Page 20 - DCOM409_CONTEMPORARY_ACCOUNTING

Unit 1: Accounting Standards

25. AS-25 – Interim financial reporting: This standard is applicable only when a business Notes
entity is required to present interim financial reports. For example, SEBI requires listed
companies to prepare and publish quarterly financial results. In such cases, AS-25 should
be followed in deciding the form and content of interim financial reporting.
Para 9 of AS-25 states that “an interim financial report should include, at a minimum, the
following components:
(a) condensed balance sheet;
(b) condensed statement of profit and loss;

(c) condensed cash flow statement; and
(d) selected explanatory notes”
An enterprise should apply the same accounting policies in its interim financial statements
as are applied in its annual financial statements. Thus, inventory valuation and depreciation
policies followed for interim financial statements should be same as those followed for
annual financial statements.
26. AS-26 – Intangible assets: An intangible asset is an “identifiable non-monetary asset,
without physical substance, held for use in the production or supply of goods or services,
for rental to others, or for administrative purposes” (Para 6 of AS-26). Common examples
of intangible assets include patents, copyright, computer software, customer list, franchises,
brands, etc. Goodwill is a special type of intangible asset in the sense that it is not separable.
The definition of an intangible asset as mentioned in Para 6 of AS-26 requires that the asset
must be separately identifiable. In that sense, Goodwill is not an intangible asset as it
cannot be bought or sold separately.

An intangible asset can be recognised in the balance sheet as an asset only if two conditions
are satisfied:
(a) it is probable that future economic benefits out of use of the asset will flow to the
enterprise; and
(b) the cost of the asset can be reliably estimated.
If both the above conditions are not satisfied, the amount incurred should be fully written
off. Goodwill can be recognised as an asset only when money or money’s worth is paid for
its acquisition. Internally generated Goodwill cannot be recognised as an asset. Similarly,
internally generated brands, customer list, publishing titles cannot be recognised as
intangible assets.

27. AS-27 – Financial reporting of interests in joint ventures: A joint venture is a business run
by two or more parties. It can take the shape of a partnership or it can also be an incorporated
venture. The criterion that one applies to determine whether a business is a joint venture
is to look for a contractual agreement (known as Joint venture agreement). Joint ventures
can be of three types:
(a) Jointly controlled operations;
(b) Jointly controlled assets; and
(c) Jointly controlled entities.

28. AS-28 – Impairment of assets: Impairment denotes loss in value. An asset is deemed
impaired when its carrying amount (i.e., depreciated value) exceeds its recoverable amount.
The difference is called impairment loss. The impairment loss should be recognised as an
expense in the statement of profit and loss immediately. This standard attempts to present

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