Cash Flow
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(ii)
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AS-14
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Merger
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(iii)
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AS-15
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Employee benefits
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(iv)
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AS-17
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Segment reporting
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(v)
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AS-18
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Related Party
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(vi)
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AS-25
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Discounting operation
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(vii)
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AS-27
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Joint Venture
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(viii)
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AS-30,31, 32
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Financial Instruments
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07. Thus out of 31 AS issued by ICAI, now left only 14 (31-7-10) considered for harmonization.
08. Now the changes suggested in TAS is given below.
SN
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AS
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Changes Suggested
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Remarks
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1
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1
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(i) No recognition of Mark to Mark losses
(ii) Accounting policy should not be change without any reasonable cause.
(iii) Substance over legal form
| |
2
|
2
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(i) Cost of service defined which include cost of labour and other costs of personal directly engaged in providing the service including supervisory personnel and attributable overheads
(ii) Retail method of valuation of inventory introduced where inventory is valued at sale price minus profit margin.
(iii) The value of opening stock should match with previous year closing stock
(iv) Method adopted should not be change without any reasonable cause.
(v) Inventory on the date of dissolution should be valued at net realizable value
| |
3
|
4
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Disclosure of events occurring after balance sheet date that do not require any adjustment has been removed
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4
|
5
|
(i) Disclosure of extra-ordinary items has been removed
(ii) Laid specific conditions for allow ability of prior period expenses
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5
|
7
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(i) Retention money now accrued based on percentage completion method
(ii) There is no more reversal of revenue. However option of bad debt is there
(iii) Allocated borrowing cost in accordance with Borrowing cost TAS (AS-16).
(iv) Pre-construction income shall be taxed
(v) Revenue & Expenses now not required to measure reliably.
(vi) Unrealized sale may allowed for deduction
(vii) Probable loss now to be recognized on proportionate basis
(viii) Once contract completed 25%, then revenue should be recognized.
| |
6
|
9
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(i) Only percentage completion method
(ii) Revenue recognition can be postponed
(iii) Specific recognition of dividend not considered.
| |
7
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10
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(i) Consistent with definition as provided in AS –10.
(ii) Lower of the fair value or actual cost should be recognized.
(iii) Consistent with AS-10 in respect of improvement of repairs.
(iv) Not recognized revaluation of fixed assets
(v) Consistent with AS-10 in respect of retirement and disposal of assets.
| |
8
|
11
|
(i) Follow section 43A of the Income tax act, 1961 and rule 115 of the Income tax rules, 1962.
(ii) Translation of non- integral foreign operation which as per AS-11 considered under balance sheet, to be considered now for computation
(iii) Disallow Mark to Market loss
| |
9
|
12
|
(i) Either government grant is revenue or to be reduced from the cost of fixed assets.
(ii) Government grant to be recognized as and when received irrespective of fulfillment of condition
| |
10
|
13
|
(i) Only dealt with investment held as stock in trade
(ii) Modify valuation method of stock in trade.
| |
11
|
16
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(i) Now forex difference cannot be part of interest cost
(ii) Modify definition of Qualifying assets.
(iii) No more capitalization of interest cost
(iv) However, provide specific formula for capitalization.
(v) Income from temporary investment cannot reduce the cost of assets.
(vi) Consistent with AS-16 in respect of commencement and cessation of borrowing cost, but removed the suspension clause.
| |
12
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19
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(i) No difference between operating and finance lease
(ii) Modify concept of gross and net investment
(iii) Now adjustment for high interest rate is possible in case of manufacture.
(iv) Adjustment of the residual value to be allowed only at the end of lease term.
(v) Concept of sale and lease back has been abolished.
| |
13
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26
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(i) Lower of fair value of share or assets value to be recognized.
(ii) Not covered guidance on amortization, retirement and disposal of fixed assets.
| |
14
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29
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(i) Replace probable with reasonably certain.
(ii) In case of Contingent assets, virtually certain replace with reasonably certain.
(iii) Re-structuring cost not incorporated
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09. Presently, nothing is announced in respect of MAT. However, same may be further announced based on the version of adoption of IFRS.
10. Following areas may also be considered for notification under the TAS.
(i) Share based payment
(ii) Revenue recognition by real estate developers
(iii) Service concession arrangements (example, Built Operate Transfer agreements)
(iv) Exploration for and evaluation of mineral resources.
Conclusion : After reading the above, it is very difficult to say in which direction the accounting of India is moving, is it old AS or IFRS or IND AS along with TAS. The accounting and tax already become so much complex for India and by introduction of all this various version of standards will bring more confusion in respect of accounting and tax. We hope our Government and various Institute will able to address the issues in very smarter way to bring more simplicity for Indian Tax & Accounts Professionals.
We also welcome your any suggestions at our email ID: taxbymanis@yahoo.com. Further, you can keep yourself more updated on various tax developments at http://taxbymanish.blogspot.in///.
Thank you.
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